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Contributions to the Theory-of-Change Symposium

ADR Prof Blog - 8 hours 6 min ago
I am thrilled that so many people already have expressed interest in participating in the Theory-of-Change Symposium described in recent posts.  So far, 26 people said that they will write a piece and 10 more people are considering doing so.  I expect that others will participate as well. These include faculty, practitioners, directors of mediation … Continue reading Contributions to the Theory-of-Change Symposium →

Comings, Goings, and Other Milestones – 2019 edition

ADR Prof Blog - 12 hours 4 min ago
Every year I do my best to keep track of faculty moves and the like and post them here to spread the news.  We’re light on moves again this year, but we have several interesting interim appointments.  As I say every year, it’s entirely possible that I’m missing something that should be on the list.  … Continue reading Comings, Goings, and Other Milestones – 2019 edition →

Enforceability of Awards from Blockchain Arbitrations in India

Kluwer Arbitration Blog - Tue, 2019-08-20 21:00

Ritika Bansal

With the rise of e-contracts and smart contracts in commercial transactions globally, it becomes important to analyse developments in ADR such as blockchain arbitration. The concept of blockchain arbitration is very recent and it seeks to use the advantages of the technology in dispute resolution (how blockchain arbitration works can be read here). However, one important facet of understanding the feasibility of using blockchain technology in arbitrations in India is understanding whether awards rendered through such a process can be enforceable in the first place. While the 2015 Amendments to the Arbitration and Conciliation Act introduced some changes to bring the Act on par with contemporary technology, there is still lack of clarity in determining whether the peculiar form of blockchain arbitration can be facilitated through the Indian Act.

 

Validity of the Arbitration Agreement in Domestic Awards

One problem identified with the enforceability of blockchain arbitration awards is the lack of enforceability of the agreement itself under the New York Convention which requires such agreements to be in writing or through exchange of telegrams/telefaxes. Similarly, Section 7 of the Arbitration and Conciliation Award also requires that a valid arbitration agreement should be in “writing”. However, unlike Article II of the New York Convention, Section 7 further clarifies that an agreement would be considered as having been in writing if it has been communicated through “electronic means”. The allowance for “electronic means” was introduced through Section 3 of the Arbitration and Conciliation (Amendment) Act, 2015. Electronic means has not been defined under the Act or the Amendment Act despite the recommendation of the 246th Law Commission Report.

However, Section 10A of the Information Technology Act, 2000 gives validity to contracts which are formed through electronic means. Electronic means is defined in the section as means used for creation of an “electronic record”. Electronic Record is further defined under Section 2(1)(t) of the Act as “data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche”. Smart contracts are made up of a series of electronic records which are transmitted and stored by the parties, thereby covering the same within the definition of an “electronic means”. Therefore it can be concluded that blockchain arbitration agreements would be valid under the amended Section 7 of the Arbitration and Conciliation Act. The question of whether the Amendment Act would apply or not to particular proceedings would depend on the date of the commencement of such proceedings.

 

Difficulty in Determining Territory of the Awarding Country

India has made the reciprocity reservation under Article I of the New York Convention which means that foreign awards made in only certain Contracting States of the Convention (gazetted by the Central Government) can be enforced in India. As of now, India has gazetted less than 1/3rd of all of the Contracting States to the Convention.

An exception was carved out in the case of Transocean Shipping Agency v. Black Sea Shipping1)(1998) 2 SCC 281. jQuery("#footnote_plugin_tooltip_8314_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8314_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); where an award of Ukraine was enforced in India despite “Ukraine” not being gazetted officially by the Central Government. However, the reason for the same was that the USSR (which Ukraine was a part of originally) was gazetted by India.

In blockchain arbitration, arbitrators are selected by the dispute resolution service provider once a request for arbitration is made from a smart contract. These arbitrators are usually individuals who have applied to the service providers with their expertise. The arbitral award is then given on the blockchain ledger with the copies of such a decision being made available to the parties on their respective computers (in different countries). The arbitral award in itself, however, cannot be said to have been given in any one country. This then results in the question of whether such an award can be enforced in India in light of the reciprocity clause. A strict interpretation of the Arbitration and Conciliation Act would mean that such an award cannot be enforced in India since the physical space of the internet has not been gazetted by the Central Government. Such an interpretation would, however, be antithetical to the arbitration-friendly approach being increasingly adopted by India. Conversely, allowing all awards given through blockchain arbitration could result in the intention misuse of such proceedings to prevent the application of the reciprocity reservation of India.

This question is better answered in cases where the service provider approaches an established arbitral institution to render an award. In such a case, the country, where the arbitral institution is established in, can be considered to decide whether the same would pass the test of reciprocity and enforceability in India.

 

Evidence of Arbitral Award

The provisions for enforceability of a domestic and a foreign arbitral award have been laid down under Sections 36 and 48 of the Arbitration and Conciliation Act respectively. An application made for enforceability of either of such awards should include an “original copy” of the award. This becomes difficult in blockchain arbitration since there is no one “original copy” of the award in these arbitrations and the award is put on the network accessible to everyone.

It can, however, be argued that the Act also allows for “duly certified” copies of the original award to be presented to the Court. The mechanism of blockchain theoretically makes it impossible for anyone to merely alter their copy of the arbitration award, which means that a copy of the award taken from the blockchain would be duly certified in itself. To make it more secure, Courts can be allowed access to the blockchain to procure a direct copy of the award.

However, unlike a foreign award2)EPC Limited v. Rioglass Solar SA, (2018) SCC Online 1471. jQuery("#footnote_plugin_tooltip_8314_2").tooltip({ tip: "#footnote_plugin_tooltip_text_8314_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, a domestic award is further required to be stamped in order to be enforced under Section 36 of the Arbitration Act. Section 3 of the Stamp Act read with Schedule I, Article 12 of the Act suggests an arbitral award made in “writing” should be stamped. The question of a “written” arbitral award is similar to the question of a written arbitration agreement discussed above. The Stamp Act currently does not include “electronic means” in the definition of a written arbitral award. Pending a legislative amendment to this effect, the Stamp Act could be read to allow for “electronic” arbitral awards in keeping with the trend demonstrated in the Arbitration and Conciliation Act and the Information Technology Act towards facilitating technological advancements in commercial transactions.

Further, section 17 of the Registration Act requires domestic awards to be registered when it affects rights related to an immovable property. Only such an award which is then duly stamped and/or registered can be presented to the Court for enforcement3)M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565 jQuery("#footnote_plugin_tooltip_8314_3").tooltip({ tip: "#footnote_plugin_tooltip_text_8314_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });. This means that giving direct access of the blockchain to the enforcing Court would not be sufficient since such an award also needs to be duly stamped and/or registered first. Direct access, in domestic awards, can be given for the purposes of proving the original award while stamping and registering the document. The copy of the award which is then duly stamped and/or registered can be considered as “original” for the purpose of making an application under Section 36 of the Arbitration and Conciliation Act. For foreign awards, direct access can simply be given to the Court in which an application for enforcement of the foreign award is made.

 

References   [ + ]

1. ↑ (1998) 2 SCC 281. 2. ↑ EPC Limited v. Rioglass Solar SA, (2018) SCC Online 1471. 3. ↑ M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565 function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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One Giant Leap for Chinese Arbitration: An Introduction to the New BAC/BIAC Fee Schedule

Kluwer Arbitration Blog - Mon, 2019-08-19 21:00

Hu Ke, Jiang Xinyan and Ren Xiaolu

On 19 July 2019, Beijing Arbitration Commission a.k.a. Beijing International Arbitration Center (the “BAC/BIAC”) released its amended Arbitration Rules (the “Rules”) and Fee Schedule (the “Fee Schedule”), both of which will take effect on 1 September 2019.

 

An Overview of BAC/BIAC’s New Fee Schedule

The amendments introduced many reforms to reduce the time and cost of arbitration, addressing a range of issues raised by arbitration users, practitioners, arbitrators and other stakeholders, such as transparency of arbitration costs, single arbitration under multiple contracts, and emergency arbitrator.

The amendment to the Fee Schedule is however the highlight of the changes.

First, the new Fee Schedule separates arbitrator’s fees from administrative expenses for both domestic and international cases, with the arbitrator’s fees consistently higher than the administrative costs. The new Fee Schedule replaces the previous one, which divided the arbitration fees into arbitration acceptance fee and arbitration handling fee without clarifying their respective components, including how much will be used to remunerate arbitrators.

Second, the Fee Schedule provides a new approach to calculate the administrative expenses and the arbitrator’s fees: the amounts calculated for each successive tranche of the amount in dispute must be added together, except where the amount in dispute is over RMB 5 billion (about USD 726 million as of 1 August 2019), the administrative fee charged by the BAC/BIAC will be capped at RMB 8.761 million (about USD 1.27 million); and where the amount in dispute is over RMB 8.682 billion (about USD 1.26 billion), the arbitrators’ fees will be capped at RMB 18 million (about USD 2.6 million), so as to avoid higher costs for high-value cases.

Third, cases with an amount in dispute of no more than RMB 5 million (about USD 0.73 million) will be conducted in an expedited manner, replacing the RMB 1 million (about USD 0.15 million) threshold in the previous fee schedule. There is a modest increase of costs for cases with an amount in dispute above RMB 5 million (about USD 0.73 million), for which the default setting will be a three-arbitrator panel. However, if parties may agree to submit their disputes to a sole arbitrator, the arbitrator’s costs can be reduced by 40% under the Fee Schedule.

Last, the Fee Schedule introduces an optional approach to arbitrator’s fees, that arbitrators may be compensated on an hourly basis upon parties’ agreement, in both domestic and international cases. The fee schedule also sets the ceiling for hourly rates at RMB 5,000/hour (about USD 720/hour), which is believed to be sufficiently attractive for leading arbitrators.

 

Groundbreaking improvements

The division of arbitrator’s fees and the administrative costs, and the consequential set-up of a transparent standard for the arbitrator’s charges are regarded by the Chinese arbitration community as the most groundbreaking improvements.

Its impact is threefold:

First, it delivers long overdue respect to the role of arbitrators in the process by providing fairer compensation for the services they render. It provides a strong incentive for high-quality arbitrator services, thus encouraging and enhancing professionalism among arbitrators’ community.

Traditionally, with institutions at the center of procedural management, arbitrators in China are often not engaged with the case before the hearing. Usually arbitrations in China do not have case management conferences, procedural timetables, comprehensive Procedural Orders No.1. or reasoned procedural orders. Higher compensation leads to more responsibilities. Arbitrators are now expected to do more in procedural management before hearings, and to deliver decisions more efficiently.

Second, by paying arbitrators more competitively and providing transparency on arbitration costs to users, it consolidates the legitimacy of arbitration as a trustworthy private mechanism for resolving commercial disputes by independent, impartial and highly respected umpires, with no or only modest increase in costs.

Last, this reform further reflects, and reinforces, the non-profit nature of arbitration institutions in China, and sets a model for other arbitration institutions to follow.

 

Why the New BAC/BIAC Fee Schedule Is Revolutionary in Chinese Arbitration

A practitioner commented that the new BAC/BIAC Fee Schedule is “one small step for BAC/BIAC, but one giant leap for Chinese arbitration”. This is not an overstatement.

All 260+ arbitration institutions in China are founded and financed by the government. For most of them, the arbitration costs the institutions charge would be regarded as part of the state revenue, while their operating costs are sponsored by the government financial budget separately. As such, when the institutions and the state treasury are making considerable revenue for the administration of justice, the arbitrators are often not well paid. To make things worse, parties are prevented from access to the fee arrangement between institutions and arbitrators, and have no idea how much goes to arbitrators.

Therefore, arbitrators – many being established practitioners, leading academics or senior in-house counsels – are often distracted from their arbitration work by their more profitable, productive, or demanding engagements, and are naturally less committed to their roles as private adjudicators of disputes. While many arbitrators are adhering to high standards in their practice and institutions are managing arbitrators as best as they can, users may find themselves stuck in poorly managed procedures, ill-prepared hearings, a long wait of 12 months or more for the award, or a final decision which is not well written and reasoned. This has become a fundamental challenge to the sustainable development of Chinese arbitration.

In short, users do not get what they pay for. Good arbitrators make good arbitrations, and economic logic tells us we cannot get better arbitrators with less fees. Without competitive remuneration to arbitrators, it would be very difficult for arbitration institutions to develop and retain a large pool of arbitrators committed to quality services. This move by BAC/BIAC is making a significant difference, and we are hopeful other institutions in China will follow.

 

What Further Steps BAC/BIAC May Take

There remain outstanding issues on arbitrator’s fees, such as the division of the arbitrator’s fees among a three-arbitrator tribunal, the method for the determination of arbitrator’s hourly rates (if applicable), and the remuneration of tribunal secretaries and assistants (if any).

The application of hourly charges would be at the center of further discussion. Although the Fee Schedule provides for the option of compensating arbitrators at hourly rates, it does not specify the method for determining the rates and how timesheet should be managed.

To avoid disputes on the application of hourly rates, we suggest BAC/BIAC issue a set of billing principles. BAC/BIAC may take the Arbitrator Billing Guidelines of AAA/ICDR and the Terms of Appointment including Remuneration of CIArb as references. Several principles therein are worth considering when drafting BAC/BIAC’s own set of billing principles, such as the relevant Code of Ethics for Arbitrators, disclosure of pre-set rates, calculation methods for arbitrators’ fees, cancellation fees, and reimbursement of expenses reasonably incurred. Such a set of billing principles would guide arbitrators in formulating their hourly rates as reasonably as possible and provide more transparency to users.

 

Conclusion

With the amendment of the Chinese arbitration laws already on the calendar of the Standing Committee of the National People’s Congress, we look forward to China further modernizing the arbitration legislation, rules and practice in the near future.

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Identifying Questions for the Future of the Field

ADR Prof Blog - Mon, 2019-08-19 16:01
Steve Goldberg, Nancy Rogers, and I recently finished the Seventh Edition of Dispute Resolution: Negotiation, Mediation, Arbitration and Other Processes. In the course of our revision, we identified several questions that we thought may have significance in the dispute resolution field. Please take a look and, if you are inspired to write a response, please … Continue reading Identifying Questions for the Future of the Field →

Kazakhstan Internationalises Arbitration Law

Kluwer Arbitration Blog - Mon, 2019-08-19 01:32

Cameron Ford

Kazakhstan has been making concerted efforts to increase foreign investment and to reduce its dependency on extractive industries which have long dominated production. In 2015, when it was ranked 77th out of 190 countries for doing business, the then President introduced a “100 Concrete Steps” Plan to make the country one of the top 30 developed countries by 2050. In 2019 it had risen to 28th place, no doubt in large part due to the Plan which focused on five critical areas – New Modern State Apparatus; Rule of Law; Industrialization and Economic Growth; Nation with a Shared Future; Transparent and Accountable Government. A report by the Boston Consulting Group in December 2018 Investing in Central Asia was optimistic about the potential for future investment in Kazakhstan, identifying further improvement of the investment environment as one of the five keys to unlocking full potential.

Straddling a number of those areas is the Astana International Financial Centre (AIFC), incorporating the AIFC Court and the International Arbitration Centre (IAC) (past coverage of that development available here). The AIFC came into being in 2018 and is intended to be a major financial hub for Central Asia, the Caucasus Republics, Eurasian Economic Union, the Middle East and Europe. The AIFC Court hears disputes arising out of the AIFC with judges from common law countries and Lord Woolf as its first Chief Justice.

Being an arbitral institution, the IAC is not limited to administering disputes arising out of transactions within the AIFC but is available for disputes in transactions generally. Any contract may refer disputes to be resolved under IAC arbitration. To deal with these, the IAC was endowed with a set of state-of-the-art rules, a panel of outstanding international arbitrators and mediators, and an internationally regarded Chairman in the person of Barbara Dohmann QC.

 

2019 Amendments to the Law on Arbitration

Complementing the Plan and the IAC in particular, in January 2019 Kazakhstan amended its 2016 Law on Arbitration (the Law) (see rough translation in English of the Law) to align it with international conventions and practice by the Law of the Republic of Kazakhstan No. 217-VI “On Amendments to Certain Legislative Acts of the Republic of Kazakhstan Concerning Strengthening the Protection of Property Rights, Arbitration, Optimizing the Judicial Caseload, and Further Humanizing the Criminal Law”. This approach to internationalising arbitration could be expected to increase the attractiveness of the IAC as an administering institution and arbitration for Kazakhstan generally. This in turn can lead to significant increases in foreign direct investment,1)A Myburgh and J Paniagua, Does International Commercial Arbitration promote Foreign Direct Investment?, The Journal of Law and Economics 59(3):597-627 August 2016. jQuery("#footnote_plugin_tooltip_7585_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7585_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); can have a measurable impact on the country’s trading patterns particularly in the increased export of complex goods, and can trigger a process of institutionalization.2)Daniel Berkowitz, Johannes Moenius & Katharina Pistor, Legal Institutions and International Trade Flows, 26 Mich. J. Int’l L. 163 (2004), 177. jQuery("#footnote_plugin_tooltip_7585_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7585_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

The more important 2019 amendments relax the requirements for the arbitration agreement, enable foreign law to be chosen to govern the dispute, allow the tribunal to use foreign law to determine the governing law, reduce the grounds for annulment of an award, internationalise the grounds for refusing to recognise an award, and restrict a state party’s revocation of consent to arbitration. This post discusses each of these changes in turn.

 

  1. Relaxing Arbitration Agreement Requirements

Before the changes, in order to be enforceable, arbitration agreements were required to state the intention of the parties to refer disputes to arbitration, indicate the subject matter to be determined by arbitration, state a specific arbitral institution or rules, and have the consent of the relevant authorised body where a state entity was party to the agreement.

Article 9.4 of the Law has been amended to remove those strictures, making more arbitration agreements enforceable and enabling parties to choose ad hoc arbitration.

This change gives foreign parties greater confidence that their arbitration agreement with a Kazakh counterparty will be upheld and this makes it more attractive for to agree to arbitration. This in turn encourages foreigners to do business with Kazakh state entities and nationals, increasing investment in the country. One of the reasons arbitration is chosen by foreign parties is their unfamiliarity with domestic courts and laws. If foreigners fear their arbitration agreement will not be upheld domestically and the local party will be allowed to commence domestic court proceedings, they may simply not enter into the transaction or require something to allay their fears such as some form of security, better terms and so on. This has the effect of either chilling investment in the country or increasing transaction costs.

 

  1. Foreign Law as Governing Law

Under Article 44.1 foreign law may now be chosen as the governing law of the contract and the dispute where one party is foreign to Kazakhstan. Formerly, that article required the governing law to be that of Kazakhstan where one party was a state entity – i.e., state bodies, and entities held 50% or more by the state. Now only contracts and disputes purely between Kazakh parties must be governed by Kazakh law.

This is a significant advancement, making transactions with Kazakh parties more attractive to foreigners and making arbitration in Kazakhstan more international. As well as being concerned at unfamiliarity with domestic courts, foreign parties worry about being committed to an unknown domestic law in a system they may not understand. Transacting under such a law increases risk and uncertainty, sometimes to levels a foreign party is unable to accept. Having the ability to choose a known and neutral governing law enables those risks to be managed and the transaction to be approved.

 

  1. Foreign Law May Determine Choice of Law

Article 44.1 now says that, if the parties do not agree, the applicable law will be determined in accordance with appropriate conflict of laws rules determined by the tribunal. This replaces the former position that the applicable law was determined by reference to Kazakh law and now conforms to Article 7 of the European Convention on International Commercial Arbitration.

Although under-appreciated by lay parties, the possibility of foreign choice of law rules determining the governing law makes contracting with Kazakh parties more appealing. Lawyers for foreign parties would have more confidence that an appropriate law with which they are familiar would be chosen in this way.

 

  1. Grounds of Annulment Reduced

Awards may no longer be annulled simply because they do not comply with the Law’s requirements on written form and signature. Under Article 52, Kazakh courts now may not examine the substance or merits of an award in annulment or recognition proceedings, in line with the New York Convention. Where the ground relied on for annulment is the tribunal’s non-compliance with the parties’ agreement that agreement cannot be contrary to the mandatory provisions of the Law. If there is no agreement, an award may be annulled if the tribunal did not comply with the Law generally, not only its mandatory provisions. This matches the approach of the UNCITRAL Model Law on International Commercial Arbitration.

Reducing the grounds of annulment, particularly quarantining the merits from review, makes parties feel safer in doing business with Kazakh counterparties and in selecting arbitration. Enforcement and recovery are very real questions for all parties to contracts without the added uncertainty of the potential for annulment through a merits review, particularly when the international standard restricts annulment to much narrower grounds.

 

  1. Internationalising Recognition and Enforcement

Article 57 on recognition of awards has been amended to align more closely to the New York Convention with three changes:

  • Under the former Law, a Kazakh court could refuse to recognise or enforce an award if it had been made possible by the commission of a criminal offence. This has been removed by the 2019 amendments.
  • Formerly an award could be invalidated and refused to be enforced if the arbitration agreement did not state its governing law. This has been removed, with invalidity of the arbitration agreement now being determined by the law where the award was made.
  • Before the amendments, the Law stated that an award was unenforceable if the tribunal did not comply with “the law”, without stating which law. Arguments could be made that “the law” referred to Kazakh law, the governing law of the contract, the lex arbitri or the law where the award was made (if different from the lex arbitri). The changes clarify that the law to be complied with is the law of the place where the arbitration was held.

While it would be rare for awards to be invalidated because they had been made possible by a criminal offence, it would be much more common for arbitration agreements not to state their governing law. Many arbitration agreements would fall into this category, with most seeming to assume they are governed by the law applicable to the contract. Removal of this ground of refusal to recognise is a significant step in giving parties confidence their awards will be enforced, in turn encouraging foreign parties to transact with Kazakh parties and agree to arbitration. The same could be said of clarification of “the law” with which the award must comply.

 

  1. Revocation of State Party’s Consent

Unlike the position before the amendments, under Article 8.10 a state party cannot now revoke its consent to arbitration. A state party is a state body or an entity in which the state has 50% ownership or more. Under Article 8.10, state parties must obtain the consent of the “authorised body” of their relevant industry to enter into an arbitration agreement. Formerly there was no preclusion on the authorised body revoking its consent at any time; however the 2019 amendments now state in article 8.10 that the consent is irrevocable.

Foreign parties must have been cautious in dealing with state parties before the amendments, not knowing whether the state party would adhere to the arbitration agreement or the foreigner be forced into domestic court proceedings. Again, this change heightens confidence in dealing with state parties and agreeing to arbitration.

 

Comments

Viewed overall, the amendments make transactions with Kazakh parties more attractive to foreigners knowing that they can choose a foreign governing law, their arbitration agreements are more likely to be upheld, they do not have to know and comply with obscure technical requirements, and that awards have a greater chance of being recognised and enforced.

On his appointment as Chief Justice of the AIFC Court, Lord Woolf said:

“[The President] wants the world to see English common law being applied in this country and not just in the capital, but to radiate throughout society in years to come as an example of how business should be done and justice done.”

The IAC and the amendments to the Law can be seen as part of that vision, not just promoting arbitration but also the common law, both with the ultimate aim of increasing business in the country and diversifying the economy.

Central Asia generally is seeing a move towards institutionalising and modernising arbitration as part of efforts to improve access to justice and the general investment environment. Kazakhstan is the largest country in Central Asia with vast oil, uranium and other mineral resources. Its efforts to attract trade through developing its laws and arbitration are likely to be mimicked by other countries in the region. Not only might the common law radiate through Kazakh society, but modern arbitration laws and rules might radiate through the region.

In November 2018 Uzbekistan resolved to establish the Tashkent International Arbitration Centre under the Chamber of Commerce and Industry of Uzbekistan to promote arbitration and investment (past coverage of that development available here).

Kyrgyzstan proposes to institutionalize arbitration as a mechanism for improving the access to justice as reported in this blog in Arbitration in Kyrgyzstan: Evolution and Next Steps Ahead.

In 2016 Turkmenistan adopted the International Commercial Arbitration Law based on the UNCITRAL Model Law but is not a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – see in this blog Law of Foreign Arbitration in Turkmenistan: An Introduction.

Tajikistan has also ratified the New York Convention with a reservation that it would not be applied to differences related to immovable property, a restriction which may impose significant limitations on the utility of arbitration in infrastructure disputes.

Further modernisation of arbitration law, institutions and rules can be expected across the region as countries vie for foreign investment and seek to diversify their economies.

References   [ + ]

1. ↑ A Myburgh and J Paniagua, Does International Commercial Arbitration promote Foreign Direct Investment?, The Journal of Law and Economics 59(3):597-627 August 2016. 2. ↑ Daniel Berkowitz, Johannes Moenius & Katharina Pistor, Legal Institutions and International Trade Flows, 26 Mich. J. Int’l L. 163 (2004), 177. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Intra-EU Disputes under the Energy Charter Treaty: Quo Vadis?

Kluwer Arbitration Blog - Sun, 2019-08-18 03:00

Florian Stefan

The tendency of arbitral tribunals constituted under the Energy Charter Treaty (ECT) to reject intra-EU jurisdictional objections, despite contrary views expressed by most EU member states, was recently continued in the case of Landesbank Baden-Württemberg (LBBW) and others v. Kingdom of Spain (ICSID Case No. ARB/15/45).1)Decision on the Intra-EU Jurisdictional Objection, dated 25 February 2019, Landesbank Baden-Württemberg, and others v. Spain (ICSID Case No. ARB/15/45). jQuery("#footnote_plugin_tooltip_8087_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8087_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The decision made by an ICSID tribunal over a claim brought under the ECT was made in February 2019 but has only recently come to light. It joins the ranks of previous decisions under the ECT made in the wake of the Achmea judgment by the Court of Justice of the European Union (CJEU), as discussed in previous posts, and comes at a time when efforts by the European Commission to reform the ECT are garnering widespread strength.

 

The LBBW Case 

The LBBW case was brought by a group of German banks against Spain under the ECT and concerns reforms to Spain’s renewable energy sector. It is one of a total 43 investor-state arbitrations pending against Spain under the ECT regarding the state’s reforms to its renewable energy sector. In the 1990s, Spain established a special regime for renewable energy production with the intention to promote foreign investment in the sector. Spain provided a guarantee to investors that renewable energy plants would be able to sell their electricity to the Spanish electricity grid at a fixed price for the entire lifetime of the plants.

In the LBBW Case, the Claimants argue that, in reliance on Spain’s commitments, they financed 78 renewable energy plants with loans totaling a combined €1.76 billion, until Spain substantially changed the regime before eventually abolishing it in its entirety. According to the claimants, Spain’s actions violated its obligations under both Article 10(1) of the ECT, which guarantees fair and equitable treatment of investments, and Article 13 of the ECT, which protects investments against expropriation.

Spain’s principal argument was that Achmea constitutes a definitive ruling that investor-state arbitration provisions in intra-EU cases are incompatible with EU law. Therefore, such provisions cannot afford a basis for jurisdiction where an EU member state is taken to arbitration by an investor from another EU member state. According to Spain, this also applies to cases brought under the ECT, regardless of the fact that Achmea concerned an intra-EU BIT and not a multilateral treaty such as the ECT, to which both EU and non-EU states are signatories.

The tribunal found that, particularly in light of Achmea, the relationship between the provisions of the ECT and EU law gives rise to important questions which Spain was entitled to raise as a jurisdictional objection. However, the tribunal flatly refused Spain’s arguments that the tribunal lacks competence and that the proceedings are to be considered as a state-to-state arbitration as the Claimants are largely owned by German federal states. Likewise, it rejected both parties’ respective arguments that the issue was already “settled law”. According to Spain, Achmea conclusively decided the matter, and according to the banks, arbitral tribunals have consistently rejected the objection. The tribunal found that it must make its own analysis of the issue and arrive at its own conclusions, particularly since the case’s circumstances were different than in Achmea and the decisions cited in favour of the tribunal’s jurisdiction. It went on to rule that a provisional interpretation of Article 26 of the ECT appears to constitute an offer of arbitration by each EU member state to investors from all other contracting parties without any limitations regarding intra-EU disputes.

 

The Effect of Achmea

The interpretation was, however, provisional as the tribunal had yet to consider the effect of Achmea. With regards to Achmea, the tribunal noted that it had to ascertain whether the logic of the reasoning of the CJEU, although made in relation to a BIT, was also applicable to Article 26 of the ECT insofar as that provision was invoked in an intra-EU dispute. It found that the differences between the tribunal’s situation, as a tribunal established under Article 25 of the ICSID Convention and Article 26 of the ECT, and that of the tribunal in Achmea outweighed the similarities between them.

The tribunal particularly emphasised the nature of the ECT as a multilateral treaty. Since the ECT was concluded both by the EU and by its member states, there is no doubt of the possibility of a tribunal established under Article 26 of the ECT having been provided for without the knowledge of the EU. It further involves reciprocal obligations by all contracting parties and thus is more than just a network of bilateral relationships as is the case with a BIT. Furthermore, issues of EU law might also arise in proceedings between one EU member state and another contracting party, and nevertheless could not be referred to the CJEU for a preliminary ruling. Furthermore, the reasoning of the CJEU in Achmea regarding the role of a national court was inapplicable in the LBBW case, as it was to be decided by an ICSID tribunal, deriving its authority from Article 25 of the ICSID Convention, that has no national seat and is not subject to the jurisdiction of any national court. Lastly, it found that the CJEU had not ruled out the possibility of a court established by an international agreement and thus rooted in public international law, such as the European Court of Human Rights, to rule on a dispute involving an EU member state while taking EU law into account.

In sum, the tribunal in LBBW v Spain arrived at the same conclusion as the tribunals in Vattenfall, Masdar and Greentech,2)Masdar Solar & Wind Cooperatief U.A. v Spain (ICSID Case No. ARB/14); Vattenfall AB and others v Germany (ICSID Case No. ARB/12/12); Greentech Energy Systems A/S and others v Italy (SCC Arbitration V 2015/095). jQuery("#footnote_plugin_tooltip_8087_2").tooltip({ tip: "#footnote_plugin_tooltip_text_8087_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); namely that EU law does not preclude arbitration of intra-EU investment disputes under the ECT. It also found that even if EU law were to prohibit Spain from making an offer of arbitration under Article 26 of the ECT, the tribunal must still accord priority to the ECT as it does not operate under EU law but under international law and the ECT.

 

Reforming the ECT

The decision in the LBBW case was made public just days before the Council of the EU announced that it has awarded a mandate to the European Commission to begin negotiations on the modernisation of the ECT. The “new” ECT should explicitly reaffirm the states’ “right to regulate“, i.e. the right of the contracting parties to take protective measures with regards to, inter alia, health, safety and environment objectives. However, the mandate also included bringing the ECT provisions on investment protection in line with recently concluded agreements by the EU and its member states and ensuring that a future multilateral investment court applies to the ECT.

This is in line with the political declaration issued by 22 EU member states in January 2019, in which they not only stated that investor-state arbitration clauses contained in BITs concluded between EU member states are contrary to EU law and thus inapplicable, but also noted that the investor-state arbitration clause in Article 26 of the ECT is incompatible with EU law.

 

Conclusion 

The tribunal in LBBW v Spain was unperturbed by the European Union’s efforts to put a halt to Intra-EU investment arbitration. While the tribunal acknowledged that the European Commission (and most EU member states) argue for the disapplication of Article 26 of the ECT in intra-EU cases, it rejected all arguments put forward in support thereto. However, the LBBW tribunal’s findings did not come much as a surprise, as the decision closely follows the observations made by the tribunal in Vattenfall, which appears to have set the new standard against applying the principles of Achmea to intra-EU disputes brought under the ECT. Although there is of course no doctrine of binding precedent in international law, respondent states will have a difficult time arguing against what has now become a series of consistent cases.

As of today, more than two-thirds of of all ECT investor-state arbitrations are intra-EU disputes. It remains to be seen how the non-EU signatory states of the ECT will react to the Commission’s proposals on a reform of the treaty and in particular its dispute settlement provisions. Further, it will not be long before the CJEU will have to concern itself with this issue. While the Swedish Court of Appeals recently rejected a request for a preliminary ruling by Spain in an ECT case, Spain has already brought another request for a preliminary ruling to the CJEU in the context of an ECT arbitration. In the meantime, it is to be expected that more ECT tribunals will reject the intra-EU objection, thereby adding further fuel to the fire.

References   [ + ]

1. ↑ Decision on the Intra-EU Jurisdictional Objection, dated 25 February 2019, Landesbank Baden-Württemberg, and others v. Spain (ICSID Case No. ARB/15/45). 2. ↑ Masdar Solar & Wind Cooperatief U.A. v Spain (ICSID Case No. ARB/14); Vattenfall AB and others v Germany (ICSID Case No. ARB/12/12); Greentech Energy Systems A/S and others v Italy (SCC Arbitration V 2015/095). function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Bulgaria: Assignment of an Arbitration Clause – Is Debtor’s Consent Required?

Kluwer Arbitration Blog - Sat, 2019-08-17 02:00

Velislava Hristova

The assignment of contractual rights is a common business practice. An important question concerning the assignment of rights under a contract is the fate of the arbitration agreement related to those rights and whether it is transferred automatically to the assignee so that such arbitration agreement becomes effective and binding in the relationship between the assignee and the debtor.

In a recent judgment, the Bulgarian highest court had the occasion to decide whether and under what circumstances an assignment of contractual receivables transfers the rights under the arbitration clause incorporated in the same contract.1)M.S.D. v. Credo Consult 55 OOD, Supreme Court of Cassation, Judgment No. 261 from 1 August 2018 under commercial case No. 624/2017. jQuery("#footnote_plugin_tooltip_9440_1").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The court departed from the widely recognised principle of automatic transfer of the arbitration agreement and held that the assignment of contractual receivables does not transfer the rights under the arbitration clause contained in the same contract unless the debtor explicitly agrees to the assignment of the arbitration clause.

 

Facts of the Case

M.S.D., as a lessee, and B.M., as a landlord, concluded a Rental Agreement containing an arbitration clause referring all disputes to be settled by a sole arbitrator in an ad hoc arbitration. The landlord assigned his receivables against M.S.D. under the Rental Agreement to a third party, Credo Consult 55 OOD. The assignee raised the assigned claims for payment of the rental price against the lessee in arbitration they commenced on the basis of the arbitration clause incorporated in the Rental Agreement.

The sole arbitrator declared herself competent to hear the dispute with the argument that the assignment of the rights under the Rental Agreement included the transfer of the arbitration agreement to the assignee and granted the claims of Credo Consult 55 OOD.

M.S.D. initiated court proceedings under Article 47 of the International Commercial Arbitration Act (“ICAA”) before the Bulgarian Supreme Court of Cassation (“BSCC”) for setting aside of the arbitral award claiming, among other grounds, lack of a valid arbitration agreement between her and Credo Consult 55 OOD. According to M.S.D., the assignee Credo Consult 55 OOD was not a party to the arbitration clause because she has never explicitly consented the arbitration clause to be transferred and the transfer of the receivables under the Rental agreement did not result in the assignee stepping into the arbitration clause.

 

BSCC’s Findings

The BSCC set aside the arbitral award on the ground that there was no valid arbitration agreement between the assignee and the debtor. It held that the arbitration agreement is autonomous from the underlying contract in which it is incorporated, is subject to a separable legal regulation and is not an accessory to the legal relationship between the parties under the main contract. The BSCC reasoned that the substantive rights and obligations under the underlying contract differ from the rights and obligations under the arbitration agreement. According to the BSCC, the mere notification of the debtor as regards the assignment is irrelevant to the transfer of the arbitration agreement. It is relevant only for assessing whether the transfer of the receivables under the underlying contract between the assignee and the assignor has had an effect vis-à-vis the debtor. Therefore, the arbitration agreement cannot be transferred to the assignee together with the assignment of receivables under the underlying contract, unless the debtor explicitly consents in writing to its transfer.

 

Comment

The judgment under consideration has reaffirmed the practice of the BSCC first expressed in its Judgment No. 70 of 15 June 2012 under commercial case No.112/2012. The BSCC has since then rendered several judgments discussing whether the arbitration agreement is transferred automatically through the assignment of rights under the main contract.

In two judgments, the BSCC has adopted the so-called automatic transfer rule deciding that the arbitration agreement is an accessory to the underlying contract that should follow the latter.2)B. O. v. Company, Supreme Court of Cassation, Judgment No. 51 from 23 September 2013 under commercial case No. 610/2012; I. D. I. v. Company, Supreme Court of Cassation, Judgment No. 203 from 20 January 2015 under commercial case No. 1300/2014. jQuery("#footnote_plugin_tooltip_9440_2").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });This view is in line with the predominant practice of arbitral tribunals seated in Bulgaria.3)Arbitral award of 16 May 2005 of the Arbitration Court at the Bulgarian Industrial Association under arbitration case No. 4/2004; Arbitral award of 27 September 2007 under Internal Arbitration Case 2011/2006. jQuery("#footnote_plugin_tooltip_9440_3").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, according to the subsequent case law of the BSCC, such an approach should not be followed and should be treated as isolated practice.

The general position of the BSCC, expressed by different judges from the BSCC, who had to decide on the matter, is that the assignment of rights under a contract does not automatically entail the assignment of the arbitration clause contained therein due to the distinct nature of the latter and its autonomy from the rest of the contractual provisions.4)Company v. A. G. Corporate and S., Supreme Court of Cassation, Judgment No. 71 from 9 July 2015 under commercial case No. 3506/2014. jQuery("#footnote_plugin_tooltip_9440_4").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Another argument against the automatic transfer of the arbitration agreement raised by the BSCC in the available case law is related to the obligations attributed to it. An arbitration agreement gives rise not only to rights but also to obligations. While rights can freely be assigned, it is not possible to assign obligations. As a consequence, the explicit consent of the debtor of the receivables is required in order for the assignee to be constituted as a party to the arbitration agreement.5)E. S. S. v. Company, Supreme Court of Cassation, Judgment No. 44 from 29 June 2016 under commercial case No. 971/2015. jQuery("#footnote_plugin_tooltip_9440_5").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); With the judgement under consideration, this position has been acknowledged by the BSCC as the constant practice and as such is expected to be followed by the court in subsequent cases.

The BSCC has decided the issue in a manner similar to the resolution adopted by Russian courts long ago, deciding that the assignee is not bound by the arbitration agreement unless the debtor explicitly consents to the assignment of the arbitration agreement.6)Russian Federation No. 8, IMP Group (Cyprus) Ltd. v. Aeroimp, Moscow District Court (Civil Department), Not Indicated, 21 April 1997, in Albert Jan Van den Berg (ed), Yearbook Commercial Arbitration 1998 – Volume XXIII, Yearbook Commercial Arbitration, Volume 23 (Kluwer Law International; ICCA & Kluwer Law International 1998) p. 748. jQuery("#footnote_plugin_tooltip_9440_6").tooltip({ tip: "#footnote_plugin_tooltip_text_9440_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); It seems that at present such an approach has lost most of its supporters.

The requirement for the debtor’s consent is understandable in exceptional cases, such as intuitu personae claims or where the assignor and the debtor have explicitly excluded the transfer of all or part of the rights and/or obligations under the main contract. However, in general, since the debtor already consented to the arbitration agreement at the time of its conclusion with the assignor, subsequent repetition of the debtor’s consent is not required for the transfer of the arbitration agreement.

The contemporary view that the arbitration agreement automatically travels together with the assigned contractual receivables has received significant support in the modern arbitral and court practice of various jurisdictions, such as France, the United Kingdom, Switzerland and Germany. Therefore, the recent approach of the BSCC seems to be in contrast with the prevailing present-day practice.

 

Conclusion

While the two decisions in which the BSCC has adopted the automatic transfer rule appeared to open the door to case law favouring the transfer of the arbitration agreement along with the rights under the main contract, the BSCC has now once again made it clear that it will not easily accept the automatic assignment of the arbitration agreement.

In light of the case law of the BSCC, the arbitration agreement contained in the contract is not transferred to the assignee, unless the debtor has explicitly agreed to its assignment. It would seem that this approach will be followed by the BSCC in future cases and should be taken into account by arbitrators and parties involved in arbitration proceedings in Bulgaria.

The key takeaway for a party wishing to seek the protection of assigned contractual rights in arbitration proceedings is to obtain explicit consent from the debtor for the transfer of the arbitration agreement contained in the contract. Otherwise, the assignee incurs the risk of not being able to invoke the arbitration agreement and to find itself before a state court rather than an arbitral tribunal. Even if the latter finds itself competent to hear the dispute, the arbitral award is likely to be set aside by the BSCC on the ground that there is no valid arbitration agreement between the assignee and the debtor, due to the lack of consent of the debtor.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Djingov, Gouginski, Kyutchukov & Velichkov or its employees.

***

NB: The links for the texts of the decisions of the Bulgarian Supreme Court of Cassation cited in this post lead to the case webpages. There, you can click on the icon located next to the phrase “Пълен текс”. In case you see more than one icon, please click on the one whose date corresponds to the date of the decision.

References   [ + ]

1. ↑ M.S.D. v. Credo Consult 55 OOD, Supreme Court of Cassation, Judgment No. 261 from 1 August 2018 under commercial case No. 624/2017. 2. ↑ B. O. v. Company, Supreme Court of Cassation, Judgment No. 51 from 23 September 2013 under commercial case No. 610/2012; I. D. I. v. Company, Supreme Court of Cassation, Judgment No. 203 from 20 January 2015 under commercial case No. 1300/2014. 3. ↑ Arbitral award of 16 May 2005 of the Arbitration Court at the Bulgarian Industrial Association under arbitration case No. 4/2004; Arbitral award of 27 September 2007 under Internal Arbitration Case 2011/2006. 4. ↑ Company v. A. G. Corporate and S., Supreme Court of Cassation, Judgment No. 71 from 9 July 2015 under commercial case No. 3506/2014. 5. ↑ E. S. S. v. Company, Supreme Court of Cassation, Judgment No. 44 from 29 June 2016 under commercial case No. 971/2015. 6. ↑ Russian Federation No. 8, IMP Group (Cyprus) Ltd. v. Aeroimp, Moscow District Court (Civil Department), Not Indicated, 21 April 1997, in Albert Jan Van den Berg (ed), Yearbook Commercial Arbitration 1998 – Volume XXIII, Yearbook Commercial Arbitration, Volume 23 (Kluwer Law International; ICCA & Kluwer Law International 1998) p. 748. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Bullying in the workplace - How to respond effectively

Communication and Conflict Blog - Fri, 2019-08-16 06:00
Why is bullying in the workplace not dealt with effectively? Here's a way of responding that improves workplace relationships and resolves the issue of bullying.

Interviews with Our Editors: Perspectives on Arbitration in Iran from Oveis Rezvanian, Director of the Tehran Regional Arbitration Centre

Kluwer Arbitration Blog - Fri, 2019-08-16 02:00

Mihaela Maravela (Assistant Editor to the Acting Editor)

Welcome to the Kluwer Arbitration Blog, Mr. Rezvanian! We are grateful for this opportunity to learn more about the Tehran Regional Arbitration Centre (“TRAC”) and your experience with international arbitration in the region.

 

  1. To start, can you briefly introduce yourself and explain your role at TRAC?

My educational background is quite diverse. I have bachelors in both law and industrial engineering, followed by an MBA degree. I have then obtained an LL.M. in International Commercial Arbitration Law from Stockholm University and a PhD in International Law from the Graduate Institute of International and Development Studies, Geneva. My doctoral thesis, titled “Relation of ADR and arbitration in resolution of construction disputes” was a combination of law and engineering, which I defended in December 2013.

Immediately after returning to Iran in 2014, I was appointed as the Director of TRAC. The appointment was made by the Government of Islamic Republic of Iran and after consultation with the Secretary-General of the Asian-African Legal Consultative Organization (“AALCO”). My activity as TRAC Director is aimed at implementing the Rules of Arbitration and the Internal Regulations with independence and impartiality and I consult with the Arbitration Boards of TRAC on matters concerning the implementation of the Rules of Arbitration.1)TRAC has one International Arbitration Board and one Domestic Arbitration Board. jQuery("#footnote_plugin_tooltip_2530_1").tooltip({ tip: "#footnote_plugin_tooltip_text_2530_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

In addition to my TRAC position, I am currently an Associate Professor of Arbitration Law at the Institute for Management and Planning Studies, lecturing on international arbitration, international trade law and legal texts (in English) to postgraduate students. Also, in the recent years, as an Iranian arbitration lawyer, I have been regularly involved in domestic and international arbitrations, either as counsel or as arbitrator.

 

  1. You mentioned AALCO, and we know that TRAC was established on the basis of an agreement by AALCO and Iran. Can you give us a brief background on the inception of TRAC and the reasons for its creation?

One of the major achievements of AALCO in its program in the economic field was the launching of its Integrated Scheme for Settlement of Disputes in the Economic and Commercial Transactions in 1978. Pursuant to that scheme, it was decided to establish regional arbitration centres under the auspices of AALCO, which would perform as international institutions with the objectives to promote international commercial arbitration in the Asian-African regions and provide for the possibility of conducting international arbitrations under these centres.

Five such Centres have been established so far, which are located at Cairo (Arab Republic of Egypt), Kuala Lumpur (Malaysia), Lagos (Nigeria), Tehran (Islamic Republic of Iran) and Nairobi (Republic of Kenya). The respective host governments recognize the Centres’ independence as an international organization and accord privileges and immunities to them.

TRAC has been established pursuant to the Agreement signed on 3 May 1997, between the Islamic Republic of Iran and AALCO. The Agreement came into force in July 2004, after receiving ratification from the Iranian legislative bodies. TRAC effectively commenced its activities a year later, in July 2005, by publishing its Rules of Arbitration.

 

  1. Since it commenced activities in 2005 how many arbitrations have been referred to TRAC?

Please allow me to not give numbers, because we are considering publishing that in a separate report. But instead, I should explain that in the last 4 years TRAC has received considerably more cases than in the previous 10 years. Therefore, I can confirm that a noticeable increase has started in the TRAC caseload as a well-known arbitration institution in the region. In addition, in the recent years, TRAC has been more known among the Iranian and regional lawyers and business users and we are aware that TRAC arbitration clause has been increasingly inserted in various types of international contracts such as oil and gas services, foreign trade, transport, distribution, banking, export credits, telecommunications, construction and engineering. Therefore, we expect that TRAC caseload would continue to increase in the future.

 

  1. You mention that TRAC operates as a regional arbitration centre. In your view, what are the advantages of using a regionally-based ADR centre for dispute resolution?

There are a number of reasons that explain the advantage of regional arbitration centres. First, regional arbitration centres have regional knowledge, particularly when disputes arise between parties from the same region. In addition, regional arbitration centres are able to provide more efficient arbitrations (in terms of time and costs) for the users. If you just take a look at TRAC’s table of fees, for example, it is clear that the costs for users are remarkably lower than those of many other arbitration institutions, while the fees might still be attractive for the arbitrators. Also, if the parties decide that the seat of arbitration is in the same place where the institution is located (i.e. Tehran) the logistic costs (i.e. travel costs, accommodation, acquiring visa, etc.) would be lower than many other places. Also, considering the limited market that the regional arbitration centres are targeting, they are able to conduct the arbitration proceedings in a very timely manner. I should also add that there is a very good chance of amicable resolution of disputes in arbitrations administered in regional arbitration centres, due to some cultural similarities.

 

  1. Can you tell us more about your users and their disputes? What kinds of parties do you usually serve, and are there particular industries or types of disputes prevalent among them?

In general, there is no limitation in types of disputes that TRAC would accept to act as the arbitration centre. However, by reviewing TRAC cases, it is apparent that the number of disputes related to sales/purchase, construction, oil and gas industry (including petrochemical) is higher than those in other areas. It is also our understanding that disputes related to technology contracts are rarely referred to TRAC. Therefore, TRAC is now considering establishing a special section for startups in this industry in order to provide very cost-effective and quick resolution of disputes. We, therefore, expect to have an increase in this sector soon.

 

  1. Typically, what is the demographic of the arbitrators appointed? How are challenges to appointments dealt with by the TRAC that we understand has a committee set up to this end?

When the dispute is between Iranian nationals, in most of the cases the arbitrator(s) would be also Iranian. But when one of the parties is from another country, the Centre shall take into account the appointment of an arbitrator of a nationality other than the nationalities of the parties. Therefore, in addition to Iranian arbitrators, thus far, TRAC has appointed arbitrators from Turkey, France, Germany and UK.

According to the new TRAC Rules of 2018 (“TRAC Rules 2018”), in case of a challenge of an arbitrator by a party, all parties may agree to the challenge, or the challenged arbitrator may withdraw, and in both such cases the challenged arbitrator would be replaced. In case all parties are not in agreement with respect to the challenge, or the arbitrator does not withdraw, the party making the challenge may seek a decision on the challenge by the Centre. In that case, the decision on the challenge shall be made by the Centre, respectively by a committee comprised of three members of the Arbitration Boards. The members of the committee shall be appointed by the TRAC Director and shall be independent from the parties and the concerned arbitrator(s).

We have just finished a challenge case, in which the Respondent appointed arbitrator was challenged by the other party at the very final stage of the proceedings, that is right before rendering the award. After such challenge was received by the Centre, the Arbitral Tribunal suspended the proceedings, pending receipt of the result of challenge. The challenge committee eventually rejected the challenge and, therefore, the case proceeded.

 

  1. In March 2018 TRAC has launched its new set of arbitration rules you have mentioned above. We understand that the main features of the new rules are the possibility to appoint an emergency arbitrator for obtaining urgent measures and the mechanism for expedite procedure. Was the new set of rules introduced to respond to users’ needs in the region? What is the experience so far with expedite arbitration under the new arbitration rules at TRAC?

TRAC Rules 2018 are based on the 2010 UNCITRAL Arbitration Rules , with some modifications to make them suitable for institutional arbitration. Also, some innovative features are added to the Rules in order to meet the business users’ needs and to be synchronized with the recent developments of international commercial arbitration. In particular, the 2018 TRAC Rules provide for the expedited procedure under Article 5, as well as for the emergency arbitration procedure under Article 27.2 and its Appendix I, encompassing 14 articles. These two procedures are unprecedented under the Iranian law and are introduced by the 2018 TRAC Rules into the Iranian legal system.

TRAC has not yet received any request for emergency measure, but three cases were filed with TRAC that were eligible for expedited procedure, for which a threshold of under Eur 1,000,000 is established by the Rules. However, in one of these cases, although it met the requirements for the expedited procedure, the parties did not request for such procedure, as each side wished to exercise its right to appoint a co-arbitrator in a panel of three arbitrators. In the other two cases, arbitrations under expedited procedure started and they are currently under progress. We expect that in both cases, the Tribunal would render awards within the six-month period as required by the 2018 TRAC Rules.

 

  1. We understand that one of the aims of TRAC is for disputes to be solved in a timely manner compared to national courts. How long have the arbitrations thus far initiated lasted?

Arbitrations in TRAC are generally being conducted in a very timely manner. The duration of arbitrations, however, depends on many factors, i.e. the nature of the dispute as well as the relief sought, the number of arbitrators (sole of three members), the cooperation between the parties, etc.

In the history of TRAC, there are a number of cases (mostly with sole arbitrators) in which the award was rendered in less than a year from the date the request for arbitration was filed with the Centre. In case of three member tribunals, however, it is expected that more time is needed, as the coordination and deliberations between the members of the tribunal might take time. But in any case, I can confirm that the average length of arbitration proceedings under TRAC Rules is remarkably shorter than proceedings in front of national courts.

 

  1. We see that TRAC has concluded in 2017 a cooperation agreement with the Permanent Court of Arbitration (“PCA”) and that TRAC constantly organizes conferences to raise awareness of arbitration in the region. What more needs to be done, in your view, to improve the visibility of TRAC and promote arbitration?

Since its establishment in 2004, TRAC has been continuously active in promoting international arbitration in Iran and in the region, as well as encouraging scholar activities.

As you mentioned, in 2017 a cooperation agreement was signed between PCA and TRAC to establish a framework for joint cooperation in promoting arbitration as means of solving international disputes. We have also conducted many joint promotional activities with some well-known arbitration centres, i.e. The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) and centres in the region, i.e. Istanbul Arbitration Centre (ISTA). All these attempts proved to be very helpful in raising awareness about developments in the field of arbitration in Iran and in the region.

Also, TRAC is regularly involved in organizing workshops, seminars and training forums in the field of international arbitration in order to spread the understanding on arbitration among practitioners and to raise educated lawyers and arbitrators. TRAC seminars are either in the form of general courses on arbitration, or specific courses on sectors that are fertile for dispute resolution, i.e. construction, oil and gas.

In addition, TRAC is very active in encouraging and supporting scholar activities. Since 2016, by organizing arbitration moots (in both Farsi and English), TRAC attempted to foster the study of international commercial law and arbitration as means of solving international business disputes among Iranian students.

Since 2018 and with the aim of encouraging Iranian students to research on arbitration related issues, TRAC started an annual prize for the best LL.M. dissertation in the field of commercial and investment arbitration.

 

  1. We know that TRAC started hosting a VIS Pre-Moot in 2018. What is the role TRAC has played in supporting development of young students/lawyers interested in arbitration?

In 2009, as master student at Stockholm University, I participated in the Willem C. Vis International Commercial Arbitration Moot. Since then, my dream was to establish a Vis Pre-Moot in Iran and this dream came true in 2018, when we launched the first Iranian Vis Pre-Moot. In the last competition, TRAC hosted four Iranian teams which shows an increasing interest among the Iranian students. We hope to develop the competition to regional level in the next years and to attract more teams from the region in this competition.

 

Thank you for this opportunity.  We wish continued success to both you and the TRAC!

This interview is part of Kluwer Arbitration Blog’s “Interviews with Our Editors” series – past interviews are available here.

References   [ + ]

1. ↑ TRAC has one International Arbitration Board and one Domestic Arbitration Board. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Arbitrability of IPR Disputes in India: 34(2)(B) or Not to Be

Kluwer Arbitration Blog - Wed, 2019-08-14 23:26

Vishakha Choudhary

Introduction

The juxtaposition of laws that seemingly operate in different domains has posed a continual challenge to arbitration – conventionally, in the form of concerns over arbitrability of disputes. Here, arbitrability connotes the notion that a dispute, by its nature, is capable of being adjudicated beyond public fora, through a private tribunal chosen by parties. This ‘objective’ arbitrability differs from ‘subjective’ arbitrability, which is the scope of arbitrable disputes as defined in an arbitration agreement. This post deals with objective arbitrability. In the context of intellectual property rights (‘IPR’) disputes, concerns of objective arbitrability stem from the impact arbitral awards may have on non-consenting parties. Owing to insufficient legislative engagement with this issue, judicial position on arbitrability of IPR disputes in India remains unsettled.

 

The notion of objective arbitrability in India

The significance of objective arbitrability is set forth in Section 34(2)(b)(i) of the Indian Arbitration and Conciliation Act, 1996, identical to Article 34(2)(b)(i) of the UNCITRAL Model Law. It stipulates that awards contemplating a non-arbitrable subject matter may be set aside.

The Supreme Court first shed light on the implications of Section 34(2)(b) in Booz Allen and Hamilton v. SBI Finance (‘Booz Allen’). The Court emphasised that the scope of arbitrable disputes must be limited to those concerning ‘rights in personam’ or personal rights enforceable against certain individuals. A contrario, rights in rem’ exercisable against the world at large were excluded from the scope of arbitrable disputes. Based on this rationale, the Court identified an illustrative list of non-arbitrable disputes: criminal offences, disputes concerning family laws, insolvency and winding up, testamentary matters and tenancy disputes. Pertinently, the Court in Booz Allen cautioned against a strict application of the rem – personam distinction by famously clarifying:

This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

Further, it also excluded from the scope of arbitration in India, disputes arising from statutes that vest exclusive jurisdiction in specified courts.

 

The curious case of intellectual property rights

A case-by-case approach by the Bombay High Court

The Bombay High Court in Eros International v. Telemax Links India Pvt. Ltd. (‘Telemax’) directly addressed arbitrability of IPR (Copyright) disputes. The legal provision at issue was Section 62(1) of the Indian Copyright Act, 1957, which states:

Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.

According to the Court, this provision only precludes infringement claims from being brought before a court hierarchically lower than the competent district court. Section 62(1) was not, however, intended to oust the jurisdiction of an arbitration tribunal. Based on this preliminary finding, the Court proceeded to analyse the nature of infringement claims. It noted that while an infringement action arising from a contractual relationship may succeed against a certain defendant, this decision would not necessitate the success of such action against a different defendant. Thus, while the overlying copyright is a ‘right in rem’ enforceable against the world at large, the specific contractual dispute over its infringement is a ‘right in personam’ action against a particular individual. Accordingly, the dispute was held to be arbitrable. Without explicitly referencing the Booz Allen obiter, the Court followed the Supreme Court’s reasoning – that is, it refrained from summarily dismissing questions of arbitrability without assessing the nature of rights at issue. The Court’s finding has been positively received in select subsequent decisions.  (See e.g., Deepak Thorat S/o Dinkar Thorat v. Vidli Restaurant Ltd., 2017 SCC OnLine Bom 7704.) Its decision also aligns with the literal approach to the interpretation of statutes followed by Indian courts. (See e.g., Swedish Match AB & Anr. v. Securities and Exchange Board of India & Anr., (2004) 11 SCC 641.)

The Bombay High Court continued to heed the Supreme Court’s warning in subsequent decisions such as Indian Performing Rights Society v. Entertainment Networks, 2016 SCC OnLine Bom 5893 (‘IPRS’). Unlike the Telemax case, the Court in IPRS was tasked with deciding whether averments of the Claimant’s right to claim royalties in relation to broadcasting of a sound recording were arbitrable. The arbitrator decided against the need to obtain a license from the Claimant, differentiating between rights held in original music works and in sound recordings. However, the Court on review found that by virtue of this decision:

[IPRS’s] …rights as a licensor were destructed in the impugned award not only against the claimant, but also against the world at large.

By distinguishing the case at hand from Telemax based on the implications of the relief granted for third parties, the Court clarified that arbitrating the case would have implications for IPRS’s rights to collect royalties on their works from third parties as well. Moreover, it would also affect several other copyright owners in the underlying musical works who were not parties to the arbitration in question. Therefore, the award was rightly set aside.

 

Disregarding the Booz Allen caveat

Unfortunately, similar analyses were absent from other decisions on arbitrability of IPR disputes. In Impact Metals v. MSR India (‘Impact Metals’), the Hyderabad High Court failed to consider the nature of the remedies or rights at issue to assess such arbitrability. Instead, it summarily based its decision on the illustrative list in Booz Allen, which did not expressly exclude IPR from arbitable subject-matters. This decision sets a dangerous precedent for arbitration of ‘rights in rem’ by failing to account for the implications this might have on rights of third parties. Further, the confidentiality of arbitral awards may prejudice interested third parties against whom such erga omnes legal decisions are rendered.

The Ayyaswamy v. A Paramsivam (‘Ayyaswamy’) decision paved way for further confusion. This Supreme Court decision declared patents, trademarks, and copyright disputes to be non-arbitrable in an obiter. The case is often viewed in academic discourse as a complete limitation on the arbitration of IPR disputes in India. Notably, this obiter is a ‘general’ remark by the Court, not rendered in relation to any particular set of facts. To rely on this generic statement in ignorance of the clarification made in the Booz Allen decision would be imprudent.

The Lifestyle Equities CV v. QD Seatoman Designs Pvt. Ltd. decision provides some clarification. The Court reasoned that the list of ‘non-arbitrable disputes’ in the Ayyaswamy judgment merely reiterates scholarly opinion and does not constitute the Apex Court’s ratio. Further, it went on to apply the Booz Allen caveat to reiterate that disputes relating to patent use and infringement (here, a right of ‘better usage’ vis-à-vis the other party) concern ‘rights in personam’, and therefore, are arbitrable.

 

Conclusion

IPR form a crucial constituent of commercial transactions and are comprised in the bundle of rights therein. To ipso facto declare them non-arbitrable would upset the purpose of the Arbitration Act, impair the efficacy of commercial arbitration and disregard party autonomy. Thus, the inflexible stance adopted in the Impact Metals and Ayyaswamy decisions is misconceived.

Admittedly, it is important to keep ‘rights in rem’ beyond the reach of arbitration. In light of the progressive reforms of the 1996 Act in recent years, this could be achieved through legislative clarifications. For example, both the United States of America and Switzerland permit the arbitration of patent infringement claims, provided that the consequent award is registered with the relevant patent authority or board. (See 35 United States Code (U.S.C) § 294(d); Article 193.2, Swiss Federal Act on Private International Law, 1989.)  This simultaneously safeguards the complementary interests of effective arbitration of IPR disputes and public interest in ‘rights in rem’. A similar legislative provision could be emulated in India. Further, the ‘arbitrable’ aspects of intellectual property could be clarified via legislation, as is the case in Hong Kong. (See Part 11A, Hong Kong Arbitration (Amendment) Ordinance, 2017 [Ord. No. 5 of 2017].)  Clarifications concerning the scope of counterclaims permissible in IPR arbitrations (such as express exclusion of counterclaims challenging the validity or registration of IPR) are also crucial. Swift action here is essential to set ghosts of the past to rest.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Invitation to Participate in the Theory-of-Change Blog Symposium

ADR Prof Blog - Wed, 2019-08-14 21:20
I invite you to participate in Theory-of-Change blog symposium. I recently posted pieces listing various goals that people in our community have had, strategies that some have used, and reflections on the process of considering these issues for our field. I invited academics, practitioners, administrators, and researchers, among others, in the US and other countries … Continue reading Invitation to Participate in the Theory-of-Change Blog Symposium →

Reflections on Our Field and Possibilities for Improvement

ADR Prof Blog - Wed, 2019-08-14 21:20
This week, I posted pieces listing various goals that people in our community have had, strategies that some have used, and guidance about writing pieces for the symposium. I was inspired to write the posts after this summer’s Past-and-Future conference.  In two full days at the conference with an amazing cast of presenters, we could … Continue reading Reflections on Our Field and Possibilities for Improvement →

Annual Securities Dispute Resolution Triathlon

ADR Prof Blog - Wed, 2019-08-14 16:08
From EFOI Elayne Greenberg: The Hugh L. Carey Center for Dispute Resolution at St. John’s School of Law and the Financial Industry Regulatory Authority (FINRA) invite you to participate in the eleventh annual Securities Dispute Resolution Triathlon, a competition of competence in the dispute resolution field. The Triathlon is the first and only competition to include negotiation, … Continue reading Annual Securities Dispute Resolution Triathlon →

Neither too little, nor too late: A delayed jurisdictional challenge finds success

International Arbitration Blog - Wed, 2019-08-14 14:30
Article 16 of the UNCITRAL Model Law on International Commercial Arbitration provides a means for early resolution of disputes...

It’s a Beautiful Day in the Neighborhood? An Overview of Arbitration Law in the U.S. and Canada

Kluwer Arbitration Blog - Tue, 2019-08-13 21:00

Eric Morgan and Charles ('Chip') B. Rosenberg

Introduction

The United States and its neighbor to the north, Canada, share the world’s longest border, a common language, and similar values, resulting in one of the most stable and mutually beneficial international business relationships in the world. Indeed the United States is Canada’s largest trading partner, and Canada is the United States’ second largest trading partner. As Mr. Rogers eloquently put it, “it’s a beautiful day in the neighborhood”. However, even with the most stable business relationships, disputes inevitably arise.

The United States and Canada have incorporated arbitration into their legal regimes in similar manners, but a number of critical differences exist of which U.S. companies doing business in Canada and vice-versa should be aware. This article addresses several important issues that parties doing business between the United States and Canada should consider when drafting an arbitration clause to ensure that the clause meets their expectations.

 

Sources of Law

United States: The Federal Arbitration Act (“FAA”) regulates domestic and international arbitrations in which the underlying transaction involves “interstate commerce”, such as transactions between the U.S. and Canada. The federal government has not adopted the UNCITRAL Model Law, but federal courts have interpreted the FAA consistently with the UNCITRAL Model Law. But where underlying transactions take place completely within one state, that state’s arbitration acts govern. Most states have adopted some version of the Uniform Arbitration Act, and some have adopted variations of the UNCITRAL Model Law.

Canada: In contrast to the United States, the key legislation governing arbitration in Canada is found primarily at the provincial or territorial – rather than the federal – level. While a federal arbitration statute does exist, it applies only in limited circumstances where at least one of the parties to the arbitration is the Crown, a federal departmental corporation, or a Crown corporation. The legislation governing Canadian arbitrations is largely the realm of the provinces, which have enacted discrete statutes pertaining to both international and domestic arbitrations. With the exception of Quebec, each province and territory has adopted the UNCITRAL Model Law either wholesale or in modified form. In addition to international arbitration statutes, all provinces and territories have adopted separate legislation governing domestic arbitration.

 

Arbitration Rules

United States: The FAA provides some foundational rules for arbitration proceedings such as requiring that arbitration agreements be in writing, but leaves much of the details to the parties. Regardless of the parties’ agreement, the FAA allows parties to “summon . . . any person to attend before them . . . as a witness”. In terms of review, the FAA allows courts to vacate an arbitral award only on limited grounds, including “corruption, fraud, or undue means”. Parties have the option of conducting an ad hoc arbitration or administering an arbitration through any number of arbitration institutions, such as JAMS, CPR, or AAA, among others.

Canada: Legislation governing international arbitrations which incorporate the UNCITRAL Model Law typically require that a binding arbitration agreement be in writing and signed by the parties. The formal requirements for domestic arbitration agreements are found in provincial legislation, which differ between the provinces. As in the United States, parties to Canadian arbitrations have significant flexibility to choose their own arbitral procedure and may adopt a specific set of arbitration rules from an arbitral institution or create their own ad hoc procedural rules. Canada has a strong tradition of ad hoc domestic arbitration while institutes are becoming more established. The ADR Institute of Canada, based in Toronto, has adopted the National Arbitration Rules relating to domestic disputes, while the British Columbia International Commercial Arbitration Centre is often used for arbitrations centered in Vancouver.

 

Class Actions

United States: The U.S. Supreme Court has explained that, due to the flexibility and contractual nature of arbitration agreements, parties can “specify with whom they choose to arbitrate their disputes” and courts and arbitrators must “give effect to the contractual rights and expectations of the parties”. In cases where an arbitration agreement is silent on class actions, the U.S. Supreme Court has held that an arbitrator cannot institute a class action because it would “change the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator”. For the same reason, an ambiguous arbitration agreement cannot provide “the necessary ‘contractual basis’ for compelling class arbitration”. Agreements that waive class action rights are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”.

Canada: Arbitration clauses are typically enforceable in the context of commercial contracts but may be unenforceable in the context of consumer contracts. Several Canadian provinces have amended their consumer protection statutes to limit the circumstances in which consumer disputes (including class actions) may be submitted to arbitration. Canadian courts have interpreted such legislation as permitting consumer class proceedings despite the existence of mandatory arbitration clauses in the underlying consumer contracts. While the use and permissible scope of arbitration clauses in employment contracts is the subject of ongoing litigation before the Supreme Court of Canada, parties should be mindful that such clauses may not be fully enforceable in the Canadian employment context by virtue of the governing employment legislation.

 

Conclusion

As it’s not always a “beautiful day in the neighborhood”, U.S. companies doing business in Canada and vice-versa should be aware of the similarities and notable differences between the U.S. and Canadian arbitration regimes. By properly understanding these similarities and differences, contract drafters can ensure that an arbitration clause fully meets the expectations of the parties.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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What’s Your Theory of Change for Dispute Resolution? – Part 2

ADR Prof Blog - Tue, 2019-08-13 20:40
Part 1 of this series provided a long list of goals of people in our community.  This post provides a non-exhaustive list of some of the many strategies that we have used to advance these goals.  In developing realistic theories of change, it is important to consider contextual factors that may affect one’s efforts.  This … Continue reading What’s Your Theory of Change for Dispute Resolution? – Part 2 →

Long-Term Healthcare Arbitration Update

ADR Prof Blog - Tue, 2019-08-13 08:27
Last week, the Centers for Medicare & Medicaid Services (CMS) finalized a revised rule (the 2019 Final Rule) removing the prohibition in the 2016 Rule on pre-dispute arbitration agreements for long-term healthcare facilities but keeping provisions from the 2016 rule “banning facilities from requiring that residents sign arbitration agreements as a condition of admission to … Continue reading Long-Term Healthcare Arbitration Update →

Communication and Conflict

Communication and Conflict Blog - Tue, 2019-08-13 05:10
A website about the relationship between communication and conflict. Articles on conflict resolution, mediation, why effective communication is important for conflict management in relationships.

Principles of Effective Interpersonal Communication skills

Communication and Conflict Blog - Tue, 2019-08-13 05:02
Principles of effective interpersonal communication and how to apply them. This article explains The Principles of Effective Communication drawn from the experiences of mediation.
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