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The Know How to Enforcing Foreign Arbitration Awards in South Africa

Kluwer Arbitration Blog - 12 hours 6 min ago

Danika Balusik

Hogan Lovells

Legislative Framework


After much anticipation, the South African International Arbitration Act 15 of 2017 (“new Act”) was welcomed by arbitration practitioners in December 2017. The intention of the new Act has been to incorporate the UNCITRAL Model Law as the cornerstone of the international arbitration regime in South Africa. The South African Arbitration Act 42 of 1965 remains applicable to domestic arbitrations.


One of the most significant changes in the new Act was the incorporation of the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 (the “REFAA Act”) which was promulgated to give effect to the New York Convention, that was signed by South Africa in 1976. The REFAA Act recognised that a foreign arbitral award is binding between parties and is capable of being enforced by way of application to the court, to have the award made an order of the court. To avoid duplication of legislation, the REFAA Act has been repealed in its entirety and replaced by the new Act.




The court application to have a foreign arbitral award made an order of a court is a fairly lengthy process. A Notice of Motion and Founding Affidavit is lodged by the Applicant (the party wanting to enforce the award) at a High Court in South Africa that has jurisdiction over the matter. Jurisdiction is usually determined with reference to the principal place of business or the location of the assets of the Respondent (the party against whom the award is being enforced). In terms of section 17 of the new Act, the application is required to be accompanied by the original foreign arbitral award and the original arbitration agreement in terms of which the award was made, both authenticated for use in the High Court, together with certified copies of the award and the agreement.


The application is issued by the Registrar of the High Court served on the Respondent by the Sheriff of the court. The Respondent can then elect to oppose the application or not. Should the Respondent elect to oppose the application, it is required to file a Notice of Intention to Oppose within the time period set out in the Notice of Motion (between 5 to 10 days). Thereafter, the Respondent is required to file an answering affidavit on the Applicant within 15 days of serving its Notice of Intention to Oppose. The Applicant will then be afforded an opportunity to file a Replying Affidavit, within 10 days of receipt of the Respondent’s Answering Affidavit.


In terms of the High Court Rules, an Applicant is entitled to make an application to the court on an urgent basis, in accordance with Rule 6(12) of the Uniform Rules of Court. In this instance, the time periods are reduced and general procedure applicable to applications is shortened. However, the Applicant would be required to motivate as to why the matter is urgent, for example, that the Respondent is in the process of disposing of all its assets in South Africa. Should the court find that grounds for urgency do not exist; the matter will be enrolled on the ordinary motion court roll.


Advantages and Pitfalls


When it comes to enforcing arbitration awards, time is of utmost importance. When a matter is placed on the ordinary court roll and the application is opposed, the hearing usually takes places approximately 4-6 months after the matter is enrolled – a pitfall with enforcement in South Africa. It is no secret that a successful party to arbitration wants to have the award enforced as soon as possible so as to receive what it is entitled to, and therefore a 4-6 month delay in enforcement can cause prejudice to the successful party. If the application is not opposed, the application can be heard approximately 1-2 months after the relevant time period has lapsed for the Respondent to serve its notice of intention to oppose.


When a party is considering opposing the enforcement of a foreign arbitral award, section 18 of the new Act is important and sets out the various grounds on which the enforcement of a foreign arbitral award will be refused. If a court finds that a reference to arbitration where the subject matter of the dispute is not permissible under the laws of South Africa or where the award is contrary to public policy, the court will refuse to recognise or enforce the foreign arbitral award.


Where a party against whom the award is sought to be invoked can prove (1) a party to the arbitration agreement had no capacity to contract, (2) the arbitration agreement is invalid under the law to which the parties are subjected to, (3) that he or she did not receive notice of the appointment of the arbitrator or the arbitration proceedings or was not able to present his or her case, (4) the award deals with disputes not contemplated by or falling within the terms of reference, (5) the arbitration procedure was not in accordance with the arbitration agreement or laws of the country in which the arbitration took place, or (6) the award is not yet binding on the parties or has been set aside or suspended by a competent authority, the court may refuse to recognise or enforce a foreign arbitral award.


There is currently no case law dealing with section 18 of the new Act, however, as the wording of section 18 mirrors that of section 4 of the REFAA Act, the below cases remain significant when dealing with refusal of recognition and enforcement of foreign arbitral awards. South African law recognises the principle of judicial precedent. It is very likely that case law decided upon with reference to the REFAA Act will still bear precedential value when deciding case law under the new Act.


In the case of Seton Co v Silveroak Industries Ltd (2000 (2) A 215 (T)), the Respondent opposed an application to have an award by a French arbitral tribunal for damages in favour of the Applicant recognised by the High Court, on the grounds that the award was tainted by a fraud committed on the tribunal by the Applicant. The Respondent contended that the South African High Court should refuse the enforcement of the award by virtue of the provisions of section 4(1)(a)(ii) of the REFAA Act in that it was contrary to public policy to recognise an award obtained through fraud. The Respondent conceded that it did not have evidence on the affidavit to substantiate the allegation of fraud, but that there was someone who, if subpoenaed to give viva voce evidence, would give the necessary evidence.


The court held that section 4(1)(a)(ii) of the REFAA Act provided that a court would only refuse to recognise a foreign arbitral award if on the face of the award and the arbitration agreement it was clear that the agreement was contrary to public policy. To successfully claim that the award was obtained under fraudulent means (and therefore against public policy), there ought to be no extraneous evidence to persuade the court that the agreement in question was an illegal agreement. The Respondent was required to approach the French court to have the award set aside on the grounds of alleged fraud and parallel to that, make an application for a stay of the Applicant’s application to have the arbitral award enforced, pending the outcome of the Respondent’s application to have the arbitral award set aside in France. The South African High Court found no reason not to recognise the award, and therefore the Applicant’s application for recognition and enforcement succeeded.


In Phoenix Shipping Corporation v DHL Global Forwarding SA (Pty) Ltd and Another (2012 (3) SA 381 (WCC)), Phoenix and DHL approached the Western Cape High Court for an order for the recognition and enforcement of a London arbitral award. Bateman Ltd resisted the application on the grounds that it was never a party to the agreement referred to in the request for arbitration, that the arbitrator had accordingly lacked jurisdiction over it, and that the enforcement of the award would, therefore, be contrary to public policy. DHL relied on the booking note, which provided that the parties submitted to London arbitration. DHL contended that the arbitrator had made an award against Bateman Ltd and that Bateman Ltd had failed to satisfy the arbitral award, which the court was then obliged to enforce.


The court held that the booking note issued by Phoenix did not, in South African law, constitute a binding contract of carriage for the transportation of Bateman Ltd.’s machinery in terms of which the parties submitted any dispute to arbitration. Arbitration is characterised by its consensual nature and there was nothing to suggest that there ever was a consensus (either between Bateman Ltd and DHL or between Bateman Ltd and Phoenix) to conclude a contract in terms of which the parties had agreed to submit to arbitration. Both the common law and the REFAA Act recognised the importance of an arbitration agreement as a prerequisite to the enforcement of the arbitral award. In this case, as a fact, there had not been a valid agreement concluded between DHL and Bateman Ltd, agreeing to arbitration in terms of either English law or South African law. DHL had accordingly failed to allege and prove a valid arbitration agreement. Absent an arbitration agreement, no arbitrator could claim jurisdiction to determine a dispute and an order for the recognition and enforcement of a foreign arbitral award, which on the face of it was invalid, would be contrary to the principles of public policy.


Whilst it may take some time to have a foreign arbitral award made an order of a court in South Africa, parties can be confident that the South African courts will continue to uphold the principles of public policy and remaining practical and impartial when deciding to recognise and enforce a foreign arbitral award.

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Libra v CODESP: Is Arbitration in the Brazilian Ports Sector Salvageable?

Kluwer Arbitration Blog - Fri, 2019-02-15 18:05

Gabriel Ferreira Labatut Simões

A long-term dispute between Libra Terminais S.A., Libra Terminais Santos S.A., two companies belonging to one of the major port operating groups in Brazil (“Libra”), and the Dock Companies for the State of São Paulo (“CODESP”) seems to have been concluded by a recent arbitral award. The dispute concerned a concession agreement of two terminals in the Port of Santos in São Paulo, Brazil. The historic award is the first decision based on controversial statutes regulating arbitration in the ports sector in Brazil. This decision can provide insights on the practical effects of these statutes and their contentious provisions.


In 1995, Libra and CODESP signed a concession agreement for terminal T-37 (“T-37”) and adjacent areas in the Port of Santos (“T-37 Agreement”). In exchange for the concession, Libra would pay CODESP a monthly fee and would be obligated to expand and improve T-37’s infrastructure.

A few years later, in 1998, Libra and CODESP signed another concession agreement for terminal T-35 and adjacent areas (“T-35 Agreement”, together with the T-37 Agreement, “Concession Agreements”). Similar to the first agreement, Libra would have to pay a monthly fee to CODESP and make investments to expand and improve the terminal.

Soon after the conclusion of the T-35 Agreement, still in 1998, Libra requested CODESP to suspend the collection of the fee owed by Libra. According to Libra, CODESP had not fulfilled its obligations to renovate terminal infrastructure and ensure minimum depth of the waterway access to the Santos Port, which supposedly allowed Libra to stay the payments. Meanwhile, CODESP was attempting to collect the amounts owed by Libra for the concessions. These discussions lasted decades in Brazilian courts. From 1998 to 2015, the parties initiated more than 10 lawsuits, resulting in different outcomes. While Libra was successful in some of the claims, CODESP was successful in others. However, the dispute had no prospect of ending soon.

In 2015, new legislation regarding dispute resolution mechanisms in the ports sector enabled Libra and CODESP to opt for arbitration to resolve their dispute.

Ports sector dispute settlement legislation

The port concessions sector in Brazil is regulated by Statute No. 12.815 (“Ports’ Statute”). The Ports’ Statute was envisaged to modernise the port concessions sector in Brazil by amplifying private investment and improving competition and efficiency. In what was seen as a positive development at the time; the Ports’ Statute established that – public and private – parties in concession contracts could resort to arbitration to resolve disputes regarding their financial obligations. The caveat was that the Statute did not specify how the arbitration should be conducted.

Therefore, in 2015, soon after the enactment of the changes to the Brazilian Arbitration Act (previously discussed in this Blog), the Federal Government enacted Decree No. 8.465 (Port Arbitration Decree, or “PAD”). PAD regulated and expanded the provision of the Ports’ Statute that allowed use of arbitration to resolve contractual disputes in the sector.

In contrast with the Ports’ Statute, the PAD was not well received (see here, here and here). It seemed that the PAD was a well-intended project but poorly executed. It was seen as an attempt by the Federal Government to manage and engage in new practices of dispute resolution. For example, among the most criticised provisions, the PAD (i) established that all information regarding the arbitration should be publicised; (ii) added time consuming bureaucracy to the process of initiating an arbitration; and (iii) provided that arbitration could only be used to settle disputes regarding the reestablishment of the financial-economic equilibrium of a contract; only if the arbitration was based on a submission agreement and not on an arbitration clause.

Nonetheless, despite criticisms, in 2015, Libra and CODESP signed a submission to arbitration agreement relying on the mechanism provided for in the PAD.

Arbitration and Partial Award

Pursuant to the submission agreement, the Tribunal had the mandate to decide (i) whether CODESP breached its obligations under the Concession Agreements; (ii) which of the parties (CODESP or Libra)  was liable for the performance of the construction works on the public docks in front of T-37; (iii) whether the financial-economic equilibrium of the T-35 Agreement had been affected by CODESP’s actions; (iv) whether Libra was liable to pay the fee originally agreed between the parties in the Concession Agreements; and (v) parties’ liability regarding these issues.

The Terms of Reference were signed in September 2017 and, a year later, the Tribunal issued an Award. The Award dismissed all of Libra’s claims, accepted CODESP’s claims, and ordered Libra to pay the fee originally agreed by the parties, as well as penalties for breach of contract. The Tribunal decided the case through the strict application of the contractual terms and the relevant statutes. However, the true contribution of the Libra v CODESP arbitration award is that it provides valuable insight as to whether initial criticism regarding application of the PAD was justified.

Time consuming bureaucracy?

One of the main criticisms to the PAD is that, in theory, it increases bureaucracy for execution of submissions to arbitrate. PAD requests a case by case preliminary government assessment regarding the benefits of using arbitration in each particular dispute. The PAD also establishes that arbitrators and arbitral institutions should be contracted by direct negotiation, as opposed to public biddings. Although the former is swifter than the latter, it still entails a number of time-consuming administrative burdens.On the other hand, a positive aspect of the PAD is the time requirement to issue an arbitration award within 24 months, which seems to offset, at least partially, the additional bureaucracy.

In Libra v CODESP, the time requirements for issuance of the award seemed to balance out the additional bureaucracy imposed by the PAD. While CODESP had to go through the preliminary government assessment; submission to arbitration was signed by the parties in less than three months from the day that the PAD entered into force. In fact, the dispute was adjudicated in record time, as the Tribunal decided on the liability issues in no more than 16 months from the signing of the Terms of Reference, which is less than the average period of time for an arbitration to be decided in Brazil, and substantially faster than obtaining a final decision in court.

Publicity issues?

Another point of contention regarding the PAD is the protection of sensitive information (e.g. price formation, production methods, formulas) vis à vis the requirement that all information regarding the arbitration must be publicized.

Again, this did not seem to be an issue in Libra v. CODESP. Even though the Federal Government divulged most of the proceedings through a specific website, no sensitive information was published. This is especially important considering that the Tribunal granted Libra’s request to keep confidential certain documents containing information on its commercial practices. Therefore, it seems that the publicity requirement of the PAD is not incompatible with, and can accommodate, existing judicial protection to sensitive information.

Abuse of privileged condition?

The most glaring issue with the PAD is that it grants to the Public Administration the power to decide whether disputes regarding the financial-economic equilibrium of contracts can be submitted to arbitration. According to the PAD, these disputes can only be submitted to arbitration via submission agreements.  This means that public parties can decide, after the dispute has arisen, whether the dispute should be submitted to arbitration or referred to a national court, which clearly puts the Administration in a privileged position as a disputing party and can hinder the “parity of arms” principle.

Nonetheless, there is some reason for optimism; Libra v CODESP has pinned down better arbitration practices for public authorities as disputing parties. For example, it is all very common for state parties in Brazil to challenge the legitimacy of arbitration. However, in Libra v CODESP, the Administration refrained from these unnecessary (and generally unsuccessful) challenges, demonstrating willingness to submit to arbitration even when there was no contractual obligation to do so.

In fact, the Federal Government Attorney’s Office, for the first time in history, has created a department to deal exclusively with arbitration. The department will represent the Federal Government in arbitration proceedings and will be responsible for gathering and managing expertise in the area, which indicates that the government intends to continue to use arbitration to resolve disputes with private parties in the future.


Prior authors in this blog (see here and here) have correctly described Brazil as an arbitration-friendly jurisdiction. Indeed, it does not appear that the PAD, despite accurate and relevant criticism, can challenge that description.

Libra v CODESP has provided strong indications that the Public Administration in Brazil, despite resistance and poorly drafted legislation. Brazil is walking steadily towards fully embracing arbitration as an efficient (and legitimate) dispute resolution mechanism.

Nonetheless, one should not let excessive optimism be a blindfold, as Libra v CODESP does not answer all the problems with the PAD. One question that remains unanswered is whether the prerogatives granted to the Public Administration by the PAD will be abused, especially in cases where future prospects of prevailing on the merits of the dispute might not be so positive.

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Cybersecurity in International Arbitration: Don’t be the Weakest Link

Kluwer Arbitration Blog - Fri, 2019-02-15 00:37

Claire Morel de Westgaver

Bryan Cave Leighton Paisner LLP

In recent years there has been a dramatic increase in cyber-attacks on corporates, governments and international organisations. Arbitration proceedings are not immune from the threat of attack as previous incidents demonstrate.

The publication last year of a draft Cybersecurity Protocol for International Arbitration by the International Council for Commercial Arbitration, the International Institute for Conflict Prevention and Resolution (CPR) and the New York City Bar was an important step in raising awareness of cybersecurity risks and initiating a discussion within the arbitration community. The discussion has focussed on the sorts of measures that may be appropriate to protect documents and data against unauthorised access. However, there appears to remain a critical issue upon which consensus has not yet been found: the manner in which cybersecurity measures should be designed, implemented and enforced.

As a firm, BCLP wanted to contribute to the discussion and formulation of cybersecurity strategies by using our Annual Arbitration Survey to find out what arbitrators, corporate counsel, external lawyers, users of arbitration and those working at arbitral institutions thought about these and other related issues.

The full BCLP Arbitration Survey 2019 can be downloaded here and some of the key findings are summarised below.


Cybersecurity is an important (and real) issue

The results of this year’s survey confirm that the importance of cybersecurity is widely recognised. 90% of respondents said that it was an important issue in international arbitration, with 11% of respondents indicating that they had had experience of arbitral proceedings being subject to a cybersecurity breach. That more than 1 respondent out of 10 was involved in an arbitration where someone was able to obtain unauthorised access to electronic documents or other information in itself demonstrates the pressing need for cybersecurity measures to be put in place.


What measures

The two factors regarded by the largest number of respondents as being relevant to a cybersecurity strategy were the level of sensitivity/commercial value of the documents to be used in an arbitration (94%) and the consequences for the parties if someone were to gain unauthorised access to the documents/information (78%). Other factors included the costs of implementing the proposed measures (70%) and the extent to which the proposed security measures may hinder the ability of a party to present its case (61%).

In nearly all cases the percentage of respondents who regarded a particular measure as desirable was significantly higher than the percentage of respondents who had seen the same measure in practice. 83% of respondents thought it desirable for electronic documents to be transferred by means of a secure shared portal, as opposed to 53% who had seen the measure adopted in practice. 50% of respondents thought participants in an arbitration should have in place appropriate firewalls and antispyware and/or antivirus software, as opposed to 12% who had seen the measure implemented in practice.


Who and when

The majority of respondents agreed that active engagement by all participants to an arbitration would be necessary in order for a cybersecurity strategy to be effective.  96% of respondents thought that the parties would need to actively engage with the process and 94% thought that the arbitrators would need to actively engage with the process. There was, however, a recognition that obtaining agreement from all participants to observe cyber security measures would not be straightforward. Only 56% of respondents thought that obtaining the agreement of the parties or the arbitrators to observe security measures would be very or relatively easy.

There was a large measure of consensus about the desirability of considering cybersecurity measures at an early stage of the proceedings but opinion was divided over who should take the lead on initiating discussions on cybersecurity issues. 48% thought the parties should take the lead, 31% thought the supervising arbitral institution (if any) should take the lead, and 21% thought it should be the tribunal. Among respondents who act as arbitrators, nearly half (48%) thought that the parties should take the lead in initiating discussion. This suggests that a significant proportion of arbitrators are reluctant to actively engage in the assessment of cybersecurity risks and the development of appropriate measures. Whilst arbitrators may have legitimate reasons for such a position, as reflected in the numbers referred to above, there may well be circumstances where parties may not be able to take a view or agree on appropriate cybersecurity measures.


How to implement

One question that has been the subject of discussion is whether cybersecurity measures is a procedural matter, best handled by the tribunal after hearing submissions from the parties, or an administrative matter, best handled by the supervising arbitral institution, assuming there is one. Just over half of respondents (52%) thought it was a procedural matter for the tribunal, 41% thought it was an administrative matter for the institution and 7% were undecided.

This is an interesting finding as there are pros and cons with both approaches and the procedural or administrative nature of measures is likely to dictate whether such measures should be implemented in procedural orders, arbitration rules or arbitrators’ terms of appointment.

Giving arbitrators the power to impose cybersecurity measures may not sit well with the background and training of all arbitrators, and the nature of their main function. Further, depending on their level of interest and the information technology environment in which they operate, individual arbitrators may take very different approaches to cybersecurity. Whilst the nature and potential consequences of cybersecurity risks may vary from one case to another, there are certain cybersecurity risks that will arise in virtually every international arbitration. In that context, the adoption of mandatory measures addressing baseline risks would raise the level of cybersecurity in international arbitration on a more systemic basis. In addition, given that to be effective any measures adopted will have to be adhered to by the arbitral tribunal, arbitrators may find themselves in a situation where their personal preferences or practices may conflict with the objectives sought to be achieved by a robust cybersecurity strategy.

52% of respondents felt that a tribunal should have the power to impose measures in cases where the parties were unable to agree them. 71% of respondents thought that a tribunal should have the power to impose sanctions on a party that breaches data security measures that have been agreed or ordered by the tribunal. What remains unclear is how, in a system where cybersecurity measures are ordered by a tribunal (rather than stemming from arbitration rules for example), a breach of a measure on the part of the tribunal itself should be handled. It is difficult to contemplate that a tribunal would be competent to sanction itself.

It was clear that respondents felt that arbitral institutions could have an important role to play in dealing with issues of cybersecurity. 68% of respondents said that they would be more likely to use the arbitration rules of an institution that was able to provide advice or assistance on appropriate data security measures. 70% of respondents felt that support from within an institution’s secretariat would be useful to improve cybersecurity.

47% of respondents indicated that, where appropriate, their clients would be willing to pay a higher fee/incur an additional cost with an arbitration institution that provided advice and assistance on appropriate security measures and/or provided a secure platform (or similar) on which all communications and data sharing storage in the arbitration could take place. This particular finding may provide comfort to institutions. It suggests that users recognise that there is a cost aspect to cybersecurity and that the pressing need for structural solutions to be put in place may in some circumstances justify the associated increase in cost. As suggested in a previous blog post published on 6 October 2017, Cybersecurity in International Arbitration – A Necessity and an Opportunity for Arbitral Institutions, arbitral institutions are particularly well positioned to implement systemic solutions to cybersecurity risks; something that a risks-based approach by which risks are assessed and dealt with by parties and tribunals on a case-by-case basis is less likely to achieve.

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Joinder of Third Parties: A Welcome Novelty Under the UAE Federal Arbitration Law

Kluwer Arbitration Blog - Thu, 2019-02-14 23:30

Soraya Corm-Bakhos

In June 2018, the long awaited UAE Federal Arbitration Law (Law No. 6 of 2018) entered into force, repealing the arbitration specific provisions (“UAE Arbitration Chapter”) contained in the UAE Civil Procedure Code (Law No. 11 of 1992). Whilst it is fair to say that the new UAE Federal Arbitration Law failed overall to meet the local arbitration community’s expectations by not resolving some of the salient issues of arbitration in the UAE, such as the issue of capacity to enter into an arbitration agreement or the recoverability of parties’ costs, it contains a number of new provisions, which notably enhance arbitration proceedings seated in the UAE. The provisions on joinder of third parties are one good example of improvements introduced by the UAE Federal Arbitration Law.

Arbitrators often may have to consider requests to “extend” the arbitration clause or “join” third parties. Many commercial contracts involve various stakeholders, which are not always signatories to the contract but either have an interest in the dispute or mutual claims arising out of the same fact pattern. In such circumstances, efficiency considerations play in favour of joining these third parties to the arbitration. This said, joinder of third parties raises challenging issues around consent to arbitrate. As all arbitration practitioners know, consent is the cornerstone of arbitration. How to reconcile the consensual nature of arbitration while maximising efficiency by binding related parties? While the precise answer and related legal arguments may differ from one legal system to another, joinder of third parties will commonly be based on either implied consent or disregard of the corporate personality.

What legal principles should an arbitrator sitting in the UAE apply when considering joinder of third parties? Arbitrators should bear in mind that the UAE Federal Arbitration Law maintains the requirement that an arbitration agreement be made in writing (Article 7.1) and signed by a person having capacity to do so (Article 4.1). Ultimately, the answer will largely depend on the pleadings and arguments put forward by the concerned parties before the arbitrator.

When considering whether or not joinder is procedurally possible in the first place, the arbitrator must take into account and respect the law of the seat or legal place of the arbitration and, if any, the procedural rules. In this context, one will note that the current version of the rules of the Dubai International Arbitration Centre (DIAC), one of the most prominent arbitral institutions in the UAE, do not address joinder of third parties. Prior to the adoption of the UAE Federal Arbitration Law, the UAE Arbitration Chapter did also not contain any provisions on joinder. Article 22 of the UAE Federal Arbitration Law now provides as follows:

“The Arbitral Tribunal may authorise the joinder or intervention of a third party into the arbitration dispute whether upon request of a party or upon request of the joining party, provided that he is a party to the Arbitration Agreement after giving all Parties including the third party the opportunity to hear their statements.”

Based on the foregoing provisions, an arbitrator sitting in the UAE in a DIAC arbitration is now empowered to order the joinder of third parties provided he or she is (i) satisfied that an arbitration agreement exists between the original parties and the third parties and (ii) provided he or she has granted the concerned parties an opportunity to be heard on the application for joinder. Importantly, Article 22 does not appear to require all concerned parties’ express consent to joinder, simply requiring that each concerned party be given an opportunity to be heard.

In a recent local DIAC arbitration case, in which I was personally involved, the claimant sought permission to apply for joinder of third parties. After considering the application for joinder, the arbitrator decided to allow service of the request for arbitration together with the application for joinder on the third parties by the DIAC. DIAC served the concerned entities while granting them 30 days to provide their answers. Despite having been duly served and given an opportunity to be heard, the concerned entities failed to respond. By a reasoned decision, the arbitrator granted the relief sought by the claimant in the application for joinder and agreed to formally join the third parties as respondents to the arbitration. The arbitrator noted that pursuant to the provisions of Article 22 of the UAE Federal Arbitration Law, third parties may be joined provided that the arbitrator was satisfied that an arbitration agreement exists between the claimant and the third parties. Based on the evidence on record, the arbitrator considered that the fact pattern of this particular case lent itself to disregard of the corporate form and to finding of apparent authority. More specifically, the arbitrator found that it was established on the record that:

  • the agreement was signed by the HR manager of “X Group”, identified as “X Group”, a company organised and duly registered in Dubai, UAE, with a specific registered office in Dubai;
  • although “X Group” advertised on its website the existence of a corporate entity named “X Group LLC”, the original respondent in the arbitration, it was established that such limited liability company did not exist; there rather appeared to be separate legal entities operating under the name “X Group”;
  • on the website of the “X Group”, the concerned third parties were described as part of the “X Group”; the third parties advertised themselves as being part of the “X Group”;
  • the claimant’s claim in the arbitration was for payment by the “X Group” of services rendered by the claimant for the benefit of the “X Group”;
  • the HR manager corresponded with the claimant in his capacity as HR manager of the “X Group”; and
  • the joining third parties shared the same address as set out for the “X Group” in the agreement.

Based on the foregoing, the arbitrator found it reasonable – in the absence of any evidence to the contrary – that the HR manager acted as the agent of the joining third party entities, having acted well within the usual range of authorities and/or powers when signing the agreement with the claimant in respect of the particular services and it stood to reason that as such the HR manager did have authority to give full effect to the agreement, including the arbitration agreement through his signature. In the prevailing circumstances, the arbitrator found that the HR manager signed the agreement in his apparent authority as HR manager of the third parties, which entities were therefore bound under the agreement, including the arbitration agreement.

It remains to be seen whether the unconventional approach adopted by the arbitrator, who – despite the absence of all concerned parties’ express consent – decided to grant the joinder in the particular circumstances of this case, will be sanctioned by the UAE courts in the event of a potential action for annulment of the award.

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Arbitral Tribunal Not Properly Constituted: What is the Role of an ICSID Committee?

Kluwer Arbitration Blog - Wed, 2019-02-13 23:51

Ba Duong (Donny) Trinh


On 14 December 2018, an ICSID committee issued a decision on annulment of the award of Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17 (“Suez 03/17”) in which it declined to uphold the application for annulment from Argentina. This decision marked the fourth time Argentina has failed in its attempt to have the award set aside since 2016 with the same reason that the original tribunals failed to disqualify Prof. Gabrielle Kaufmann-Kohler due to the conflict of interest. Three of these four cases were ICSID arbitrations (the two other ICSID cases are: EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23 (“EDF”) and Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19 (“Suez 03/19”)). The fourth case was an ad hoc UNCITRAL arbitration under Argentina-UK BIT (AWG Group Ltd. v. The Argentine Republic (“AWG”)). This post will focus on the three ICSID committees’ annulment decisions and the debate therein regarding the limitation of review powers of an ICSID committee under the ICSID Convention.

Factual Background

Prof. Kaufmann-Kohler started to act as a member of the Board of Directors of UBS in April 2006 and remained in this position until 2009. In each of the three ICSID arbitration proceedings that took place within this period of time, UBS was undeniably connected with the claimants in some different forms. Argentina hinged its arguments on these connections in order to question Prof. Kaufmann-Kohler’s qualifications before other unchallenged members in accordance with Article 58 of the ICSID Convention. In EDF, Argentina requested the rest of the tribunal to disqualify Prof. Kaufmann-Kohler on the basis of five connections between UBS and EDF and EDFI, a subsidiary of EDF, most importantly the common interests of these three companies in an Italian company and a Swiss Company. In Suez 03/17 and Suez 03/19, Argentina challenged Prof. Kaufmann-Kohler on the ground that UBS held shares and other interests in the claimant companies, i.e. Suez and Vivendi (only in Suez 03/19). Argentina further claimed that Prof. Kaufmann-Kohler had failed to disclose these connections.

The tribunals in each of the three cases followed the requirement under Article 14(1) of the ICSID Convention, thus applying the test of whether Prof. Kaufmann-Kohler could “be relied upon to exercise independent judgment”. The tribunals reached similar conclusions, namely that the connections between Prof. Kaufmann-Kohler and the claimants were so far-flung that they could not have affected her independence. In EDF, the unchallenged members opined that Prof. Kaufmann-Kohler’s non-executive directorship at UBS gave her no financial interest in any of the Claimant companies and that she would not benefit in any way from an award in their favour.1) Decision of 25 June 2008 on the challenge to Prof. Kaufmann-Kohler in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23), para. 71 jQuery("#footnote_plugin_tooltip_9272_1").tooltip({ tip: "#footnote_plugin_tooltip_text_9272_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Meanwhile, in Suez 03/17 and Suez 03/19, the tribunals evaluated the extent of arbitrator-party relationship based on four qualitative criteria: proximity, intensity, dependence, and materiality. Taking into account the facts regarding the significance of shares that UBS held in Suez and Vivendi, as well as the role of Prof. Kaufmann-Kohler at UBS, both tribunals concluded that the connections between Prof. Kaufmann-Kohler and the claimants ‘did not create a manifest lack of independence and impartiality of judgment’ because UBS was merely a portfolio investor in the claimant companies and the economic links were fairly insignificant. Therefore, these proceedings still remained ongoing with Prof. Kaufmann-Kohler as part of the tribunal.

The Consistency in Three ICSID Committees’ Decisions

After losing in each of the original proceedings, Argentina decided to request the ad hoc committees to annul the award on two grounds. The first ground was the improper composition of the tribunal under Article 52(1)(a) with the participation of Prof. Kaufmann-Kohler who was supposed to be disqualified based on an alleged of conflict of interest. On the second ground, Argentina claimed that Prof. Kaufmann-Kohler committed ‘a serious departure from a fundamental rule of procedure’ under Article 52(1)(d) with her failure to disclose the connections between UBS and the claimants. Argentina further argued that the ad hoc committee would have to examine the issues de novo and decide as though there was no challenge that had been previously made.

To begin with the earliest decision in EDF, the committee responded to Argentina’s argument that the issues should be determined de novo by assessing the relationship between the findings and rulings of the tribunal in respect to Article 58 and the role of the committee at the annulment stage. The EDF committee considered that the function of an ICSID ad hoc committee did not include the determination of the independence and impartiality of an arbitrator, because Articles 57 and 58 entrusted this function to the unchallenged members of the tribunal. According to this committee, the role of an ad hoc committee was not to determine whether or not the original tribunal has rendered a correct decision because it is not an appellate body. It would not find a ground of annulment existing under Articles 52(1)(a) and 52(1)(d) unless the tribunal’s decision was “so plainly unreasonable that no reasonable decision-maker could come to such a decision”. The tribunal continued to point out that the same conclusion had actually been reached by another ‘reasonable decision-maker’, which was the Suez 03/19 tribunal, and therefore rejected Argentina’s annulment request with regards to Prof. Kaufmann-Kohler’s disqualifications.

The two Suez committees followed the lead of the EDF committee. They held that, with direct reference to EDF committee’s decision, they would only review whether the decisions made by the tribunals were “so plainly unreasonable that no reasonable decision-maker could come to such a decision” since they would not operate as an appeal mechanism. In the end, the outcomes in both subsequent decisions on ‘Kaufmann-Kohler controversy’ were not different from the first one with the loss for Argentina.


Another way to understand the approach of these ICSID committees is that if the decision of an arbitral tribunal is not clearly unreasonable, though it could be somewhat controversial, still there will be no point going through it all over again. From the author’s view, such approach would probably raise two questions:

(1) What should be the actual role of an ICSID committee when dealing with a request to annul an award on the ground of improper composition of the tribunal?

(2) What is the role of Article 52(1)(a) in this context?

Firstly, it is clear that the function of review of an ICSID ad hoc committee should be akin to that of a national court before which a challenge of a non-ICSID arbitration award is brought. Besides the three ICSID proceedings, as mentioned above, Argentina also sought vacatur of an UNCITRAL award in AWG before the District Court for the District of Columbia with the same ground that Prof. Kaufmann-Kohler’s participation constituted improper composition of the tribunal.2) Decision of the US District Court for the District of Columbia on Argentina’s Petition to Vacate the Arbitral Award, 30 September 2016; Judgment of the United States Court of Appeals for the District of Columbia, 3 July 2018 jQuery("#footnote_plugin_tooltip_9272_2").tooltip({ tip: "#footnote_plugin_tooltip_text_9272_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Unlike the ICSID committees, both the DC district court and then the Court of Appeals adjudicated this particular issue by analyzing the factual background and came to decision on their own, not depending on whether or not the arbitral award was ‘plainly unreasonable’. The question is why an ad hoc committee and a national court performed in two different ways. From author’s view, there would be no reason for them to perform differently, given that they had the same function to decide on an annulment request raised by the same party, with very similar set of facts, based on substantively same grounds under Article 52(1)(2) ICSID Convention and § 10(a)(2) Federal Arbitration Act, which is challenge of an award due to improper constitution of tribunal. The question now is which way is more appropriate.

Secondly, if the approach of three ICSID committees is more appropriate, how should Article 52(1)(a) be interpreted? Article 52(1)(a) enunciates:

“Either party may request annulment of the award […] on one or more of the following grounds:

(a) that the Tribunal was not properly constituted”.

Words matter. There is clearly no implication of a limited scope of review under this provision. When a party raises request, the committee shall decide de novo on its own whether or not to set aside the award based on the party’s request, not on whether there is another tribunal that comes with the same conclusion. If the committee’s decision depends on other decisions that much, then what is the role of Article 52 in such circumstances?

Finally, all three ad hoc Committees never answered the question raised by Argentina: how did the members of the Committee come to the conclusion not consider the annulment of award relating to disqualification of an arbitrator unless the tribunal’s decision was “so plainly unreasonable that no reasonable decision-maker could come to such a decision”, since this requirement is not expressly spelled out in Article 52(1)(a) nor anywhere else in the ICSID Convention? The Committees reasoned that they performed the function of an annulment committee, not of an appellate body. If the scope of review was so wide as to re-consider the merits of a decision, an ad hoc committee would be turned into an appellate body and thus it would be inconsistent with the limited scope of annulment under the ICSID Convention.3) Decision on Annulment (5 February 2016) in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23), para. 145 jQuery("#footnote_plugin_tooltip_9272_3").tooltip({ tip: "#footnote_plugin_tooltip_text_9272_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, the distinction between annulment and appeal consists of two elements: the result of the process and the aspects of the decision under review.4) Christoph H. Schreuer, ‘The ICSID Convention: A Commentary’ (Cambridge University Press, 2009), p. 901. jQuery("#footnote_plugin_tooltip_9272_4").tooltip({ tip: "#footnote_plugin_tooltip_text_9272_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); First, the result of annulment is the invalidation of the original decision while the result of a successful appeal is its modifications. In this case, Argentina clearly did not request the committees to modify the decisions but to invalidate them. Secondly, annulment is not concerned with substantive correctness of the decision while appeal is, and annulment does not provide the challenging party an opportunity to raise new arguments on the merits or introduce new evidence. However, Argentina asked for none of these. Argentina asked the committees to set aside the decisions based on one of fundamental standards listed exhaustively in Article 52(1) and, therefore, the distinction made by the tribunals between annulment and appeal was not relevant in this context.

References   [ + ]

1. ↑ Decision of 25 June 2008 on the challenge to Prof. Kaufmann-Kohler in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23), para. 71 2. ↑ Decision of the US District Court for the District of Columbia on Argentina’s Petition to Vacate the Arbitral Award, 30 September 2016; Judgment of the United States Court of Appeals for the District of Columbia, 3 July 2018 3. ↑ Decision on Annulment (5 February 2016) in EDF International SA and Others v. Argentine Republic (ICSID ARB/03/23), para. 145 4. ↑ Christoph H. Schreuer, ‘The ICSID Convention: A Commentary’ (Cambridge University Press, 2009), p. 901. 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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Listening Exercise - A listening skills activity: 'Facts and Feelings'

Communication and Conflict Blog - Wed, 2019-02-13 16:20
A listening exercise which enables participants to reflect on various aspects of the experience of listening and being listened to as well as the experience of being the speaker in a situation.

Schiefelbein Global Dispute Resolution Conference – Wrap Up

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Below is a wrap up of the recently held Schiefelbein Global Dispute Resolution Conference at Arizona State.   It was a great conference, and I hope that you find this information enlightening.  And note that we regularly post conference highlights on this web page, so feel free to send a write up to one of the … Continue reading Schiefelbein Global Dispute Resolution Conference – Wrap Up →

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When is Commencement of Court Proceedings a Repudiatory Breach of an Arbitration Agreement?

Kluwer Arbitration Blog - Tue, 2019-02-12 20:00

Andrew Pullen

In Marty Ltd v Hualon Corporation (Malaysia) Sdn Bhd [2018] SGCA 63, the Singapore Court of Appeal held that an arbitral tribunal had no jurisdiction because the claimant in the arbitration (“Hualon”) had repudiated the arbitration agreement1)See here another discussion of this case from the Singapore law perspective jQuery("#footnote_plugin_tooltip_3652_1").tooltip({ tip: "#footnote_plugin_tooltip_text_3652_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });. Of most interest, the decision appears to create a presumption in Singapore law that commencing litigation in breach of an arbitration agreement is repudiatory, diverging from English law.



In 2014, Hualon, through a receiver appointed by its creditors (the “Receiver”), commenced proceedings in the BVI courts (the “BVI Action”) against its former directors and Marty Ltd (“Marty”), a company owned by the former directors. Hualon claimed that the former directors, in breach of duty, had unlawfully diluted Hualon’s shareholding in its Vietnamese subsidiary in favour of Marty. Hualon brought claims for dishonest assistance and unjust enrichment against Marty. The BVI Action was eventually dismissed.

In 2015, following various steps in the BVI Action, but before it was dismissed, Hualon (through the Receiver) commenced an arbitration against Marty, pursuant to an arbitration agreement set out in the Vietnamese subsidiary’s company charter (the “Charter”). The claims against Marty were essentially the same as in the BVI Action. Marty unsuccessfully challenged the tribunal’s jurisdiction before the tribunal and in the High Court. Those decisions were overturned by the Court of Appeal.


The decision


The Court of Appeal held (at [68] and [80]) that Hualon had repudiated the arbitration by a combination of commencing the BVI Action and contending in its statement of claim that, upon appointment of the Receiver, the former directors lost all authority to bind Hualon. This amounted to a “disavowal” of all documents signed by the former directors after the Receiver’s appointment, including, crucially, the Charter containing the arbitration agreement. The Court observed (at [43]) that an allegation that the entire contract was entered into without authority is a challenge to each and every clause, including the arbitration clause. Hualon did not qualify its position and this, therefore, was sufficient to evince “repudiatory intent”.

Acceptance of the repudiation

It is only if a repudiation is accepted by the innocent party that the contract is terminated. The Court of Appeal held (at [89]) that Marty had accepted the repudiation. Where the breach of the arbitration agreement was commencement of litigation, acceptance “must lie in accepting the court’s jurisdiction and engaging it on the merits” (see [85]). Marty did so when it applied for summary judgment in the BVI Action. In contrast, Marty’s challenge to the jurisdiction of the BVI court on forum non conveniens grounds, stating that Malaysia or Vietnam were possible alternative fora but without committing to submit to those courts, was not sufficiently clear and unequivocal.


A presumption of repudiation?

The Court of Appeal rested its decision that Hualon repudiated the arbitration agreement on a combination of commencement of the BVI Action and disavowal of the Charter because Marty’s counsel accepted that commencement of proceedings did not per se amount to a repudiatory breach. However, the Court stated, obiter, (at [66]) that it is:

“strongly arguable that the commencement of court proceedings per se by a party who is subject to an arbitration agreement is prima facie repudiatory of such party’s obligations under that agreement” (emphasis in original).

According to the Court, commencement of litigation is prima facie repudiatory, but it would be open to the breaching party to furnish an explanation or qualification for having commenced the proceedings which showed objectively that it had no repudiatory intent in doing so. It appears that the explanation would have to be furnished to the other party contemporaneously with the breach. The effect of this is to create something akin to a rebuttable presumption.



There are three types of repudiation in Singapore and English law: (i) renunciation of the contract; (ii) self-induced impossibility of performance; and (iii) a sufficiently serious failure to perform in accordance with the terms of the contract.

We are not concerned with impossibility. Nor was the case analysed as a serious failure to perform. That would have required the Court to assess:

(i) whether the obligation not to litigate a dispute had the status of a condition (a term, any breach of which, no matter how trivial, amounts to a repudiation); or

(ii) if not, whether the breach had the effect of depriving the innocent party of substantially the whole benefit which it was intended it should obtain from the arbitration agreement (the Hong Kong Fir test).

There was no such assessment.

The discussion of whether Hualon had manifested “repudiatory intent” by its actions makes clear that the Court analysed the case in terms of renunciation, i.e. where a party “expressly or implicitly refuses to perform in accordance with the terms of the contract”. However, a refusal to perform will amount to a renunciation only if it is a refusal to perform (i) all obligations under the contract, (ii) a condition, or (iii) where the consequent breach would satisfy the Hong Kong Fir test2)The Law of Contract in Singapore, Andrew Phang Boon Leong, Gen Ed, para 17.003, 17.031 and 17.048; Chitty on Contracts, 33rd edition, para 24-018 jQuery("#footnote_plugin_tooltip_3652_2").tooltip({ tip: "#footnote_plugin_tooltip_text_3652_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });.

The obligation not to litigate cannot have the status of a condition, because that would mean that commencement of litigation would always be repudiatory, no matter what explanation was provided.

The Court of Appeal did not mention the Hong Kong Fir test.

The Court therefore appears to regard commencement of court proceedings as a refusal to perform all obligations under the arbitration agreement. One can see why the BVI Action evinced such a refusal: it was combined with a disavowal of the arbitration agreement.

But that will not be the same in every case. By commencing litigation in respect of a claim, a party may evince a refusal to arbitrate that claim. But even without a specific qualification of the sort which the Court of Appeal suggested would be necessary to rebut the presumption, there are circumstances in which it would not be clear that it was refusing to arbitrate every claim falling under the arbitration agreement. Such circumstances might include the following:

  • the litigation concerns one claim, but the parties are already arbitrating a different claim under the same contract and the party commencing the litigation gives no indication that it wishes to abandon the arbitration;
  • the claim in the litigation is limited in scope, in the context of much broader contract which could give rise to multiple disputes e.g. a small debt claim arising under a 30-year licensing agreement covering a suite of products;
  • there is (objectively) legitimate doubt as to whether the claim in the litigation falls within the scope of the arbitration agreement (even if it is later held to do so) e.g. a non-contractual claim relating to a transaction involving multiple contracts, some containing arbitration clauses, others containing jurisdiction clauses.

Beyond the above examples, it is not unknown for parties simply to make mistakes and overlook an arbitration agreement. However, such a mistake will not negate repudiatory intent because the test is objective. Hualon claimed it was unaware of the arbitration agreement when it commenced the BVI Action, but Hualon was not entitled to rely on its own alleged ignorance because it was not communicated to Marty. That was a purely subjective reason for its conduct and could not negate the repudiatory intent which a reasonable person would infer (see [52] and [74]). The Court of Appeal’s view would therefore create something of a hair trigger, since commencement of the litigation is said to be prima facie repudiatory, not continuation of proceedings after the breach of the arbitration agreement has been pointed out.

The Court of Appeal’s presumption, albeit obiter, appears to put Singapore arbitration law onto a different footing from English arbitration law. The Court departed from earlier Singapore and English authorities (describing the reasoning in the leading English case, Rederi Kommanditselskaabet Merc-Scandia IV v Couniniotis SA (The “Mercanaut”) [1980] 2 Lloyds Rep 183, as “thin”), and from the views expressed in the leading (English) textbooks Chitty on Contracts, which states that “resort to legal proceedings of itself [does not] constitute a repudiation of the arbitration agreement” (33rd edition, para 32-051) and Russell on Arbitration, which states (24th edition, para 2-137) that:

“A party may repudiate the arbitration agreement by commencement of proceedings in court in breach of its terms, but such breach will only be repudiatory if done in circumstances that show the party in question no longer intends to be bound by the agreement to arbitrate”.

The view in Chitty may be too lenient on the breaching party, but for the reasons explained above it is suggested that the Court of Appeal’s presumption goes too far and requires qualification. The position described in Russell allows an appreciation of the facts of the particular case and may be preferable. In any event, the Court of Appeal’s presumption requires further consideration when next before the Court.

References   [ + ]

1. ↑ See here another discussion of this case from the Singapore law perspective 2. ↑ The Law of Contract in Singapore, Andrew Phang Boon Leong, Gen Ed, para 17.003, 17.031 and 17.048; Chitty on Contracts, 33rd edition, para 24-018 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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