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SC: Employee of a party allowed as 'arbitrator' in proceedings initiated prior to 2015 amendment to the Arbitration ... - Lexology (registration)

Google International ADR News - 6 hours 8 min ago

SC: Employee of a party allowed as 'arbitrator' in proceedings initiated prior to 2015 amendment to the Arbitration ...
Lexology (registration)
It was directed that in the event of failure by Aravali Power to suggest an appropriate arbitrator, Era Infra would be at liberty to revive the petitions, in which case the Court would appoint a sole arbitrator from the list maintained by Delhi ...

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alliantgroup's Kathy Petronchak Addresses House Ways and Means Oversight Subcommittee on Potential IRS Reforms - Markets Insider

Google International ADR News - 8 hours 13 min ago

alliantgroup's Kathy Petronchak Addresses House Ways and Means Oversight Subcommittee on Potential IRS Reforms
Markets Insider
From issues such as a decrease in the use of alternative dispute resolution, emerging problems in the independent Appeals process, an overall lack of transparency from the IRS during examinations and third party contact procedures that are often ...

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India: SC: Employee Of A Party Allowed As 'Arbitrator' In Proceedings Initiated Prior To 2015 Amendment To The ... - Mondaq News Alerts (registration)

Google International ADR News - 8 hours 30 min ago

India: SC: Employee Of A Party Allowed As 'Arbitrator' In Proceedings Initiated Prior To 2015 Amendment To The ...
Mondaq News Alerts (registration)
It was directed that in the event of failure by Aravali Power to suggest an appropriate arbitrator, Era Infra would be at liberty to revive the petitions, in which case the Court would appoint a sole arbitrator from the list maintained by Delhi ...

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alliantgroup's Kathy Petronchak Addresses House Ways and Means Oversight Subcommittee on Potential IRS Reforms - PR Newswire (press release)

Google International ADR News - 11 hours 27 min ago

alliantgroup's Kathy Petronchak Addresses House Ways and Means Oversight Subcommittee on Potential IRS Reforms
PR Newswire (press release)
From issues such as a decrease in the use of alternative dispute resolution, emerging problems in the independent Appeals process, an overall lack of transparency from the IRS during examinations and third party contact procedures that are often ...

FG reconstitutes investment, securities tribunal - Guardian (blog)

Google International ADR News - Wed, 2017-09-20 23:10

Guardian (blog)

FG reconstitutes investment, securities tribunal
Guardian (blog)
“The Alternative Dispute Resolution (ADR) window is going to be rejuvenated to dispel fears and threats from both Capital Market operators and the investing public on issues that require declaratory orders by the Tribunal,” she said. The Minister ...

Nigerian govt. moves to sanitise capital market; reconstitutes ... - Premium Times

Google International ADR News - Wed, 2017-09-20 03:37

Premium Times

Nigerian govt. moves to sanitise capital market; reconstitutes ...
Premium Times
The Nigerian government said on Tuesday that the reconstitution of the Investment and Securities Tribunal, IST was a practical step to sanitise the capital market ...

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Using I-statements in effective communication

Communication and Conflict Blog - Wed, 2017-09-20 02:37
Why and how I-statements support effective communication and conflict resolution. Examples of I-statements to illustrate.

Lagos airport road project and contextual federalism - Guardian (blog)

Google International ADR News - Tue, 2017-09-19 18:10

Guardian (blog)

Lagos airport road project and contextual federalism
Guardian (blog)
It is indeed remarkable that even as controversy persists on responsibility for roads construction and rehabilitation in the country, Lagos State government has reportedly flagged off the construction of the access road to the international airport ...

India Secures Ex-parte Ad-interim Injunction Restraining Vodafone BIT Arbitration

Kluwer Arbitration Blog - Tue, 2017-09-19 17:22

Ashutosh Kumar and Anjali Anchayil

The long-standing tax dispute between India and the Vodafone, also previously discussed in here,  recently entered new territory when India secured an ex-parte ad-interim injunction restraining the continuation of one of two bilateral investment treaty (“BIT”) arbitration proceedings initiated against it by the Vodafone group.

A judge of the Delhi High Court granted this injunction on 22 August 2017 (I.A.9460/2017 in CS(OS) 383/2017) at the very first hearing of a civil suit filed by India against Vodafone Group PLC and Vodafone Consolidated Holdings Ltd. (the “Vodafone Entities”).

Background

In April 2014, Vodafone International Holdings B.V. (the “Dutch BV”) initiated arbitration proceedings (the “First Arbitration”) under the India-Netherlands Bilateral Investment Promotion and Protection Agreement (the “India-Netherlands BIPA”). The dispute arose as a result of India’s efforts to impose tax liability on the Dutch BV for its alleged failure to deduct tax in relation to the indirect acquisition of an Indian company by the Dutch BV. Subsequently, in January 2017, the Vodafone Entities, as parent companies of the Dutch BV, initiated separate arbitration proceedings (the “Second Arbitration”) in relation to (broadly) the same dispute under the India-United Kingdom Bilateral Investment Promotion and Protection Agreement (“India-UK BIPA”).

In response, India filed a civil suit against the Vodafone Entities seeking declaratory and injunctive reliefs in relation to the Second Arbitration. India asserted that: (i) both arbitrations were based on the same cause of action and sought identical reliefs; (ii) the Second Arbitration constituted an abuse of law relying on the recent award in Orascom TMTI v. Algeria (ICSID Case No. ARB/12/35, 31 May 2017), where an ICSID arbitral tribunal had applied the doctrine of abuse of rights to decline jurisdiction over one of multiple parallel BIT arbitration proceedings; (iii) disputes in relation to tax demands were beyond the scope of BIT arbitration proceedings as taxation was a sovereign function and tax disputes could only be raised before domestic courts; and (iv) laws passed by the Indian Parliament could not be the subject of adjudication in BIT arbitration proceedings.

The injunction

The court granted an ex-parte ad-interim injunction restraining the Vodafone Entities from pursuing the Second Arbitration. It relied on the following conclusions: (i) the principles of Indian law applicable to anti-suit injunctions (see Modi Entertainment Network v. WSG Cricket Pte. Ltd., (2003) 4 SCC 341) were also applicable to anti-arbitration injunctions, and accordingly, an arbitration could be restrained by an injunction if such arbitration was “oppressive or vexatious”; (ii) prima facie there was a duplication of parties and reliefs in the two BIT arbitration proceedings; (iii) prima facie India was the “natural forum” to resolve the disputes raised by the Vodafone Entities; (iv) prima facie the Vodafone Entities and the Dutch BV constituted one economic entity/corporate group with common management and shareholders; (v) prima facie the filing of two BIT arbitration proceedings in such circumstances was an abuse of the process of law and created a risk of parallel proceedings and conflicting decisions; and (vi) prima facie it would be inequitable, unfair and unjust to permit the Vodafone Entities to prosecute the Second Arbitration.

Comment

The court noted the overlap between the two BIT arbitration proceedings and recognised the abuse of the process of law which would result as a direct consequence. The grant of an interim injunction in such circumstances was clearly justified. However, the decision suffered from certain procedural and analytical lacunae, which provide cause for concern. These lacunae are briefly noted below.

  • Lack of urgency justifying an ex-parte order

The ex-parte ad-interim injunction was granted under Order XXXIX of the Code of Civil Procedure, 1908 (the “CPC”). While Order XXXIX of the CPC permits a court hearing a civil suit to grant an ex-parte injunction, recourse to an ex-parte injunction is permissible only “where it appears that the object of granting the injunction would be defeated by delay”. In addition, a court granting an ex-parte injunction must “record the reasons for its opinion that the object of granting the injunction would be defeated by delay”. However, from a reading of the decision, it appears that no circumstances were cited by India to satisfy the above condition and the court did not record any reasons for its opinion to such effect. In fact, as the Second Arbitration appears to have not progressed beyond the appointment of arbitrators, there was no apparent urgency justifying an ex-parte order. This procedural lacuna may be relevant in any appeal against the ex-parte ad-interim injunction.

  • Tribunal being the more appropriate forum for relief

Although the court considered the award in Orascom TMTI v. Algeria, it did not acknowledge the implicit point that the more appropriate forum for relief in relation to parallel BIT arbitration proceedings would be the arbitral tribunal in the Second Arbitration. The arbitral tribunal would likely be better placed to assess the scope of the two BIT arbitration proceedings and the likelihood of parallel proceedings and conflicting decisions. In addition, by permitting the arbitral tribunal to decide this issue, the court would give due regard to the kompetenz-kompetenz principle. Accordingly, before granting an ex-parte ad-interim injunction, the court should have considered whether India should be directed to move an application before the arbitral tribunal in the Second Arbitration to seek an appropriate order declining jurisdiction. However, from a reading of the decision, it appears that this issue was not considered by the court. This analytical lacuna is another cause for concern. While the jurisdiction of the court to grant an injunction is not in doubt, the court appeared to disregard the more appropriate forum for relief and the kompetenz-kompetenz principle.

  • Lack of clarity as to the scope of BIT arbitration proceedings

India argued that disputes in relation to tax demands were beyond the scope of BIT arbitration proceedings as taxation was a sovereign function, and also that laws passed by the Indian Parliament could not be adjudicated in BIT arbitration proceedings. These arguments challenged the jurisdiction of the arbitral tribunals in the two BIT arbitration proceedings, and did not have any relevance to whether these BIT arbitration proceedings were “vexatious or oppressive”.

While the court did not specifically address these arguments, it seemed to see some merit in them as it prima facie held that India was “the natural forum for the litigation of the [Vodafone Entities’] claim against [India]”. This conclusion (although prima facie in nature) indicated a lack of clarity as to the scope of BIT arbitration proceedings. While Indian courts have certainly had limited experience in deciding issues relating to BIT arbitration proceedings, to not recognise that state action (including legislation) can potentially be challenged in BIT arbitration proceedings with reference to independent standards of protection guaranteed under BITs is a serious analytical lacuna. However, it is quite likely that the court will ultimately recognise this aspect as it deals with the civil suit further.

  • Application of principles applicable to anti-suit injunctions

The court granted an ex-parte ad-interim injunction by applying principles of Indian law applicable to anti-suit injunctions – specifically the principles laid down by the Supreme Court in Modi Entertainment Network v. WSG Cricket Pte. Ltd., (2003) 4 SCC 341. However, the application of these principles in the context of anti-arbitration injunctions was specifically rejected by a Division Bench of the Delhi High Court in McDonald’s India Private Limited v. Vikram Bakshi, (2016) SCC OnLine Del 3949, which is binding precedent for the court. Thus, the court appears to have applied incorrect principles to decide on the grant of the ex-parte ad-interim injunction. However, because BIT arbitration proceedings are substantially different from commercial arbitration proceedings (which were also the subject of the decision of the Delhi High Court in McDonald’s), it is arguable that principles applicable to anti-arbitration injunctions should not apply to BIT arbitration proceedings.

Conclusion

The ex-parte ad-interim injunction is likely to provide some respite to India. However, the procedural and analytical lacunae in the decision of the court leave it vulnerable to challenge. Therefore, this victory may only be short-lived. In any event, this civil suit is likely to test and redefine the contours of the law governing anti-arbitration injunctions in India – particularly in respect of BIT arbitration proceedings.

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Nigerian reconstitutes securities tribunal for capital market - TV360

Google International ADR News - Tue, 2017-09-19 14:13

Nigerian reconstitutes securities tribunal for capital market
TV360
“The Alternative Dispute Resolution (ADR) window is going to be rejuvenated to dispel fears and threats from both Capital Market operators and the investing public on issues that require declaratory orders by the Tribunal”, she said. The Minister ...

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Nigeria: FG inaugurates Investment and Securities Tribunal, to restore investors' confidence in capital market - WorldStage

Google International ADR News - Tue, 2017-09-19 12:35

WorldStage

Nigeria: FG inaugurates Investment and Securities Tribunal, to restore investors' confidence in capital market
WorldStage
“The Alternative Dispute Resolution (ADR) window is going to be rejuvenated to dispel fears and threats from both Capital Market operators and the investing public on issues that require declaratory orders by the Tribunal,” she said. The Minister ...

Patent disputes - Financier Worldwide

Google International ADR News - Tue, 2017-09-19 11:00

Financier Worldwide

Patent disputes
Financier Worldwide
Cross: In the EU, preparation for the Unitary Patent (UP) has been the key development, with both EU and US-based firms developing their litigation teams in the expectation that the Unified Patent Court (UPC) will become a major forum for international ...

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Lagos Airport Road Project And Contextual Federalism - Osun Defender (blog)

Google International ADR News - Tue, 2017-09-19 08:28

Osun Defender (blog)

Lagos Airport Road Project And Contextual Federalism
Osun Defender (blog)
It is indeed remarkable that even as controversy persists on responsibility for road construction and rehabilitation in the country, Lagos State government has reportedly flagged off the construction of the access road to the international airport ...

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Challenges to the Legitimacy of International Arbitration: A Report from the 29th Annual ITA Workshop

Kluwer Arbitration Blog - Tue, 2017-09-19 01:34

Michelle Grando

ITA

The 29th Annual Workshop of the Institute for Transnational Arbitration (“ITA”), which took place on 14-15 June 2017 in Dallas, focused on a timely subject of much importance to the future of international arbitration, namely, the “Challenges to the Legitimacy of International Arbitration.” The event was co-chaired by Caline Mouawad (King & Spalding), Jeremy K. Sharpe (Shearman & Sterling), and Jarrod Wong (McGeorge School of Law).

The tone of the workshop was positive and constructive, starting from the keynote speech delivered by Gary Born (WilmerHale). Gary Born demonstrated through historical references spanning more than two hundred years that the current criticisms of international arbitration are not new. Yet, international arbitration continues to exist and has become more widespread. Born argued that ultimately the success of international arbitration lies in the fact that it is an expression of individual rights such as the right to contract and the right to form relationships with others that are widely recognized and considered fundamental to any healthy society. He noted that States have not been able to come up with a better alternative, and concluded that it is difficult to imagine the world without international arbitration.

Following the keynote address, the speakers identified several challenges to the legitimacy of international arbitration, including issues regarding the decision-makers, the conduct of counsel, the efficiency of the proceedings, and domestic court oversight, among others. These issues are addressed in turn and are followed by concluding considerations about whether the existing criticisms indicate that international arbitration is in crisis.

Decision-makers

One of the characteristics of international arbitration is the right of the parties to choose the decision-makers. While this characteristic is often presented as one of the main advantages of international arbitration, it has also given rise to criticism. In particular, critics have raised questions about the legitimacy of an award issued by privately appointed arbitrators.

The discussion during the workshop revealed that the right to nominate arbitrators actually enhances the legitimacy of the process in many ways. In particular, party-appointed arbitrators play an important role in ensuring that the tribunal considers the evidence and arguments presented by the parties that appointed them. Apart from ensuring that the award accurately takes into consideration the views of the parties, this enhances the likelihood that the losing party will accept the award and comply with it. It was noted that this reflects the view not only of private parties, but also of many states.

The speakers agreed, however, that it is necessary to adopt and enforce strong conflict rules; procedural controls on appointments so that the parties do not abuse the right to nominate arbitrators (e.g., by nominating arbitrators that are unfit or forcing their nominee to resign in order to delay the proceedings); and rules of ethics to ensure that arbitrators act diligently and impartially. Jan Paulsson suggested that the legitimacy of party-appointed arbitrators might also be strengthened if the parties were to agree on the President of the tribunal first and then nominate the other two arbitrators with her/his input.

Conduct of counsel

While the parties’ counsel play a fundamental role in international arbitration, due to their diversity of backgrounds and legal cultures they are not always guided by the same values and ethical principles. The lack of a binding uniform code and a global authority to enforce it make the regulation of counsel conduct challenging in practice, raising questions about the legitimacy of international arbitration.

The subject of regulation of counsel conduct has been widely discussed in the last few years, and there seems to be an emerging consensus about the need to regulate and sanction counsel for unethical conduct. The speakers argued that the standards should focus on objective issues such as, for instance, the filing of futile challenges to arbitrators and arbitrator conflicts caused by the appointment of new counsel during the proceedings. This is, in fact, the approach adopted by the two most well-known guidelines, the IBA Guidelines on Party Representation in International Arbitration and the LCIA’s General Guidelines for the Parties’ Legal Representatives.

No general consensus, however, has been reached yet as to who should be the regulator – options include national bar associations, courts at the seat of arbitration, arbitral institutions, and a global ethics counsel. The preference of the speakers was for arbitral institutions to take the role of adopting standards. This is a reasonable approach, as it would allow for greater experimentation and refinement of the standards over time. The LCIA has pioneered this route with the adoption of its Guidelines in 2014. Under the LCIA rules, however, the application of the standards is left to international tribunals (see Article 18.6). According to the representative of the LCIA, the enforcement of the standards is better left to tribunals because counsel conduct is a due process issue.

Efficiency of the proceedings

International arbitration has come under attack for being costly and slow. In the 2015 Queen Mary/White & Case International Arbitration Survey, the survey respondents indicated that the cost (68%), lack of insight into arbitrators’ efficiency (39%), and lack of speed (36%) were among the worst characteristics of international arbitration. Against this backdrop, the workshop provided an opportunity to discuss options to increase the efficiency of the proceedings.

One option that was considered was the use of bifurcation and motions for summary judgment. The speakers agreed that these procedures can increase efficiency if the issue in question is discrete and its early resolution can dispose of the case or a significant part of it. However, when the issue is connected with other aspects of the case, bifurcation and motions for summary judgment might actually lead to inefficiencies such as repeat presentation of the same evidence and multiple appearances of the same witnesses. The most important aspect to ensure that bifurcation and motions increase efficiency is for the parties and the tribunal to discuss and establish clear ground rules at the outset of the proceedings. Rule 41(5) of the ICSID Arbitration Rules was cited as an example of a procedure for summary judgment that has worked well.

The panelists also explored ways to deal with the perceived problem that arbitral tribunals are taking too long to issue their awards. In this regard, in 2016, the ICC announced that it would reduce the fees paid to arbitral tribunals that fail to submit a draft award within three months of the last substantive hearing or the last substantive post-hearing submission. Depending on the length of the delay, the reductions can vary from 5% to 20% or higher. Other options discussed at the workshop included having institutions and parties ask more questions about how much time the arbitrators have available for the drafting of the award before appointing or confirming their appointment; and creating a reporting mechanism requiring arbitrators to report to the parties on their progress periodically after a certain amount of time has passed. As regards the latter, there was consensus among the speakers that shame might provide a strong incentive for arbitrators to render the award in a timely manner.

Domestic court oversight

It has been argued that the arbitral process is too autonomous from domestic law and domestic court oversight. In light of this, the speakers considered whether courts should exercise more oversight over the arbitral process. It was noted that States have defined the respective roles of national courts and arbitral tribunals through instruments such as the New York Convention, the ICSID Convention, and domestic laws. Therefore, it is for States to change the existing balance through legislation or treaties if a more active role for the courts is deemed appropriate. The panelists were skeptical about this because most domestic courts do not have the resources, time, and technical expertise necessary to exercise greater oversight. In fact, this is one of the reasons why many States have embraced arbitration in the first place and why it has become popular.

Ultimately, as one of the speakers noted, giving courts a more active role over the arbitration process would blur the line between arbitration and litigation. It would be contrary to the very idea of having arbitration as an alternative method of dispute resolution. It would also be contrary to the expectations of the users of international arbitration, who in the 2015 Queen Mary/White & Case International Arbitration Survey observed (64% of the respondents) that one of the most valuable characteristics of international arbitration is “avoiding specific legal systems/national courts.”

Is international arbitration in crisis?

While it is undeniable that international arbitration has been the subject of criticism from certain corners, in particular as regards the investor-state system, the opinion of the workshop participants and available data indicate that international arbitration is not in crisis and about to disappear.

Major institutions such as the ICC and ICSID continue to report solid or record numbers of arbitrations filed. 157 States are now parties to the New York Convention and 153 States are parties to the ICSID Convention. While some States such as Ecuador, Bolivia, India, South Africa, and Indonesia have terminated various BITs with investor-state arbitration provisions, the overwhelming majority of States, including States that are notorious critics of investor-state arbitration, such as Venezuela, has not withdrawn from the investor-state arbitration system. Moreover, States increasingly provide for arbitration in contracts with private parties or in investment legislation. This includes States that have been notoriously skeptical of investor-state arbitration, such as Brazil.

If anything, criticisms have contributed to the health of the system. Arbitral institutions have revised their rules and practices to increase the efficiency and fairness of the arbitral process. These include the LCIA in 2014, the ICC in 2015 and 2017, the ICDR in 2014, and SIAC in 2016. ICSID is currently in the process of amending its Arbitration Rules for the fifth time. Professional associations such as the International Bar Association have revised and adopted guidelines addressing relevant subjects such as conflicts of interest and counsel conduct. All this activity shows the vibrancy of international arbitration. As long as the arbitral community does not become deaf to relevant criticisms, international arbitration will not become irrelevant. It will continue to be a legitimate – and the most effective – way of resolving international disputes.

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Call for Papers: Running With Scissors

ADR Prof Blog - Mon, 2017-09-18 08:18
From Jackie Font-Guzmán: We have a call for chapters of a book I am co-editing, Running with Scissors:  Leading in Uncertainty.   Anyone who has a powerful leadership story to share in the times we are living is welcome to submit an abstract. This new leadership book series will focus on personal leadership accounts from … Continue reading Call for Papers: Running With Scissors →

Lesotho sets aside award before the Singapore High Court

Kluwer Arbitration Blog - Mon, 2017-09-18 07:00

Darius Chan

YSIAC

In a 172-page judgment, the Singapore High Court in Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Limited [2017] SGHC 195 (Lesotho), set aside an investor-state arbitration award rendered against Lesotho after an extensive review of international investment jurisprudence.

This is the second investor-state matter that has confronted the Singapore courts following Sanum Investments Ltd v Government of the Lao People’s Democractic Republic [2016] 5 SLR 536.

Similar to Sanum, the dispute in Lesotho had no connection to Singapore other than the fact that, with the benefit of parties’ submissions, the Tribunal in Lesotho had decided on Singapore as the seat of arbitration.

 

Background

In Lesotho the investors contended that their mining leases in Lesotho, a member of the Southern African Development Community (SADC), had been unlawfully expropriated between 1991 to 1995.

The SADC was established by the SADC Treaty.  Under the SADC Treaty, a regional tribunal was established to hear disputes regarding adherence to and interpretation of the SADC Treaty.  In 2006, SADC signed a Protocol on Finance and Investment which granted protections to investors.  Under Annex 1 to the Protocol, investors could commence international arbitration against signatory States if the dispute arose after 16 April 2010.  The precise scope of the arbitration agreement in Annex 1 to the Protocol extended to “disputes between an investor and a State Party concerning an obligation of the [State] in relation to an admitted investment…after exhausting local remedies”.

In June 2009, the investors commenced a claim before a SADC tribunal constituted under the SADC Treaty and a Protocol on Tribunal in the SADC.  However, that SADC tribunal was dissolved by resolution at a summit of the SADC before the claim could be heard.

In response, the investors commenced arbitration against Lesotho in 2012, this time before the Permanent Court of Arbitration (PCA) under Annex 1 to the Protocol.  The investors alleged that Lesotho had breached its obligations under the SADC Treaty after 16 April 2010 by contributing to or facilitating the shuttering of the SADC tribunal, without providing alternative means of recourse.

By a majority, the PCA Tribunal rendered an award in favour of the investors, and directed the parties to constitute a new tribunal to hear the expropriation claims.  Lesotho applied to the Singapore courts to set aside the award on the basis that the PCA Tribunal lacked jurisdiction and/or the award exceeded the scope of the submission to arbitration.

 

Singapore High Court’s decision

The Singapore High Court, applying a de novo standard of review, set aside the award in its entirety under Art 34(2)(a)(iii) of the Model Law. Among other things:

  • The Court disagreed with the Tribunal that the investors’ right to submit disputes to the SADC tribunal qualified as an “investment” under Annex 1.
  • The Court disagreed with the Tribunal that the dispute before the PCA Tribunal involved an “obligation of the [State] in relation to” the investors’ right to submit disputes to the SADC tribunal.
  • The Court disagreed that the investors had exhausted local remedies.

 

Comments

 There are at least three take-away points for readers.

  1. The first point concerns whether Lesotho had invoked the correct grounds to set aside the award. The Court, following a previous decision, held that Art 16(3) of the Model Law does not apply to an award that deals with the merits of the dispute, however marginally.   Additionally, the Court rejected the investors’ reliance on various textbooks for the proposition that Art 34(2)(a)(iii) of the Model Law is only applicable in cases concerning excess of jurisdiction (rather than the absence of any jurisdiction at all).

The Court clarified that any argument concerning the existence and validity of the arbitration agreement belonged to the specific province of Art 34(2)(a)(i).  On the other hand, any argument concerning the scope of the Tribunal’s jurisdiction, as in the present case, belonged to the province of Art 34(2)(a)(iii).

 

  1. The second point concerns the definition of “investment”. Readers will immediately appreciate that the question of what qualifies as an “investment” has attracted much ink in foreign investment law jurisprudence.  Typically, “investment” is defined to mean “every kind of asset, including ”.  In this case, the Court placed significant weight on how the definition of “investment” was narrower; an “investment” means “the purchase, acquisition or establishment of productive and portfolio investment assets, and … includes ”.

Readers will also recall the case of White Industries Australia Limited v India, where the Tribunal, citing Mondev v USA, Chevron Corporation v Ecuador and Frontier Petroleum Services v Czech Republic, held that awards made by tribunals arising out of disputes concerning investments made by investors represent a “continuation or transformation of the original investment”.  Such awards “constitute part of the investor’s original investment”, being a crystallisation of its rights.

By dint of reasoning, the investors’ argument in this case was that the mining leases created a bundle of rights which were protected, and that bundle included “secondary rights to seek remedies”.  The majority of the Tribunal in Lesotho accepted the investors’ argument.  However, the Court was not persuaded, reasoning that the purported “secondary right” was not reciprocal with the investors’ contractual obligations under the mining leases; the investors’ right of recourse to the SADC Tribunal arose much later in 2001 when the Protocol on Tribunal in the SADC entered into force.

Yet, at the same time, the Court observed that it does not matter whether an “investment” arose before or after the entry into force of Annex 1 to the Protocol.  If that were the case, it is suggested here that, even if the investors’ right of recourse to the SADC Tribunal arose only in 2001, that would not ipso facto preclude that “secondary right” from forming part of the bundle of rights, that would, in turn, qualify as an “investment” for the purpose of the Annex 1 to the Protocol.

 

  1. The third point concerns the exhaustion of local remedies. Applying Articles 14 and 15 of the ILC Draft Articles on Diplomatic Protection on the basis that they are reflective of customary international law, the Court held that the local remedies to be exhausted must be reasonably available to provide effective redress.  In the Court’s view, whether local remedies have been exhausted ought to be referenced with reference to the shuttering dispute, and not the underlying expropriation claim.

The Court accepted that Lesotho’s domestic courts recognise a tortious claim for pure economic loss, known as an “Aquilian” action. However, although Lesotho identified an Aquilian action as a potential remedy, in the words of the Court “what is less clear or even unclear is whether such an [Aquilian] action is available in a case such as this”.

 Consequently, what is noteworthy for readers is that, this issue was ultimately decided based on the burden of proof.  The investors bore the burden of establishing that they had exhausted local remedies.  To discharge this burden, the investors had to, in the words of the Court, adduce “evidence positively demonstrating” that an Aquilian action is unavailable or ineffective with reference to the shuttering dispute.  With the Court recording that the investors had acknowledged that no steps had been taken in Lesotho’s legal system regarding the shuttering dispute, this would have been a tall order.

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Give North Korea a seat at the grown ups table - Duke Chronicle

Google International ADR News - Mon, 2017-09-18 00:22

Give North Korea a seat at the grown ups table
Duke Chronicle
A prevalent theory in alternative dispute resolution states that understanding the goals of the other parties to a negotiation is only one component of successful conflict resolution. The key to mitigating conflict is figuring out how to ... Meanwhile ...

[VIDEO] Chief Justice: Court of Appeal will significantly cut down case backlog - The New Times

Google International ADR News - Sun, 2017-09-17 17:34

The New Times

[VIDEO] Chief Justice: Court of Appeal will significantly cut down case backlog
The New Times
At least 70 per cent of litigants are satisfied with what the courts are doing, going by Rwanda Governance Board scorecard and Transparency International (Rwanda). The issue of backlog is just remaining in the ... In fact, recently, we had a conference ...
How to end appeal delays, by lawyersThe Nation Newspaper

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Public Consultation Paper on Proposed Amendments to the 2013 HKIAC Administered Arbitration Rules

Kluwer Arbitration Blog - Sat, 2017-09-16 23:51

Joe Liu

HK45

The HKIAC Rules Revision Committee (the “Committee”) is considering amendments to the current version of the HKIAC’s Administered Arbitration Rules, which came into force on 1 November 2013 (the “2013 Rules”).

The 2013 Rules, while maintaining the “light touch” approach of the 2008 Administrated Arbitration Rules, made important contributions to international arbitration by introducing unprecedented provisions on multi-party and multi-contract arbitrations (including joinder, consolidation and single arbitration under multiple contracts). The 2013 Rules have been well-received by users and are widely recognised as one of the market-leading sets.

Considering that the number of arbitrations brought under the HKIAC Administrated Arbitration Rules has grown significantly since 2013, and the 2013 Rules have been working well in practice, the Committee does not contemplate a wholesale revision. However, drawing upon HKIAC’s experience implementing the 2013 Rules for almost four years, and in light of the latest arbitration developments in Hong Kong and globally, the Committee nevertheless considers that certain amendments might usefully be made.

This Consultation Paper outlines the major amendments proposed by the Committee at this stage, which include the following:

Online Document Repository

Provide for use of secured online repositories to store any written communications submitted in an arbitration upon all parties’ agreement. Add provisions to recognise written communications uploaded to the online repository as an alternative means of service. The Committee seeks views on whether this should be a repository established and maintained by HKIAC, or whether the Rules should permit the parties to use their own online repositories (e.g. by using systems hosted by one party’s law firm), upon all parties’ agreement and subject to HKIAC’s approval. See Articles 2.1(c), 2.2 and 2.3.

Alternative Means of Dispute Settlement (e.g. “Arb-Med-Arb”)

Include a provision to allow expressly parties to pursue other means of dispute settlement after the commencement of the arbitration and resume arbitration upon a party’s request. Stipulate that an arbitrator or emergency arbitrator may not participate in the other dispute settlement process if he or she may be privy to ex parte communications with any party, except with the express consent of all parties. See Article 13.9.

Multilingual Procedures

Introduce a set of default procedures on the conduct of arbitral proceedings in two or more languages, such as the language(s) to be used by the arbitral tribunal, the parties and other participants at hearings and conference calls, as well as the language(s) of all written communications. See Article 15.4 and Schedule 5.

New Grounds for Joinder

Introduce new grounds to permit the joinder of (i) an additional party that is not bound by the arbitration agreement giving rise to the arbitration, provided that all parties, including the additional party, expressly agree; and (ii) an additional party that is bound by a different arbitration agreement under the Rules, provided that a common question of law or fact arises, the rights to relief claimed arise out of the same transaction or a series of related transactions, and the arbitration agreements are compatible. See Article 27.1(b) and (c).

Expanded provisions for single arbitration under multiple contracts

Add a provision permitting parties to commence a single arbitration under multiple contracts, even where there is not complete identity of parties to each relevant contract. This would allow a claimant to commence one arbitration to resolve disputes arising under, for example, a head contract and related sub-contracts. See Article 29.

Concurrent Proceedings

Incorporate a provision to state expressly that the same arbitral tribunal and (possibly) different arbitral tribunals may hear multiple proceedings at the same time, or one immediately after another, or suspend any of those proceedings until after the determination of any other of them, in situations where a common question of law or fact arises and the arbitrations have not been consolidated under the Rules. See Article 30.

Third Party Funding

Add a new provision on disclosure of third party funding (“TPF”) and amend the confidentiality provisions to allow disclosure of information to a third party funder, having regard to the TPF amendments to the Arbitration Ordinance (Cap. 609). The Committee seeks views on whether an express provision should be added to allow the arbitral tribunal to award costs of third party funding as part of costs of arbitration? See Articles 34.1(d), 44 and 45.3(e).

The Committee seeks views on whether express provisions should be introduced in relation to the following:

Investment Treaty Arbitrations

Whether HKIAC should issue a set of rules suitable for both international commercial and investment treaty arbitration, with provisions applicable to investment treaty arbitration possibly contained in a new schedule. The Committee invites views on what provisions should be included.

Early Determination Procedure

Whether a procedure should be introduced to allow the arbitral tribunal to determine one or more issues of fact or law in a preliminary or a separate phase, and in a summary fashion.

Please click here for a copy of the Rules which incorporates all proposed amendments. If you wish to obtain a track-change copy of the Rules reflecting amendments to the 2013 Rules, please send a request to [email protected]
Users are invited to submit comments on the proposed amendments to [email protected] by Monday, 2 October 2017. The Committee then intends to consult further before making a final decision as to the timing and form of any amendments to the Rules.

HKIAC Rules Revision Committee, Current Members: Nils Eliasson (Chair), Matthew Gearing QC, Cameron Hassall, Briana Young, Sarah Grimmer, Joe Liu.

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Is India losing the Litmus Test on Investor Protection by Preventing Vodafone from Invoking Arbitration under UK-India BIT?

Kluwer Arbitration Blog - Fri, 2017-09-15 17:47

Sumit Rai

India’s dispute with Vodafone has been one of its most publicized and long pending disputes with a foreign investor. Despite attempts at conciliation, parties remain locked in international arbitration under the relevant BIT. It may not be hyperbole to suggest that India’s approach to this dispute effectively defines its attitude to investor protection, at least so is the perception Therefore, when it recently chose to obtain an ex-parte injunction against Vodafone from starting an arbitration under UK-India BIT from a domestic municipal court (Delhi High Court), it came as a surprise to many.

The Delhi High Court decision is far from being the last word on the issue. It is capable of being modified by the same court after hearing Vodafone’s objections. Yet, the order has attracted substantial attention and for good reasons.

Three questions immediately arise: first, is India’s action to move a domestic court to restrain arbitration under an international treaty in bad faith? Second, under what jurisdictional basis did the Delhi High Court entertain such action? Third, does the Orascom award hold that multiple claims by companies in a vertical structure under different treaties against same State measure will always be an abuse of rights?

Before considering this, a short recap of what led to this dispute. Vodafone (Netherlands) bought a Cayman Island entity of Hutchison (Hong Kong) group, in order to acquire controlling interest in the Indian entity Hutchison – Essar Ltd. The entire transaction was outside India and did not involve transfer of shares of any Indian entity. As the Indian tax statute then stood, it did not specifically provide that if the effect of a transaction was change in control of an Indian entity, it would be taxable in India. The Indian Supreme Court in January 2012 rejected the Indian government’s contention that the text of the statute as it then stood could be interpreted to include such a tax demand.

To overcome this decision, India amended the statute to bring such transactions within the tax net and made it retrospective in application. Considering this to be in breach of India’s commitment under India-Netherlands BIT, Vodafone (Netherlands) notified disputes in April 2012 and invoked arbitration in April 2014. Subsequently, in June 2015, Vodafone (UK) sent a notice of dispute under the UK – India BIT and invoked the arbitration January 2017.

In the arbitration under Netherland – India BIT, India had raised a preliminary jurisdictional objection. In June 2017, the tribunal decided to consider the issue with the merits of the case. Soon thereafter, Indian government filed a suit before the Delhi High Court, seeking a declaration and permanent injunction against Vodafone (UK) from initiating arbitration under the India – UK BIT. From information available in public domain, it seems India contends that Vodafone (UK) seeks to claim the same reliefs arising out of the same cause of action (i.e. the same measures) with respect to which Vodafone (Netherlands) is already engaged in an arbitration with India. Therefore, the duplication of claim amounts to abuse of process and is oppressive and vexatious.

There may be valid grounds for the India to contend, even successfully, that Vodafone’s action of initiating multiple arbitration at multiple times under different treaties with respect to the same measures is an abuse of rights. But, India cannot legitimately contend that this is an issue that is capable of being determined by an Indian court. It would be absurd to suggest that a State can commit to resolving all disputes with foreign investors by a specific dispute resolution mechanism under international treaties and then seek to restrain the invocation of such right by recourse to its domestic courts. If nothing else, such act would be in breach of its good faith performance of international treaty, contrary to the principle enshrined in Article 26 of the Vienna Convention.

It is not as if India would have no remedy. It would be an issue fully capable of being addressed in the arbitration itself. It is well established that an arbitral tribunal has the competence to determine its own jurisdiction – including any issues of abuse of such jurisdiction. Additionally, there might be a remedy available through the court of the seat of arbitration, as selected under Article 18.1 of UNCITRAL Rules, 2010.

As to the basis to exercise jurisdiction, the Delhi High Court merely observes that Indian courts have “natural jurisdiction” to adjudicate the disputes in question. Seen strictly from a municipal law point of view, it may not sound very strange for an Indian court to prima facie suggest that it would be the ‘natural court’ for resolution of a tax demand raised by Indian authorities. The issue in question is, however, not a municipal law dispute – it is a claim for breach of an international investment treaty – rooted in public international law.

To block access to arbitration under such treaty, which itself is an international law guarantee by the State, by invoking municipal legal principles of the State party is problematic to say the least. If this was permissible, would it not be the very antithesis of an investor protection treaty – allowing the State party to prevent access to arbitration under the treaty by moving its domestic court? Application of common law principles relating to anti-suit injunction by the Delhi High Court is itself erroneous in the present case, let alone the fact that in the final analysis, even the threshold prescribed by those principles are not likely to be met in the present case. One of the fundamental principles of international law, as provided in Article 27 of the Vienna Convention, is that a State cannot invoke its domestic law to justify breach of a treaty. India cannot reason that the Delhi High Court action is valid under its laws (if it is eventually so held to be). It will still fail the test of meeting its international law obligations, particularly that of good faith observance of treaties.

This brings us to the award in Orascom TMT Investments S.a.r.l v. Algeria. India has placed reliance on it to convince the Delhi High Court that its request for injunction is well founded in investment treaty jurisprudence. The Orascom award has been interpreted to suggest that invoking multiple treaties at multiple times with respect to the same measures by vertically structured corporations is of and by itself an abuse of rights. It is difficult to derive such a wide proposition from the Orascom award.

It is true that the last sentence of paragraph 543 of the Orascom award records what appears to be a widely worded proposition and capable of being misread. However, when read in context and as a whole – as any judicial determination must be read – what Orascom establishes is far from this. The award expressly notes that abuse of right in the investment jurisprudence has previously only been considered in situations where an investment was restructured to attract BIT protection after a dispute arose. Orascom, therefore, is the first award to consider the issue in case of multiple actions from vertically structured entities.

In its analysis, the Orascom tribunal does not simply find that as a matter of law raising multiple claims under multiple treaties amounts to abuse of right resulting in the rejection of claim. It painstakingly considers each claim, with the assistance of extensive fact and expert evidence, to determine that they overlap with the claims made under a previous settled arbitration. It is only after such factual determination that the tribunal finds Orascom’s actions to be in abuse of the right to invoke arbitration.

Therefore, what Orascom establishes is that multiple claims under multiple treaties at different times by companies in a vertical chain might amount to an abuse of the right to invoke arbitration under the investment treaty. It also, in the process, shows that to arrive at such a conclusion, it might become necessary to consider the claims in detail, including with the assistance of relevant evidence. It cannot be read as an authority to support an action to restrain the very invocation of the arbitration in which such question ought to be decided.

Vodafone now has time until end of October to respond to the injunction and raise its objections. While it could be a valid strategic call to refuse to appear on grounds that it would not voluntarily submit to the jurisdiction of Indian courts, it will be a difficult choice given it operates a massive telecom operations in India and cannot simply ignore an Indian court’s order – even one that may appear to be without jurisdiction. This dispute is India’s litmus test in its approach to investor protection and this new innings that it has been ill advised to start will be closely watched – and to its disadvantage.

 

 

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