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Why Arbitration Needs Conflict of Laws Rules

Kluwer Arbitration Blog - 10 hours 34 min ago

Giuditta Cordero-Moss

ITA

It’s been decades since arbitration has started its emancipation from conflict of laws rules (private international law). Many were of the opinion, and still are, that conflict of laws rules are an undesirable straitjacket forcing the arbitral tribunal to determine the applicable law according to rigid and complicated rules and thus hindering it from considering whatever rules it deems appropriate. The private international law method for determining applicable law, so goes the criticism, is unnecessary, complicated and leads to results that may come as a surprise to the parties. Underlying is the known philosophy according to which arbitration is international and not rooted in any specific national legal system. According to this philosophy, arbitration owes no obedience to national laws. It is delocalized. It owes obedience only to the parties. The logical consequence is that there is no need to apply conflict rules to determine the applicable law. Under most sources of arbitration law, the arbitral tribunal is obliged to apply the law chosen by the parties. Failing a choice by the parties, this philosophy requires that the tribunal determine the applicable law directly, without having to apply any conflict rules (the voie directe). The ICC was first out in introducing the voie directe, and many arbitral institutions followed suit. Other instruments of arbitration law are less radical, for example the UNCITRAL Model Law makes still reference to conflict rules – albeit not necessarily belonging to the law of the place where the tribunal has its seat.

There is no question that party autonomy is crucial in arbitration.

However, this does not necessarily mean that conflict rules have no function in arbitration.

Firstly, where the parties have not chosen a law, the result will be much more predictable if the applicable law is determined on the basis of objective criteria known in advance (i.e., applying conflict rules), than if it is the result of the tribunal’s complete discretion.

Secondly, and perhaps more importantly, conflict rules may contribute to the efficiency of the specific proceedings and (thirdly) to the effectiveness of arbitration in general.

Let’s discuss first the efficiency of the specific proceedings.

It is quite evident that a proceeding will not be efficient, if it results in an award that eventually is set aside as invalid or is refused enforcement. How can conflict rules contribute to avoiding such an inefficient proceeding?

If the parties have chosen the applicable law, conflict rules will generally confirm their choice – party autonomy is the most important conflict rule for contract disputes. However, following the parties’ choice may lead to disregarding other laws, and, in some cases, this may result in an award that is invalid or unenforceable. Imagine a contract containing the choice of a law belonging to a non-EU state. If the contract violates EU competition law, the defaulting party may invoke EU competition law as a defence: that party has not fulfilled its obligations, because doing so would have infringed EU-competition law. The other party will point at the choice of law made in the contract and exclude that EU competition law is applicable. As known and as confirmed by the famous Eco-Swiss decision, an award infringing EU-competition law may violate public policy and may thus risk being set aside or refused enforcement. The tribunal, therefore, may wish to take into consideration EU-competition law, so as to avoid rendering an invalid or unenforceable award. But does the tribunal have the power to disregard the choice of law made in the contract? If the tribunal exceeds its power, the award will be invalid and unenforceable.

How does the tribunal solve this dilemma?

This is where conflict rules may be extremely useful: they give the tribunal a basis upon which it can take into consideration EU-competition law, without disregarding the parties’ choice of law and exceeding its power.

If the parties’ choice is considered as a conflict rule (rather than being considered as being based on an absolute principle of arbitration law, as is assumed by the delocalization theory), it will follow that it has a certain scope, usually confined to matters of contract law and possibly of tort law. The choice made in the contract, therefore, will not affect issues of competition law. If the tribunal considers EU competition law, it has not disregarded the parties’ choice, because the parties’ choice did not cover competition law. In addition to having given the tribunal a basis to avoid rendering an invalid and unenforceable award, conflict rules have given the tribunal a basis to do so without exceeding its power. Furthermore, conflict rules have contributed to the predictability of the result.

It is certainly more predictable to acknowledge that the parties’ choice is a conflict rule and that therefore it follows the criteria and has the scope regulated in the private international law, than promising that the parties’ choice is an absolute principle. This promise may not be kept if the award is to be valid and enforceable. Hence, the tribunal will have to restrict party autonomy. Without the benefit of conflict rules, it will come as a surprise that party autonomy is not absolute. Moreover, there will be no objective criteria for restricting party autonomy, and the tribunal will have to do so on the basis of discretionary considerations. Conflict rules, therefore, may contribute to the predictability and efficiency of the specific proceeding.

Thirdly, conflict rules may contribute to the effectiveness of arbitration in general. If arbitration only obeys by the will of the parties, there is a risk that it becomes the instrument for evasion of important regulatory provisions. Parties who desire to ignore competition law, for example, choose for their contract a governing law without competition rules, and insert an arbitration clause. If the tribunal only follows the will of the parties, it will disregard competition law of the state that is actually affected by the disputed transaction. It is deleterious to the effectiveness of regulatory law such as competition law, if such a wide spread mechanism for dispute resolution such as arbitration permits to avoid its application. This is why, decades ago, disputes that involved issues of regulatory law such as competition law were deemed not to be arbitrable. With the famous Mitsubishi decision, an era of arbitration-friendliness was introduced: US courts, and later courts in many other states, accepted that disputes involving regulatory issues be arbitrated, because courts maintained the possibility to give a “second look” to the award. Through set aside or enforcement proceedings, courts would have the possibility to annul or refuse enforcement of an award that violated public policy.

This arbitration-friendliness, however, shows signs of erosion. The second look approach is not always sufficient to ensure the effectiveness of regulatory law or other mandatory rules that are deemed particularly important. If the losing party does not challenge the validity of the award, there will be no set aside proceedings. If the winning party does not need enforcement, there will be no enforcement proceedings. Enforcement may be sought in other jurisdictions, so that the courts of the system whose law has been avoided will not be involved. In these situations, courts will have no possibility to give a second look at the award.

The pendulum seems to be swinging now, and numerous courts in member states of the EU have rendered decisions restricting arbitrability of disputes regarding agency agreements, because they could not be sure that the arbitral tribunal would apply mandatory EU rules on protection of the agent.

Courts might be more prone to trust arbitration, if they could count on the use of conflict rules for the selection of the applicable law in arbitration.

Far from being the useless, arbitration-hostile cage from which arbitration should seek to liberate itself, conflict of laws rules are a useful tool that contributes to predictable and efficient arbitral proceedings, as well as to the effectiveness of arbitration as a dispute resolution mechanism.

Conflict rules are, in other words, more arbitration-friendly than the delocalization theory.

This post is a short summary of part of my scholarship. Various of the mentioned issues are not uncontroversial and require more extensive analysis. More extensive analysis may be found in my publications, a list of which is available here.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


The post Why Arbitration Needs Conflict of Laws Rules appeared first on Kluwer Arbitration Blog.

Conflict Resolution Day event set for Thursday - Cecil Daily

Google International ADR News - Tue, 2018-10-16 16:56

Cecil Daily

Conflict Resolution Day event set for Thursday
Cecil Daily
There will be other “alternative-dispute-resolution-friendly” organizations on site to provide information about their services. There also will be free food. “National Conflict Resolution Day started here (in the United States) in 2005 and it's part ...

Company That Controls Domain Name System Can't Be Sued by Disappointed Bidder - Metropolitan News-Enterprise

Google International ADR News - Tue, 2018-10-16 11:23

Company That Controls Domain Name System Can't Be Sued by Disappointed Bidder
Metropolitan News-Enterprise
... International Centre for Dispute Resolution of the American Arbitration Association, comprised of an independent panel of arbitrators.' Thus, the covenant not to sue does not exempt ICANN from liability, but instead is akin to an alternative ...

Global FRAND issues unpicked in Japan Patent Office's new licensing guidance - Lexology

Google International ADR News - Tue, 2018-10-16 11:09

Global FRAND issues unpicked in Japan Patent Office's new licensing guidance
Lexology
This appears to be in line with an increased emphasis in Japan on arbitration and alternative dispute resolution: in June 2018, it was announced that Asia's first international arbitration centre specialising in patent disputes would be opening in ...

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Ezekwesili condemns killing of another aid worker by Boko Haram - Daily Sun

Google International ADR News - Tue, 2018-10-16 08:22

Daily Sun

Ezekwesili condemns killing of another aid worker by Boko Haram
Daily Sun
Dr Oby Ezekwesili, the Co-Convener of the Bring Back Our Girls (BBOG), on Tuesday described Boko Haram's execution of Hauwa Liman, a worker with the International Committee of Red Cross (ICRC) as heart-breaking. The News Agency of Nigeria (NAN) reports ...

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UK: Governing Law And Jurisdiction Clauses In International Contracts - Mondaq News Alerts

Google International ADR News - Tue, 2018-10-16 07:37

UK: Governing Law And Jurisdiction Clauses In International Contracts
Mondaq News Alerts
Tom: It's not an alternative dispute resolution (ADR) but it is an option rather litigation. In the past people would say ADR was everything which was alterative to litigation. To me litigation and arbitration are competitors now and any other ADR is ...

Open Position: Assistant Editor of Kluwer Arbitration Blog

Kluwer Arbitration Blog - Mon, 2018-10-15 21:40

Crina Baltag (Acting Editor)

The Editorial Board of Kluwer Arbitration Blog announces the opening of the following position with Kluwer Arbitration Blog: Assistant Editor for North America, covering Canada and USA.

The Assistant Editor reports directly to the coordinating Associate Editor and is expected to (1) collect, edit and review guest submissions from the designated region for posting on the Blog, while actively being involved in the coverage of the assigned region; and (2) write blog posts as contributor. You have the opportunity to work with a dynamic and dedicated team and liaise with the best arbitration counsel in the world.

The Assistant Editor will work remotely. Please note that this is a non-remunerated position. If you are interested, please submit a resume and cover letter by email to [email protected], with cc to Dr Crina Baltag, [email protected]. The deadline for receiving the applications is 4 November 2018.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


The post Open Position: Assistant Editor of Kluwer Arbitration Blog appeared first on Kluwer Arbitration Blog.

Workers' shutdown of MMIA - NIGERIAN TRIBUNE (press release) (blog)

Google International ADR News - Mon, 2018-10-15 21:05

NIGERIAN TRIBUNE (press release) (blog)

Workers' shutdown of MMIA
NIGERIAN TRIBUNE (press release) (blog)
WORKERS at the Murtala Mohammed International Airport (MMIA), Lagos, have been restive in the past few days. They have caused a lot of disturbances and delays at the airport which happens to be the first point of contact for the ... Ideally, the ...

BCCI v. Kochi – (Un)tangled Issues?

Kluwer Arbitration Blog - Mon, 2018-10-15 19:05

Anu Shrivastava

The Supreme Court of India (“Court”) in an landmark decision titled “BCCI vs. Kochi Cricket Pvt. Ltd. (previously covered in a blog post) clarified the applicability of the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Act”) to pending arbitration and court proceedings commenced under the Arbitration and Conciliation Act, 1996 (“1996 Act”). The Court held the following:

  1. Subject to party autonomy, the amendments would not apply to “arbitral proceedings” that had commenced before the commencement of the 2015 Act.
  2. The amendments would apply to court proceedings which have commenced, “in relation to arbitration proceedings”, on or after the commencement of the 2015 Act.

Exception: The amendments under the 2015 Act would apply to enforcement of an award under Section 36, even if the court proceedings relating thereto have been filed before the commencement of the 2015 Act.

Section 36 of the 1996 Act provides for enforcement of an arbitral award in the same manner as if it were a decree of a court in India.  The Court carved an exception to  Section 36 of the 1996 Act on the ground that enforcement proceedings are entirely procedural in nature, and could be applied retrospectively since no rights are vested in the parties seeking such enforcement. This post seeks to analyse the Court’s decision in carving out the exception for Section 36 and also to highlight practical problems which may arise in the aftermath of the decision.

Section 36 of the 1996 Act to apply retrospectively and no automatic stay on enforcement of the award – exception to the general rule.

The Court held that the 2015 Act was prospective in nature and would apply in relation to arbitration proceedings commenced after the commencement of the 2015 Act, i.e., 23 October 2015.  In the pre-amendment scenario, Section 36 provided for an automatic stay on the enforcement of an award until the expiry of the time limit for challenging the award, or until the disposal of such a challenge. Under the 2015 Act, there was no longer a provision for automatic stay on enforcement of an award and such stay could only be granted upon a request being made to the court.

The Court held that the amended Section 36 would apply to those applications for setting aside an arbitral award under Section 34 which had been filed after the commencement of the 2015 Act. Further, the amended Section 36 would apply retrospectively to Section 34 applications that had been filed prior to the commencement of the 2015 Act.

In declaring that Section 36 applies retrospectively, the Court analysed Section 6 of the General Clauses Act, 1897 which provides that the repeal of any enactment does not affect any right or privilege accrued or incurred under the repealed enactment. According to the Court, an automatic stay of awards could not be claimed as a vested right under Section 6 because enforcement is purely procedural and not substantive. Therefore, the provisions of the amended Section 36, being purely procedural, could apply retrospectively.  The operative portion of the judgment which concludes that Section 36 is purely procedural reads as follows:

“Since it is clear that execution of a decree pertains to the realm of procedure, and that there is no substantive vested right in a judgment debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the Amendment Act”

In concluding so, the Court seems to have only considered precedents on execution of a decree, and not on enforcement of an award under Section 36. The Court did not consider if the un-amended Section 36 was also purely procedural or if there was a change in its nature due to the 2015 Act vis-à-vis substance and procedure. In arriving at the conclusion that Section 36 of the 1996 Act is purely procedural, the Court only considered the post-amendment scenario which does away with automatic stay on awards.

The essential issue which escaped the Court’s consideration is whether Section 36 could have been considered as purely procedural even before the amendments were introduced. Enforcement of an award, as provided for under Article 36 of the Model Law, does not only relate to procedural aspects but also contains substantive grounds of challenging an award.  Similarly, the Article V of the New York contains substantive objections to resist the enforcement of an award.  While such objections and grounds for setting aside a domestic award are provided for under Section 34 of the 1996 Act, perhaps the Court should have considered if Section 36 of the 1996 Act could be read in isolation from Section 34 of the 1996 Act. An argument was raised before the Court that Section 36 proceedings could not be considered as a proceeding which was independent of a proceeding under Section 34 of the 1996 Act. However, the Court considered it unnecessary to go into the “by-lane of forensic argument” about Section 36 standing independent of Section 34 of the Act.  Once the Court had decided that the 2015 Act was to apply prospectively, there should have been compelling reasons to the carve an exception to this general rule.

Practical considerations

The Court’s decision that Section 36 of the Act applies retrospectively because it is purely procedural may lead to further litigation on retrospective application of other similarly placed provisions which concern only procedural issues. The Court did not undertake a detailed analysis as to why the proceedings under Section 36 were not proceedings “in relation to arbitration”. This leaves room for further attempts at seeking retrospective applicability of other similarly situated provisions on the basis that they are purely procedural. For instance, what would be the fate of an interim order rendered by a tribunal under Section 17 of the Act? Section 17 of the 1996 Act is modelled on Article 17 of the UNCITRAL Model Law and confers powers upon an arbitral tribunal to issue interim measures. Before the amendments, Section 17 of the Act did not provide for any court assisted measure for enforcing an interim award. The 2015 Act has led to the insertion of Section 17(2) to provide that an interim order shall be enforceable as if it were an order of the court. On the basis of the Court’s decision, it may be possible to argue that enforcement of an award being procedural and “in relation to arbitration”, Section 17(2) should also apply retrospectively for enforcement of an interim award made before the enactment of the 2015 Act.

To consider another instance, an arbitration commences under the 1996 Act and a challenge is made to the appointment of one of the arbitrators on the ground of independence or impartiality. The tribunal decides under the 1996 Act as it stood before amendments, rejects the challenge and delivers the final award. After the amendments are introduced, a party approaches the Court under Section 34(2)(a)(v) of the 2015 Act for setting aside the award on the ground that the composition of the tribunal was improper. The 2015 Act led to the insertion of the Fifth Schedule which lists down the grounds which give rise to justifiable doubts as to the independence or impartiality of arbitrators. The tribunal while deciding under the 1996 Act would not have considered the grounds listed in the Fifth Schedule since it was inserted subsequently. However, the court while considering the Section 34 application under the 2015 Act would scrutinize the award on the basis of the Fifth Schedule. This would lead to different grounds being considered by the tribunal and the court in deciding the same issue.

The Court’s decision goes a long way in granting relief to award-debtors who have been waiting to enforce their awards,but has also caused it has also led to certain an uncertainty in the law of arbitrationies relating to the arbitration regime in India.The decision also runs contrary to the recommendations made by the Srikrishna Committee that the 2015 Act should not apply retrospectively lest it would result in inconsistency and uncertainty, and would cause prejudice to the parties.

The Arbitration and Conciliation (Amendment) Bill, 2018 (“2018 Bill”) tries to resolve these uncertainties and clarifies that the 2015 Act would not apply to arbitral proceedings and court proceedings (arising out of such arbitral proceedings) that have commenced before the 2015 Act.  The 2018 Bill further provides that the 2015 Act would only apply to arbitral and court proceedings which commence after the 2015 Act. It may be important to note that the provisions of the 2018 Bill were brought to the Court’s attention during the hearing for BCCI v. Kochi but the Court was not inclined to consider it.  The Court had observed that the amendments in the 2018 Bill would put all the important amendments of the 2015 Act on a “back-burner”.  Yet, the 2018 Bill has been passed by the Lower House of the Parliament without making any substantive modificationsin the same form, without making any changes. Once enacted, it will be interesting to see how courts interpret the 2018 Bill on applicability of the 2015 Act.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


The post BCCI v. Kochi – (Un)tangled Issues? appeared first on Kluwer Arbitration Blog.

Blaney McMurtry bolsters team with addition of eight associates - The Lawyer's Daily

Google International ADR News - Mon, 2018-10-15 11:31

The Lawyer's Daily

Blaney McMurtry bolsters team with addition of eight associates
The Lawyer's Daily
At Queen's, Hontoulas was awarded a Course Prize in alternative dispute resolution. She was a caseworker at Queen's Prison Law Clinic, providing legal representation to inmates and representing their interests at disciplinary and parole board hearings.

Candide-Johnson: Ineffective justice system hampering graft war - New Telegraph Newspaper

Google International ADR News - Sun, 2018-10-14 21:44

New Telegraph Newspaper

Candide-Johnson: Ineffective justice system hampering graft war
New Telegraph Newspaper
LCA is a private-sector-driven, alternative dispute resolution (ADR) institution which is poised to become the preferred natural, neutral arbitral and ADR institution on the African continent. It was established to institutionalize ADR in Lagos and ...

Natural resource - Law Gazette

Google International ADR News - Sun, 2018-10-14 19:20

Law Gazette

Natural resource
Law Gazette
Nigeria is also home to the Lagos Multi-Door Courthouse (LMDC), Africa's first alternative dispute resolution (ADR) centre connected to the national justice system. ... Global firm DLA Piper international development partner David Church concurs ...

Could Blockchain Become The New Standard For Transparency in Investment Arbitration?

Kluwer Arbitration Blog - Sun, 2018-10-14 17:20

Mauricio Duarte

In a world hurtling through one technological breakthrough after another, we are entering into an exciting new era. In recent contributions to this Blog, blockchain and its potential applications in arbitration have been well-documented by practitioners and early-adopters. However, there is one exceptional feature in blockchain that might be useful in investment arbitration.

The notion of transparency was once unfamiliar in international arbitration. Nonetheless, recent regulations have popularized the concept and the debate about transparency in investment arbitration shows little sign of fading. Investment arbitration has moved from being a highly confidential mechanism to one where transparency is a key component to the legitimacy and credibility of the system.

Transparency is a procedural notion that corresponds to openness, clarity, and reliability. At the same time, transparency, accessibility, openness, and democratization are concepts that lie at the heart of the value of blockchain. Blockchain is more than just a platform that further enhances our ability to communicate. Blockchain is a technology that tackles the issue of trust between peers. So, could we use this enhanced form of technology in investment arbitration?

The Rise of Transparency

The debate about transparency lies around the notion of a greater democratic participation in a globalized world. To many, the turning point towards greater transparency was the decision in SD Myers Inc. v. Government of Canada arbitrated pursuant to the North American Free Trade Agreement. The tribunal went on to determine that confidentiality was not an inherent component of the investor-state arbitration. The trend acquired a new flavor in Methanex Corp. v. United States of America when the tribunal permitted a joint amicus curiae brief from several interested civil society groups.

The fundamental argument became whether increased transparency would enable the state to better explain their actions to the people. The argument relies on the concept that is the obligation of a state to seek the welfare of its citizens at all times and transparency is a key mechanism for democracy to keep the State accountable for its actions. This was a compelling argument to promote transparency on all parts of the arbitration procedure, including the hearings, to ensure democracy and allow access to policy decision-making.

It was under this context that the UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration (“UNCITRAL Transparency Rules”) sought to clarify the extent of confidentiality and transparency in investment arbitration. The rules are a compilation of previous pro-transparency trends such as the publication of arbitral documents, amicus curiae submissions by third parties and, perhaps most controversially, the accessibility to arbitral hearings. This trend was later cemented with the subsequent Mauritius Convention on Transparency .

Despite the advantages, transparency in investment arbitrations does have some disadvantages. Primary among them is the notion that transparency can result in delays and higher costs. Allowing the stream of information and involvement of non-parties would require more time and, consequently, higher costs.

The Transparency Registry

Under Article 2 of the UNCITRAL Transparency Rules, information is made public through the UNCITRAL Transparency Registry, which is the central source for the publication of information and documents in treaty-based investor-state arbitrations managed by the UN Secretary-General through the UNCITRAL secretariat.

Under the Rules, the Transparency Registry is freely accessible to the public; hence information and documents in the arbitration process are made public, subject to certain safeguards, including the protection of confidential information or the integrity of the arbitral process.

The Registry, as the central repository for the publication of information and documents in treaty-based investor-state arbitrations, requires that the arbitral tribunal appoints a person from the tribunal from whom the Registry will receive information and to whom the Registry can revert for questions. In all cases in which the Transparency Rules are applicable, the arbitral tribunal has to submit the documents by email, through upload to http:// or by courier, on USB stick, CD-ROM or DVD. Furthermore, the documents sent to the Registry are required to be in searchable PDF format, 300 dpi, and not exceed 5 MB. If a document exceeds this size, it should be divided into smaller documents. Finally, any costs for submission of documents shall be borne by the submitting party or the submitting tribunal.

In principle, the service of the Registry is at no cost to the parties, tribunals, and the public. However, it would be remiss, to neglect the issue of the transaction costs associated with transparency (e.g., courier of documents, information chain, and time elapsed).

Merging with Blockchain

Everywhere, people are demanding more transparency. Curious individuals want distributed access to information. Now, everyone wants to increase trust and transparency in information exchanges of all shapes and sizes, and blockchain technology has the answer.
Blockchain removes the need for a central authority (i.e., Transparency Registry) to manage information, making it highly secure and impenetrable to hackers. Blockchain systems include a fully auditable and valid ledger of information. Entries into the ledger can only be made if they are validated by the system, and in order to change it, every single other blockchain in the system would also need to be changed. Therefore, the “trust mechanism” does not reside solely in a central authority, but in the members of the chain itself.

In the not too distant future, arbitrators should have the power to share the information that the UNCITRAL Transparency Rules mandates directly to a blockchain system. With the use of this enhanced form of technology, a protocol could be introduced to protect highly sensible information under the limits of the Transparency Rules. Consequently, the system would be automated to minimize the discretion to be exercised by the arbitral tribunal and enhance the efficiency in the process.

With higher transparency comes the need for information to be passed in a faster way. Currently, transparency is achieved with a long chain of information and parties involved, starting from the contracting parties to the arbitral tribunal and subsequently ending with the Transparency Registry. However, higher transparency requires that the information be shared with all participants simultaneously in a fast-paced manner.

Using a blockchain system to share the information directly by the arbitrators could mean that third parties and non-disputant parties can learn about a given dispute faster. This could enhance the participation in the arbitration process earlier while it is ongoing; for example, as observers at oral hearings or as drafters of amici curiae. With blockchain, a person wholly unconnected to the dispute, a third person requesting participating rights, and a non-disputing Party to the relevant investment treaty, are all entitled to the same level of access, encouraging a pre-award transparency in a low-cost and efficient manner.

Conclusion

Blockchain and the Transparency Rules are compatible; both strive to achieve an effective balance between that necessary cost – imposed on behalf of the public interest in transparency– and ensuring the efficiency and fairness of the proceedings for the disputing parties.

UNCITRAL’s Rules on Transparency, with a complementary enhanced form of technology present an opportunity for States to improve investor-State arbitration. The primary cost of opting out of transparency is the loss of an opportunity to legitimize a State’s actions under investment treaties and the loss of an opportunity to legitimize investor-State arbitration itself. These critiques could translate to a legitimacy problem, which could have more consequences for the future of the institution.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


The post Could Blockchain Become The New Standard For Transparency in Investment Arbitration? appeared first on Kluwer Arbitration Blog.

Qatar International Court highlights QFC legal system - MENAFN.COM

Google International ADR News - Sun, 2018-10-14 00:58

MENAFN.COM

Qatar International Court highlights QFC legal system
MENAFN.COM
He added that the conference provided the Court with the opportunity to introduce its services and the nature of its work, especially in the field of alternative dispute resolution methods. In a speech given during the conference, he said that Qatar ...

It’s All Chinese To Me: Preparing And Cross-Examining Mandarin-Speaking Witnesses

Kluwer Arbitration Blog - Sat, 2018-10-13 20:26

Dorothy Murray, Meg Utterback, Llewellyn Spink and Zhen Ye

King & Wood Mallesons

Witness evidence is an integral part of international arbitration, but challenges can arise from the interaction of different legal cultures, norms and languages.  Although issues can arise with any testimony given through an interpreter, Mandarin-speakers are more challenged, and challenging, because of 1) the stark differences between Mandarin and English (the lingua franca of IA); and 2) the differences between international arbitration and the PRC legal system and process.

This article outlines practical considerations for preparing Mandarin-speaking witness evidence and conducting cross-examination in international arbitration. Mandarin-speaking witnesses will also find it useful in understanding the process and challenges of cross-examination.

 

Tips for being a witness

The role of a fact witness in international arbitration is to explain facts that are within his or her knowledge to the Tribunal to assist them in making their decision. The witness should present as honest and reliable so that the Tribunal believes their explanation of events.

Cross-examination is used by the cross-examiner to put their case to the opponent’s witness, and in doing so, to educate the Tribunal. The cross-examiner seeks to establish and advance their case whilst undermining the other side’s case, usually achieved by undermining the credibility of their witnesses.

In common law legal systems, the process of witnesses giving evidence orally and being tested by cross-examination, is considered one of the most effective means of discovering the truth.  English arbitrators are increasingly unwilling to give much weight to written witness statements, prepared and polished by a party’s lawyers.  They therefore rely more heavily on cross-examination and hearing directly from the witness at the hearing.

While PRC law permits witnesses to appear in Court, this rarely happens in practice.  When witnesses do appear, the process is more akin to a deposition than oral testimony in a common law court.  The witness may give a brief oral statement, generally for no more than 30 minutes. The witness may then be questioned by the lawyers from both sides and the judge.  However, the PRC court system is more inquisitorial than adversarial with the judge having the discretion to end the questioning of witnesses or to forego witness testimony and cross-examination entirely.

Oral witness testimony is little used in practice because it is not held in the same regard as in common law systems. Judges consider written statements and documentary evidence to be more reliable than oral evidence. Witnesses are assumed to be biased in favour of the party for whom they testify, and their testimony given little weight.

A Chinese witness must therefore appreciate that, in contrast to domestic Chinese procedure, their oral testimony is an important part of an international arbitration and the Tribunal will consider what they say carefully. Honest and reliable witnesses, who persuade the Tribunal, can win the arbitration.

 

Tips for preparing a Mandarin-speaking witness

Witnesses familiar with Chinese court procedure are likely to be focused on demonstrating the authenticity of documents that evidence the facts. Reassure them that the Tribunal wants to hear their personal recollection of facts with which they were directly involved, even where there are no documents available on the point.

Witnesses may be privy to information that they are not able to reveal to you as foreign counsel or to the Tribunal, for example where there are ongoing criminal investigations in the PRC or where the matters are considered a Chinese state secret.  Ensure the boundaries are clear to you and the witness, that they are raised in advance with the other side and Tribunal, and that the client is willing to risk having adverse inferences drawn if the witness refuses to answer a question.  Should the witness still be called to testify or is the risk to the client too great?

A Mandarin-speaking witness will be inclined to only answer the exact question asked.  This poses two problems.  First, the witness will not tell his lawyer everything he knows unless the right questions are asked.  A lawyer should have a detailed interview with the witness when preparing the witness statement and should ask questions in different ways to insure all information is being elicited. Second, witnesses will find it difficult to provide robust answers on cross-examination. The witness may fear saying the wrong thing.

Respect for hierarchy is an important Chinese cultural norm so it is useful to understand a witness’s position within the company.  A junior witness may be uncomfortable in giving testimony, especially before his or her superiors, and may look toward their superiors or their lawyers when testifying to seek approval of their testimony.  Conversely, a senior executive may be offended by the process of cross-examination and may become defensive to deflect any challenge to his credibility.

When interviewing and preparing senior witnesses and experts, Chinese lawyers are usually more deferential than common law lawyers. It is important to strike a balance between adequate deference and thorough fact-finding.  Be deferential but persistent.

If your witness speaks English as well as Mandarin, consider whether it is be better to give evidence in their imperfect English and avoid the delay and confusion that can arise from interpretation.

If the witness can read English but is less able or confident with the spoken word, a real-time transcript will be extremely useful to help him or her (and likely the interpreter) to understand the questions more accurately.

 

Cross-examining a Mandarin-speaking witness

First and foremost, do not attempt any Mandarin terms unless you are very confident of your pronunciation.  Mandarin is a tonal language, and a misplaced inflexion can mean that you and your witness end up speaking about different things, both of which may make sense to the speaker in context.

There are several key differences between the Mandarin and English languages and their grammar. In Mandarin, much of the meaning is contextual. Cross-examiners must state the question clearly and accurately. Moreover, Mandarin does not use tenses. Be careful formulating questions that involve different tenses as these will all be lost in translation.

Mandarin can be ambiguous and flowery. Unlike legal English, Mandarin expressions evoke more than just the words spoken. This can make accurate interpretation difficult. Often witnesses can reply in a vague manner that is open to interpretation if not further clarified.  This may explain why Mandarin interpreters often have a lengthy dialogue with the witness before replying, “The witness said ‘Yes.’”  The process can be frustrating for the cross-examiner and the Tribunal, if they cannot understand the Mandarin discussion resulting in the simple answer.  Thus, having a fluent Mandarin speaker at counsel table is crucial to the integrity of the transcript.  Often counsel must correct or at least question the interpreter’s understanding of the answer and be prepared to explain any “lost in translation” moments to the Tribunal. Waiting until the end-of-day transcript, or a post-hearing review of the tapes, will be too late.

Legal concepts may differ as well.  The cross-examiner should ensure that the witness, especially an expert witness on PRC law, understands what is being asked. Concepts such as indemnification, liquidated damages, and indirect loss may have a slightly different meaning in Chinese.  The cross-examiner must word their questions carefully and understand its implications.

 

Tips for counsel on both sides

Given the importance of the interpreter, the parties may wish to meet with him or her and test their interpretation prior to the hearing, particularly any relevant legal or technical industry terms. Consider if the interpreter will need experience with accented Mandarin or specific dialects. Consider too that Mandarin expressions may differ between Mandarin-speaking countries or regions.

There may simply be no translation of a term into or from Mandarin.  It may be necessary to ask the interpreter to explain what synonym has been used and ensure all are content it is the best available.

People, ships, places, and companies may have both an English name and a completely different Mandarin name. Be aware that words may also have a Pinyin transliteration of the Chinese name. As such, a short bi-lingual glossary of key terms and names agreed between the parties can be a useful tool for the interpreter, counsel and the Tribunal.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Qatar International Court highlights QFC legal system - Gulf Times

Google International ADR News - Sat, 2018-10-13 16:48

Gulf Times

Qatar International Court highlights QFC legal system
Gulf Times
... the unjust blockade, which they said expressed a new direction of the state in the economic field by opening up for more private investment, whether local or international. Qatar International Court is one of the golden sponsors of this year's IBA ...

and more »

Are Unilateral Option Clauses Valid?

Kluwer Arbitration Blog - Sat, 2018-10-13 03:07

Youssef Nassar

A unilateral option clause (“UOC”) can take many forms. It may grant its beneficiary the exclusive right to choose between litigation and arbitration when a dispute arises, or to choose to litigate before a specific jurisdiction, while constraining the non-beneficiary to a specific forum or a specific mode of dispute settlement. Consequently, UOCs are undoubtedly exclusively advantageous to one of the parties and they are frequently used in specific industries, such as banking and construction.

Due to a lack of statutory guidance as well as judicial approaches that fall on opposite ends of the spectrum, the validity of UOCs remains susceptible to a great deal of uncertainty and debate. Courts that uphold their validity rely on party autonomy. Courts that reject such validity rely on a wide array of arguments. This essay briefly analyzes the arguments used by courts rejecting the validity of UOCs and concludes that none constitutes adequate basis for invalidation.

  1. The potestative nature of an option clause

The first argument for the invalidity of UOCs, and possibly the least convincing and most criticized, is that a UOC is potestative. The concept of “caractère potestatif” is used in French law to describe a situation where performance of a contract is subject to a condition precedent the fulfillment of which falls within the discretion of one of the contracting parties.

In 2012, the French Cour de Cassation in Rothschild held that a UOC is a potestative condition and invalidated it. The UOC in the case granted exclusive jurisdiction over any disputes to the courts of Luxembourg, while maintaining the bank’s right to bring an action before the courts of the client’s domicile or any other court of competent jurisdiction. The obligation of each party to submit to the jurisdiction of the contractually chosen court was not subject to any condition. Further, “the ability of one party to bring actions before any court which would otherwise have lawful jurisdiction over the other party does not impose any obligation on such other party.” 1)Martin Gdanski & Marc Robert, The validity of unilateral hybrid clauses has become less certain under French law, Norton Rose Fullbright (2012).  jQuery("#footnote_plugin_tooltip_4582_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Additionally, the UOC cannot be considered to impose a condition upon which the performance of the contract is dependent.

In relying on the concept of potestative, the Cour de Cassation also used domestic legal principles to interpret the applicable EU provision where it had no basis to do soIn fact, this goes against the purpose of the Brussels Regulation, which is to provide a uniform and predictable legal framework.

  1. Lack of mutuality (consideration)

Consideration requires a ‘bargained-for exchange.’ “It is a common law doctrine of ‘mutuality of obligation’ that ‘either both must be bound, or neither is bound.’”2)Cristopher Drahozel, Nonmutual Agreements to Arbitrate, 27 J. Corp. L. 537, 538 (2002). jQuery("#footnote_plugin_tooltip_4582_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); While both parties must manifest assent for a contract to be formed, that manifestation need not be symmetric in time, place, or form. Contract provisions need not give the parties the same positions, and it is rather illogical to require this. It is enough that value be given on both sides. If the law required the terms of contracts to be symmetrical such that the parties merely traded the same thing for the other, no exchanges would take place.

The only context in which this argument would work is if the UOC is severed from the rest of the agreement when assessing consideration. This proposition is as absurd as requiring specific consideration for any other clause in the agreement.

The circumstances that one of the provisions in an integrated agreement grants certain rights to only one of the parties does not in other instances render that provision ineffective for lack of consideration or mutuality, as long as appropriate consideration can be found in other provisions of the agreement or elsewhere.There appears to be no good reason for deviating from this rule merely because an arbitration, rather than some other, clause is involved.3)Hans Smit, The Unilateral Arbitration Clause: A Comparative Analysis, 20 American Rev. Int. A. 391, 401 (2009). jQuery("#footnote_plugin_tooltip_4582_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

However, courts rejecting the validity of unilateral arbitration agreements based on lack of mutuality seemingly adopt this specific approach. The clause is severed from the agreement and assessed separately. Inevitably, it is found lacking in consideration and, consequently, invalidated. “Severability” was developed in a different context for a different purpose and it is inapplicable in this respect. It is a rule developed to effectuate the salvation, not the condemnation, of arbitration clauses.” 4) Id. jQuery("#footnote_plugin_tooltip_4582_4").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Ultimately,“it is sufficient to note that under general rules of contract law, consideration should be present, but need not be adequate … the unequal position[s] of the parties, including presumably the imbalanced consideration, should not be grounds for invalidity.”5)Deyan Draguiev, Unilateral Jurisdiction Clauses: The Case for Invalidity, Severability or Enforceability, 31 J. Int’l Arb. 19, 41 (2014). jQuery("#footnote_plugin_tooltip_4582_5").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

  1. Violation of EU law

In addition to its reliance on the widely criticized potestativedoctrine, the court in Rothschild       held that UOCs were in violation of article 23 of the Brussels I Regulation concerning “prorogation of jurisdiction” (the equivalent of article 25 in the Recast Brussels Regulation). This interpretation was rejected by many and, although the issue has never been considered by the European Court of Justice (“ECJ”), some commentators are of the view that, had the matter been referred to the ECJ, it may well have concluded that the Cour de Cassation misinterpreted Article 23. The Cour de Cassation in Rothschildheld that the UOC was contrary to “the finality of the extension of jurisdiction provided for in Article 23” and its objectives.6)Supra note 1. jQuery("#footnote_plugin_tooltip_4582_6").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

The UOC exclusively enabled the bank to bring an action before the courts of the domicile of Mrs. X, the courts of Luxembourg or any other court of competent jurisdiction. Despite potentially being numerous, these options are both limited and foreseeable. Further, article 23 explicitly states that the parties may agree on conferring exclusive jurisdiction unto courts other than those of competent jurisdiction. In that sense, Article 23 is the “epitome of party autonomy, as declared in recital 14 to the Brussels I Regulation … [its] primary purpose … is to establish an avenue in favor of choosing a competent court other than the normally competent court under the rules of the Regulation.”7)Supra note 5, at 37. jQuery("#footnote_plugin_tooltip_4582_7").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Therefore, the position of the Cour de Cassation that the clause in Rothschildwas not compatible with the object and purpose of the Brussels I Regulation is based on a misinterpretation of the Brussels I Regulation.

  1. Equality of treatment and unconscionability

Prima facie a UOC is imbalanced, as it serves the interests of only one party. “This designation potentially follows the natural lack of balance between the parties, especially regarding their bargaining power. In effect, one of the parties to the clause has to ‘adhere’ to the unfavorable terms of the clause.”8)Supra note 5, at 33. jQuery("#footnote_plugin_tooltip_4582_8").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_8", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This gives way to two grounds for invalidity: imbalance between the parties and unconscionability.

With respect to the first ground for invalidity, it has been submitted that UOCs violate article 6 of the European Convention on Human Rights pertaining to the right to a fair trial. The Supreme  Arbitrazh Court of Russia in the Sony Ericsson case has also implied that the “right to equality of arms” is violated by a UOC. In essence, the argument here, whether articulated in the contours of article 6 of the European Convention on human Rights or otherwise, pertains to the right to a fair trial. More specifically, the right to have equal opportunity to present one’s case before a court. This argument is based on a misinterpretation or a misunderstanding of the concept in question. The principle of “a fair trial” means that the parties have equal procedural rights (due process) once the proceedings have begun. In other words, equal footing before a specific forum not with regards to the choice of forum.

The second ground for invalidity is that of unconscionability. It may be argued that it is unconscionable “for a party to exploit its economically powerful position or the ignorance of the party who agrees to a unilateral arbitration clause without understanding the unfair advantage it gives to its contract partner by insisting upon acceptance of a unilateral arbitration clause.” 9)Smit, supra note 3, at 404. jQuery("#footnote_plugin_tooltip_4582_9").tooltip({ tip: "#footnote_plugin_tooltip_text_4582_9", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This argument is not convincing for a number of reasons. First, an agreement may include a number of imbalanced clauses and lack of balance is rarely a per se ground for invalidity. Secondly, submitting to this argument would lead to the absurd result of invalidating a great number of agreements simply because they contain a clause that is favorable to one of the parties. Finally, a defense of unconscionability requires both procedural and substantive unconscionability. Procedural unconscionability is manifested by unfair surprise. It is difficult to argue that such a condition is satisfied in the context of UOCs where both parties negotiated the agreement and accepted the UOC.

  1. Conclusion

Despite the variety of arguments, none constitutes acceptable grounds to invalidate UOCs. On the other hand, the argument for upholding their validity is well established. Neither arbitral tribunals nor courts deciding on the validity of a UOC should curb or contain party autonomy absent adequate grounds to do so. Without explicit statutory guidance, however, it seems that the debate will continue on.

References   [ + ]

1. ↑ Martin Gdanski & Marc Robert, The validity of unilateral hybrid clauses has become less certain under French law, Norton Rose Fullbright (2012).  2. ↑ Cristopher Drahozel, Nonmutual Agreements to Arbitrate, 27 J. Corp. L. 537, 538 (2002). 3. ↑ Hans Smit, The Unilateral Arbitration Clause: A Comparative Analysis, 20 American Rev. Int. A. 391, 401 (2009). 4. ↑ Id. 5. ↑ Deyan Draguiev, Unilateral Jurisdiction Clauses: The Case for Invalidity, Severability or Enforceability, 31 J. Int’l Arb. 19, 41 (2014). 6. ↑ Supra note 1. 7. ↑ Supra note 5, at 37. 8. ↑ Supra note 5, at 33. 9. ↑ Smit, supra note 3, at 404. 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: Arbitration in Belgium: A Practitioner’s Guide
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Efficient Arbitration – Part 4: Document Production in International Arbitration

Kluwer Arbitration Blog - Sat, 2018-10-13 00:48

Pawel Halwa and Jakub Kaczmarek

Schoenherr

In Parts 1 – 3 of our Efficient Arbitration Series, we introduced various efficiency tools. In Part 4 we will discuss one of these tools which has considerable savings potential: “document production”.

Presenting the right evidence is key in arbitration. But, what if a party does not have the documents it needs to prove its case, because they are in the possession of its opponent?

This is where “document production” comes into play: the party will request these documents from its opponent, and the arbitral tribunal will decide whether and to what extent the opponent needs to comply with that request.

As with most aspects of arbitration, document production is also agreed by the parties. The requirements and procedure are best addressed already at the Case Management Conference. This, in particular, as parties do not always see eye to eye when it comes to document production: For one, parties and arbitrators with a common law background are familiar with ‘discovery’. They are likely to provide for more extensive document production than parties and arbitrators with a civil law background. For another, of course, the party seeking documents to prove its case will argue for more extensive document production than its opponent, who would prefer these documents to remain off record.

The commonly used procedure for document production, as set forth by the 2010 International Bar Association Rules on the Taking of Evidence in International Arbitration, includes the following steps:

• To avoid ‘fishing expeditions’, a party’s request under these IBA Rules should describe the requested documents (or a narrow and specific category of documents), and state that they are relevant and material to the outcome of the case, and not in the possession, custody or control of the requesting, but of another party.
• The other party may either produce the documents or object to the production. The IBA Rules specify the detailed reasons for refusing to produce documents.
• The tribunal will then decide which documents to order the party to produce. To help the tribunal determine the contentious issues and to assess whether a document may be relevant and material, Parties often used the so-called Redfern Schedule. Also, the parties may appoint an impartial and independent expert, the so-called Document Production Master.

Reaching a decision on producing the documents or maintaining objections is often difficult. If the opposition is based on formal grounds, e.g. insufficiently precise application for submitting a category of documents it may, in principle, be resolved without knowledge of the evidence sought. However, deciding on an opposition based on substantive grounds (such as privilege, commercial or technical confidentiality of the documents) may require the tribunal to read the contents of the documents. In such cases appointment of an impartial and independent expert may help the tribunal decide whether to order the party to produce documents.

The expert’s task is to opine if the objection is legitimate without disclosing the contents of the documents to the tribunal and other parties. However, even in such a case, the decision to uphold the objection is taken by the arbitral tribunal.

The expert appointed in this way may also be able to decide on the legitimacy of the objections and perform other functions, such as inspecting the parties’ headquarters to search for the relevant documents to be submitted in the proceedings.

Ultimately, the decision to appoint an expert, as well as the scope of its competence and powers, is with the parties.

For its complex procedure, document production can be time-consuming and expensive. However, when used properly, it is a powerful tool to strengthen (or weaken) a party’s case — in particular if, without document production, one of the parties will lack the evidence that will likely make or break their case.

This makes document production such a great example of an efficiency tool:
If mishandled, document production is an expensive, lengthy process without much of a result. But, if handled properly, it will indeed improve the chances to win the arbitration.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Blockchain Training For Arbitrators Can't Come Fast Enough - Law360

Google International ADR News - Fri, 2018-10-12 19:12

Blockchain Training For Arbitrators Can't Come Fast Enough
Law360
Law360 (October 12, 2018, 8:12 PM EDT) -- Industry experts are praising an effort by the alternative dispute resolution provider JAMS to train arbitrators to better adjudicate disputes arising from blockchain transactions and smart contracts, saying ...

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