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Beware of contractors causing delays, says Uma - The Hindu

Google International ADR News - 4 hours 14 min ago

Beware of contractors causing delays, says Uma
The Hindu
Irrigation Minister Devineni Umamaheswara Rao has asked the International Centre for Alternative Dispute Resolution (ICADR) to study the details of 10-year-old projects that are under the purview of the Irrigation Department. Speaking after the ...

Gadens continues Sydney hiring binge - Australasian Lawyer

Google International ADR News - Tue, 2017-11-21 15:05

Australasian Lawyer

Gadens continues Sydney hiring binge
Australasian Lawyer
The firm has hired Dermott Lynch, who returns to the firm joining its disputes team in Sydney. He comes from London, where he operated his own legal practice for 10 years, specialising in commercial litigation, international arbitration, and ...

Against Secret Settlements

ADR Prof Blog - Tue, 2017-11-21 14:15
The New Yorker has a fascinating new article by Ronan Farrow providing more information about some of the settlement structures used by Harvey Weinstein and his company. It is worth reading in full, but I’m including a few excerpts from the article below to give you a sense of the piece. The short version is … Continue reading Against Secret Settlements →

Beware of contractors causing delays, says Uma - The Hindu

Google International ADR News - Tue, 2017-11-21 13:31

Beware of contractors causing delays, says Uma
The Hindu
Irrigation Minister Devineni Umamaheswara Rao has asked the International Centre for Alternative Dispute Resolution (ICADR) to study the details of 10-year-old projects that are under the purview of the Irrigation Department. Speaking after the ...

Chapman Law Mediation Clinics Receive Ninth Circuit ADR Education Award - Chapman University: Happenings (blog)

Google International ADR News - Tue, 2017-11-21 13:04

Chapman University: Happenings (blog)

Chapman Law Mediation Clinics Receive Ninth Circuit ADR Education Award
Chapman University: Happenings (blog)
In addition to the clinics' work in Southern California, Professor Dowling and his students have also provided training in alternative dispute resolution to international attorneys and law students. The Ninth Circuit ADR Committee was created in 1997 ...

Arb-Med-Arb: what is it and how can it help the parties to solve their disputes efficiently? - Lexology

Google International ADR News - Tue, 2017-11-21 04:17

Arb-Med-Arb: what is it and how can it help the parties to solve their disputes efficiently?
Lexology
“The parties further agree that following the commencement of arbitration, they will attempt in good faith to resolve the Dispute through mediation at the Singapore International Mediation Centre (“SIMC”), in accordance with the SIAC-SIMC Arb-Med-Arb ...

M&A Arbitration: Pre-Closing Disputes and Letter of Intent

Kluwer Arbitration Blog - Mon, 2017-11-20 18:54

Nahila Cortes

The complexity of M&A

In recent years there has been an increase in M&A disputes. These are often complex because the underlying dispute can involve complicated business transactions between big companies that merge, are acquired, or form a joint venture. And more importantly, they can have a significant impact on the market (for example, the recent deal of United Technologies to buy Rockwell Collins amounted to US$30 billion).

In the context of the Argentine path to recovery from years of economic crisis and recession -which led to countless claims from foreign investors against the state- it is expected that there will be an increase in M&A, and foreign investors are likely to participate in these proceedings. Since the Argentine market seems to be gaining strength again, it is worth taking a close look at disputes that might arise in the context of international M&A disputes and how international arbitration can play a role to resolve them, especially when they arise at an earlier stage of the transaction.

Pre-closing disputes

The entire process of an M&A transaction can last several months, starting from the early negotiations until the end of the survival period or the expiration of statute of limitations. The parties involved in the transaction may initiate disputes based on different causes of action that are generally related to representations and warranties, earn out clauses, price adjustment provisions, indemnity clauses, and put and sales options, which arise at a post-closing phase.

However, disputes can also arise during the pre-closing phase. Such disputes are generally related to the breach of confidentiality or exclusivity provisions agreed in pre-contractual documents, or to other provisions and obligations arising out of the letter of intent (hereinafter “LOI”).

Concerning the LOI, it could be the source of conflicts at the early stage of the M&A. The LOI is commonly understood to be non-binding document, used to express a tentative intention of the parties to enter into negotiations or to pursue negotiations for the conclusion of a contract. If signed, this document will govern throughout the negotiation stage until the final execution of the contract.

Yet, the binding effect of the LOI is controversial. Although the parties generally state therein that their sole intention is to outline their will by stating “this LOI has no binding effects” or “they are subject to a contract,” most LOIs might probably have legal implications that arise from (i) the intention of the parties, (ii) the laws that governs the LOI, or (iii) a court decision that could impose binding obligations although they were not foreseen by the parties.

In this context, the first question that arises is whether the LOI is really a non-binding document and whether the parties must comply with minimum duties during the pre-contractual stage. Since there is not a uniform way to approach this matter, the parties negotiating a LOI in cross border transactions should acknowledge the degree of enforceability of the LOI according to the applicable law to it.

In Argentina, the Civil and Commercial Code (“C&CC”) expressly states that the LOI is an instrument by which a party, or all the parties, express their consent to negotiate over issues related to a future contract. Under the C&CC the LOI is subject to a restrictive interpretation, and it will have the binding effects of an offer if it fulfills the necessary requirements to be considered as such. Moreover, under Argentine law the parties have the duty to negotiate in good faith (sections 9, 961, and 991 C&CC) as well as the duty to inform, to protect confidential information, and to cooperate between the parties.

On the other hand, in common law jurisdictions the issue of the binding effect of the LOI is complex, and in the case of the U.S., there is no uniformity among States. In principle, the LOI is an agreement to enter into negotiations with no binding obligations arising out of it, however, depending on the jurisdiction, the courts may determine that the parties are bound by their terms by looking to the language of the LOI or to the conduct of the parties.

Regarding additional duties imposed to the parties that were not expressly agreed, the Uniform Commercial Code (“UCC”) and the Restatement (Second) of the Law of Contracts state that the duty to negotiate in good faith only applies in the contractual stage and the parties could waive it. However, U.S. case law shows that the different States have yet to reach a uniform ground regarding the enforceability of the duty to negotiate in good faith. Some states recognize this duty, such as Pennsylvania (see Bennet and Chanel Home Centers Div.), Delaware (see SIGA Technologies), and New York (See Vacold LLC); others do not.

Having said this, the binding effects of the LOI will be determined on a case-by-case basis and it is likely that litigious matters related to it may appear. In this context, the second question that arises is whether an arbitration clause included in the LOI is enforceable. Fouchard, Gaillard, and Goldman explain that an international arbitration agreement is an agreement in which two or more parties agree that a dispute which has arisen, or which may arise between them, and which has an international character, shall be resolved by one or more arbitrators. Shortly, the parties contractually agree to submit the dispute or the future disputes to an arbitral tribunal excluding the state courts jurisdiction.

The enforceability of the arbitration clause will depend on its validity as analyzed under the applicable rules. According to the 1958 New York Convention, the validity of the agreement will be analyzed under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made (Article V.1.a).

In the event that the arbitration agreement is governed by Argentine law, the C&CC will govern its formalities and substance. Section 1650 of the C&CC states that the arbitration agreement should be in writing and consented by all the parties. It could be included in a contract, in an independent agreement, in a bylaw, or in a rule of procedure.

Hence, under Argentine law, an arbitration clause included in an LOI will be enforceable, provided that all the parties consent to it. In the event there is a unilateral LOI, the other party will have to unconditionally accept the terms of the LOI including the arbitration clause. In the U.S., the situation will be similar. Notwithstanding the non-binding nature, we must keep in mind that the arbitration clause inserted is severable from the underlying contract or document in which it is contained. Therefore, a dispute under the LOI containing an arbitration clause should be resolved by arbitration.

Drafting arbitration clauses in an LOI

It is important to bear in mind that if the parties decide to include an arbitration clause in their LOI, the drafting will play an important role. Poorly drafted clauses may be unenforceable or cause unnecessary delays. That is why parties may want to analyze the type of clause they will insert, and it will depend, among other things, on the type of binding provisions agreed to in the LOI, the amount of money involved, the structure of the transaction, and the stage of the pre-closing phase in which the clause will have effects.

There are many elements to consider when drafting the clause (see the IBA Guidelines for drafting arbitration clauses). For a clause to be inserted in an LOI, the following elements should at least be considered, since at this stage of the M&A the parties might not want to spend a lot of time and money in the dispute or might want to reconduct their relationship.

First, the expedited procedure provided in ICC rules, as well as in other institutions such as SIACHKIACSCC is a good option to expedite the resolution of the dispute and reduce costs. A fast resolution could help the parties to reconduct negotiations. Also, this procedure will be effective when the transaction involves a small amount of money, or if that is not case, when there are not many and fundamental binding provisions in the LOI.

Second, a multi-tiered clause is also another good element to include providing for mediation, negotiation or other form of alternative dispute resolution, before resorting to arbitration. This will give the parties an opportunity to settle their claims in a less “litigious” environment and reconduct their transaction.

Third, the scope of the arbitration clause should not be limited, unless there are very good reasons to do it. Since it is hard to foresee all the types of disputes that can arise at the negotiation phase of M&As, it is better to keep it simple and broad. As stated in the IBA Guidelines, less inclusive language invites arguments about whether a given dispute is subject to arbitration.

Conclusion

M&A transactions are complex. Although many disputes arise after the closing, they can also come up during the pre-closing phase. The LOI is commonly used by the parties to express their intention, and in principle is a non-binding document. Notwithstanding this, depending on the applicable law and the jurisdiction, it is likely that provisions will be considered as binding. In this sense, resorting to arbitration to solve the dispute is a possibility and a good option. However, the parties must be careful in the drafting in order to adequate the dispute provisions to the structure of the transaction and have an effective clause aligned with their intentions.

*The views expressed herein are the views and opinions of the author and do not reflect or represent the views of Allende & Brea or any other organization to which the author is affiliated.

 

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The post M&A Arbitration: Pre-Closing Disputes and Letter of Intent appeared first on Kluwer Arbitration Blog.

Smart & Savvy: Negotiation Strategies in Academia

ADR Prof Blog - Mon, 2017-11-20 11:00
I am delighted to announce that my new book is now available. Smart & Savvy: Negotiation Strategies for Academia is based on my experience training scientists and doctors in negotiation. My father and co-author, David Kupfer, is distinguished professor emeritus at the University of Pittsburgh, was chair of their Department of Psychiatry for over 25 … Continue reading Smart & Savvy: Negotiation Strategies in Academia →

Recent Major Law Faculty Awards

ADR Prof Blog - Mon, 2017-11-20 10:24
If you didn’t see the blog or the listserv a little over a week ago, you missed the announcements of two major awards.  Carol Izumi (UC-Hastings) received the William Pincus Award for outstanding service and commitment to clinical legal education, the highest award the AALS’s Clinical Section bestows.  And, Carrie Menkel-Meadow (UC-Irvine) received the ABA … Continue reading Recent Major Law Faculty Awards →

China: Legal Practice Of Dispute Resolution For Chinese Overseas Investment - Mondaq News Alerts

Google International ADR News - Mon, 2017-11-20 09:26

China: Legal Practice Of Dispute Resolution For Chinese Overseas Investment
Mondaq News Alerts
Enterprises in China advocate the Chinese traditional principle that "harmony is most precious", which is conducive to resolving overseas investment disputes through mediation and other alternative dispute resolution methods. The settlement of ...

and more »

Use alternative dispute resolution mechanism: Prabhu to legal community - Moneylife

Google International ADR News - Mon, 2017-11-20 06:58

Use alternative dispute resolution mechanism: Prabhu to legal community
Moneylife
Published in the International Journal of Communication, the study examined Modi's Twitter account to show how he used political irony and sarcasm to become broadly appealing. "Modi's irony provides a form of political spectacle and resonated on social ...

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Revisiting the Chagos Decision: Search for a Rationale

Kluwer Arbitration Blog - Mon, 2017-11-20 06:00

Ritwik Bhattacharya

In 2012, the Permanent Court of Arbitration [“PCA”] in the  Chagos Decision entertained a challenge to an arbitrator’s impartiality in an inter-state arbitration between Mauritius and the United Kingdom (“UK”) (analyzed here) . The PCA had to decide the appropriate standard for impartiality of arbitrators, and in the process, deal with the novel question of whether inter-State arbitration should be considered more like private commercial arbitrations or State-to-State permanent tribunals (like the International Court of Justice (“ICJ”) or the International Tribunal for the Law of the Sea (“ITLOS”)). While it decided in favour of the standard applicable to the latter, this post will examine whether the Tribunal’s decision is supported by a clear rationale.

 

The Two Viewpoints and the Tribunal’s Decision

Mauritius argued that inter-State arbitration should be treated like any other arbitration. Thus, the higher standard of appearance of bias was “applicable to all arbitrations,” and there was “no justification in law or policy for a different or lower standard of arbitral ethics in inter-State arbitrations.” It further argued that inter-State arbitration could not be considered akin to State-to-State permanent tribunals like the ICJ or the ITLOS for three reasons: first, the views of a particular judge carry far lesser weight in the ICJ or the ITLOS as the number of judges is higher; second, judges of the ICJ or the ITLOS are elected as opposed to being appointed in inter-State arbitrations and third, the likelihood of a dispute involving the home state of the elected judge in the ICJ or the ITLOS is very small.

The UK considered any reliance on the law and practice applied in international commercial and investment protection arbitrations to be “misleading” and “wrong” since inter-State arbitration does not involve “repeat arbitral appointments, whether by the same party or by the same law firm; potential for influence where arbitrators may be perceived as worrying about where their next appointment will come; [and] cross-overs, where individuals repeatedly switch between the roles of counsel and arbitrator […]”. It argued that the standard derived from the rules and practice of the ICJ and the ITLOS, which envisages a lower threshold, should be applied.

The Tribunal supported the UK’s viewpoint. In doing so, the Tribunal did not consider that the principles “developed in the context of international commercial arbitration and arbitration regarding investment disputes” had any relevance to the present dispute. To buttress its conclusion, it relied on the UK’s argument regarding inter-State arbitration being an alternative to the ICJ and the ITLOS, stating that “it cannot have been the intention behind that framework that different conditions would apply to the independence and impartiality of adjudicators in the third forum (arbitration under Annex VII) in comparison with the ICJ or ITLOS.”

 

The Search for a Rationale

The Tribunal did not directly address the submissions made by Mauritius and the UK about why inter-State arbitration should be treated like international commercial arbitration/investor-State arbitration, and State-to-State permanent tribunals respectively.

The Tribunal’s only reason was that inter-State arbitration in the instant case was an alternative to the ICJ and the ITLOS, because of which different rules cannot apply to impartiality and independence of arbitrators. First, it is not always necessary that inter-State arbitration is presented as an alternative to the ICJ or the ITLOS. It is possible for inter-State arbitration to exist as a standalone option, say in a Friendship, Commerce and Navigation (“FCN”) Treaty, where this reasoning is not tenable. Second, in any event, it is not necessary that alternative options for dispute resolution must be subject to the same procedural constraints. This was explicitly pointed out by Mauritius when it said that the mere availability of three alternative judicial bodies “doesn’t meld them or merge them in their procedures. There is no common set of procedural rules for bodies exercising jurisdiction under Part XV. […] To take an example, there is no provision for intervention before Annex VII Tribunals. There are different provisions for intervention before the court and before ITLOS.”

It is also not clear why the standard in international commercial arbitration/investor-State arbitration is irrelevant in the present case. In paragraph 151, the Tribunal recognized that the standard for impartiality in the PCA’s Optional Rules, while not adopted by the parties to the dispute, “has been adopted in a number of PCA administered arbitrations” and “can be considered to form part of the practice of inter-State arbitral tribunals.”  The explanatory notes to the text of the PCA’s Optional Rules clearly state that they “are based on the UNCITRAL Arbitration Rules,” with certain modifications. The articles to which such modifications have been made are enumerated in the notes to the text at page 64. None of the modifications concern the standard of impartiality under Rule 10, PCA’s Optional Rules. Therefore, it can be inferred that decisions applying UNCITRAL rules and supporting the appearance of bias standard, would arguably be relevant to the standard of impartiality, even in inter-state arbitrations.

Lacking a clear rationale by the Tribunal for its decision, some authors have speculated what the rationale behind this decision could be. Annalise Nelson has stated that a potential rationale could be the “diplomatic culture or sensitivity that pervades inter-State disputes and sets them apart from other forms of arbitration.” This, combined with the low frequency of inter-State arbitrations, means that “arbitrators are therefore less likely to focus their careers and income streams around securing future state-to-state arbitration appointments than other kinds of arbitration.” That, by itself, is not a very strong reason since it does not explain why the perception of the integrity of the dispute resolution process is any less important in an inter-state arbitration. Furthermore, it could be argued that an arbitrator could potentially be seen as favouring a State in inter-State arbitrations, so as to procure future appointments in other kinds of arbitrations.

 

A Question of Practicality

Some authors have focussed on more practical considerations that may have played on the mind of the Tribunal. Chiara Giorgetti posits that the decision to employ a low threshold for impartiality was taken deliberately to disincentivise challenges to arbitrators, which have become common and unnecessarily increase the cost and length of arbitration proceedings. Annalise Nelson argues that if a stringent threshold is applied, it will make it difficult to find arbitrators, as most arbitrators who are appointed in inter-state arbitrations tend to come from “a tiny pool of candidates.” These practical considerations need to be weighed against the strong principle of preserving the integrity of the judicial decision-making process where justice should not only be done but should manifestly and undoubtedly be seen to be done. Further, the practical implications of this decision must also be considered.

Broadly, there are three impacts that flow out of the Chagos Decision. First, while the Tribunal disregarded the appearance of bias standard, it did not provide an alternative standard beyond stating that there must be no prior involvement in the subject matter of the case and there must not be justifiable doubts about the impartiality of the arbitrator. Lack of prior involvement in a subject matter cannot be the only criterion for bias. The “justifiable doubts” standard is an unhelpful truism since it does not provide any guidance as to what conditions can lead to these “justifiable doubts.” Therefore, as one author has noted, “the contours of the applicable standard adopted remain unclear.” Second, challenges to arbitrators will undoubtedly reduce. While this will help in saving time and costs in arbitration, it also means that parties will deter from challenging arbitrators in legitimate cases. In the Chagos Decision, Mauritius was careful to repeatedly emphasise its “respect for the probity and standing of Judge Greenwood.” However, parties must now show that the concerned arbitrator is actually biased, which can prove detrimental from a strategic viewpoint if the challenge fails and arbitrator proceeds to adjudicate the case. Third, a practical consequence peculiar to inter-state arbitration would be the likelihood of state parties considering the arbitration as illegitimate and refusing to accept its consequences, as can be seen in the case of China in the South China Sea. This danger is more aggravated in the context of inter-state arbitral awards since no direct enforcement mechanism exists and this can potentially undermine the faith in inter-state arbitration as a viable means of dispute resolution. For the sake of clarity of the law and viability of inter-state arbitration as a dispute resolution mechanism, it is imperative that appearance of bias threshold be applied even to inter-state arbitrations or in the alternative, compelling reasons be provided for applying a lower threshold.

More from our authors: Arbitrators as Lawmakers
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Minister commends BCDR-AAA role - Bahrain News Agency

Google International ADR News - Mon, 2017-11-20 04:42

Minister commends BCDR-AAA role
Bahrain News Agency
Manama, Nov. 20 (BNA): Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa has praised the positive contribution of the Bahrain Chamber for Dispute Resolution (BCDR-AAA) in promoting alternative dispute resolution in the Kingdom of Bahrain.

and more »

Charleston-area hires and promotions - Charleston Post Courier

Google International ADR News - Sun, 2017-11-19 23:10

Charleston Post Courier

Charleston-area hires and promotions
Charleston Post Courier
He focuses his practice on mediation, alternative dispute resolution and general litigation. He is a former 9th Circuit Court ... Follmann has a bachelor's degree in international business and finance from Texas A&M University. Gatto has more than 12 ...

A New, BLEU-based Objection to Intra-EU Energy Charter Treaty Claims

Kluwer Arbitration Blog - Sat, 2017-11-18 23:24

Danilo Ruggero Di Bella

Currently, several dozen arbitral claims have been lodged by investors from an EU Member-State against another EU Member-State based on the Energy Charter Treaty (ECT). These so-called intra-EU ECT-based arbitrations seem to be increasing, despite attempts by the European Commission to halt them. So far, neither the Respondent-States nor the Commission (as amicus curiae) have succeeded in convincing an arbitral tribunal of intra-EU jurisdictional problems with such claims.

This post argues a new potential objection to intra-EU ECT-based claims based on is the parallelism between the ECT and the Belgo-Luxembourg BITs, or in other words, between the superseded European Economic Community (EEC) and the Belgo-Luxembourg Economic Union, coupled with the principle of systematic integration. To understand this comparison, it is first necessary to recall the background of these treaties.

The 1957 Treaty of Rome set forth in article 210 the international legal personality of the EEC and granted the Commission competence to conclude treaties in name of the EEC. In 1991, the Commission signed, on behalf of the EEC (and also the ECSC and the EURATOM), the European Energy Charter – the treaty establishing the ECT’s political foundations – whose signature is a precondition for joining the Energy Charter Conference and acceding to the ECT. In 1993, following the entering into force of the Maastricht Treaty, the European Union (EU) was established and the European Economic Community became the European Community (EC) to reflect its new wider scope of action. Consequently, in 1994 the ECT was signed as a mixed agreement by the Commission on behalf of the back then European Communities – the ECSC, the EURATOM, and the EC – and by the Member States, falling the Energy Charter Conference related areas within the mixed competence. Once the Treaty on the Functioning of the EU (TFEU) entered into force in 2009, the EU replaced and succeeded the EC by amending the EEC Treaty and relabeling it as the TFEU. Nowadays, of the three Communities that signed the ECT in 1994, only EURATOM is still operating and is a Contracting Party to the ECT just as the EU is.1)BALTAG Crina, The Energy Charter Treaty: The Notion of Investor, Kluwer, 2012, p.57-63. jQuery("#footnote_plugin_tooltip_9685_1").tooltip({ tip: "#footnote_plugin_tooltip_text_9685_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); All the way from the drafting of the European Energy Charter to the negotiation of the ECT, the role of the European Commission has been crucial to the ECT’s adoption and entrance into force in 1998. The three European Communities, on one hand, as well as, the EU and EURATOM, on the other, when signed and entered into the ECT, respectively, did so as a Regional Economic Integration Organisation (REIO) pursuant to article 38 of the ECT, which allows REIO to become a Contracting Party to that treaty. Simultaneously, the EU Member-States signed and ratified the ECT (the value of these signatures and ratifications will be put in perspective down below through the lens of the Belgo-Luxembourg BITs).

Let us turn now to the intriguing Belgo-Luxembourg Economic Union (BLEU). The BLEU was constituted in 1922 by the entrance into force of the 1921 Convention establishing an Economic Union between Belgium and Luxembourg. This Convention established a Regional Economic Integration Organisation primarily based on a common external trade-investment policy and customs-excises union – where the territories of the Member-States are to be considered as forming one single territory –, and on a monetary association, too. Overtime the 1921 Convention has been adapted to the new circumstances – such as the founding of the Benelux Economic Union, the EEC and, later, the EU – through Protocols up to the negotiation of a new Convention, which entered into force in 2005. The new Convention confirmed and strengthened the preferential relations between Belgium and Luxembourg within the legal framework of the BLEU2)SOMERS Eduard, Belgium-Luxembourg Economic Union, Max-Planck. jQuery("#footnote_plugin_tooltip_9685_2").tooltip({ tip: "#footnote_plugin_tooltip_text_9685_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This preferential relation is acknowledged by the Benelux and the EU in Article 94 of the Benelux Treaty and Article 350 of the TFEU, respectively. The EU recognizes so much the special bound between Belgium and Luxembourg that at times it considers the Belgo-Luxembourg Economic Union as a single Member-State (e.g., the “whereas (2)” of the EC Regulation No. 2771/1999). As regards the institutions of this Economic Union, they closely recall the structure of the EU itself for their functions as well as their names. The BLEU is, indeed, administered by the Mixed Administrative Commission, that is entrusted with tasks similar to those of the European Commission, being the executive arm of the Economic Union and ensuring on a permanent basis the application of the Convention and a regular liaison between the Governments of the two Member-States. Whereas the Council of the European Union closely resembles the BLEU’s Committee of Ministers, which is regularly summoned to adopt legal instruments, and coordinate common policies, just as the Ministers do in the Council. And just like the EU Commission proposes the legislation to be adopted by the Council of the EU and the EU Parliament as well as supervises its application, the BLEU Commission prepares proposals to be submitted to the Committee of Ministers for decision making, and oversees the implementation of the Convention.

It is noteworthy that, long before the EU, the BLEU has guaranteed nationals of its Member-States – both natural and juridical persons – freedom of movement and establishment, equal treatment in respect of the exercise of professional occupations and salaried employments.

As the similarities highlighted above make clear, although it is well-known that the Benelux is presumably the forerunner of the European Economic Community, the true forerunner of the Benelux (and consequently of the EEC, the EC and the EU) is the Belgo-Luxembourg Economic Union itself.

Investment protection is one of the BLEU’s areas of action, conducted through a peculiar bilateral investment treaty model, that is usually offered to the prospective third High Contracting Party for its acceptance (a third Party with respect to the Union). On behalf of the Economic Union, the BLEU has entered into approximately 100 BITs. Now, these Belgo-Luxembourg BITs concluded by the BLEU share many of features with the ECT concluded by the EU, primarily for two reasons:

1) the EU and the BLEU are both Regional Economic Integration Organizations (undoubtedly, as illustrated above, with a lot in common, as one inspired the other);

2) the way these treaties have been negotiated, signed and ratified by the Parties (as explained below).

Due to the mixed nature of the competences necessary to authorize its entrance into force, the ECT was negotiated, signed and ratified by the EU Commission on behalf of the EU, by each EU Member-State and, of course, by third State Parties. Curiously enough, BLEU BITs are no exception to it, and not only vis-a-vis Luxembourg. Again, because of the very same reason (the mixed nature of the competences necessary to authorize their entrance into force), BLEU BITs are signed not only by the representative of the Economic Union, but also by representatives of Luxembourg, Belgium, and by representatives of each Belgian region. The fact that a region of Belgium signs a BIT does not give that region an independent legal standing under that treaty, of course. After the signature, Luxembourg and Belgium are each responsible to ratify the BIT to ensure its implementation. Hence, in our parallelism, the signature of the representative of the Economic Union is comparable to the EU Commission’s signature in the ECT, whereas the signature of the representative either of Walloon Region or Luxembourg is equivalent to the signature of Italy or Spain representatives on the ECT.

So, if it is clear that a Belgian investor cannot rely on a BLEU BIT to file an arbitration against Luxembourg, why is it not equally clear that a French investor may not resort to the ECT to launch an arbitration against Italy? It flows from the above mentioned analogy that this ought not to happen. After all the BLEU has significantly influenced the shape of the EU and its activities, so why should this influence have been absent during the drafting and signing of the ECT? That’s why it is sensible to suggest that the ECT should be read in the light of the older and consolidated BLEU BITs tradition to prevent intra-EU arbitrations just like intra-BLEU arbitrations.

Avoiding inconsistencies in international law – resulting from allowing intra-EU arbitrations while denying intra-BLEU arbitrations – calls for cross-applying the principle of systematic integration to Economic Integration Organizations in investment arbitrations. Tribunals have frequently construed the particular international investment agreement (IIA) at issue based on other IIAs in a manner that brings coherence to the system of investment law. The weight accorded to other treaties in understanding the applicable IIA may be seen as proportionate with the degree of similarity among equivalent texts. Accordingly, given the high affinity between the ECT and the BLEU-BITs, when interpreting the status of the EU or its Member-States under the ECT, BLEU BITs may offer interpretative guidance as to the legal standing of an Economic Integration and its Contracting Parties to an IIA by contextualizing and redefining their peculiar contours.

References   [ + ]

1. ↑ BALTAG Crina, The Energy Charter Treaty: The Notion of Investor, Kluwer, 2012, p.57-63. 2. ↑ SOMERS Eduard, Belgium-Luxembourg Economic Union, Max-Planck. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitrators as Lawmakers
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Access to Justice: Rebalancing the Third-Party Funding Equilibrium in Investment Treaty Arbitration

Kluwer Arbitration Blog - Fri, 2017-11-17 22:02

Ylli Dautaj and Bruno Gustafsson

Third-party funding remains a hot topic in arbitration, which is understandable considering its complexity and that its accompanying issues often have major implications for arbitral procedure. This fall, the ICCA-Queen Mary Task Force on third-party funding in international arbitration released its “draft,” touching upon a number of contemporary issues vis-á-vis third-party funding, all of which ought to be of high interest to practitioners, scholars, and students alike.

The third-party funding market exceeds billions of dollars and various actors are involved by way of funding, getting funded, and as brokers/intermediaries.1)Chapter 3: “Litigation Funding in International Arbitration”, in Jonas von Goeler, Third-Party Funding in International Arbitration and its Impact on Procedure, International Arbitration Law Library, Volume 35 (Kluwer Law International; 2016) p. 75-76. jQuery("#footnote_plugin_tooltip_4624_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4624_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); One of the primary reasons for seeking third-party funding is the lack of “access to justice.” In the context of third-party funding, “access to justice” refers to all tools and resources that implicate a party’s opportunity to defend or enforce a legal right. In other words, lack of “access to justice” can be roughly equated to a lack of resources to litigate properly. Notwithstanding, this reason alone is changing and third-party funding is more and more being used by claimants to allocate risks and costs while continuing its business operations with a steady cash flow. However, with competition being the hallmark of the western economy, businesses being able to compete while simultaneously litigating for justice is ipso facto the essence of real “access to justice.”

In “Gamblers, Loan Sharks & Third-Party Funders“, Catherine Rogers wrote that investment arbitration has attracted funders’ attention due to massive potential recoveries. However, she raised an important point in that critics are concerned that ”significant new funding in investment arbitration cases will aggravate an already exploding caseload that creates a disproportionate burden on States.” Although funders can, in theory, fund the respondent party, too, there is no real incentive to do so and ”[f]or this reason, the arrival of third-party funders may well alter the entire landscape by significantly increasing the number of claims, as investors whose claims were considered too costly to pursue are able to obtain financing.” Furthermore, she wrote that ”[t]he resulting concern is that third-party funding will further distort perceived disparities in investment arbitration that favor investors over States.” It can be said that Catherine was right in her analysis and most probably the near future will shed further light on the otherwise bullet-proof analysis.

This view makes it easy to overlook certain important features vis-á-vis access to justice, e.g. that some states might also lack sufficient expertise and resources to litigate properly, and thus “access justice.” Two important issues come to mind. First, that the overwhelming majority of funding goes – either directly or indirectly – to the claimant, and perhaps reasonably so. Second, the decision of whether to fund or not is primarily based on the merits of the case, the benefit-cost analysis, and the enforceability of the award. It is in light of this latter calculus that a third-party funder, privileged with the expertise of well-known arbitration scholars and practitioners, could potentially weigh in a less developed country’s lack of resources to prepare and litigate a case as a factor in its analysis. The calculus might culminate in, for example, that a less developed state would be more amenable to reach a quick settlement for an otherwise vexatious or frivolous claim.

On September 6, 2017, a new “investment support programme for the least developed countries” was released. The program is designed to provide a number of less developed countries (and there “under-resourced” law firms) with, among other things, advice and support in investment-related negotiations and to assist in dispute settlement, such as international arbitration.

It is true that third-party funding enhances the access to justice and that it is a good thing for the equality of arms and for the overreaching principles of procedural fairness and justice. However, less developed countries, too, have shortcomings vis-á-vis realizing real access to justice. If third-party funders do factor in the less developed states’ resources, experience, and knowledge in its calculus (which is likely), it is with anticipation that we wait to see whether the investment support programme (or similar projects) will be a factor of consideration in the third-party funding calculus. If it does become so, it is a welcome feature in rebalancing the contemporary one-sided regime of third-party funding in investment treaty arbitration.

References   [ + ]

1. ↑ Chapter 3: “Litigation Funding in International Arbitration”, in Jonas von Goeler, Third-Party Funding in International Arbitration and its Impact on Procedure, International Arbitration Law Library, Volume 35 (Kluwer Law International; 2016) p. 75-76. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitrators as Lawmakers
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