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New York Arbitration Week 2021 Redux: Getting it Right: Building Quality + Trust in the Arbitral Process

Kluwer Arbitration Blog - 5 hours 48 min ago

During New York Arbitration Week 2021, the New York International Arbitration Center (“NYIAC”) and the Chartered Institute of Arbitrators (“CIArb”) New York branch hosted two panels dedicated to the theme of “Getting It Right in International Arbitration.”  This post presents some highlights.

 

Getting it Right:  How Arbitrators, Counsel, and Institutions Can Improve the Quality of the Arbitral Process

This panel tackled how arbitrators, counsel, and institutions can improve the quality of the arbitral process.  The program was moderated by Professor Gabrielle Kaufmann-Kohler (Partner at Lévy Kaufmann-Kohler).  The panelists were Adriana Braghetta (Independent Arbitrator, Adriana Braghetta Advogados), Dyalá Jiménez Figueres (Independent Arbitrator, DJ Arbitraje), Joseph E. Neuhaus, FCIArb (Partner at Sullivan & Cromwell LLP), and Elliot E. Polebaum (Independent Arbitrator, Polebaum Arbitration).  Each panelist proposed a method to improve the arbitral process, which was put up for debate.

  1. Early Definition of Key Issues

Mr. Polebaum proposed that arbitrators create a list defining the key legal issues early in the proceedings to focus counsel on the main points of resolution.  He believes parties can become distracted by side issues and narrative disputes that distract from the core issues requiring resolution, leading to inefficiencies.  Recognizing that issues evolve throughout a proceeding, the list of issues should be dynamic, giving the parties flexibility.

The panel was skeptical because there is a danger in memorializing issues too early.  Ms. Jiménez Figueres noted that it presents the risk of prejudging the issues, especially at a time when the arbitrator might not have fully immersed themselves with the context of the dispute.  On the other side, there is a concern that memorializing the issues too late could harm procedural efficiencies, because the parties already have a strategy locked in place.

  1. Circulating Draft Procedural Orders

Ms. Jiménez Figueres proposed that arbitrators circulate drafts of procedural orders to parties that solve interim, non-final issues rather than holding oral hearings.  Collateral issues or pre-hearing motions often come before an arbitrator is fully aware of the case and orders can have unintended consequences.  By foregoing extensive oral argument and allowing parties to trade drafts of the proposed order, the relief granted is less likely to contain error and will incorporate the parties’ relative positions.

The panel again expressed skepticism, noting that this practice can create inefficiencies, risk the possibility of interested parties crafting orders for personal benefit, or raise due process risks that would affect the enforcement of the award.  As an alternative, arbitrators may pose direct questions to the parties and allow for submissions of factual errors after the order is entered.

  1. Continuing Arbitrator Education

Continuing the focus on arbitrators, Ms. Braghetta proposed ongoing, and possibly required, continuing education for arbitrators in core substantive areas of law that arbitrators often encounter in their practices.  Not only might this decrease errors and avoid the intervention of an institutional scrutiny process, it also prepares the next generation of arbitrators.

While most panelists agreed that continuing education of arbitrators is a virtue, the benefit of such requirement would have limitations.  With international arbitration, it would be difficult to implement mandatory education on substantive areas of law where the approaches vary greatly across jurisdiction.  Further, if institutions provided or required this substantive training, they may open themselves up to criticism for exceeding their scope as a procedural body meant to facilitate proceedings, not determine the application of law.

  1. The Case for Episodic Justice

Mr. Neuhaus presented the case for what he termed “episodic justice.”  Arbitral tribunals often place efficiency as the predominant value of arbitration, and thus are reluctant to engage in dispositive motion practice unless there is a strong showing that it will shorten the overall length of a proceeding.  Episodic justice, however, would look more favorably on motion practice even with no efficiency gain.  Such motion practice could cull bad claims, focus the hearing on the larger issues, and provide the parties with early and continual feedback throughout the proceeding that would increase the chances of settlement.

Feedback for episodic justice was generally favorable, with only slight caution.  This practice presents opportunities to focus the parties on the main issues and can create efficiencies, both in terms of cost and prospects of resolution.  However, arbitrators may want to ensure that they make a threshold determination that the movant has shown a reasonable prospect of success in making its motion to prioritize efficiency.

 

Getting it Right:  Should the Functus Offico Rule be Reformed?

The panel focused on the functus officio doctrine, which prevents arbitrators from clarifying or correcting an arbitration award after it is issued.  The panel was led by Richard F. Ziegler, FCIArb (Independent Arbitrator at Acumen ADR).  The panelists were Martin F. Gusy (Partner at Bracewell LLP), Eduardo Silva Romero (Partner & Co-Chair of International Arbitration, Global Practice, Dechert LLP), Professor Janet Walker, C.Arb, FCIArb (Independent Arbitrator, Arbitration Place and Outer Temple Chambers & York University Osgood Hall Law), and Professor Anne Marie Whitesell (LLM Program & Faculty Director, Program on International Arbitration and Dispute Resolution at Georgetown Law School).

  1. Functus Officio Reveals Schisms between Competing Values, Civil and Common Law

The panel began with a robust discussion on whether the functus officio rule should remain in its current state or be reformed.  Professor Whitesell engaged in a passionate defense for the preservation of functus officio, contending that arbitrators should be generally prohibited from substantively modifying awards to promote finality.  Parties typically choose arbitration instead of litigation to guarantee only narrow bases for “appeal,” through the limited grounds to resist enforcement of arbitral awards in the 1958 New York Convention.  If arbitrators were permitted to re-open final awards, it could “open the door to chaos.”

Building off this focus, Mr. Silva Romero noted that the functus officio doctrine illuminated a tension between two core values in international arbitration: (1) finality and (2) the quality of arbitral justice.  Mr. Silva Romero observed that if a party places the quality of arbitral justice over finality, then it may want functus officio to provide some flexibility to allow arbitrators to eventually “get it right” and correct any errors in an award.

Mr. Silva Romero explained that a party’s preference regarding a tribunal’s ability to change an award after it is issued may depend on whether the party is more accustomed to a civil or common law approach.  In civil law jurisdictions, there is more flexibility in devising solutions, while in common law jurisdictions, parties are disposed to adhering to stricter rules.  In France, for example, the law codified an arbitrator’s ability to correct an award, subject to “classic limitations” as well as the unique instruction for potential revision when fraud is discovered after the final award is rendered.

Speaking from his experience in Germany, Mr. Gusy concurred that civil law jurisdictions may approach the rule of functus officio on a more issue-by-issue level, drawing comparisons to the UNCITRAL Model Law which provides for some limited corrections of an award.

Professor Walker noted that functus officio comes with additional considerations, including whether a court or a tribunal may be tasked with determining an arbitrator’s ability to modify an arbitration award.  The application of functus officio is potentially rife with difficulty, particularly where provisional awards may be subject to revision, or the tribunal that issued the award cannot be re-constituted.

  1. New York City Bar Proposal to Expand the Ground for Revising Awards

In conclusion, Mr. Ziegler prompted panelists to consider a New York City Bar Association’s Arbitration Committee Report of 2021, which proposed to expand the grounds on which an award can be revised, subject to four characteristics that (1) provide an opt-in to these expanded grounds at the beginning of the proceeding; (2) allow for an award to be corrected when there is an error or misapplication of fact or law; (3) impose time limitations to seek revisions; and (4) require fee-shifting, so that the moving party cannot apply for its adversary to pay for fees if it succeeds in an application for revision, but if the moving party loses it compensates the other party for costs associated with the application.

Professor Whitesell discouraged adopting the proposal, arguing that the opt-in is unnecessary, because parties already have the autonomy to choose rules governing their disputes, and can select rules that already permit some form of limited appellate arbitral review.  Professor Whitesell cautioned that there could be serious due process concerns if arbitrators implement a correction to an award that goes beyond mere clerical correction, such as a substantive change, because due process would likely afford both parties the right to be heard on the merits of the revision.  Imposing time limits to correction of an award could also pose practical problems, and the cost-shifting scheme does not align with the notion that a party should not bear the financial burden of insisting that a tribunal remedy a mistake.

 

Concluding Remarks

In conclusion, although the panelists tackled a variety of proposals and issues, the robust debates demonstrated that while there are creative solutions and innovative reforms that can be implemented into the arbitration process, it may be difficult to gain widespread acceptance of such changes, particularly because there can be diverging views as to how to “get it right” when it comes to case management and determinations in arbitration.

 

*The opinions expressed are those of the author(s) and do not necessarily reflect the views of their firms, clients, or any respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

 

A recording of the program is available here and Kluwer Arbitration Blog’s full coverage of New York Arbitration Week is available here

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New York Arbitration Week 2021 Redux: Options, Opportunities, Pivots, and Challenges in an International Arbitration Career

Kluwer Arbitration Blog - Mon, 2021-12-06 00:00

This year’s theme for the New York Arbitration Week (“NYAW”) was “getting it right.” It invited ArbitralWomen and the Young International Arbitration Practitioners of New York (YIAP-NY), the latter in partnership with the New York International Arbitration Center (NYIAC), to reflect on the challenges but also new opportunities that the past year has presented to the arbitral community. In this context, ArbitralWomen and YIAP-NY hosted a series of discussions revolving around the changing demands of users, mental health, technology, and career options, intending to inspire attendees to reflect on the impact of the last year and lessons for the future.

The ride is certainly not without challenges, especially for diverse lawyers. Getting together to share our own experiences, views, and feelings is a safety net that makes us stronger. This post shares some highlights of discussions held over two days in the hopes of inspiring the reader to continue thinking deeply on these crucial topics.

 

New York Stories: Career Options, Opportunities, and Challenges in International Arbitration
ArbitralWomen’s program focused on the available career options and opportunities, as well as the accompanying challenges faced by international arbitration practitioners. The panelists shared stories about their professional changes and career transitions they have observed in the field.

The panel was moderated by Yasmine Lahlou (Chaffetz Lindsey LLP & Board Member, ArbitralWomen) and Louise Woods (Vinson & Elkins LLP & Vice President, ArbitralWomen). Louise Woods introduced the panel with very appropriate words by the famous poet, Robert Frost:

“Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.”

The panelists included Chris Alberti (Saudi Center for Commercial Arbitration); Lorraine Brennan (Independent Arbitrator, JAMS & Adjunct Professor, Georgetown Law School); Dana MacGrath (Independent Arbitrator, MacGrath Arbitration & President, ArbitralWomen); and Dr. Friedrich Rosenfeld (Hanefeld Law Firm & Global Adjunct Professor of Law, NYU Law School in Paris).

The discussion focused on four key concepts which influence the international arbitration field, and concluded by addressing the constant need for practitioners to track their career progression:

Key Concept 1: Changing Demands of Users
Arbitration is a service industry which adapts to the needs and demands of its users. Those needs and demands have changed over time. Economies have become more globalized, and this globalization has led to the development of the arbitration practice in all parts of the world. This requires lawyers to be culturally intelligent while transacting with clients. Moreover, increasing diversity in the business community directly aligns with the need for a diverse arbitration community.

Key Concept 2: Relevance of Technology
Technology has altered international arbitration practice in several ways, by enabling virtual hearings and submissions and environmentally-friendly practices. In addition, due to technological advancements, there is greater transparency regarding arbitrators’ experiences as counsel and arbitrators in various matters. E-discovery has in many cases led to greater effectiveness and cost efficiency for clients. Technology has also assisted younger practitioners globally in launching initiatives, creating mentoring opportunities, and providing them with an opportunity to participate in virtual webinars.

Key Concept 3: Regulatory Competition
The New York Convention is the most important and widely ratified treaty in international arbitration. Domestic arbitration legislation has become more arbitration-friendly in more than 100 jurisdictions. Arbitration institutions regularly update their rules and compete against each other while emphasizing cost and time efficiency. This has made the arbitration route more attractive to clients and efficient for counsel.

Key Concept 4: Giving back to the Arbitration Community
The panelists emphasized the need to give back to the arbitration community through coaching, mentoring, and sharing advice, as well as the importance of networking. Greater engagement in these activities by senior practitioners would help younger practitioners and those interested in this field learn about the reservoir of available resources and opportunities, which are pertinent for one’s professional development. The panelists also encourage practitioners not only to be a member of committees relevant to their areas of interest but also to be an active participant in their activities.

Conclusion
Finally, the panelists emphasized a recurrent theme – the need to rethink and dare to change even at the risk of failure. A career journey must involve a plan and constant reflection on its development. Being open to taking risks often goes hand-in-hand with becoming more entrepreneurial. It is important to recognize underrepresented areas and develop a niche practice in these areas if they are in line with practitioners’ interests.

 

Getting it Right – Arbitrating in the Post-COVID Virtual Arena
In a three-part series event, YIAP-NY and NYIAC invited attendees from around the globe to listen to a brief presentation and participate in guided networking sessions held at multiple times of day to accommodate participants from the different continents.

Each event focused on contemporary topics relevant to practicing international arbitration in the post-COVID virtual arena (although the authors of this post are still considering whether it is possible to refer to a “post-COVID” world in light of recent events). Those topics were:

  • Mental health in the virtual world, featuring Desi Vlahos (Mentor and Lawyer, Practical Legal Training, Leo Cussen Centre for Law)
  • Lessons learned from the virtual battlefield, featuring José María de la Jara (ODDS Legal, Co-Founder)
  • Getting the experience needed to advance your career post-COVID, featuring Chris Campbell (Baker Hughes, Senior Counsel; Tales of The Tribunal, Curator & Host)

Desi Vlahos opened the day of discussions by defining what “good mental health” means: not just the absence of mental illness but the ability to lead a life of value. In this context, she discussed with attendees the key factors at work that can impact negatively on mental health – pressure, workload, lack of work-life balance, among others – and how these have gotten worse during the pandemic. Nonetheless, Desi remarked that just as these factors became accentuated, so did the institutional response to overcome them. Organizations such as the New York State Bar Association Taskforce have prepared recommendations including making sure lawyers take all vacation time, encouraging parents to take leave, and addressing (and training on) the importance of recognizing mental health issues and wellbeing. But the response cannot come only at an institutional level: individuals also need to be proactive about their mental health, engaging in regular self-care.

José María de la Jara continued the conversation in the afternoon focusing on virtuality, and how this has affected the players in the arbitration field: for centuries, we relied on face-to-face communications, and now we have been reduced to little boxes on a screen. However, technology is here to help, and it is necessary to think outside the box to embrace innovative solutions while adapting to the new reality. As part of the conversation, José María queried whether physically returning to the office is in fact essential to providing better services to clients, searching for more collaboration, or training lawyers. The answer is not clear-cut: the same achievement levels can be obtained by capitalizing on tech-based solutions.

Chris Campbell closed the event by discussing the impact of the COVID-19 pandemic on career development, and how to make the most of it to advance in our profession – especially considering that many do not have the luxury of in-person encounters. Chris commented that to gain more experience in the field, young practitioners need to make sure “they are out there.” Some practical tips he shared with the audience were preparing and publishing articles; actively engaging in virtual events; trying to keep in touch with contacts; and preparing podcasts on topics of interest. Although there is no recipe to succeed in the profession, these steps can definitively contribute to attaining such goal.

After each presentation, attendees engaged in meaningful networking sessions supported by young arbitration practitioners organizations from the different regions of the world in a remarkable global collaboration across young practitioners organizations: the Asian International Arbitration Centre Young Practitioners Group; Young Singapore International Arbitration Centre; Paris Very Young Arbitration Practitioners; London Very Young Arbitration Practitioners; German Arbitration Institute under-40 group; Colombian Very Young Arbitration Practitioners; Uruguay Very Young Arbitration Practitioners; and ICDR Young & International. Their representatives, together with YIAP-NY and NYIAC, acted as facilitators guiding the discussions in the networking groups, in which participants discussed the topics presented by the speakers, and had a candid, open dialogue sharing experiences, views, and feelings.

 

Concluding Remarks
The panelists in the ArbitralWomen event concluded by sharing ways to diversify the international arbitration practice. Senior practitioners could, for instance, provide young arbitration lawyers with advocacy opportunities and/or involve associates as tribunal secretaries on matters, making them visible to the institutions that play a significant role in the appointment of arbitrators. The panelists also emphasized the need to acknowledge that diversity extends far beyond gender diversity. Finally, the panelists shared the sentiment feeling view that international arbitration is one of the few fields of legal practice where lawyers are genuinely content with the practice which makes the community stronger.

The YIAP-NY members in their event series shared the same sentiment: the arbitration community is more than willing to help others to thrive, as these conversations have demonstrated. There was also a common thread among the topics covered by both events. Part of being able to advance and succeed in this field is to be mindful of the challenges that the COVID-19 pandemic has brought (mental health; a new reality posed by virtuality; lack of in-person meetings) and see them as an opportunity to grow. Embracing challenges means that young practitioners do not see them as an obstacle, but instead as an opportunity to improve as growing, young professionals.

More information about the program is available here and here and Kluwer Arbitration Blog’s full coverage of New York Arbitration Week is available here

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Open Position: Assistant Editor of Kluwer Arbitration Blog

Kluwer Arbitration Blog - Sat, 2021-12-04 00:10

The Editorial Board of Kluwer Arbitration Blog announces the opening of the following position with Kluwer Arbitration Blog: Assistant Editor for Australia, New Zealand and the Pacific Islands.

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 Dr Crina Baltag, crinabalta[email protected]. The deadline for receiving the applications is 17 December 2021.

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Arbitration Tech Toolbox: Are We Ready for the ArBot?

Kluwer Arbitration Blog - Fri, 2021-12-03 00:05

At the time the New York Convention (1958) and the UNCITRAL Model Law (1985) were being drafted, the possibility of sophisticated technology rather than natural persons running and controlling an arbitration must have seemed far-fetched. But, at the same time, the language employed in both the Convention and the Model Law did not expressly exclude the use of technological tools in conducting an arbitration or deciding the outcome of an arbitration. In fact, the Model Law was amended in 2006 to respond to the evolving practices of international trade and technological development, such as the use of electronic communication.

While the underlying assumption of these instruments seems to remain that an arbitrator must be a natural person, such assumption is no longer fail-safe in the world of digitalization. The interpretation that only a natural person is capable of acting as an arbitrator seems limiting especially in light of growing demands for access to justice. Perspectives on this issue must be broadened to consider a more dynamic view – to include the possibility of reliance on the Artificial Intelligence (“AI”) Arbitrator, or Arbitrator-Robot (“ArBot”). In this post, I focus on the anatomy of the arbitral process and, in particular, the conduct of proceedings and the rendering of awards. I also discuss how use of an ArBot fits into the existing global framework for international arbitration as structured by the New York Convention and Model Law. For a detailed explanation on the use and mechanics of AI in arbitral decision-making, one could refer to my previous article.

Today, virtually all stages of an international arbitration are facilitated by technology, with tools widely available for: selection of arbitrators, case management, discovery, legal research, document review and hearings. However, up to now, there is no all-encompassing AI tool that can conduct an arbitration from the commencement of an arbitration until the rendering of an award, without any human interference. It is predicted that AI tools will be able to conduct arbitrations and perform the tasks of neutral decision makers within the next two decades, and commentators have already been questioning whether such tools can ensure fairness. If the ArBot becomes a reality, what will the arbitral procedure look like? Will the requirements of the Model Law or the stipulations for enforcement under the Convention be met by an award rendered by an ArBot?

 

Conduct of Hearing

Party autonomy is the backbone of arbitration. This principle is enshrined in almost all rules and laws enacted on arbitration. Article 19 of the Model Law provides that subject to its provisions, the parties are free to agree on the procedure to be followed by the arbitrator for the conduct of arbitration. The parties may agree upon documents-only arbitration, limit the number of oral hearings, or agree upon an electronically conducted hearing. The only mandatory principle which holds weight is that the parties must be treated equally and be given a reasonable or full opportunity to present their case. Article 19(2) of the Model Law provides that the tribunal has the power to determine the admissibility, relevance, materiality, and weight of any evidence. This essentially enables an arbitrator to exercise discretion, including in the use of technology, in its assessment of evidence.

Where the parties agree to electronic proceedings, the arbitration would commence by filing an e-request for arbitration and would involve e-hearing, e-submissions, e-production of documents/evidence and would normally culminate in an e-award. For conduct of a seamless e-hearing, appropriate translation and transcribing technologies (such as that employed in Opus2) may be used by an ArBot. Voice recognition technologies also have the potential to substitute transcripts and facilitate e-hearings. Other tools incorporating natural language processing can analyse naturally occurring texts in e-submissions and witness testimonies, similar to human language processing skills. Technologies involving cognitive neuroscience can provide a means for lie detection and might be key to assessing witness credibility. AI tools such as EDR are already being employed in the review of documents for the purposes of e-discovery. The use of predictive coding in document production has also been recognised as producing results that are superior to traditional manual review.  In simple contractual disputes, especially e-commerce disputes, the electronic documents will be readily available to be submitted to ArBot for evaluation. Encryption technology such as blockchain could enable secure transmission of electronic documents and ensure cybersecurity in the arbitral process. Individually, these tools are already facilitating the conduct of arbitration.

An ArBot will be a combination of the various technologies employed together to conduct an arbitration from the beginning until the end. Similar to a human arbitrator, the ArBot will be required to ensure that the parties are given equal treatment, are heard and have a full opportunity to present their case. This requirement could be programmed into the ArBot, and its verification could be a function within the domain of the administrator of the ArBot. The prescriptions of the Model Law are broad and may sufficiently accommodate the use of technology for the conduct of hearing, as described above. Given that party autonomy plays such an important role in arbitration, if the parties themselves agree to arbitration using an ArBot, their choice must be respected.

 

Arbitral Award

The ultimate goal of parties to an arbitration is to obtain an award that is final and binding and that stands the test of the limited grounds of refusal of enforcement under the Convention.

Predictive analysis involves a machine learning from the data that is fed into it, formulating an algorithm, and applying it to the new set of data. Drawing from the various examples of applications of machine learning and predictive AI discussed in my article, it may become possible to train a computer to render arbitral awards. In principle, even with the existing technology, ArBot can review facts and substantive laws, and predict outcomes. Since arbitration is known for confidentiality as one of its selling features, the issue of how data will be obtained to feed the algorithm is a critical one. Arbitral institutions are increasingly moving toward publishing international commercial arbitration awards, even if in redacted form. Court decisions on the proper interpretation of substantive laws are in the public domain. Together, the data can be used to train the ArBot.

The Model Law prescribes in Article 31 that an award must be in writing and that it must be signed by the arbitral tribunal. Article 32(2) of the Model Law prescribes that the award must provide reasons upon which it is based unless the parties agree otherwise. Some national legislation also requires that the award must be reasoned. Insofar as the award rendered by the ArBot is in writing and signed (electronically, of course) by the ArBot and is ‘accessible’ and ‘usable’ by humans (and, if required, reasoned), it could conceivably qualify as an award capable of being enforced. The award must therefore be interpretable by the various stakeholders involved in the process of arbitration, including the judicial forum in which a challenge to its enforcement would be heard. AI in its current form is not capable of providing an explanation for its decision in natural language. Explainable AI (XAI) is being used by several predictive analysis tools to study the impact of different inputs on the results produced by the machine. With further research into XAI, it may become possible for the ArBot to explain the important factors that it considered in rendering its decision. XAI would also enable the administrator of ArBot to inspect and trace the actions of the system. Therefore, XAI will be an important way forward to ensure transparency, accountability and reliability of such automated dispute resolution system.

One of the main potential obstacles to reliance on an AI-based decision maker is that an award rendered by ArBot might not stand the test of the grounds under the New York Convention. To seek enforcement of an award, the Convention mandates the production of an authenticated award and the original agreement, or certified copies. Regarding authentication and formalization of the award, many national regimes recognise e-signatures as valid authentication of an arbitral award. Additionally, award scrutiny (by humans) may be introduced to ensure that an award by ArBot meets any required standards of form and substance, thereby preventing the rendering of unenforceable decisions by the machine. This would help in making the decisions less susceptible to annulment by a national court.

That said, the above interpretation would only be helpful if the enforcement of such an award is not blocked under the Convention in the garb of public policy.

This possibility can be protected against by encouraging and moving toward interpreting international enforcement standards more liberally so as to condone the use of non-human decision makers as arbitrators. The New York Convention is a living document that has assimilated drastic advances over the past 60 years. Public policy is a broad concept, interpreted varyingly by courts in the context of national or international standards and cultural, social, and political climate of the member States. The Convention or the Model Law do not define public policy. If reliance on the ArBot as arbitrator begins to catch on, it would be imperative for the member States to accommodate their standards of public policy to the growing demands of justice and fairness. Soft law instruments on the applicability of the Convention may be adopted to accommodate the technological advancements. The Model Law may also be amended to adjust to the new technologies. This may eventually result in transforming the national arbitration regimes of the member States.

 

Conclusion

Owing to COVID-19, the world entered a lockdown in 2020, and all trade and commerce was put to halt or forced to adapt to new realities. Technological disruption in the practice of international arbitration revived the industry and stimulated improvements in access to justice for parties to disputes. As a community, our experience signifies that technology is making our lives easier and is here to stay. In line with the technological advancements in the field of AI, ArBot is a realistic prediction of the future of dispute resolution. And when it arrives, we might as well be ready for it.

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Further posts on our Arbitration Tech Toolbox series can be found here. The content of this post is intended for educational and general information. It is not intended for any promotional purposes. Kluwer Arbitration Blog, the Editorial Board, and this post’s author make no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information in this post.

 

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The Contents of the Yearbook Commercial Arbitration, Volume XLVI (2021), Upload 5

Kluwer Arbitration Blog - Thu, 2021-12-02 00:00

Subscribers to KluwerArbitration.com enjoy access to the ICCA Yearbook Commercial Arbitration.

A new upload of materials for the 2021 volume of ICCA’s Yearbook Commercial Arbitration is now available on the KluwerArbitration website. The upload consists of 22 decisions from 15 countries and includes, among others, an update of Belarusian jurisprudence on the 1958 New York Convention. Here are some of the highlights.

The Supreme Court of India in PASL Wind Solutions held that nothing in Indian law precluded Indian parties from arbitrating in a foreign seat. The Court also provided an in-depth analysis of the distinction between two definitions of international arbitration: “party-centric”, based on the nationality of the parties, and “place-centric”, taking into account where the arbitration takes place. The Court here sided with the latter approach.

Second, in Luminati, the Supreme Court of Israel provided an intriguing discussion of the different theories on when an award becomes binding and is hence enforceable under the New York Convention. It concluded that an award becomes binding when it can no longer be appealed in arbitration proceedings (even if it can still be annulled before a domestic court). The Court further addressed to which extent an award set aside by domestic courts at its seat can be enforced elsewhere under the New York Convention. It considered this possibility to be limited to exceptional cases – for example, when the set-aside decision was made by a court that was not independent and impartial.

Finally, a Mexican Collegiate Circuit Court made an interesting contribution on the nature of the authority exercised by arbitral tribunals. In a case involving a constitutional appeal of amparo against the acts of arbitrators, the Court found that arbitrators were private parties who could not be deemed to exercise public authority within the meaning of the Amparo Law. An amparo action was therefore not available against decisions rendered by arbitrators.

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State Aid Unravels Everything: The Νοt (Quite) Binding Effect of Energy Arbitration in Greece

Kluwer Arbitration Blog - Wed, 2021-12-01 00:00

In a recent judgment of the General Court (the “GC”) in joined cases – T-639/14 RENV, T-352/15 and T-740/17, the question of the clash between EU law (in this case, state aid legislation) and arbitration was discussed. Not surprisingly, from an EU law standpoint, the EU Courts once again found that in case of such clash, EU law shall prevail.

 

The Background

The specific cases reached the GC following a complaint of «Δημόσια Επιχείρηση Ηλεκτρισμού» – DEI (the Greek, at the time State-owned, energy production enterprise) to the European Commission (“the Commission”), according to which the fixing of energy prices by the “permanent arbitration of RAE” (RAE stands for «Ρυθμιστική Αρχή Ενέργειας» – Regulatory Authority of Energy) was violating state aid legislation of the EU.

A type of cases that reach the permanent arbitration of RAE is about setting prices of invoices of power production in Greece, following a joint request of the parties involved. The relevant process essentially involves two steps: (a) under its decision 692/2011, RAE, acting as an administrative body, has set the general principles for the setting of such prices, which (b) are further specified by RAE arbitral tribunals that are provided for under art. 37 of law 4001/2011, following a request of the parties involved to this effect. In this instance, the RAE tribunal operates as a judicial body. This means that the arbitral tribunal will have the final say in the fixing of such prices, despite the fact that the aforementioned functions (administrative on the one hand, and judicial on the other) are considered (and should be) separate, independent and unaffected by each other.

The GC addressed the matter under the spectrum of the EU law on state aid. The related question was whether the arbitral tribunal of RAE, when fixing electricity tariff in the above sense, must be classified as a body exercising a power coming within the scope of public authority rights and powers. In its core, the question is whether this particular arbitral tribunal should be treated as an ordinary state court within the meaning of art 267 TFEU, given that in that case its decision would be revisited under the state aid legislation of the EU by the Commission which has the general power to this effect and eventually by the GC. In order for the GC to address this issue, it considered the nature, the context in which the tribunal’s activity takes place, its objective and the rules to which it is subject, according to which its decisions may be challenged before the State courts, have the force of res judicata and are enforceable. The GC found that this arbitration tribunal could be treated in the same way as an ordinary State court.

As described in the GC’s press release on the case:

 

“… in view of the division of powers between national courts and the Commission in the monitoring of State aid, national courts are themselves liable to disregard their obligations under Articles 107(1) and 108(3) TFEU and, in so doing, to make possible or perpetuate the granting of unlawful aid, or even to become the instrument of such aid, this being a matter which comes within the scope of the Commission’s supervisory power.”

 

In this respect, the GC found that the Commission failed to carry out a review as to whether a state measure which was not notified but which was challenged by a complainant, such as the fixing of that price, came within the definition of State aid. Essentially such a review requires complex economic assessments, relating, in particular, to how consistent this price is with normal market conditions. However, the GC found that the Commission delegated those assessments to the Greek courts (RAE arbitration tribunal), while disregarding its own supervisory duty.

 

Discussion of the Judgment

Obviously, for the GC, the issue at stake is an EU law one. However, as it was very eloquently said some twenty years ago by L. Idot (2001 Revue Critique de droit international privé, 115-116, comments on C-381/98, Ingmar/ Eaton) sometimes the EU courts ––much like M. Jourdain, the Bourgeois Gentilomme, who was speaking prose for forty years without being aware of it–– touch upon points of law that are not necessarily, and strictly speaking, EU law ones. This can be explained given the special “political” role of EU Courts regarding the interpretation and uniform application of EU law. However, this way it ends up mingling with other fields of law, in a way that the legal reasoning of certain judgments seems insufficient, or even wrong. The counter (or even reverse) argument on this would be that the various fields of law are not “leakproof” and  for that reason the EU courts need to ensure that EU law’s effectiveness is not undermined in favour of non-EU law considerations.

From an arbitration perspective though, it is clear that the judgment does raise eyebrows. The specific issue that it addresses is whether the RAE arbitral tribunal should be treated as a state court and not as an independent arbitral body. The General Court concluded that the RAE arbitral tribunal has, in this instance, the status of a state court. To reach this conclusion, it actually used two criteria. The first is the organizational criterion, according to which the RAE arbitration is a public body in the sense that it does not operate completely independently but (i) it replaces the state courts; (ii) the arbitrators are chosen among the persons listed in a special catalogue of RAE; (iii) the relevant provisions of the Code of Civil Procedure (“CCP”) of Greece apply in this respect; (iv) the decisions of the tribunal are legally binding and have enforcing effect; and (v) its decisions can be appealed before the competent Court of Appeal of the territory of the place of arbitration (points 150-158 of the judgment). The second is  the functional criterion, according to which the RAE arbitration is the one that actually fixes the prices of energy sold to the client by the state-owned energy enterprise (point 229).

While the second “functional” argument seems rather convincing, given that the fixing of the prices in a specific contractual agreement presupposes the intervention of the tribunal which finalizes the fixing of prices process, and under the circumstances (joint request of the parties to RAE to have prices fixed) is an absolutely necessary step to this effect, the first (“organizational”) is less convincing. This is so, since the points 150-158 of the judgment essentially apply to any type of institutional arbitration. The arbitral tribunal replaces the court ones, special catalogues exist under most institutional arbitrations (albeit not under all of them), in particular in Greece, the relevant provisions of CCP (arts 867-903) apply in all domestic arbitrations (Greece still has the dual system in arbitration), all awards are subject to appeal for formal reasons under the CCP – comparable to the ones of the law on international arbitration (law 2735/1999) based on the 1985 UNCITRAL model law. Evidently, if this enumeration of criteria were to be followed in the future, we should be navigating in unchartered waters. The organic criterion should not therefore be construed as decisive in the labeling of the RAE arbitral tribunal as “state court”.

Going back to state aid law, it is more than evident that the Commission has the general competence in relation to state aid cases. However, to the extent that the Commission has the final saying in the above sense, this will practically mean that any arbitral award touching upon state aid questions can be indirectly “appealed” before the Commission. This clearly undermines the effectiveness of arbitration in this specific filed of law. Of course, in our case, the RAE arbitration tribunal was construed by the General Court as a state court. On the basis of this argumentation, the General Court has not intervened with the independence of an arbitral tribunal as such, given that, in the General Court’s appraisal, this is not one…

This judgment is not a standalone one, when it comes to arbitration in the EU. The emblematic Achmea (C-284/16) (see for Blog’s coverage here) needs no discussion, other than it has literally displaced investment arbitration from intra EU member states cases. In the past, EU courts have on more occasions limited the effectiveness of arbitration in the EU. This was, for example, the case done in the Dorsch Consult (C-54/96), case where the, then called, European Court of Justice ( ECJ) found that in case that an arbitral tribunal has a binding jurisdiction, and the award issued is also binding (although the distinction between the two was not elaborated in the judgment), such tribunal should be treated as state court. Furthermore,  and in the Ascendi (C-377/13) case, where a Portuguese fiscal arbitral tribunal was again treated as a state court in the context of a request to the ECJ, for a preliminary ruling to the ECJ, since it operates as a direct alternative to the state courts under the Portuguese Constitution and the related award is equally binding. The legal basis for these judgments is art. 267 of the Treaty for the Functioning of the EU, whereby the title granted to a court/ tribunal by national law is irrelevant and the important criteria for labelling them under an EU law perspective, are organizational and functional.

In this sense, the discussion about the clash of EU law and arbitration is ongoing, with the EU courts seemingly willing to pursue a clear pro-EU law approach.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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What I’m Reading – What We’ve Got Here is Failure to Communicate

ADR Prof Blog - Tue, 2021-11-30 20:28
It’s a damn miracle that people ever understand each other. A recent episode of the This American Life podcast provides ample illustration.  Entitled, What We’ve Got Here is Failure to Communicate, the podcast tells several, mostly discouraging, stories.  (Click here for the source of this phrase.) One story describes special challenges due to the covid … Continue reading What I’m Reading – What We’ve Got Here is Failure to Communicate →

The Problem of Padawan: Once More on the Issue of Tribunal Secretaries

Kluwer Arbitration Blog - Tue, 2021-11-30 00:25

Most international arbitration institutions have already adopted regulations concerning the roles of tribunal secretaries and scope of their duties. Although this topic has not been on the radar for some time now, several incoming court decisions are likely to reverse this trend. This post sets out a few critical views on the current practice in arbitration, in order to clarify the role of tribunal secretaries in arbitration and address the problem of Padawan they create (For those who are not familiar with the Star Wars universe, a Padawan is a Jedi apprentice. As per the dictionary.com definition, “[i]t can also be used more generally to refer to a trainee, a beginner, or an inexperienced person.”).

 

Tribunal Secretary vs Personal Assistant (PA)

The postulate that arbitrators write their awards from cover to cover may have been a good solution some years ago, when the typical arbitral award consisted of a few pages. Nowadays, when awards in more complicated cases run into hundreds of pages, with the entire case history and arguments presented at length, support of a secretary in drafting the award is not uncommon. Recent court decisions confirm this stance. As long as arbitrators do not delegate their powers in deciding the substance of the case, even preparation of an entire first draft by a tribunal secretary is prima facie acceptable.1)Please see C. Sanderson, Brussels court says tribunal secretaries can draft awards, Global Arbitration Review, 30 June 2021, M. Feit, C. Terrapon Chassot, The Swiss Federal Supreme Court Provides Guidance on the Proper Use of Arbitral Secretaries and Arbitrator Consultants under the Swiss lex arbitri: Case Note on DFC 4A_709/2014 dated 21 May 2015, ASA Bulletin, Kluwer Law International 2015, Volume 33 Issue 4) jQuery('#footnote_plugin_tooltip_39604_21_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39604_21_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); This is just as well, reflecting that being an arbitrator is primarily about resolving a dispute, and not about Benedictine labour and rivers of ink alone.

Some sets of rules provide that the tribunal secretary may be entrusted with drafting only the non-substantive parts of the award. The classification into substantive and non-substantive parts (as employed inter al. in HKIAC – Hong Kong International Arbitration Centre, Guidelines on the use of a secretary to the arbitral tribunal, effective 1 June 2014), does not contribute much to the problem of delegation of arbitrators’ powers. For the sake of illustration, let us focus on the dispositive part of the award. In a situation where the arbitrator briefed the secretary about the outcome of the tribunal’s deliberations with a view to draft the dispositive, the secretary indubitably drafted the dispositive, i.e. the substantive part of the award, but he or she did not decide it. The scope of work assigned to the secretary usually depends on the arbitrator’s character, their methods and the legal tradition they come from – some arbitrators will draw up the entire first draft of the award by themselves, some will draft only selected parts, and yet some will rely entirely on the secretary. It is for the arbitrator in the given case to decide whether they can delegate the full drafting of the award without jeopardising their decision-making control.

 

Tribunal Secretary vs Arbitrator

For the purposes of this post, I assume that the decision-making process consists of two elements: gaining full knowledge of the case file and participation in the deliberations and formation of the tribunal’s intent (see M. Feit, C. Terrapon Chassot, The Swiss…., op. cit.). In this context, there is no problem with the award being drafted by the secretary as long as it fully reflects the tribunal’s will. As the parties appoint an arbitrator, they implicitly express trust in his or her integrity, and fundamental faith that their case will be resolved in a just manner. Seen from this perspective, the manner or scope of delegating arbitrators’ tasks to the tribunal secretaries becomes but a technicality. If things turn out otherwise – if this trust of the parties proves to have been misplaced – then the problem likely lies with the arbitrator as such, not with the secretaries, as C. Partasides concluded.2)C. Partasides, Chapter 7. Secretaries to Arbitral Tribunal, in B. Hanotiau, A. Mourre (eds), Players interaction in International Arbitration, Dossiers of the ICC Institute of World Business Law, Volume 9, International Chamber of Commerce (ICC) 2012, pp. 88. jQuery('#footnote_plugin_tooltip_39604_21_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39604_21_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

In this vein, it appears obvious that secretary must not participate in the arbitrators’ deliberations. The deliberations, it is fair to say, are the essence of the decision-making process. It is not for the secretary, by definition, to witness the process by which the arbitrators come to their mutual conclusions, or to hear the particular opinions voiced during this process. Such a prohibition is envisaged in inter alia CEPANI Rules (although in this case the prohibition covers drafting of the award as well). Thus, I disagree with the Swiss Supreme Court as regards its acceptance that, if a secretary is to draft parts of the award or its entirety, he or she should also be allowed to assist the arbitrators in the deliberations stage of the arbitration proceedings (see M. Feit, C. Terrapon Chassot, The Swiss…., op. cit., pp. 908).

Finally, if we are all in agreement that the secretary is, by definition, not entrusted with any decision-making powers, it is difficult to understand why all institutional regulations apply the same test of independence and impartiality, including challenge prerequisites, as for the arbitrators themselves. This makes sense only if we want to treat the secretary as a fourth arbitrator, which is patently not the case. Accordingly, a confidentiality undertaking on the secretary’s part would be perfectly sufficient.

 

Tribunal Secretary vs Consultant

The role of the tribunal’s secretary cannot be mistaken with the role of a legal consultant, as envisaged in the Swiss Federal Supreme Court decision rendered in May 2015 (4A_709/2014 dated 21 May 2015). In this case, the sole arbitrator, not being a lawyer but an architect, was assisted by two lawyers, E. and F., referred to by the Swiss Court as counsel and a secretary respectively. This construction dispute was to be decided according to the principles ex aequo et bono. The award was rendered, in which the sole arbitrator made the following remark:

In view of the openly hostile attitude adopted by A., the Arbitral Tribunal chose to be assisted by Mr. E. and Mr. F. of the law firm of G. in Geneva, at its own expense and only to keep minutes of the hearing, to advise the Arbitral Tribunal during the hearing as to the innumerable objections raised by A. in particular (emphasis added), and to assist the Arbitral Tribunal in drafting the award. These two lawyers kept the minutes and advised the Arbitral Tribunal so that the elementary rules of arbitral procedure, with which the Sole Arbitrator is not necessarily entirely familiar as a non-lawyer, would be complied with. By doing so, Mr. E. and Mr. F. acted only upon the request of the Arbitral Tribunal in the framework of Art. 365 CPC without participating in the decision-making process or in the outcome of the award that the Arbitral Tribunal is alone responsible for, without influence or advice.

This case manifestly shows what the role of the secretary is when compared to a consultant. The consultant E. advised the arbitrator on several legal matters, while secretary F. did not advise but purely acted under the direction of the arbitrator. The court noted that the role of E. as a consultant was very peculiar, namely because he was not retained for his technical skills but because of the knowledge in the field of arbitral proceedings.

The consultant in this case could have potentially gained a label of an extra arbitrator, as he was advising the non-lawyer arbitrator on all legal aspects of the case, and the parties to the arbitration had no opportunity to comment on the consultant’s opinions. It was a very extraordinary situation; one that is found very rarely in practise and one that required individual approach and agreement of all participants of these proceedings. The consultant should have been subject to the test of independence and impartiality in the same manner as the arbitrator.

The comparison between the role of a consultant, as seen in the above case, and tribunal secretary, as performed in regular practise of arbitration, shows the real difference. The secretary is, at the maximum, hands and eyes of the tribunal. If this line gets crossed, the tribunal secretary’s role metamorphoses into that one of a consultant.

 

Conclusion

To sum up, in modern arbitration practise, there is a tendency to treat tribunal secretaries as no more than PAs, hence confining their role to the logistics matters only. This stance, as illustrated above, is neither founded nor sustainable. Surprisingly, court decisions tend to take more flexible position in relation to this matter than arbitral institutions themselves. This state of affairs is somewhat unexpected given the very nature of arbitral institutions.

References[+]

References ↑1 Please see C. Sanderson, Brussels court says tribunal secretaries can draft awards, Global Arbitration Review, 30 June 2021, M. Feit, C. Terrapon Chassot, The Swiss Federal Supreme Court Provides Guidance on the Proper Use of Arbitral Secretaries and Arbitrator Consultants under the Swiss lex arbitri: Case Note on DFC 4A_709/2014 dated 21 May 2015, ASA Bulletin, Kluwer Law International 2015, Volume 33 Issue 4) ↑2 C. Partasides, Chapter 7. Secretaries to Arbitral Tribunal, in B. Hanotiau, A. Mourre (eds), Players interaction in International Arbitration, Dossiers of the ICC Institute of World Business Law, Volume 9, International Chamber of Commerce (ICC) 2012, pp. 88. function footnote_expand_reference_container_39604_21() { jQuery('#footnote_references_container_39604_21').show(); jQuery('#footnote_reference_container_collapse_button_39604_21').text('−'); } function footnote_collapse_reference_container_39604_21() { jQuery('#footnote_references_container_39604_21').hide(); jQuery('#footnote_reference_container_collapse_button_39604_21').text('+'); } function footnote_expand_collapse_reference_container_39604_21() { if (jQuery('#footnote_references_container_39604_21').is(':hidden')) { footnote_expand_reference_container_39604_21(); } else { footnote_collapse_reference_container_39604_21(); } } function footnote_moveToReference_39604_21(p_str_TargetID) { footnote_expand_reference_container_39604_21(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39604_21(p_str_TargetID) { footnote_expand_reference_container_39604_21(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Arbitration in Egypt: A Practitioner\'s Guide
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Simulations Based on Actual Cases – Why Reinvent the Wheel?

ADR Prof Blog - Mon, 2021-11-29 20:29
From Debra Berman: I know there have been many discussions over the years regarding how to effectively use simulations in negotiation and mediation classes.  After reflecting on my semester, I’d like to take this opportunity to reopen the conversation and provide you with my perspective. This year, I decided to substantially change how I utilize … Continue reading Simulations Based on Actual Cases – Why Reinvent the Wheel? →

DR Professor Meet-Up Thursday, Dec. 2 at 1 EST

ADR Prof Blog - Mon, 2021-11-29 20:11
From Debra Berman: Dear colleagues, I hope you all had a wonderful holiday.  As we get back into the swing of things, I’d like to take this opportunity to remind you about an event this week.  Please join the ABA Legal Education in Dispute Resolution (LEDR) Committee for its inaugural DR professor virtual meet-up this … Continue reading DR Professor Meet-Up Thursday, Dec. 2 at 1 EST →

The Psychology of Witness Evidence and its Role in Tribunal Decision-Making

Kluwer Arbitration Blog - Mon, 2021-11-29 00:08

On 27 October 2021, Young ITA organised an event on the topic of “The Psychology of Witness Evidence and its Role in Tribunal Decision-Making”, hosted by Allen & Overy in London. Katrina Limond (Young ITA UK Chair, Allen & Overy London) and Robert Bradshaw (Young ITA UK Vice-Chair, Lalive London) led a roundtable discussion panelled by Professor Kimberley Wade (Professor of Psychology at the University of Warwick), Christopher Newmark (Arbitrator, Mediator and former Chairman of the ICC Commission on Arbitration and ADR), Professor Aldert Vrij (Professor of Applied Social Psychology at the University of Portsmouth) and Professor Maxi Scherer (Queen Mary University of London; WilmerHale).

Katrina Limond began by giving a brief introduction and summary of recent developments highlighting the importance of psychology in dispute resolution, particularly for witness evidence. These developments include publication of the ICC Commission Report on The Accuracy of Fact Witness Memory in International Arbitration (the ICC Report) and the introduction by the Business and Property Courts of England and Wales of a new mandatory Practice Direction governing trial witness statements.

Robert Bradshaw opened the discussion on the first topic of the event: the reliability of fact witness memory. Professor Wade explained that eliciting detailed and accurate reports from witnesses can be difficult. Multiple studies have demonstrated the fallibility of witness memory, and Professor Wade pointed to two key explanations for why honest witnesses may nevertheless misremember events. First, a witness’s memory can be influenced by information (and misinformation) they encounter after the event, including practices commonly employed by arbitration counsel in preparing witness evidence. For instance, evidence such as emails, meeting minutes or photographs may unconsciously override a witness’s recollection of events. Similarly, discussing events with other witnesses can “contaminate” witnesses’ memories. To reduce the risk of such contamination, Professor Wade highlighted recommendations in the ICC Report including interviewing witnesses separately and eliciting reports before witnesses can confer. Second, a witness’s personal perspective matters and witnesses’ beliefs and motivations may unconsciously bias the way they report information. This is particularly relevant in international arbitration, where witnesses will often take a particular perspective, either as claimant or respondent, especially when testifying on behalf of their employer. Subtle differences in the phrasing of questions can also affect a witness’s answers, and even influence their recollection of events.

Mr Newmark and Professor Scherer provided practitioners’ views on witness memory. Professor Scherer noted that, as an arbitrator, her experience has been that witness memory is not set in stone, but is contextual. She highlighted the importance for arbitrators of asking open questions, and recommended all practitioners review the ICC Report and the recommendations for witness preparation in a forthcoming article by Professor Wade and Dr Cartwright-Finch.1) Kimberley Wade & Ula Cartwright-Finch, The Science of Witness Memory: Implications for Practice and Procedure in International Arbitration, 39(1) J. INT’L ARB. (Forthcoming, 2022). jQuery('#footnote_plugin_tooltip_39601_24_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39601_24_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Mr Newmark provided an example of wording he has used in a procedural order with an option to describe how witness evidence has been prepared – it remains to be seen how this will affect the content of witness evidence and cross-examination.

The second topic was witness credibility, including how to detect verbal and non-verbal cues of deception. Both Mr Newmark and Professor Scherer agreed that identifying dishonest witnesses is extremely difficult in practice, and emphasised that they place greater importance on the substance of witness evidence than its delivery. It is all too easy to misinterpret common physical manifestations such as sweating, twitching, foot-tapping or gaze aversion as signs of dishonesty, when they may simply be the result of nervousness, individual habits or cultural differences. Professor Scherer emphasised that judging whether witness evidence is credible involves a contextual assessment, and that the only reliable indicator of dishonesty is the presentation of directly contradicting documentary evidence. Professor Vrij, a leading expert on the psychology of deceit, agreed that reliance on non-verbal cues and body language is a poor method for identifying whether someone is lying; there is no universal “tell” in liars’ behaviour. He highlighted a number of errors in the conventional wisdom. For example, while fidgeting is often seen as a sign of dishonesty, liars in fact typically make fewer movements due to the greater cognitive load of fabricating a story. Focusing on the speaker’s appearance may actually hinder credibility assessments. A more reliable indicator of honesty is the amount of information provided by a witness; truth-tellers give more detailed answers than liars. In practice, Professor Vrij concluded, interviewers should focus on listening to witnesses rather than watching them and, if aiming to facilitate verbal lie detection, should ask open rather than closed questions.

Third, Mr Newmark gave an arbitrator’s perspective on assessing witnesses and the impact of witness evidence on tribunal decision-making. He explained that while witnesses can provide helpful context, few cases turn solely on witness evidence. He noted that the most effective way for counsel to deploy witness evidence is to focus on the issues of fact that cannot be proved by documents—a strategy that gives the tribunal the essential information they need to make an award but that limits the scope for cross-examination. Mr Newmark also suggested that counsel consider using descriptive narratives or chronologies in written briefs or opening submissions in place of witness evidence. He reiterated that witness statements need not be unduly lengthy, that first drafts of statements should not be produced until after the witness has been interviewed, that witnesses should not argue the case, and that witnesses should be able to acknowledge any gaps in their memory.

Finally, Professor Scherer discussed remote hearings and the effect of remote testimony on assessing witnesses. Professor Scherer discussed the results of a recent survey into remote hearings which showed that, while experts and counsel rated them as worse for giving evidence and conducting cross-examinations, tribunal members found them better for developing an understanding of the case and for assessing witness and expert evidence.2) Gary Born, Anneliese Day & Hafez Virjee, Remote Hearings (2020 Survey): A Spectrum of Preferences, 38(3) J. INT’L ARB. 292 (2021). jQuery('#footnote_plugin_tooltip_39601_24_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39601_24_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Professor Scherer suggested that hybrid hearings may offer advantages, including more effective assessment of witness evidence up-close on-screen, easier recall of recordings of the hearing and improved communication amongst legal teams and tribunal members.

The panel answered questions from the audience, including considerations for witnesses testifying in a second language (and the potential pitfalls of using an interpreter unless necessary), the impact of time on a witness’s memory, and how obvious it can be to tribunal members when witness statements are drafted by lawyers. Katrina Limond rounded off the discussion by providing some practical tips for practitioners, including considering the practical points in the ICC Report and listening (and reviewing transcripts) closely to pick out discrepancies in evidence that may indicate deceit.

 

The event was co-sponsored by Allen & Overy and The Center for American and International Law. Further information on the Young ITA can be found here.

References[+]

References ↑1 Kimberley Wade & Ula Cartwright-Finch, The Science of Witness Memory: Implications for Practice and Procedure in International Arbitration, 39(1) J. INT’L ARB. (Forthcoming, 2022). ↑2 Gary Born, Anneliese Day & Hafez Virjee, Remote Hearings (2020 Survey): A Spectrum of Preferences, 38(3) J. INT’L ARB. 292 (2021). function footnote_expand_reference_container_39601_24() { jQuery('#footnote_references_container_39601_24').show(); jQuery('#footnote_reference_container_collapse_button_39601_24').text('−'); } function footnote_collapse_reference_container_39601_24() { jQuery('#footnote_references_container_39601_24').hide(); jQuery('#footnote_reference_container_collapse_button_39601_24').text('+'); } function footnote_expand_collapse_reference_container_39601_24() { if (jQuery('#footnote_references_container_39601_24').is(':hidden')) { footnote_expand_reference_container_39601_24(); } else { footnote_collapse_reference_container_39601_24(); } } function footnote_moveToReference_39601_24(p_str_TargetID) { footnote_expand_reference_container_39601_24(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39601_24(p_str_TargetID) { footnote_expand_reference_container_39601_24(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Arbitration in Egypt: A Practitioner\'s Guide
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How Mediators Can Solve Tough Problems in Mediation

ADR Prof Blog - Sun, 2021-11-28 21:19
In a recent presentation to mediators in Michigan, I asked the audience to describe what was frustrating in their mediations.  They often struggle when lawyers and parties are not prepared when they go to mediation, have unrealistic expectations, and act very emotionally. Their reactions prompted me to write this short article in the Michigan Dispute … Continue reading How Mediators Can Solve Tough Problems in Mediation →

ASA Launches the Arbitration Toolbox: A First-of-its-Kind Interactive Tool in the Field of International Arbitration

Kluwer Arbitration Blog - Sun, 2021-11-28 00:38

In June 2020, the Swiss Arbitration Association (ASA) launched its much-awaited Arbitration Toolbox, an online and interactive tool that guides a user through the various stages of an arbitration. Initially the brainchild of former ASA President, Elliott Geisinger, the Toolbox was brought to fruition under the presidency of the current ASA President Felix Dasser. The project was chaired by Elliott Geisinger, Gabrielle Nater-Bass and Andrea Meier, with an editorial team comprising of Stefanie Pfisterer, Dilber Devitre and Antonio Ardielli.

This post introduces the Arbitration Toolbox, its purpose, functionality and potential to assist arbitration practitioners, scholars and enthusiasts with their work.

The overarching goal of the Toolbox is to make arbitration proceedings more efficient, by showing that the proceedings can – and should – be tailored to the circumstances of a given case and the needs of the users (being first and foremost those of the parties). The purpose of the Toolbox is to highlight the different approaches to conducting an arbitration, thereby decrying the popular belief that “one size fits all”. The Toolbox emphasizes the flexibility of arbitral proceedings and provides guidance on which approach is advisable in a given situation. The Toolbox aims to provide practical and useful information to users on the various aspects of the arbitral process.

The Toolbox is designed as an electronic platform that guides a user through the various stages of an arbitration procedure. It is not intended to be an online and academic encyclopaedia, but rather, its focus is practical. The Toolbox is organised into sub-sections that follow the general steps involved in an arbitration. Users can dive into the Toolbox at any sub-section, thus making it easier for them to find the information they are looking for.

The Toolbox is organized according to the following steps in an arbitration, all of which contain various sub-sections:

 

Once in a given sub-section, users can navigate their way through a series of questionnaires and decision trees to find the specific information they are looking for.

Below is an example of a questionnaire in the section on “Commencement” of an arbitration:

 

The Toolbox also includes various practical tools such as checklists and examples of procedural orders and submissions that the users can download.

 

Likewise, “red flags” incorporated into the various sections of the Toolbox warn users about controversial and tricky issues to which special attention must be given. For example, users get alerted to the advantages and perils of arbitrator interviews as the image below illustrates.

 

 

Although developed under the aegis of ASA, the Swiss Association of Arbitration, the Toolbox is entirely independent of the applicable lex arbitri or the institutional rules and can thus be used by anybody, anywhere, for any arbitration, institutional or ad hoc, irrespective of the seat. Due to this and given its complementarity with the UNCITRAL Notes on Organizing Arbitral Proceedings, which also aim to make arbitration proceedings more efficient, ASA has collaborated with UNCITRAL on the Toolbox project. The Toolbox now features on the UNCITRAL website as an additional resource to the UNCITRAL Notes on Organizing Arbitral Proceedings.

The Toolbox is specifically designed for users of all levels of experience. Because the Toolbox is based on questionnaires, experienced practitioners may find it useful to question whether the “standard way of doing it” makes sense in a given case or whether there is a more appropriate and efficient way of handling a given arbitration. On the other hand, several features of the Toolbox such as the pop-up definitions and the explanation boxes are aimed at and will be of service to the less initiated practitioner. The Toolbox is also a useful educational tool and can be used by students interested in learning the practical aspects of international arbitration. The Toolbox is available free of charge on the Internet and can be accessed here.

The current version rolled out by ASA is the first version of the Toolbox. However, the Toolbox will be updated at regular intervals in order to keep it up to date with the latest developments in international arbitration. Future versions may be expanded to cover investment arbitration and include further practical and useful tools. Any feedback on the Toolbox from KAB readers would be welcome!

ASA’s president, Felix Dasser, commends the Toolbox: “This is not another guideline. ASA is not trying to tell the world how it should arbitrate. We do not pretend to be smart enough for that. ASA is simply providing all of you with a tool to make best use of your skills under your specific circumstances.”

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4-word-build, A Conflict Resolution Exercise and Teamwork Exercise

Communication and Conflict Blog - Sat, 2021-11-27 16:37
4-word-build - a conflict resolution exercise for gaining a shared understanding of a concept in a group or team. The exercise enables all present to participate in the creation of the shared view.

Deal or No Deal: The Fate of the EU-China Comprehensive Agreement on Investment and its Potential Impact on Future Investment Claims

Kluwer Arbitration Blog - Sat, 2021-11-27 00:46

The EU-China Comprehensive Agreement on Investment (CAI), agreed in principle in December 2020, was announced with great fanfare. Forged after seven years of negotiations between the world’s current largest trading block (the EU) and the country expected to have the world’s largest economy by the end of this decade (China), the CAI was set to have a far-reaching impact on the global economy, including investment arbitration.

The recent tensions in the EU-China political relationship have, however, cast a shadow on the future of the CAI. At the moment, the ratification of the CAI is suspended in accordance with a decision rendered by the European Parliament in May 2021. It remains to be seen whether the deal can overcome current hurdles on the road to ratification.

Given such uncertainty, this article explores what either the passage or failure of the CAI entails for the world of investment arbitration by examining: (i) the status quo; (ii) the relevant provisions of the CAI; (iii) the CAI’s prospects of success; and (iv) the outlook for future European-Chinese ISDS claims.

 

Where Do Things Stand?

Currently, there are 25 bilateral investment treaties (BITs) in force between China and all EU Member States, except Ireland. These BITs serve as a patchwork, offering some – but not consistent – investor protection. The older generation of BITs generally provide for investor‑State arbitration only regarding certain claims, including for instance “a dispute involving the amount of compensation resulting from expropriation” (ie. Article 8(3) of the China-Denmark BIT). Conversely, the second-generation BITs expressly grant investors the right to bring arbitration claims for an enlarged suite of investment protections, including, most importantly, the violation of the fair and equitable treatment (FET) standard.

Despite the large-scale foreign direct investment that has flowed in both directions, these arbitration provisions have found little application to date. At the moment, there is only one known investment arbitration claim brought by an EU company against China, Hela Schwarz v China, which remains pending. Similarly, Chinese investors have initiated only three arbitrations against EU Member States, none of which has proceeded to an award on the merits: Ping An v Belgium was brought by a Chinese insurance company in 2012, but dismissed on jurisdictional grounds in 2015; Wuxi T Hertz Technologies and Jetion Solar v Greece was brought by Chinese solar investors in 2019, but subsequently withdrawn; and most recently, a bank registered in Hong Kong brought a claim against Malta in Alpene v Malta in July 2021.

Chinese companies have, however, shown markedly increased interest in ISDS in recent years. One of the more high-profile examples is Huawei, which, in 2019, threatened claims against the Czech Republic regarding assertions by a Czech government agency that Huawei’s technology posed a security threat. Moreover, in January 2021, Huawei submitted a Notice of Dispute to Sweden, asserting that the government’s decision banning the company from participating in the country’s 5G network violated the applicable BIT. Chinese investors’ recent willingness to resort to ISDS can be seen even more clearly outside the EU, with recent headlines reporting claims against Ukraine and several African states.

 

What Does the CAI Say about Investment Protection?

From an EU investor perspective, the most progressive development in the CAI is the state parties’ clear commitment to national treatment (Section II, Article 4), where each state party shall accord to investors of the other state party “treatment no less favourable than the treatment it accords, in like situations, to its own investors and to their enterprises, with respect to establishment and operation in its territory”.

Nevertheless, other key investment protection mechanisms, such as an FET standard and an ISDS provision, are currently missing. Instead, the CAI contains essentially a placeholder –   Section VI(2), Article 3 – that stipulates that parties will continue their negotiations on “state of the art provisions” in the fields of investment protection and ISDS, which they shall endeavour to complete within two years of the CAI being signed. Interestingly, this provision determines that in the negotiations of the dispute settlement mechanism, parties will take into account progress on “structural reform of investment dispute settlement” in the context of the UNCITRAL.

What the EU understands by “state of the art provisions” concerning investor protection and ISDS is relatively clear from the agreements it has recently signed with Canada, Mexico, Singapore and Vietnam, and the high-profile position it has undertaken in the ongoing UNCITRAL negotiations. First, in terms of substantive protections, this refers to a more precisely defined scope of FET, with clear deference to the state’s right to regulate and explicit carve-outs for public health and environmental measures. Second, in terms of the ISDS process, it refers to establishing a permanent court, and, eventually, replacing the current system of party‑appointed arbitral tribunals with a multilateral investment court (MIC).

China has also shown interest in reducing the scope of substantive protections. While almost all existing BITs between China and EU countries adopt a simple, unqualified formulation of the FET standard, China’s more recent BITs often place limitations on FET. For instance, the Canada-China BIT (2012) confines the FET obligation to the minimum standard of treatment required by international law.  Concerning ISDS procedures, China adopted a rather reserved attitude towards the EU’s preference for an MIC in its submission to the UNCITRAL Working Group in July 2019. China noted in its submission that “[t]he right of parties to appoint arbitrators … is a widely accepted institutional arrangement … and should be retained in any reform process.”

 

What is the Prospect for the CAI?

After both parties had reached an agreement in principle in December 2020, the EC suggested that the next steps would be finalisation of the agreement, as well as submission for approval by the EU Council and the European Parliament. Nevertheless, as the tensions between the EU and China grew, the European Parliament eventually voted in May 2021 to freeze the ratification of the CAI until China lifts the sanctions imposed on certain MEPs and EU institutions.

The suspension does not necessarily mean that ratification is out of the question. In a press conference in July, the spokesperson of China’s Ministry of Commerce indicated that China and the EU were still processing the legal review and technical preparations for the CAI. Analysts also stressed the mutual self-interest that both sides have to finalise the deal.

Should the CAI be ratified, the parties still need to agree on the outstanding provisions to grant protection to investors. Although the EU’s stated objective is for the CAI to replace Member States’ existing BITs with China, Section VI (2), Article 15(1) of the CAI expressly preserves previous agreements between EU and China for the time being.

Thus, any changes to the investment protection regime are essentially two steps away: first, the CAI itself will have to be ratified; and second, the exact contours of the ISDS provision will need to be negotiated and agreed upon between the EU and China. Until both of these steps are achieved, investors will remain protected to the extent provided for under the existing BITs.

 

Will there be More EU-Chinese Investment Claims?

With history as a guide, more EU-Chinese investment claims appear likely – regardless of the CAI’s fate. The most important reasons are the waning of the Chinese authorities’ historical reservations over ISDS and the increasing Chinese investments in Europe.

Successful ratification of the CAI and the agreement on final ISDS proceedings could further promote arbitration by providing investors with more consistent and broader protection. On the other hand, failure to ratify the CAI would reflect tensions between China and the EU, giving rise to additional potential claims. A particular area to monitor is the ongoing concerns expressed by certain EU Member States relating to security and the level of Chinese influence over crucial economic sectors.

At the same time, we should not necessarily expect a flood of new claims. While China may have embraced ISDS as a potential tool, it is plainly not seen as a tool of first resort, as highlighted in China’s UNCITRAL Working Group submission, emphasising the importance of state-to-state dialogue and alternative dispute resolution mechanisms. Moreover, many Chinese investments are made by state-owned enterprises, and hence, potentially valid claims may remain unasserted due to broader considerations. Conversely, given the importance of China’s market, some EU investors will think twice before commencing any arbitral proceedings against the State.

 

Conclusion

If adopted, the CAI may ultimately provide increased protection for European and Chinese investors. Moreover, given the economic and political weight of the parties, the ultimate form of ISDS provisions will have a significant impact on the future of investment arbitration and the fate of the MIC initiative. However, even without a clear final answer on the CAI, the evolving attitude of both the Chinese government and its investors towards ISDS, coupled with the changing international political and economic climate, suggests that we can expect to see more EU-Chinese investment claims in the years to come.

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Notes From Practice: Announcing The SIFCA Framework – Is The Confluence Of Investment Protection With Business And Human Rights The Future Of Investment Treaties?

Kluwer Arbitration Blog - Fri, 2021-11-26 00:00

This post shares a development of potential significance, i.e., the drafting of the Sustainable Investment Facilitation & Cooperation Agreement (SIFCA), a next-generation model bilateral investment treaty (BIT) developed for The Gambia, a sovereign State in West Africa and one of the world’s least developed countries (LDCs). This post continues the discussion raised in January 2021, in a post by Nicholas Diamond and Kabir Duggal titled “2020 in Review: The Pandemic, Investment Treaty Arbitration, and Human Rights”, which considered the “intersection of investment and human rights in 2021”. Developed for State-to-State investment treaty negotiations, the SIFCA framework incorporates certain investor obligations based on the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles) to a degree previously unknown in modern investment treaty practice.  The SIFCA has already had an impact in prompting The Gambia to reconsider several more traditional bilateral investment treaties currently in negotiation to include the innovations of this  treaty moving forward.

This post briefly considers: (1) key innovations of the SIFCA model investment treaty; (2) the UN Guiding Principles as a framework for investor obligations; and (3) the Hague Rules on Business and Human Rights Arbitration (the Hague Rules) as procedural rules in investor-State dispute settlement (ISDS). We raise the prospect that the confluence of two different regimes of public international law – investment protection on the one hand and business and human rights on the other – may signal a new imperative for the future of investment protection and ISDS.

 

The SIFCA: Next-Generation Bilateral Investment Treaty

Pursuing the best interests of the Host State, the SIFCA’s objectives reach far beyond the limits of standard treaty design in international investment agreements (IIAs), which has been criticized as primarily benefitting foreign investors while disproportionately allocating risks to the Host States. Some key SIFCA objectives include:

  • To promote more equal sharing of risks and benefits in modern IIAs;
  • To introduce investors’ business and human rights obligations as a shield for Host States in IIAs; and
  • To reduce perceived power imbalances in ISDS between developing States and well-funded investor claimants.

The following innovative elements appear in the SIFCA framework:

  • A requirement for the investor to submit a declaration of compliance with both the SIFCA itself and the UN Guiding Principles as a condition precedent to the submission of a dispute to arbitration;
  • The exclusion of the investor’s claims as inadmissible if:
      • the investor’s declaration (above) is untruthful, or
      • more than five years have passed from the claim arising and the detection of the associated loss or damage;
  • Availability of the Hague Rules as procedural rules for ISDS as an alternative to ICSID Arbitration, and where arbitration under the ICSID Convention and ICSID Rules is chosen, the tribunal’s procedure must be determined by reference to the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration;
  • A requirement that investors pay all deposits during proceedings;
  • An express reference to the possibility of the Host State to file counterclaims;
  • A requirement that investors, in commencing arbitration, consent to recognizing (1) concerns of human rights, environmental protection, sustainability and investment protection as interrelated and arising directly from an investment (including for jurisdiction under ICSID), and (2) the tribunal’s jurisdiction over any third-party claims asserted against the investor by natural persons who have suffered the violation of internationally recognized human rights in connection with an investment; and
  • A requirement that any compensation consider the investor’s infringement of its obligations under the SIFCA framework or its responsibilities under the UN Guiding Principles or related instruments, including the OECD Guidelines for Multinational Enterprises.

 

The UN Guiding Principles

A key advancement of the SIFCA framework is the incorporation of investor obligations based on business and human rights principles into an investment treaty model. This approach reflects the UN Guiding Principles’ stated purpose of “enhancing standards and practices with regard to business and human rights so as to achieve tangible results for affected individuals and communities, and thereby also contributing to a socially sustainable globalization”. Given the parallels between this stated purpose and public interest considerations underlying ongoing discussions of ISDS reform, it is unsurprising to find resonance between the UN Guiding Principles and efforts to improve ISDS by incorporating investor obligations into next-generation model IIAs.

A careful review of the UN Guiding Principles addresses the assertion that the business and human rights regime lacks the requisite specificity to provide effective investor obligations in IIAs. In particular, incorporating the UN Guiding Principles as a whole into investor obligations in IIAs provides clarity regarding both the spirit and the letter of investment treaty law. Concerning the former, Guiding Principle 11 provides:

Business enterprises should respect human rights.  This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.

As Guiding Principle 12 explains, the responsibility of businesses to respect human rights refers – at a minimum – to “internationally recognized human rights”. Guiding Principle 15 builds upon this foundation, outlining the following more specific considerations:

In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances, including:

(a) A policy commitment to meet their responsibility to respect human rights;

(b) A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights;

(c) Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.

It follows from the above that an investor’s compliance with the UN Guiding Principles entails not only a general aspiration to respect human rights in the abstract, but rather a specific policy commitment, due diligence processes, and processes to enable the remediation of adverse human rights impacts. In this way, the UN Guiding Principles outline not only the high-level spirit of compliance, but also specific aspects of implementation in practice. Simply put, you either have such policies and processes in place, or you don’t. This binary quality – expressed both in the spirit and the letter, in general, and in the specific – allows for the ready incorporation of the UN Guiding Principles into investment treaties as the basis of well-considered investor obligations.

 

The Hague Rules on Business and Human Rights Arbitration

For the first time, the SIFCA introduced the Hague Rules into the ISDS context, an innovation that proves to be compatible with the investment protection regime. While the scope of the Hague Rules has previously been considered “in contrast to investment treaty arbitration”, there is actually no reason to assume that the reach of the Hague Rules is necessarily different from the potential reach of investment treaty arbitration or that the use of the Hague Rules in this context is inappropriate.

First, the Hague Rules were developed from the 2013 UNCITRAL Arbitration Rules and key aspects of the Transparency Rules with the stated purpose of providing “a set of rules for the arbitration of business and human rights disputes”. As the Hague Rules’ Introductory Note recognizes, however, “the scope of the Hague Rules is not limited by the type of claimant(s) or respondent(s) or the subject-matter of the dispute”, and “[p]arties could thus include business entities, individuals, labor unions and organizations, States, State entities, international organizations and civil society organizations, as well as any other parties of any kind”. Key purposes of the Hague Rules include addressing adverse human rights impacts and serving as a grievance mechanism consistent with the UN Guiding Principles, which is not inconsistent with investment protection as a fundamental premise.

Second, the Hague Rules also address such concerns in arbitral proceedings as cultural appropriateness (Article 18(1)), rights compatibility, tensions between transparency and confidentiality in the public interest context, reasonableness in fees and expenses (Article 52(1)), and public interest considerations in the allocation of costs (Article 53(1)). Since the Hague Rules contemplate “the potential inequality of arms among the disputing parties” (Article 5(2)), e.g., “in cases between rights-holders and businesses”, they also hold a unique capacity to address potential inequality of arms between developing States and well-funded investors in ISDS. The incorporation of a requirement that investors consent to the application of the Hague Rules to access investor-State arbitration in investment treaty models like the SIFCA may assist with answering “the question of why companies will agree to arbitrate” under the Hague Rules as well as encouraging their full application rather than “watered down arbitration agreements that cancel out possibilities for human rights remedies”, at least in the context of such disputes arising in relation to a foreign investment.

 

Conclusion: Confluence of Two Regimes

The SIFCA innovatively brings together investment protection and business and human rights considerations. Some may claim that these two regimes are distinct and that the SIFCA Model is overly ambitious in seeking such a convergence. Every reform project must, however, begin with a first step. In the current climate in which ISDS reform is receiving significant and serious consideration, the innovations of the SIFCA, and in particular the incorporation of investor obligations based on business and human rights principles, may suggest a thought-provoking new direction for the evolution of international investment law and ISDS.  As the Urbaser Tribunal noted in considering the applicability of human rights to private sector entities, “an obligation to abstain, like a prohibition to commit acts violating human rights . . .  can be of immediate application, not only upon States, but equally to individuals and other private parties” (Award at [1210]).  Of course, as the Urbaser Tribunal also noted, any extension of positive human rights obligations to the private sector (such as “an obligation to perform services complying with the residents’ human right to access to water and sewage services” (Award at [1207])) remains subject to further development in treaty practice or in the general principles of international law. Viewed in this light, the SIFCA represents not only a framework for incorporating investor obligations into a model investment treaty, but also a promising addition to the broader conversation over the future of human rights discourse and responsibility in international law. Ultimately, it is expected that healthy and respectful debate may lead to acceptance of the principles espoused in the SIFCA and to improvements in future treaty practice. In time, investment treaty practice may witness the confluence of two different regimes in public international law that perhaps were never so different after all.

 

 

Disclaimer: The authors wish to recognize the following as having contributed to the efforts of the SIFCA Working Group:  Raja Bose, Rob Houston, Nikhil Dutt Sundaraj and Joseph Nayar (K&L Gates Straits Law LLC in Singapore); Hena Sial (K&L Gates LLP in Doha); Alessandra Mistura (Investment Support Programme for LDCs (ISP/LDCs) at the International Development Law Organization (IDLO) in Rome); and Chester Brown (University of Sydney Law School).  Of course, the authors also wish to recognize the numerous and visionary individuals in leadership positions in the Government of The Gambia whose leadership and insight have made possible the development of the SIFCA framework, including the following with the Ministry of Trade, Industry, Regional Integration and Employment (MOTIE): Permanent Secretary Ebrima Sisawo (Chief Supervisor of the Technical Support from the IDLO’s ISP/LDCs) as well as Director of Industry and Investment Fabba Jammeh and Deputy Director of Industry and Investment Omar Badjie (Coordination Team for the Technical Support from the IDLO’s ISP/LDCs).  This post is not offered as legal advice, which should be obtained only from properly licensed legal professionals with regard to specific circumstances.  The authors write in their personal capacities, and any opinions or views offered are those of the authors alone and do not necessarily reflect the opinions or views of any other entity or individual.

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In Word and Deed? The Indian Supreme Court’s Approach to Scrutiny of Awards

Kluwer Arbitration Blog - Thu, 2021-11-25 00:00

It is no secret that Indian courts have previously faced criticism over their excessive interference in arbitral awards. However, there has been a course-correction in recent years, through legislation and judicial decisions. With the 2015 amendments to the Arbitration and Conciliation Act, 1996 (“Act”), it is clear that judicial scrutiny of arbitral awards should be extremely limited. Recent decisions of the Supreme Court of India (“Supreme Court”) on Section 34 of the Act (challenges to awards in India-seated arbitrations) also emphasise this position.

However, our analysis of the Supreme Court’s judgments between January 2020 through September 2021 demonstrates that while its decisions largely adhere to settled principles on Section 34, there have been a couple of notable outliers. The Supreme Court seems to be conscious of this tendency and recently even expressed some cautionary observations on it.

 

1. Present scope of scrutiny under Section 34 of the Act

The Supreme Court comprehensively laid down the scope of judicial scrutiny under Section 34 following the 2015 amendments in two landmark judgments — Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India (discussed here) and MMTC Limited v. Vedanta Limited.

The Supreme Court clearly stated that there should be no review on merits of the award, as the court under Section 34 is not sitting in appeal. The ground of public policy, through which parties often subverted the limited judicial review under Section 34, is now restricted to: (a) fundamental policy of Indian law; (b) conflict with most basic notions of morality and justice; and (c) fraud or corruption in the making of the award. Patent illegality (now a separate ground) covers only illegality that goes to the root of the matter and does not include erroneous application of law by the arbitral tribunal. While examining the challenge on the ground of patent illegality, the court cannot re-appreciate evidence. Nor can the court substitute the arbitrator’s view for its own where the arbitrator’s view is a possible view.

These decisions have settled the law on judicial scrutiny under Section 34.

 

2. Notable departures

Despite these decisions, in some instances, courts have engaged in excessive intervention, suitably fitting their analysis into one or more of the grounds under Section 34.

a. Supreme Court’s decision in PSA Sical

In its July 2021 decision in PSA Sical Terminals Pvt. Ltd. v. Board of Trustees of V. O. Chidambranar Port Trust Tuticorin and Ors., the Supreme Court reiterated the principles laid down in Ssangyong and MMTC, but the manner in which these principles have been applied merits consideration.

The dispute related to the change of law clause in a licence agreement for development of a container terminal at a port. The arbitral tribunal passed an award in favour of PSA Sical Terminals Private Limited holding that there was a change in law entitling it to a higher level of tariff collection.

Following two rounds of litigation before lower courts on a challenge to the award under Section 34, the parties reached the Supreme Court. The Supreme Court held that the arbitral tribunal’s finding on change of law was based on ‘no evidence’ and ‘ignorance of vital evidence’, thus making it perverse and liable to be set aside on the ground of patent illegality.

The judgment started off on the premise that the court’s job is to “examine the correctness of [the arbitral tribunal’s] finding [on change of law]”. This is at variance with its reiteration of the principles that the court is not required to undertake a review on merits or substitute its own view for that of the arbitral tribunal. It is more so when nothing in the judgment indicates that the arbitral tribunal’s view was so irrational, and one that no reasonable or fair-minded person would have taken.

Thereafter, the Supreme Court assessed whether there was a change of law, going at length into the various tariff guidelines and orders involved. This invariably involves a review on merits. Ultimately, the Supreme Court gave its own interpretation of the tariff guidelines and orders to hold that there was no change of law, and that the arbitral tribunal’s finding was based on “no evidence” and “ignorance of vital evidence.”

The Supreme Court also stepped into the territory of reappreciation of evidence by examining the tariff guidelines and orders, justifying its approach under the pretext of seeing whether the award is based on no evidence or in ignorance of vital evidence.

The Supreme Court observed that had the arbitral tribunal considered the initial tariff orders, it would have arrived at the conclusion that there was no change of law. For this purpose, the Supreme Court interpreted the initial tariff orders, differently from the arbitral tribunal’s interpretation. In effect, the Supreme Court substituted its view for that of the arbitral tribunal’s, without considering whether the tribunal’s view was a possible one.

The Supreme Court’s approach blurs the lines between the separate assessments to be undertaken by courts under the various grounds in Section 34, and the limitations imposed by legislation or judicial precedent on those grounds.

b. Supreme Court’s approach in SEAMEC

In its May 2020 decision in South East Asia Marine Engineering and Constructions Limited v. Oil India Limited, the Supreme Court again undertook a review of the merits, interpreting a contractual provision on change of law. The Supreme Court framed the scope of its analysis as being an examination of whether the arbitral tribunal’s interpretation was “reasonable and fair” – an exercise entirely different from considering whether no “reasonable and fair-minded person” would have taken the arbitral tribunal’s interpretation. This, in a nutshell, is indicative of the inconsistent application of the yardsticks laid down for Section 34 challenges.

The Supreme Court set aside the award holding the tribunal’s interpretation of the contractual provision to be perverse. This was on the basis that the arbitral tribunal gave a liberal interpretation which did not consider other terms of the contract and was based on no evidence. The Supreme Court was re-interpreting the contractual provisions, and substituting its view for the arbitral tribunal’s – even though the arbitral tribunal had adopted a liberal (and permissible) interpretation after considering witness testimony. A liberal interpretation is not necessarily the same as an implausible one, but the Supreme Court conflated the two. Further, the Supreme Court’s exercise fails to meet the high threshold required for perversity. Perversity requires that the arbitral tribunal’s finding “outrageously defies logic” or was arrived at by ignoring or excluding relevant material or by considering irrelevant material – not that the arbitral tribunal adopted a possible liberal interpretation instead of a narrow one.

 

3. Restoring the balance — Delhi Airport Metro Express

In Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd., the Supreme Court reiterated the law laid down in Ssangyong and emphasised the need for judicial restraint when exercising jurisdiction under Section 34. This decision is an excellent example of the measured approach to be taken by courts.

The case was an appeal against a decision partially setting aside an arbitral award on grounds of patent illegality and conflict with most basic notions of justice. The Supreme Court dealt with various findings of the subordinate court, particularly on interpretation of the concession agreement between the parties. The Supreme Court observed that where the arbitral tribunal’s interpretation was a possible one, it should not be interfered with even if another interpretation could be taken. Similarly, findings of fact by the arbitral tribunal could not be interfered with.

The Supreme Court also made an astute observation – often enough, courts approach the exercise of reviewing the award under Section 34 from a lawyer’s perspective, although many awards may be passed by engineers or non-lawyers. This leads to a tendency to excessively interfere with findings, resulting in misguided application of the grounds under Section 34. In this case too, the subordinate court had held the arbitral tribunal’s view to be perverse and supplanted its view on facts.

 

4. Conclusion

The judicial review undertaken under Section 34 requires a tight-rope balancing act, to ensure that it does not become an appellate mechanism. Therefore, there is a great need for clarity, coherence and uniformity in the manner in which the review is done.

The decisions in PSA Sical and SEAMEC show that the Supreme Court’s own approach sometimes deviates from the yardsticks set by it. These judgments set the course backwards, by providing parties with new ways of canvassing their claims under the grounds set out in Section 34. Further, it also creates a situation where the arbitral award often becomes the start of a prolonged litigation rather than the end of it. The decision in Delhi Airport Metro Express on the other hand is the beacon for correctly applying the grounds to any challenge under Section 34. We hope that we will see similar jurisprudence from the Supreme Court, which will trickle down to lower courts as well.

 

Anjali Anchayil and Tamoghna Goswami are Senior Associates at J. Sagar Associates. Pratik Joshi is an Associate at J. Sagar Associates.

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The City of St. Louis’ Lawsuit Against the NFL Resolves in Mediation

ADR Prof Blog - Wed, 2021-11-24 10:46
In the biggest civil case you haven’t heard much about, the City of St. Louis (along with other public entities) and the NFL settled the litigation surrounding the Rams’ move to Los Angeles.  The case settled for $790 million, but the NFL was reportedly readying itself to pay up to $1 billion and maybe even … Continue reading The City of St. Louis’ Lawsuit Against the NFL Resolves in Mediation →

Latest Arbitration Trends and the New ICDR International Dispute Resolution Procedures: Highlights from the BIAC – ICDR Conference

Kluwer Arbitration Blog - Wed, 2021-11-24 00:20

On 20 October 2021, the Bucharest International Arbitration Court (“BIAC”) and the American Arbitration Association – International Centre for Dispute Resolution (“ICDR”) held a conference on the latest arbitration trends and the new ICDR International Dispute Resolution Procedures (“Conference”).

The Conference kicked off with a welcome speech by Annet van Hooft (FCIArb, BIAC Honorary President, Founding Partner, van Hooft Legal) who gave a brief introduction of the organizers and the panelists. Mrs. van Hooft then gave the floor to Daniel F. Vişoiu (FCIArb, BIAC General Secretary, Founding Partner, Vişoiu Law Firm), who was the moderator of the event.

The Conference was divided into three sessions: (a) the advantages of stipulating arbitration in M&A and VC/PE investments definitive agreements; (b) the necessity to include arbitration in infrastructure construction agreements; and (c) recent changes to the ICDR’s new International Dispute Resolution Procedures, which came into effect on 1 March 2021. This post highlights the key takeaways from the three panels.

 

Arbitration in M&A and VC/PE agreements: Why is this a good idea?

The first panel of the day delved into a discussion regarding the advantages of stipulating arbitration in M&A, Venture Capital/Private Equity (VC/PE) investments definitive agreements. The panel was composed of:

  • Vlad Peligrad, Managing Partner, KPMG Legal (Romania)
  • Alexandru Stănescu, Partner, SLV Legal / President, Club Español del Arbitraje (Romania Chapter)
  • András Dániel László, Partner, LFB László Fekete Bagaméry (Hungary)
  • Cristina Dăianu, Partner, Dentons (Romania) / Vice President, The Court of Arbitration of the Romanian-German Chamber of Industry and Commerce

Mr. Peligrad started the discussion by analyzing the essential elements of an arbitration agreement. He emphasized the importance of including broad language of the arbitration agreements in order to ensure that non-contractual disputes are covered as well. Mr. Peligrad then yielded the discussion to Mrs. Dăianu who offered some ‘DOs’ and ‘DON’Ts’ in the drafting of an arbitration agreement. In particular, she underlined that the agreement should be as clear as possible, and not offer alternative jurisdiction to the courts or other arbitration tribunals. In addition, Mrs. Dăianu advised that dispute resolution lawyers should always be involved in the drafting of arbitration agreements. She further noted that standard institutional arbitration clauses should be included if the parties are not familiar with arbitration.

Mr. Vişoiu then moved the conversation to arbitration and M&A transactions. Mrs. Dăianu first discussed the key issues that may be the subject matter of a dispute with respect to the different stages of an M&A transaction: pre-signing (confidentiality, exclusivity); share purchase agreement (representation, warranties, indemnities, non-compete clauses); post-closing (shareholders agreement). In connection with the pre-signing stage of an M&A transaction, Mr. Stănescu recommended that parties always insert an arbitration clause, including in letters of intent or memorandums of understanding. There are some binding clauses in such types of documents, such as confidentiality undertakings or certain limited intellectual property to be disclosed, which would continue to remain in effect even if the transaction would not be concluded. Likewise, Mr. Stănescu recommended that it is important to contemplate inserting an arbitration clause in the early stages of a VC transaction, given the more informal nature of such types of transactions. Finally, it was noted that VC transactions are very likely to be arbitrable as they have been appearing more frequently on the Romanian market. The discussion was continued by Mr. Stănescu, who offered a particular example of a type of VC investment instrument, that is the use of convertible notes. The assumption with respect to the use of convertible notes is that the value of start-ups is not known during the initial stage and will continue to develop and grow indefinitely until the next stage of investment (i.e., Series A) when the determination of the value of the business will be possible; however, the use of convertible notes is advantageous as continued growth may not always be the case, thus investors include liquidation and anti-dilution clauses in order to be compensated in case of potential bankruptcy.

The third point of discussion raised by Mr. Vişoiu was the cost of arbitration. Contrary to the assumption that arbitration is more expensive than litigation, Mr. László explained that the procedural costs involved in arbitration may in fact be lower due to the reduced number of or lack of formal hearings, or other procedural matters agreed upon at the case conference hearing. In addition, Mr. Peligrad noted that when analyzing the overall costs of arbitration, one must give due regard to the added-value of an arbitration procedure. Confidentiality, the arbitrators’ expertise, and party autonomy weigh against any perceived or actual higher monetary costs.

The final discussions of the panel were addressed by Mr. László, who covered the interplay between civil and common law in international arbitration. In particular, certain contractual practices and clauses have emerged in common law countries, although they may not exist in all traditional civil law jurisdictions. As such, when deciding upon sophisticated contractual issues, experienced arbitrators are better prepared to find a more efficient solution than judges of national courts, given their more frequent exposure to these matters.

 

Infrastructure construction agreements: Arbitration increases the chances of successful projects? 

The second panel primarily addressed the necessity to stipulate arbitration in infrastructure construction agreements. The panelists were:

  • Ioana Knoll-Tudor, Partner, Jeantet (France, Hungary, Spain) / Vice-President, Club Español del Arbitraje (Romania Chapter)
  • Jay Range, Partner, Hunton Andrews Kurth LLP (U.S.A.) / Chair, ABA Section of Infrastructure and Regulated Industries Alternative Dispute Resolution Committee
  • Adrian Iordache, FCIArb, Partner, Consortium Legal (UK, Romania)
  • Wojciech Sadowski, Partner, Queritius (Poland)

The first question addressed by Mr. Vişoiu was whether foreign investors insist on arbitration as a dispute resolution method. Mr. Range opened the discussion by addressing the interplay between national courts and arbitral tribunals, and the recent discussions in the U.S. with regard to the application of Section 1782 to international arbitration procedures. He also emphasized that the decision also depends on the possible existence of external funding from financial institutions. Dr. Knoll-Tudor added that foreign investors would most likely prefer to have a choice as to the drafting of their dispute resolution clause, but that is not always the case, especially in public procurement procedures. States usually have model contracts that they present to investors and some of them include dispute resolution clauses referring to national courts or to specific arbitral institutions.

The second topic for discussion concerned how parties can make use of Dispute Avoidance/Adjudication Boards (“DAB” or “DABs”) to ensure they achieve their purpose in streamlining the dispute resolution process.  Dr. Knoll-Tudor mentioned that the first step is to check whether the contract contains a DAB reference; and if it does, the DAB should be constituted immediately, instead of waiting for a dispute to arise. Mr. Sadowski pointed out the CEE dispute resolution culture, and also the fact that parties do not always consider the DAB decision as binding. Finally, Mr. Iordache discussed the importance of DABs in providing certain expectations to the parties with regard to future expert determination in full-fledged arbitration or court proceedings.

Mr. Vişoiu then turned the conversation to the necessity of customization. Mr. Range opined that customization should be necessary particularly because infrastructure contracts generally involve multiple parties and the dispute resolution clause should be adapted in order to empower arbitrators to consolidate any potential disputes. Dr. Knoll-Tudor further emphasized the importance of customizing pre-arbitral dispute resolution mechanisms and making them less sophisticated than those stipulated in FIDIC contracts. Mr. Sadowski agreed that customization may be efficient, but he argued that it should only happen when the dispute is complex enough to justify the legal costs involved in customization.

The panel discussions were concluded with Mr. Iordache’s comments on the Romanian legislation which, on the one hand, mandates arbitration in public procurement contracts, but also limits the reference to a stipulated institution and does not allow negotiation of any other term of the arbitration clause. Mr. Iordache emphasized that foreign investors are reluctant to agree to such a limitation mainly out of a concern for neutrality of the dispute resolution mechanism, especially for first-time investors in the region dealing with state entities. For this reason, in order to promote and attract investment, it is advisable to allow the parties to adapt their dispute resolution clause to international best practices and negotiate and agree terms appropriate to the contract, including by way of the place of arbitration, institution or other specific rules of procedure.

 

The ICDR updates its international best-practices rules 

The last panel presented the recent changes to the ICDR’s Dispute Resolution Procedures which became effective on 1 March 2021 (“Rules”). The changes aim to further enhance the efficiency of ICDR proceedings. The panelists were:

  • Luis M. Martinez, Vice-President, American Arbitration Association – International Centre for Dispute Resolution (AAA-ICDR)
  • Rafael Carlos del Rosal Carmona, Director, American Arbitration Association – International Centre for Dispute Resolution (AAA-ICDR)
  • Yanett Quiroz, Director, American Arbitration Association – International Centre for Dispute Resolution (AAA-ICDR)

The 2021 revision reflects the commitment to greater transparency so that every administrative step is prescribed by the Rules. For example, Mr. Martinez explained that the new Rules enshrine the procedure to be followed in arbitrator challenge procedures. In addition, the current Rules give special attention to the pre-arbitral procedure. In this sense, there was an update in the international mediation procedures, and international arbitration as well as mediation best practices were incorporated. Ms. Quiroz mentioned that the current Rules provide a detailed description of the mediation procedure administered by ICDR and that they also refer to the enforcement mechanism established under the Singapore Convention. Lastly, the revision aims to improve economic efficiency in order to reduce the duration and costs of ICDR procedures.  In terms of technological advances, Mr. Carmona pointed out that the ICDR has implemented extensive cybersecurity measures and has established cybersecurity training programs available to all of the AAA-ICDR’s arbitrators.

 

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OSU seeks staff attorney for DCP and Mediation Clinic

ADR Prof Blog - Tue, 2021-11-23 14:30
The OSU Moritz College of Law and the Divided Community Project seek a staff attorney to supervise students in OSU’s longstanding mediation clinic and support a collaborative, interdisciplinary project focused on race equity initiatives. We hope to fill this position before the new year. If you know of interested candidates who have two to five … Continue reading OSU seeks staff attorney for DCP and Mediation Clinic →
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