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Interviews with Our Editors: Insights from Adedoyin Rhodes-Vivour, Doyin Rhodes-Vivour & Co, Nigeria

Thu, 2019-08-01 02:29

Sadaff Habib (Assistant Editor for Africa)

Disputes, particularly arbitration, has been predominated by the old pale male. Diversity, though a hot topic, is something that the arbitration field is still striving to achieve. What many would like to see is that all people, male or female, are appointed whether as an arbitrator or a counsel based on their credentials. However, as female practitioners from an ethnic minority background may still struggle, perhaps more active steps such as quotas need to be introduced to initiate a sort of balance.

Kluwer Arbitration Blog invited Adedoyin Rhodes-Vivour, managing partner of Doyin Rhodes-Vivour & Co in Nigeria and Member of the Advisory Board at Africa Arbitration to share her experiences and perspective on climbing to the top and on developments in arbitration in Africa and particularly in Nigeria. She was also recently elevated to the rank of Senior Advocate of Nigeria (Queen’s Counsel equivalent) and continues to show by example that dedication and hardwork is rewarding.

 

  1. What attracted you to disputes and arbitration?

I come from a legal background, my father was a lawyer and incidentally, I also married into a family of lawyers. My husband is a Judge as was his father. Having been exposed to the legal profession right from childhood, I guess it’s not surprising I went on to read law which is essentially about dispute resolution. However, in my days both at university and law school neither arbitration nor ADR were being taught in the Nigerian educational system despite arbitration and ADR being part of our traditional means of resolving disputes and its continuing recognition in the Nigerian legal system. Luckily, I was exposed to arbitration in the early years of my career whilst a State Counsel in the Lagos State Ministry of Justice. A rather large arbitration which the Lagos State Government was involved in about the same period further spurred my interest in arbitration as a preferred mode of dispute resolution and one in which I desired to play a vital role.

Even after leaving the Ministry of Justice and going into corporate practice, I continued gaining professional knowledge in the field by attending conferences organized by top organizations including the International Law Institute Washington DC and leading ADR organizations, including the Chartered Institute of Arbitrators, International Chamber of Commerce Court of Arbitration Paris and the London Court of International Arbitration. I commenced my professional training with the Chartered Institute of Arbitrators and was admitted as an Associate in 1995.

I enjoy travelling, meeting people and making new friends. The opportunities in the arbitral plane for travel and making new friends are added advantages.

 

  1. There have been a number of recent developments across the African continent. What in your view has been one of the most significant?

I think the most significant is the fact that African arbitrators are beginning to receive more recognition in the international arena. International arbitration involves parties from different countries and to retain legitimacy, all players need to be involved. There is a renewed focus on encouraging African countries to take proactive steps, to develop their countries into preferred places of arbitration and continue to build capacity in the field.

Recently, the African Arbitration Association (AFAA), a non-profit private sector-led association was established (in 2018) to serve as the continent’s promotional body for international arbitration and other forms of international dispute resolution. AFAA aims to support the continuing development of international arbitration in Africa and promote its members and their activities in international arbitration and international dispute resolution. AFAA is working within Africa and with other arbitration organizations worldwide is expected to bridge any knowledge gap operating within the continent and further expose African arbitration organizations and practitioners to the rudiments of International dispute resolution and best practices. I must say that over the past years, Africa has built capacity and there is a good crop of well-trained African arbitrators who should consider themselves obliged to encourage and mentor the younger ones.

 

  1. In your view, what more needs to be done to improve the visibility of different countries in Africa as an International Arbitration hub?

Firstly, a lot has been done in various countries including Nigeria by the practitioners who work closely with stakeholders with a view to ensuring that our arbitration laws are up to date and advocate against any laws that are not arbitration-friendly. African countries should continue to update their arbitration laws and also sign on to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Not signing on to the New York Convention or having obsolete arbitration laws can only militate against the perception of being an attractive venue for arbitration/ an investment-friendly climate.

Highly trained arbitrators and supportive court systems are also essential. Nigerian courts largely understand arbitration as reflected in various arbitration supportive decisions. Recently in Nigerian National Petroleum Corporation (NNPC) v. Esso Exploration and Production Nigeria (Offshore East) Limited [Suit No. FHC/ABJ/CS/390/2018], the court held that the decision of an arbitral tribunal on the challenge to its authority and capacity “is final and binding on the parties and it is to be respected by the court since the Arbitration and Conciliation Act has not given the court the jurisdiction to review the said decision or to supplant the court’s own view with that of the arbitral tribunal”. Indeed, this decision will further prevent recalcitrant parties with the support of counsel from using the court system to frustrate arbitration proceedings.

The need for improved infrastructure, addressing security concerns and ease of transport/Air connectivity within Africa cannot be overemphasized. African governments should take all necessary steps to address these concerns.     

          

  1. In your view, other than the provisions on third-party funding in arbitration, what other key changes does Nigeria’s Arbitration and Conciliation Act (Repeal and Re-Enactment) Bill 2017 introduce?  

The current Federal Arbitration Statute is based on the 1985 UNCITRAL Model Law and the 1976 Arbitration Rules. Nigeria was the first country in Africa to adopt the 1985 Model Law. However, the Model law has since been modified by the 2006 revisions to the Model Law and the most current 2010 Arbitration Rules. In Nigeria, presently the most current arbitration law is the Lagos State Arbitration Law which is based on the 2006 revisions to the UNCITRAL Model Law.

Nigeria’s Arbitration and Conciliation Act (Repeal and Re-Enactment) Bill 2017 aims to modify the current Federal Arbitration Law in line with the 2006 amendments to the UNCITRAL Model Law as well as to correct other provisions of the 1985 Model Law as enacted in Nigeria in 1988.

The Bill makes it mandatory for courts to stay proceedings in favour of the arbitration agreement of parties. The Bill expatiates the writing requirement in arbitration agreements to incorporate modern means of communication (including electronic communication) and deletes the requirement for signature in arbitration agreement contained in documents. In addition, the definition of “costs” has also been expanded to include the cost of arbitral institutions and third-party funding.

Apart from the tacit recognition given to third-party funding, additional provisions in the Bill include immunity of an arbitrator/arbitral institutions, introduction of an Award Review Tribunal, consolidation and concurrent hearings, joinder of parties, the power of the Arbitral Tribunal to grant remedies and award interest, arbitrator’s power to exercise lien on the award, provision of security for costs, joint and several liability of the parties for arbitrator’s fees and expenses, application of Statutes of Limitation to arbitral proceedings, grant of pre-emptory order, provisions on grant of interim measures by courts or arbitral tribunals and the appointment of emergency arbitrators by courts or arbitral institutions.

In line with modern statutes, the Bill provides that an application for setting aside an award shall not be made on the ground of an error on the face of the award or any other ground not expressly stated in the Bill.

Thus, it is expected that once passed into law by the concurrence of the lower house and the assent of the President, a more effective framework for arbitration under the Federal regime will be in place.

 

  1. What are your thoughts on the $8.9 billion arbitration award that British company Process and Industrial Developments Limited obtained last year against the Nigerian government?

Whilst I will not like to go to the merits of the Award on which there has been considerable debate, I think the lesson learnt is for parties to be more circumspect when entering into commercial transactions and once a well-considered decision is made to enter into a contractual relationship, parties should hold seriously the obligation to comply with the terms of the commercial transaction entered into. In the unfortunate event of valid reasons or circumstances justifying a termination, the contract should be properly terminated in accordance with its terms. Furthermore, in any legal proceeding including arbitral proceedings, there must be adequate case preparation and presentation.

I commend my article1)“Damages in International Arbitration, in “A life of Law & Business; Essays in Honor of Chief (Dr.) Chris Ogunbanjo OFR, CON” p. 346, December 2018. jQuery("#footnote_plugin_tooltip_5550_1").tooltip({ tip: "#footnote_plugin_tooltip_text_5550_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); in which I discussed some of the issues in relation to the damages award. The award does bring up various issues including the appropriate principle and basis for the assessment/measure of damages, including the application of the principle of mitigation of losses.

I would say for Nigeria, it is indeed a monumental tragedy for such a colossal sum to be awarded against it, a country with a population of nearly two hundred million people, with a great number of her people living below the poverty line and the much needed infrastructural and development programmes.

Enforcement proceedings are now before the courts and we can only wait and see how the courts will determine the issues brought before them.

 

  1. It is acknowledged that African arbitration practitioners are underrepresented in arbitration.

a) Do you see this particularly challenging as a female arbitrator and lawyer?

Firstly by nature, I do not allow any perceived or actual challenge to get in my way. I am focused on what I want to achieve and I go about it in the appropriate way. Being a female has not affected nor in my view impacted on my career development. Definitely, women do have more challenges in their career development and need to acquire the act of balancing which I admit can be a struggle. Having a supportive husband has significantly been in my favour. Women have to manage the home and raise children. The workplace and the home/partners should be more aware of the needs of women and be as supportive as possible. The workplace should be made more tolerable for women with an understanding of women’s needs.

b) What steps do you think need to be taken to improve the representation of Africans in African arbitrations and particularly women?

This has to be a concerted effort by institutions, appointing parties, arbitral community and even Government at times. There are some complaints that African governments do not appoint African arbitrators as they should. Though I must say that with the increase in the number of qualified arbitrators this is changing. Institutions are also taking steps to ensure diversity concerns in all its ramifications (geographical, gender, generational etc.) are addressed. Statistics now published by various arbitration institutions are tools which assist in assessing the extent to which the arbitration field is moving towards wider representation. Recently, the International Chamber of Commerce created an African Commission in recognition of Africa’s relevance. The International Chamber of Commerce African Commission aims to develop training efforts to expand the pool of available African arbitrators. The London Court of International Arbitration is also involving Africans through its various platforms including its Users Councils. Some time ago the Singapore International Arbitration Centre (SIAC) also established an Africa Regional Committee under its Users Council.

Capacity building within Africa and compliance with international best practices by Africans is also crucial.

On the question of encouraging more female participation, I must commend the efforts of ArbitralWomen, the ERA pledge and other initiatives which are doing a lot to highlight this problem and proffer solutions. We are seeing more proactive steps being taken to address the gender imbalance in arbitration.

The need for wider representation should be borne in mind of course on an equal basis and without compromising merit anytime one is called upon either as an institution, a party, advocate or arbitrator to be a part of the appointment process.

 

  1. What would be your key advice to fellow female practitioners in the field?

First-class education and training are essential for practitioners in the field irrespective of their gender. Acquiring knowledge of international best practices and committing to practising in accordance with those standards is essential. Effective networking and attendance at international arbitration conferences, seminars and arbitration moots are equally necessary. We must all be dedicated, hard-working and be willing to be of service. The more experienced women practitioners should take up the responsibility of mentoring the younger women and guiding them.

All of us collectively in the arbitral community must deal with any bias; unconscious or implicit militating against women or any other disadvantaged groups to ensure the continuing legitimacy of arbitration worldwide.

 

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

References   [ + ]

1. ↑ “Damages in International Arbitration, in “A life of Law & Business; Essays in Honor of Chief (Dr.) Chris Ogunbanjo OFR, CON” p. 346, December 2018. 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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Post-Achmea Winds of Change: Opportunities and Perspectives for Bosnia and Herzegovina

Wed, 2019-07-31 04:00

Fahira Brodlija

The Effects of Achmea on the Prospective EU Member States 

Much ink has been spilt on of the aftermath of the CJEU Achmea decision which has turned the world of arbitration on its head. In-depth analysis and commentary were previously featured on the Kluwer Arbitration Blog as well. Following the decision of the CJEU and the clarifications of the EU Commission, all member states have taken swift actions to create the framework of full compliance with the Achmea decision by signing several joint declarations expressing their willingness to terminate their intra-EU BITs and to replace their investor protection mechanisms with their equivalents under the acquis communautaire. Regardless of what side of the discussion one may eventually settle with, there is no doubt that a new day has dawned in the world of ISDS in the EU, and this is a consideration which will have to be addressed not only by the existing member states, but also by the countries seeking to gain membership status in the near future.

Bosnia and Herzegovina (“BiH”) and its neighboring countries in the Western Balkans are aspiring EU member states, and as such, they have been involved in comprehensive reform processes aimed at harmonizing their legislative and political framework with the acquis communautaire. The ISDS system is, therefore, no exception, and the Achmea decision was a pivotal moment in this process as well. Thus, BiH has to take immediate action towards developing a strategy for terminating intra-EU BITs prior to its accession to the EU, in order to avoid gaps in investor protection and legal uncertainty. The country is in the position to preemptively construct an “exit” strategy with EU member states, which will not only be beneficial to its EU accession prospects, but also to the stability of its investor protection system.

 

The Investor Protection Framework in BiH

BiH is currently a party to 20 BITs with EU member states, whose content is largely similar and they contain the standard terms of protection for the investors and their investments, the relationship between the contracting states and the dispute resolution mechanism. Although there are slight variations in the exact constellation of the dispute resolution clauses, all the BITs provide for arbitration as an option, following an attempt of an amicable settlement, in addition to or as an alternative to domestic remedies (national courts and administrative tribunals). These are so-called “fork in the road” provisions which allow the parties to choose among various fora, but once they decide, they waive their recourse to the remaining options. Therefore, there is no obligation of exhausting the local remedies as a precondition to initiating arbitration. Under this framework, any dispute is most likely to end up before an arbitral tribunal (whether ad hoc under the UNCITRAL Rules or institutional – ICSID, ICC or national arbitral institutions). This means that the ISDS provisions in BiH BITs are “incompatible with EU law” and will thus have to be terminated and replaced. Thus far, there have been no indications from the BiH government of what (if any) BIT termination mechanism is most likely to be applied.

 

Best Practices in Intra-EU BIT Termination

Any approach to the termination of intra EU-BITs chosen by the BiH government will have to be in compliance with the termination provisions of the Vienna Convention on the Law of Treaties (“VCLT”), which state that a contracting state can terminate the treaty in accordance with its provisions or at any time in mutual agreement of the contracting parties. This means that the door is open to a bilateral or multilateral approach to BIT termination, in coordination with its EU counterparts.

There have been examples of mechanisms developed by states either approaching EU accession or current member states which can serve as useful models for BiH in this context.
Some member states chose the bilateral approach which allows a case-by-case modification of the relevant BITs and their ultimate termination. For example, this was done with the Czech-Malta BIT in 2009, where the BIT was amended through an exchange of notes verbales between the two countries. These amendments also cover the so-called “sunset clause”, which maintains certain provisions of the BIT in force for a given time period after the termination of the BIT. The Czech Republic and Malta agreed to terminate the BIT and explicitly replaced the protections granted to the investors through the sunset clause by the protections provided under EU law.

An interesting approach was taken by the USA and their partner countries which were approaching EU accession in 2003. Their solution was a Memorandum of Understanding which was signed between the USA and the candidate states, expressing their desire to continue fruitful cooperation, while allowing the full compliance of the new EU member states with the acquis.

More recently, the member states issued declarations (on 15 January and 16 January 2019, and a third one by Hungary on 16 January 2019) that they would commit to terminating their intra-EU BITs by 6 December 2019. These declarations also clarified that the termination would extinguish the existing sunset clauses, and 22 of the member states accepted the view that the Achmea decision also extended to the ISDS provisions contained in the ECT.

 

Potential Termination Mechanisms for BiH BITs

Ultimately, the most adequate solution could be a two-step process (for each individual BIT or on a multilateral basis) where the countries

  1. agree to terminate their BITs with automatic effect from the day BiH joins the EU and
  2. make express amendments to the provisions of the BITs which extend the effect of certain protections (including the ISDS provisions) for a specified period of time after the termination of the BIT (most notably sunset clauses).

The initial agreement to terminate the BIT could serve as an official notification for the investors which would contribute to the transparency and legitimacy of the process. With the knowledge of the upcoming termination, the investors would be in the position to get informed on the protections they will enjoy in the post-BIT era. The amendments which will be made to certain provisions of the BIT will ensure that there is no confusion regarding the exact protection framework and dispute resolution mechanisms which the investors can refer to.

Lock-in periods are provisions determining a period of time during which the BIT cannot be unilaterally terminated, from the date of entry into force (10 years in most BiH BITs). Three BiH intra-EU BITs are currently locked-in (the lock-in period for Portugal lapsed in February of 2019, while other BITs will remain locked in (Sweden – 3 years, the Belgo-Luxembourg Economic Union – 1 year, and Lithuania – 5 years). Although under Article 54 of the VCLT the contracting states can consensually terminate the BIT at any time, an explicit agreement between the parties on the waiver of any lock-in period could add a layer of legal certainty for future reference. Sunset clauses as a general matter provide that the investors can benefit from certain BIT protections even after its termination for a certain period (10 years in most BiH BITs). The ability of investors to initiate investor-state arbitration after the termination of the BIT would run contrary to the intention of compliance with the Achmea decision. Therefore, BiH and its EU counterparts should expressly extinguish such sunset clauses and enumerate the provisions of investor protection provided under EU law, which will come into effect immediately after BiH’s accession into the EU. According to the Communication issued by the EU Commission, such investor protection can be found in the four fundamental freedoms (free movement of capital, services, goods and workers), legal certainty and protection of legitimate expectations, the Charter of Fundamental Rights of the European Union, general principles of EU law, and sector-specific legislation. These investor-protection mechanisms were explicitly enumerated by the EU Commission as adequate replacements for the BIT framework, as they prohibit any discriminatory or arbitrary conduct of the states which could be harmful to the investors. They also ensure that the potential disputes will remain within the jurisdiction of the member states or any subsequent ISDS tribunal or court established in accordance with EU law.

 

Concluding Remarks

The future of investor-state dispute settlement within the EU is far from predictable, but there is no doubt that arbitration will not be in the picture. As it is laying down the foundations for EU accession, BiH has the opportunity to adapt its investor protection system to the EU acquis “on its feet” along with the member states thus ensuring that its policies are in line with EU best practices. In these times of intensive change, it is important to ensure that the trust of the existing and future investors is maintained and that the abandonment of intra-EU BITs does not lead to new claims being brought against BiH as a host state. In addition to the wealth of natural resources the country possesses, the predictability and stability created by a unified system under the auspices of the EU could be the boost BiH needed to become more attractive for investors.

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Transmission of Arbitration Agreements By Subrogation: The Newfound Brazilian Approach

Mon, 2019-07-29 17:05

André de A. Cavalcanti Abbud and Luiza Romanó Pedroso

In a landmark decision rendered on May 15, 2019, the Brazilian Superior Court of Justice rejected the argument that transmission of an arbitration agreement via subrogation violated public policy. The Court thus gave full effect in Brazil to a foreign arbitral award resulting from a transmitted arbitration agreement. The decision sets the “law of the land” on a highly-debated issue in this country and abroad.

The issue appears quite often in insurance disputes. By settling a claim raised under an insurance contract, the insurer is put in the position of the insured and thereby becomes vested with the power to enforce the insured’s rights against third parties. In technical terms, the insurer is subrogated in the rights of the insured against the party who caused the damage that gave rise to the insurance payment.1)Brazilian Civil Code, Art. 786: “Upon payment of the indemnity, the insurer is subrogated, up to the amount of the indemnity, in the rights and actions that the insured has against the party that caused the damage.” jQuery("#footnote_plugin_tooltip_1628_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1628_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Against this background, the question put to the Superior Court of Justice was the following: where the contract between the insured and the third party contains an arbitration agreement, once the insurer pays the indemnification, is the insurer bound by such arbitration agreement to assert his/her rights against the third party? The Superior Court of Justice’s answer was yes.

The judgment was handed down in the context of a request for recognition of an ICC foreign arbitral award. In declaring that the third party was not at fault for the damages, the arbitral tribunal held that it had jurisdiction over the insurance company, despite the latter’s contention that it was not a party to the contract and, therefore, was not bound by the arbitration agreement.

The recognition of the arbitral award inspired controversy amongst the Justices of the Superior Court of Justice. Justice Noronha spearheaded opposition to the recognition, arguing that transmission of the arbitration agreement by subrogation would be in violation of public policy – grounds for denial of recognition under Art. V.2.b of the New York Convention, reproduced in Art. 39, II, of the Brazilian Arbitration Act.

In brief, Justice Noronha was of the opinion that (i) the arbitration agreement is procedural in nature, and is not encompassed within the “rights and actions” transferred via subrogation; (ii) subrogation encompasses “rights and actions”, but not the obligations undertaken by the insured party; (iii) an arbitration agreement is intuitu personae and therefore its transmission cannot be presumed; (iv) consent to arbitration must be express. Justice Noronha’s reasoning was ultimately rejected by the majority.

In particular, the Reporting Justice, Og Fernandes, thoroughly examined the interpretation to be given to the concept of public policy as a ground for refusing to recognize foreign arbitral awards. In his view, in ascertaining whether a violation of public policy has occurred, the Superior Court of Justice must ask whether the foreign award is (a) absolutely incompatible with (b) the fundamental principles of (c) national public policy. In other words: is the foreign award entirely repulsive in light of public policy? Justice Og Fernandes answered the question in the negative –transmission of the arbitration agreement by subrogation would not be contrary to the fundamental principles of Brazilian public policy, which made it unnecessary for him to delve into the arguments for or against the transmission itself.

Concurring with the Reporting Justice, Justice Nancy Andrighi dug deeper into the analysis of transmission of arbitration agreements by subrogation. She took the position that arbitration agreements have a dual procedural-substantive nature and, therefore, can indeed be subject to transmission. Moreover, upon being subrogated in the insured’s rights and actions, the insurer effectively steps on the former’s shoes and binds itself to the underlying source of rights and obligations in all of its “limits, defects, qualities, terms and conditions”. Finally, an obligation is only intuitu personae where it would not have been undertaken were it not for the individual characteristics of the obligor. In Justice Andrighi’s view, this consideration does not apply to an arbitration agreement whose terms are generic and equally applicable to both contracting parties, regardless of their personal characteristics.

The award was thus recognized by a 9-3 majority opinion. This groundbreaking decision is in line with the stance adopted by courts in different jurisdictions (e.g., United States, England and France), and once again reinforces Brazil’s position as the “belle of the ball” within the international arbitration community. The judgement will serve as a compass in cases to come, and lay another brick in the pro-arbitration path that has been paved by the Superior Court of Justice and the Brazilian Judiciary as a whole.

References   [ + ]

1. ↑ Brazilian Civil Code, Art. 786: “Upon payment of the indemnity, the insurer is subrogated, up to the amount of the indemnity, in the rights and actions that the insured has against the party that caused the damage.” 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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The Contents of Journal of International Arbitration, Volume 36, Issue 4, 2019

Mon, 2019-07-29 03:00

Maxi Scherer

We are happy to inform you that the latest issue of the journal is now available and includes the following contributions:

 

Lucy Greenwood, Revisiting Bifurcation and Efficiency in International Arbitration Proceedings

In 2011, the author published an analysis of available empirical data on bifurcation of disputes in this journal. The article, ‘Does Bifurcation Really Promote Efficiency?’ (28(2) J. Int’l Arb. 105-11 (2011)) tested the ‘generally accepted view that bifurcation of proceedings promotes efficiency’ by analysing the available data on the time taken for bifurcated cases to conclude and comparing that data with time taken for non-bifurcated cases. The author noted that ideally, to test whether bifurcating a case does result in the case being resolved in less time, the comparison should be made between a case that was bifurcated to the same case without bifurcation. However, this was not possible in practice. Thus, the next best alternative approach, that of comparing different cases was adopted, although it was recognized that cases can vary significantly in terms of factual and legal complexity. Nonetheless, the empirical evidence, however imperfect, can be and was illustrative. This article revisits the available data relating to the bifurcation of international arbitration matters and expands the previous discussion.

 

Dorothee Ruckteschler & Tanja Stooss, International Commercial Courts: A Superior Alternative to Arbitration?

International commercial arbitration has long been the hallmark of international dispute resolution. However, with the increasing establishment of specialized English-speaking courts dealing solely with commercial disputes (‘International Commercial Courts’) the popularity of arbitration is being called into question. The phenomenon of International Commercial Courts is not completely new, but their number has significantly increased in recent times. In 2018 alone, China, the Netherlands, France, and Germany have, among others, announced the opening of specialized English-speaking courts and others are preparing to shortly follow their example. Whilst the arbitral process is often criticized for its costs, procedural delays, or lack of power against third parties, the question remains whether International Commercial Courts will be able to deal with these issues any better. This article first examines the history and the features of International Commercial Courts, with a special focus on those recently established in Europe, before evaluating whether they are – or might be in the future – better suited to serve the needs of international commerce.

 

Mingji Qu, Status Quo of Enforcing Commercial Arbitral Awards in the People’s Republic of China: An Empirical Study of the Enforcement Practices in China’s Two Economically Less-Developed Regions

This article gives some insights into the practices for enforcing commercial arbitral awards in China’s two anonymized economically less-developed regions. By virtue of the empirical and qualitative data contributed by empirical research, this article depicts this theme from three aspects, namely, the general sociocultural environment for enforcement; practitioners’ perceptions; and the enforcement status of arbitral awards, highlighting the gaps between legislative perceptions and real-life practices. This article concludes that China’s current sociocultural environment is suitable for accommodating the rapid growth of commercial arbitration, which indicates that the collision between modern arbitration practice and the sociocultural environment is unlikely to constitute a cause of difficulty in the China-seated enforcement of arbitral awards. This article also notes an innate scepticism towards the country’s arbitration practice among Chinese practitioners, which could affect their perceptions towards the development prospect of commercial arbitration and the enforceability of arbitral awards, despite the pro-arbitration attitude shared by Chinese judicial organs. Meanwhile, the article observes preliminary evidence showing the impact of Chinese culture on the country’s enforcement practices. Finally, the article statistically portrays the enforcement status of arbitral awards in the concerned regions, showing the regionally differentiated enforcement rates, competence of Chinese courts and other issues involved.

 

Julio César Betancourt, What Are the Arbitral Tribunal’s Powers in Default Proceedings?

When the claimant serves on the defendant a notice in connection with the initiation of arbitral proceedings pursuant to an arbitration agreement, there is a legitimate expectation that both parties will actively participate in those proceedings and forcefully argue against one another in order to persuade the arbitral tribunal of the merits of the case in question. This expectation is generally met. However, there are cases in which the respondent decides not to take part in the proceedings, with the result that the arbitral tribunal is left with no option but to proceed on an ex parte basis. These types of cases have received relatively scant attention within the international arbitration literature. Nonetheless, the problem of default proceedings remains a matter of practical importance. This article is intended to fill this gap. It provides a practical insight into the arbitral tribunal’s powers in these kinds of proceedings (whether ad hoc or institutional), particularly in the context of an international arbitration seated in London.

 

Michael Kotrly & Barry Mansfield, Recent Developments in International Arbitration in England and Ireland

This article considers developments in international arbitration in England and Ireland by way of a review of arbitration-related judgments rendered in 2018 by the countries’ respective courts.

 

Alain Farhad, The United Arab Emirates’ New Arbitration Legislation: A Giant Leap Forward? 

This article analyzes the new Federal Law No. 6 of 2018 (the ‘New Arbitration Law’) of the UAE which took effect on 16 June 2018. The New Arbitration Law brings the statutory framework for the practice of arbitration in the UAE into the twenty-first century. Compared to the previously applicable regime, the New Arbitration Law thus gives wider recognition to the principle of party autonomy, fully utilizes modern technology and takes into account the use of institutional (vs. ad hoc) arbitration. It also helpfully deals with some of the technical arguments, which litigants have traditionally relied on to attempt to disrupt or delay arbitration proceedings in the UAE.

 

BOOK REVIEW

Eckart J. Brödermann, Principles of International Commercial Contracts: An Article-By-Article Commentary, Alphen aan den Rijn: Kluwer Law International, 2018, ISBN 978-90-411-9956-0 (reviewed by François Dessemontet)

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Negotiation in the Context of Arbitration

Sun, 2019-07-28 23:02

Erin Gleason Alvarez

Mediation and arbitration are often categorized as separate and distinct fields for good reason.  Arbitration is an adjudicative process; mediation, on the other hand, is more accommodating, dependent on negotiation among parties. There is a formality attached to arbitration that one usually does not find in mediation. While the arbitration process is prescribed by rules, the mediation experience is created by the parties and the mediator to fit the needs of a particular dispute.

Although these two dispute resolution mechanisms surely have their distinctions, parties, advocates and arbitrators would do well to take lessons from the mediation forum in the preparation for, practice and perhaps resolution of arbitrated disputes. At the core of mediation is negotiation, a skill that can also encourage greater efficiency and economy in arbitration.

Therefore, this post includes practical considerations for parties and arbitrators to leverage negotiation and mediation skills in the arbitration process, particularly where cross-cultural considerations come into play. The post concludes with a short checklist to consider when preparing for negotiation.

 

Crafting the Clause

Arbitration clauses seem to get lengthier each day. From considerations over the extent of hearing, arbitrator qualifications, information exchange protocols, appellate processes and carefully crafted nuances to established institutional rules…. Parties’ appetite to create bespoke arbitrations is a growing trend.

The problem here is that many clauses are nearly impossible to act on when the dispute finally arises. The requirements are so specific or, at times in conflict, that they are often nearly impossible to adhere to. Moreover, many of the provisions inserted into contracts are already addressed in institutional rules.

Making time at contract initiation to understand a business partner’s interest in tailoring the dispute resolution clause will save future colleagues the time and expense in subsequently re-negotiating for terms that are workable. Concerns over varied approaches to arbitration are especially understandable where parties hail from different jurisdictions.

Addressing the potential for concerns over the arrangement of arbitral proceedings should be addressed upfront with candor. This may be accomplished by simply listening to the concerns of business partners relating to arbitration, asking clarifying questions to better understand their perspective and holding open dialogues to craft arbitration processes that meet both parties’ goals.

 

Arbitrator and Chair Selection

Negotiation is also critical once a dispute arises and arbitrators must be selected. This is of particular importance where the matter will be heard by a sole arbitrator and also in the selection of a tribunal chair.

One of the great benefits of an arbitral process is the ability to choose a decision-maker qualified to hear the dispute. However, where parties are unable to agree on an arbitrator, the choice often falls to the institution instead. This is an opportunity that should not be abandoned due to an inability to forge agreement.

In the selection process, vetting should not only take into consideration your own preferences, but your opponent’s likely preferences as well. And while strike lists are often exchanged, parties may still meet and review the attributes they agree upon in an arbitrator – before any names are exchanged. Here, the importance of process expertise, subject matter knowledge, availability, cultural background, diverse characteristics and level of experience can be weighed and prioritized together. Thereafter, consideration of preferred candidates may be shared.

While the cross-cultural aspects of these considerations should not be minimized, there is a danger in attributing cultural expectations on an individual person. While researching cross-cultural candidates is a necessary part of the process, it should be done thoughtfully and based on individuals, simultaneously cognizant of the possibility for any implicit biases.

 

The Tribunal that Negotiates Together, Stays Together

Open and collaborative communications amongst the tribunal are a necessity for a seamless process. While each member of the panel holds this responsibility, it is ultimately the chair who is best positioned to foster a collegial environment with her co-panelists. In some respects, the chair almost assumes the role of quasi-mediator, listening to the concerns and opinions of the panel on the structure of the process and the manner in which party requests are granted or denied. This is perhaps most critical at the award drafting stage, when panelists’ views of the solution may differ.

 

Parties Should not Lose Sight of Continuing Opportunities for Negotiation Throughout the Process

Opportunities to streamline or dissolve the arbitration process exist throughout. Although a formal process has been initiated and invested in, it is often sensible to explore opportunities for settlement outside the arbitration process.

Arbitration does not foreclose the opportunity for mediation. Whether the jurisdiction or local practice permits traditional arb-med, or parties initiate a mediation that is separate from the arbitration process, mediation may be leveraged to secure a resolution crafted by parties instead of arbitrators.

 

Negotiation Takes Planning

In each of the examples listed above, it is much easier to conduct the negotiation if some effort has gone into planning for the bargaining and presentation beforehand. With preparations done in advance, you are in a better position to attend the negotiation conversation with the focus required to actively listen and to be open to the path your negotiation takes.

At a high level, a negotiation plan may take the following considerations into account:

  1. Clarify your goals for the conversation, prioritized and with an understanding of the reasons why each goal is important.
  2. Assess your counterpart’s likely views on these goals, along with any goals you anticipate they will seek in the conversation and their reasons for seeking those goals.
  3. Understand the relative strengths and weaknesses in your position, along with those of your counterpart.
  4. Identify the areas of overlap between your respective positions, along with those issues where you are furthest apart.
  5. Develop a plan for the conversation, knowing it will likely evolve in real time. Where do you need to start the discussion? How can you build a collaborative environment that is conducive to forging agreements?
  6. Propose the best forum for the discussion – in-person dialogues are hard to come by where parties or arbitrators are dispersed across continents. Thus, preference for conference calls, video calls, or e-mail exchange should be weighed in advance to evaluate the best venue for your discussion.

Taking time to understand your counterpart’s perspective (what are their priorities and where are there opportunities for shared interests to be explored, etc.) is an important step in the process.

And though it may seem an unreasonable request, cultivating empathy here can go a long way towards a productive conversation. Demonstrating that you have made the time to consider positions other than your own is not only a showing of good faith, but also an ideal way to foster trust and open dialogues.

 

Conclusion

From crafting an efficient and enforceable arbitration clause, to tribunal dynamics and the opportunity for exploring mutually agreeable settlement terms…. The opportunities to leverage creative negotiation in order to encourage arbitration efficiency abound. This post has provided some examples for parties to consider as they proceed through the arbitration process.

 

 

 

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The Effect of Australia’s Approach to Construing the Scope of an Arbitral Clause

Sat, 2019-07-27 19:00

Edwin Choi

For the first time, the High Court held in its decision in the Rinehart dispute that the ordinary principles of contractual interpretation must be applied when interpreting the scope of arbitration clauses. While this approach is consistent with modern contractual interpretation, it may deter parties from selecting Australian law to govern arbitration agreements. This post considers the significance of the High Court’s decision and, in turn, highlights the importance of drafting clear arbitration clauses, particularly for parties who wish to settle disputes relating to certain aspects of a contract in courts.

 

Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13

This case involved a dispute between Bianca Rinehart and John Hancock (Appellants) and Hancock Prospecting Pty Ltd (Respondent), a company controlled by the appellants’ mother, Gina Rinehart. The dispute concerned various deeds executed by the appellants who alleged that Gina Rinehart dealt with the companies and assets under the deeds to the respondent’s benefit. These allegations were ‘the substantive claims’ raised by the appellants. Of the two claims raised by the appellants, the most contentious was the validity claim. Bianca Rinehart and John Hancock challenged the validity of the deeds they executed by alleging that Hancock Prospecting Pty Ltd and Gina Rinehart did not disclose all material facts to them and did not negotiate at arms’ length. Relevantly, the various deeds that were entered into contained arbitration clauses that broadly required parties to resolve any dispute arising under the deed by arbitration and not in court. As it happens, the ambiguous and inconsistent language of each arbitration clause under the various deeds became the most contentious issue for the courts, as the judges sought to determine whether claims regarding the validity of the deeds should be referred to arbitration as required by the arbitration clauses. If the answer was no, then the claims could be litigated in a court proceeding.

 

Final decision: the approach when interpreting the scope of arbitration clauses

On 8 May 2019, the High Court decided that a commercial contract, including one that contains an arbitration clause, must be interpreted according to ordinary rules of contractual interpretation. Referencing its earlier decision in Electricity Generation Corporation v Woodside Energy Ltd, the High Court decided that the arbitral clauses contained in the deeds must be construed against ‘the language used by the parties, the surrounding circumstances and the purposes and objects to be secured by the contract’ when determining their scope.1) Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 jQuery("#footnote_plugin_tooltip_1579_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1579_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Applying this rule, the High Court dismissed the appeal after finding that the overriding purpose of the deeds was to resolve disputes by arbitration in order to maintain the confidentiality of the affairs of Hancock Prospecting, the intra-family dispute between the Rineharts, and the underlying provisions contained in the deeds.2) Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13 jQuery("#footnote_plugin_tooltip_1579_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1579_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Taking this into consideration, the High Court found that the arbitral clauses had a wide scope, thus extending their application to cover issues regarding the validity of the deeds themselves. The High Court considered it was ‘inconceivable’ to interpret the clauses otherwise.

 

Refusal to apply the general presumption approach adopted by the Full Federal Court

Notably, the High Court expressly declined to apply the general presumption adopted from the House of Lords case, Fiona Trust & Holding Corporation v Privalov (‘Fiona Trust’), which was referred to by the Full Federal Court. The Fiona Trust presumption holds that parties intend that their disputes be decided in the same venue (in this case by arbitration) rather than being heard in two different venues. The presumption purports to align with the intention of commercial parties to settle all parts of a contractual dispute in one venue as opposed to separate venues for different parts of a contract. This approach provides certainty when attempting to resolve issues regarding imprecise wording of an arbitration clause, as in the current case. The general presumption also supports the doctrine of separability, which provides that an arbitral clause is separate from the underlying agreement. The effect of this is that a dispute arising about the validity of an underlying agreement will not impact the arbitral clause. The doctrine of separability has been accepted and followed in international arbitration. The approach taken by the High Court in Rinehart raises uncertainty about the position of this general presumption in Australia. While some lower courts have relied on it, there have been instances of courts rejecting it. In this case, the High Court expressed its view that the Fiona Trust approach ‘may not assume so much importance for courts in the future’ as arbitral clauses stated in wider terms (such as the UNCITRAL Arbitration Clause) are increasingly recommended for use when constructing commercial contracts.

This approach may disincentivise parties from choosing Australian law to govern their arbitration disputes. Given the individuality of the approach taken by the High Court to resolve the Rinehart dispute, parties should expect disputes regarding the scope of arbitral clauses to be resolved on a case-by-case basis. This leaves uncertainty regarding the types of disputes covered by an arbitral clause and the Fiona Trust approach in Australian law.

 

The importance of careful, precise drafting of arbitral clauses

The importance of this case lies in the fact that it indicates that the High Court will take a case-by-case approach when determining the scope of arbitral clauses through its application of the ordinary principles of contractual interpretation. This means there is no hard and fast rule that can be applied for determining the types of disputes an arbitration clause covers, reinforcing the need for careful, precise drafting of arbitral clauses in contracts.

Following this decision, it is recommended that parties who intend to settle disputes in court clearly specify their intention to do so for each respective clause. This is especially important when confidentiality is a critical aspect of the affairs of the parties and arbitration is designated the desired venue for dispute resolution. In such circumstances, the Rinehart decision indicates that courts are likely rule in favour of arbitration to maintain the parties’ desire for confidentiality.

References   [ + ]

1. ↑ Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 2. ↑ Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13 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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CIAMA: A Specialist Maritime and Air Arbitration Centre for the MENA Region

Fri, 2019-07-26 20:00

Aïda Ounissi

As the backbone of globalization, the shipping industry is at the heart of cross-border transportation networks that support supply chains and facilitate international trade.

In the MENA region, the maritime sector is a significant industry. In order to manage the rise in foreign trade, both governments and the maritime industry have increased investment into the sector.

Due to the involvement of transnational actors, maritime transportation of goods is almost always international in character, which makes it a breeding ground for arbitration. This has led actors of the maritime industry to congregate for the purpose of creating centres for dispute resolution which are both independent from State jurisdiction and adapted to their needs.1)SMA; LMAA; CAMP; José M. Alcántara, ‘An International Panel of Maritime Arbitrators?’, Journal of International Arbitration, (© Kluwer Law International; Kluwer Law International 1994, Volume 11 Issue 4) pp. 117 – 126. jQuery("#footnote_plugin_tooltip_4117_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4117_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Although Western Europe and North America still maintain a monopoly over settling maritime disputes through arbitration, ‘[w]e should never forget that, just as anyone can be an arbitrator, arbitration can take place anywhere’.2)Bruce Harris, Arbitration-A World Overview, in BIMCO Review, 1994 (2nd edition), W. H. Robinson, Stroudgate plc., London, at p. 65. jQuery("#footnote_plugin_tooltip_4117_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4117_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Therefore, there has been a need for diversification of the options when it comes to accommodating the parties’ choice for dispute resolution in the MENA region. This diversification can be achieved through providing the shipping industry in the MENA region with a reliable and secure internationally established forum.

The first step towards achieving this goal in the MENA region was the establishment of the Emirates Maritime Arbitration Centre (EMAC), which was established in Dubai in April 2016. This initiative has been further pursued by the establishment of the CIAMA in Morocco in September 2016.

 

Introducing CIAMA

The Cour Internationale d’Arbitrage Maritime et Aérien (International Court of Maritime and Air Arbitration), shortened ‘CIAMA’, is a private and independent institution, the purpose of which is to organize and manage arbitration proceedings in disputes related to international maritime trade.

CIAMA has partnered with the Chambre Arbitrale Maritime de Paris (Paris Chamber of Maritime Arbitration) to offer new means for dispute resolution between economic actors through arbitration.

The creation of CIAMA coincides with the commitment by public authorities and professionals of the maritime community to endow the Moroccan Kingdom with a specialized centre for international dispute resolution that adds to EMAC for the MENA region.

CIAMA aims to provide a simple alternative framework for the resolution of national and international commercial disputes by arbitration.

Moroccan legislation encourages the use of arbitration, with the most recent reform enacted by Law n° 08-05.3)Promulgated by Royal Decree No. 1-07-169 of 30 November 2007 and published in the Bulletin Officiel du Royaume du Maroc No. 5584 of 6 December 2007. jQuery("#footnote_plugin_tooltip_4117_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4117_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In effect, Moroccan law leaves arbitrators a great deal of freedom in the organization of arbitral proceedings and the choice of applicable law. On the other hand, CIAMA adopted its own Rules, which set out the procedural framework for the conduct of arbitral proceedings.

 

How are CIAMA Arbitration Proceedings Engaged and Conducted?

Arbitration, as a fundamentally consensual process for the settlement of disputes, is initiated either through the parties’ mutual consent – materialised through an ad hoc arbitration agreement once a dispute arises – or in accordance with an arbitration clause in a commercial contract. If parties opt to have their disputes heard at CIAMA, they must adhere to CIAMA Rules (see 3rd preliminary disposition of CIAMA Rules).

At CIAMA, formalities are reduced to a minimum. For instance, a mere registered letter with acknowledgment of receipt, or an e-mail confirmed by postal letter sent to the Respondent is enough to engage the arbitration proceedings and therefore interrupt the statutory limitation period (see Article 5.1 of CIAMA Rules). Once the proceedings are engaged, the parties exchange their respective memoranda.

Pursuant to Article 7.2 of the CIAMA Rules, the parties have the opportunity to appoint a single arbitrator for small claims. In most cases however, the constitution of an arbitration panel, composed of three arbitrators, is required. In such instances, each party appoints one arbitrator, with the third being designated by the CIAMA Committee of the Court, according to the provisions of Articles 7.3 and 7.4 of the CIAMA Rules. The arbitrator or arbitration panel is then seized of the dispute and proceeds to fix the date of the first hearing and schedule the proceedings.

The conduct of the preliminary investigation and the hearing is very similar to that of a common court trial. The arbitrators lead the hearing and may request further explanation, call upon an expert for an opinion on a given technical point, and generally, take any measure of instruction such as they consider necessary in view of rendering an award.

The award should be rendered within six months, which can be extended by decision of the President of the Committee of the Court, (i.e. the President of CIAMA).

 

Who are CIAMA’s Arbitrators?

The General Meeting of Court members keeps a list of registered arbitrators. The arbitrators are selected based on rigorous criteria among professionals currently belonging or having previously belonged to organizations or companies related to maritime trade and maritime industry (i.e. any activities directly or indirectly related to matters stated in Article 1 of the CIAMA Rules).

Arbitrators registered with CIAMA can be divided into three broad categories: maritime trade practitioners (shipowners, charterers, brokers, insurers and consignees), academics or other legal practitioners (maritime law professors, business lawyers and judges) and technicians (maritime engineering engineers, long-term captains, mechanical officers and experts). Composing a panel with maritime industry professionals of different backgrounds balances out the opinion of the arbitral tribunal, thanks to practical experience and knowledge of customs specific to maritime law within the region.

 

What are the Functions of the Committee of the Court?

The Committee of the Court is composed of the President of CIAMA and two other members appointed by the CIAMA Board of Directors. It is in charge of administering the arbitration.

The Committee of the Court appoints the President of the Arbitral Tribunal based on criteria such as experience and knowledge of the specifics of any given case. The Committee thus has an important role in the constitution of the Arbitral tribunal. Moreover, during the first and second stages, the draft awards are submitted to the Committee, which may then suggest any changes in the motivation or draw the arbitrators’ attention to any matter of substance without imposing any modifications on arbitrators.

 

Appealing an Award

During the proceedings, arbitrators are bound to respect the guiding principles for conducting a trial as set out in Articles 327-9 et seq. of the Moroccan Code of Civil Procedure.

Moroccan legislation recognizes the autonomous nature of arbitration; thus, the only possible remedy against an award before a Moroccan court is that of annulment, which is only granted on the grounds listed in Articles 327-26 et seq. of the Civil Procedure Code. If the award is annulled by the Court of Appeal, the dispute will be sent back to CIAMA.

At the same time, the CIAMA rules also allow for an internal appeal against an award, giving the parties’ the chance to have their case re-examined by a differently composed panel (see Article 17 of the Court’s Articles). However, the parties can waive their right of appeal through a contractual clause to such effect (see Article 19 of the CIAMA Rules).

 

Transparency and Publication of Awards

CIAMA has integrated into its rules the growing concern for transparency regarding the conduct of arbitration proceedings. The anonymous publication of awards4)As CIAMA is newly opened, there has not yet been a published award. However, it is expected that future awards will be published in the documentation section of its website. jQuery("#footnote_plugin_tooltip_4117_4").tooltip({ tip: "#footnote_plugin_tooltip_text_4117_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); contributes to attaining this goal, while also allowing for the development of a uniform case law (see Article 23 of the CIAMA Rules).

As a counter part to the full autonomy of international arbitration, arbitrators and CIAMA have joint responsibility with regards to building a coherent case law respectful of the nature of arbitration as a method of resolving disputes which is chosen by the parties and for their own convenience. The organization of CIAMA is meant to efficiently address this ambition.

 

Concluding Remarks

The introduction of a sector-specific dispute resolution centre such as CIAMA offers many advantages.

On the one hand, it enables charters and professionals from the maritime and air sectors to have their disputes resolved locally and at a lower cost.5)See CIAMA Costs and Fees and LMAA Notes on Fees. jQuery("#footnote_plugin_tooltip_4117_5").tooltip({ tip: "#footnote_plugin_tooltip_text_4117_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

On the other hand, being North Africa’s only specialised maritime arbitration centre, CIAMA fills a geographical and economic gap, giving parties trading internationally and which are reluctant to submit claims through foreign courts a viable alternative for dispute resolution in this region.

Finally, with its rules based on internationally recognised standards, CIAMA is able to level with international norms and established best practices in arbitration.

References   [ + ]

1. ↑ SMA; LMAA; CAMP; José M. Alcántara, ‘An International Panel of Maritime Arbitrators?’, Journal of International Arbitration, (© Kluwer Law International; Kluwer Law International 1994, Volume 11 Issue 4) pp. 117 – 126. 2. ↑ Bruce Harris, Arbitration-A World Overview, in BIMCO Review, 1994 (2nd edition), W. H. Robinson, Stroudgate plc., London, at p. 65. 3. ↑ Promulgated by Royal Decree No. 1-07-169 of 30 November 2007 and published in the Bulletin Officiel du Royaume du Maroc No. 5584 of 6 December 2007. 4. ↑ As CIAMA is newly opened, there has not yet been a published award. However, it is expected that future awards will be published in the documentation section of its website. 5. ↑ See CIAMA Costs and Fees and LMAA Notes on Fees. 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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Impact of the Arab Spring on the International Arbitration Landscape

Thu, 2019-07-25 19:00

Cherine Foty

The Arab Spring erupted in Tunisia in December 2010 and quickly spread to Egypt, Libya, Yemen, Bahrain, and other countries of the Arab World in 2011 and 2012. As I wrote in a 2015 Kluwer Arbitration Blog post, The Evolution of Arbitration in the Arab World, the uprisings of the Arab Spring and the political changes resulting therefrom were expected to have a significant impact on the international arbitration landscape with a surge of new investment cases anticipated against Arab states.

 

Increase of ICSID Cases from the Arab World in the Aftermath of the Arab Spring

As expected, the number of newly filed ICSID cases from the Arab World did indeed rise sharply in the period from 2011 to 2018. As shown in the graph below, since 2011, the average number of newly filed cases with Arab state respondents has been 6 per year, with 8 new cases in 2013 and 2017 and 9 new cases in 2018.

While there has been a general increase in the number of newly filed cases on ICSID’s docket during the period of 2011-2018 (not dropping below 38 since 2011 and rising as high as 56 in 2018), the percentage of newly filed cases involving Arab state respondents has also risen, representing on average 12.6% of newly filed ICSID cases and rising as high as 20% of newly filed ICSID cases in 2013. Most recently in 2018, 16% of newly filed ICSID cases (9 out of 56) came from the Arab World.

In addition, as shown in the graph below, while the respondent states from the region have become increasingly diverse, Egypt has remained the most frequent respondent state with 20 new cases filed against it between 2011 and 2018. The highest number of new cases brought against it in one year were 6 in 2013. Far behind Egypt, Algeria was confronted with 5 new cases in the 2011-2018 period, and Jordan and Saudi Arabia were both confronted with 3 each.

Despite the increasing number of new cases filed against Arab respondent states, the outcomes have not always been favorable for investors. A number of cases brought by investors have been dismissed on jurisdictional grounds (i.e. National Gas) or resulted in liability decisions in favor of the respondent state (i.e. Veolia and Al Tamimi). An even larger number of cases have settled (at least 12 since 2011, i.e. Bawabet Al Kuwait, Sajwani, Indorama, and LP Egypt), which leads one to question whether investment arbitration may have been increasingly employed during this period as a tactical mechanism for obtaining amicable settlement.

 

The Invocation of Arab Spring Events in Recent Arbitration Cases

Of the 20 newly initiated cases against Egypt in the past 8 years, only some have directly dealt with the events of the Arab Spring in the assessment of the parties’ factual or legal arguments or defenses. Many cases have seemingly not made a direct reference thereto (although the details of these recently filed cases have still not fully come to light) including a dispute on the cancellation of a contract for the development of a new city south of Cairo, a mining dispute, and a water and sewage distribution dispute, among others.

However, other cases dealing with the actions recently taken with respect to commitments made to investors by the former Egyptian regime have been a topic discussed in depth. Such cases include: Damac, in which a Dubai-based investor had asserted violations of the UAE-Egypt BIT for his conviction in absentia by Egyptian courts due to his company’s acquisition of land far below market value during the former regime; Indorama, in which a 2011 Egyptian court annulled the 2007 privatization of a previously state-owned industrial asset under which an Indonesian investor had acquired the asset; and Bawabet Al Kuwait, in which the government withdrew its establishment of an investment free zone in Egypt.

Other cases against various respondent states, both in the investment and the commercial context, have examined select events of the Arab Spring uprisings which have been raised by claimants and respondents alike to support their positions. A few of these cases will be briefly discussed below.

 

The Defense of Necessity

In the Unión Fenosa ICSID case, a Spanish gas company brought a case against Egypt. The respondent state Egypt invoked, among other arguments, the doctrine of necessity under customary international law to defend against its shutting down of the Damietta LNG plant. It claimed that its prioritization of supplying natural gas to feed domestic electricity in Egypt rather than export it as agreed with the concerned investor was an act of necessity which was the only way to maintain Egypt’s security, public order, and stability, safeguard its essential interests, and maintain its basic services in the face of “grave and imminent peril”.

Egypt referenced the historic levels of violence, riots, and clashes in the country which allegedly constituted a threat to “the basic functioning of society and the maintenance of internal stability”. It claimed that these events caused a “dramatic drop in the supply of natural gas both internally and for exportation” which led to repeated blackouts and more widespread violence and unrest. Egypt claimed that if it had not prioritized its domestic needs, the situation at the time would have become far worse.

However, in its 2018 award, the Tribunal found that a number of elements were missing to legitimize Egypt’s necessity defense. It found that the timing was off. The Egyptian Revolution began in 2011, however it was only in 2013 that the respondent made any suggestion that the social and political instability in Egypt was a force majeure event. And despite the revolution having ceased in 2015, gas supplies did not resume at that point in time.

In addition, the Tribunal found that the events of the Egyptian Revolution could not be the proximate cause of curtailing gas supplies to the plant because such curtailment occurred both prior to and following the Egyptian Revolution.

Furthermore, the tribunal found that the act of the government was not the “only way” to maintain Egypt’s security situation. In fact, there was a stark disproportionality in the reduction of gas delivered during the relevant period where other users saw a reduction of only between 12% and 60%, whereas the Claimant investor suffered a curtailment of 96%.

The Tribunal therefore held that the Egypt failed to prove the defense of necessity under customary international law.

 

Seeking to Break the Causal Link

In the Olin Holdings ICC case against Libya, a Cyprus investor sought compensation for Libya’s alleged expropriation of the land in which it had invested to build a dairy and juice factory. Libya argued that the element of causation was missing from the Cyprus investor’s case, asserting among other arguments that the harm it may have suffered in the post-February 2011 time period was the result of the chaos arising out of the Libyan Revolution and not from acts attributable to the Libyan state.

However, in its 2018 award, the Tribunal was unconvinced by Libya’s line of argument. It held that while the events of the Libyan Revolution and civil war may have had a general impact on the investment climate post-2011 and may have contributed to the underperformance of the Cyprus investor’s business, those events would not be sufficient to address the investor’s underperformance prior to 2011. When compared to other market entrants around the same time period as the Cyprus investor, another competitor with similar initial investments at the outset of its investment in 2006 was able to make large profits in a short period of time and maintain its position as a market leader even today, despite the events of the Libyan crisis.

This, among other factors, led the Tribunal to conclude that the events of the Libyan crisis “cannot be considered as an event that breaks the causal link between Libya’s breaches of the BIT and Olin’s underperformance after 2011”.

 

Invoking Force Majeure As A Claimant

In the Gujarat ICC case, a group of Indian investors sued the Yemeni state and one of its ministries, seeking among other claims, declaratory relief that an event of force majeure continuing for six months existed and that the contracts in question were validly terminated.

The Tribunal recalled in its 2015 award that as of January 2011, the security situation in Yemen had begun to deteriorate, with increased instances of tribal clashes, attacks, and kidnappings leading up to the declaration of a State of Emergency on 18 March 2011 by the Government. It stated that a number of such events occurred on multiple occasions and in various locations from March 2011 to February 2013 and were beyond the reasonable control of the claimants.

The three claimants suggested that those events fell within the definition of force majeure contained in the relevant contracts and relied upon the clause in question to send a notice to the respondent state automatically suspending its obligations under the contracts. A further contractual clause provided that if the force majeure situation would continue for a period of six months, the Claimants would have the option to terminate their obligations.

The Tribunal agreed with the Claimants that an event of force majeure existed and continued for a period of six months and that as such the Claimants had validly terminated the contracts.

 

State’s Right to Improve Workers’ Wages

While the three cases above involved scenarios where investors prevailed, the 2012 ICSID case Veolia Propreté resulted in a decision dismissing the investors claims and ruling in favor of the respondent state. In that case, a 2018 award dismissed a claim involving a long-term waste management contract in the Egyptian governorate of Alexandria in which Veolia sought compensation for alleged damage resulting from an increase in the minimum wage following a change in the labor law.

While the award remains unpublished, the press has reported that the tribunal dismissed the investor’s claim that the change in the relevant labor law caused damage to its investment, conduct allegedly prohibited by the Egypt-France BIT. The labor law in question dates back to 2003, however the issues raised by this case, notably the juxtaposition between changes in workers regulations and assurances provided to investors in long-term contracts, are likely to arise in other cases in the aftermath of the Arab Spring. Indeed, issues of workers’ rights have been at the forefront of many Arab Spring demonstrations, for example the 2011 labor protests in the textile factories of Mahalla, Egypt.

 

Conclusion

It remains to be seen how Tribunals will continue to deal with attempts by states and investors alike to have the events of the Arab Spring and the political and social uprisings which may follow taken into account.

While investors have been successful in some instances in invoking such events, state respondents have also prevailed on jurisdictional and liability claims. These facts, taken as a whole, demonstrate that while some investors may have legitimate claims which were exacerbated by or conduct that was excused by the political events of the Arab Spring, others may have brought increasing numbers of meritless claims or attempted to use such events as a tactical mechanism to leverage the possibility of settlement.

In order to successfully utilize such events to one’s advantage, it follows from the cases discussed above that investors and states alike must be very precise in their invocation of such facts. Simple reference to political events without a clear temporal connection to particular action or inaction will likely be unsuccessful. However, when political happenings are invoked during the progression of dealings between the parties, in official correspondence, and employed in real time as a justification for taking certain action, they are more likely to be seen as legitimate as opposed to an after-the-fact attempt to cover a party’s conduct.

In any event, a large number of cases from 2011 to 2018 have not yet provided conclusory findings. As mentioned above, the details of many cases from the 2011-2018 period, which have either settled or been discontinued, have not been publicly disclosed. Furthermore, around 30 ICSID cases from the 2011-2018 period are still pending.

As more cases continue to be introduced, as pending cases are resolved, and as the political situation in the region continues to remain largely in flux, a clearer picture of the relevant standards to be applied to such political events should come to light.

 

The views expressed in this article are those of the author alone and should not be regarded as representative of, or binding upon the author’s law firm and its clients.

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The 15th IFCAI Biennial Conference in Helsinki: Finding the Right Balance to Maximise Strategic and Effective Conflict Resolution

Thu, 2019-07-25 03:01

Santtu Turunen and Adriana Aravena

The 15th IFCAI Biennial Conference in Helsinki

On 23 May 2019, the Arbitration Institute of the Finland Chamber of Commerce (FAI) hosted the 15th IFCAI Biennial Conference in Helsinki. The International Federation of Commercial Arbitration Institutions (IFCAI) organises the “IFCAI Biennial Conference” every two years in cooperation with an IFCAI member arbitration institution. This year it was hosted by the FAI in lieu of the traditional Helsinki International Arbitration Day (HIAD). A record number of more than 250 participants from 26 countries and 17 international arbitral institutions attended the event.

The topic of the day was strategic and effective conflict management from the point of view of different stakeholders. The first panel focused on conflict diagnosis, conflict resolution strategies, arbitration and ADR methods for strategic and effective conflict resolution. The second panel focused on effective conduction of arbitration in the face of current challenges in the arbitration scene. The third panel addressed how to enhance the interplay between state courts and arbitral tribunals. The final interview session offered a glimpse into the future of international arbitration and dispute resolution in an era of artificial intelligence.

 

First Panel: Conflict Diagnosis, Conflict Resolution Strategies and Versatile Use of ADR Mechanisms – How to Use These Tools for Strategic and Effective Conflict Resolution?

The first panel was a round table discussion moderated by Tuuli Timonen (White & Case LLP, Finland) with the participation of Carlos S. Forbes (Center for Arbitration and Mediation of the Chamber of Commerce Brazil Canada CAM-CCBC, Brazil), Ralf Lindbäck (Wärtsilä Corporation, Finland), James South (CEDR, UK) and Urs Weber-Stecher (Wenger Vieli AG, Switzerland).

Tuuli Timonen started off the discussion asking whether it is true that companies want ADR, while the arbitration community wants arbitration. The panel discussion revolved around this issue. The market conditions of supply and demand for services were the common nominator for the different issues addressed by the panel.

Ralf Lindbäck brought up that Wärtsilä Corporation is developing conflict dispute resolution strategies through collaboration. According to him, in the contemporary world, winning is about partnerships, collaboration and interconnection. Long-term contracts are a market trend and dispute resolution must be rethought. Thus, a concrete solution is to include relationship management in contracts to ensure continuous communication. In practice, this means that when a problem arises, those involved will first try to find together the root cause of the problem instead of passing on the blame and costs. He emphasised that for the benefit of the arbitration community, it would be important that the skills of arbitrators be used in a broader scope.

Carlos S. Forbes spoke about the role of arbitral institutions as enablers of amicable solutions.  He suggested that arbitral institutions take an active role in promoting and developing mediation, i.e. developing rules and boards for mediation and having rosters of mediators. He also addressed the market conditions and pointed out that there must be a financial incentive to mediate but there is money in mediation as well. This position was supported by the rest of the panellists. It was pointed out that nobody wants to lose a profitable case, but, on the other hand, there is room for business in mediation, too. Counsel just need to be able to provide added value. The panellists agreed that lawyers have a new business opportunity in drafting settlement agreements.

Urs Weber-Stecher elaborated on the right timing for mediation in a multi-tier process. It was stated that the best time for mediation is not necessarily before arbitration and that arbitrators need to have experience and knowledge about mediation to understand the right timing for it.

James South discussed the ingredients of effective mediation. While the parties should be open-minded and understand their real interest, counsel should advise them on how to frame an offer. Counsel should be patient during the mediation and not incur in pseudo-efficiency by saving a few hours and approaching mediation like a settlement conference. Reflecting on Ralf Lindbäck’s words on relationship management, South pointed out that mediation can be used not only for dispute resolution but also for relationship management.

 

Second Panel: Issues Giving Arbitrators a Headache when Striving for an Effective Arbitral Process – What Are the Topical Questions?

The second panel was an interactive session moderated by Alice Fremuth-Wolf (Secretary General, Vienna International Arbitration Centre – VIAC, Austria). The speakers were Karl Hennessee (Airbus, France; ICC, France), Daniel Hochstrasser (Bär & Karrer, Switzerland), Kathleen Paisley (Ambos NBGO, Belgium), José Rosell (Independent Arbitrator, Denmark) and Ismail Selim (Cairo Regional Centre for International Commercial Arbitration – CRCICA, Egypt).

Karl Hennessee pleaded for arbitral courage as to the role to be played by arbitrators to ensure efficient and effective arbitration proceedings. He emphasised that it is essential that arbitrators be willing to take the responsibility bestowed by the parties upon them. In his view, the arbitrator’s role should be something between a kindergarten teacher and an absolute dictator depending on the arbitration itself. In terms of due process, he suggested that arbitrators look at district court judges, whose decisions are overruled continuously and still life goes on.

Daniel Hochstrasser referred to the loneliness of the arbitrator in the quest for arbitration efficiency. Procedural schedules are drafted by counsel, not always in the best interest of their clients. However, it is difficult for arbitrators to interfere – in the end, it is not their process.

The panel also discussed the impact of the GDPR in arbitration. Kathleen Paisley pointed out that GDPR affects everyone involved in arbitrations. Currently, the trend moves from not caring at all to overcaring. She encouraged everybody to spend some time on the GDPR and understand it—get their arms around it and realise it is not so bad after all.

 

Third Panel: Interplay Between Arbitral Tribunals and State Courts during the Arbitral Proceedings – How to Find the Right Balance?

Moderated by Marieke van Hooijdonk (Allen & Overy LLP, Netherlands) and with the participation of Alexander G. Fessas (ICC, France), Gisela Knuts  (Roschier Attorneys Ltd, Finland), Emilia Lundberg (Advokatfirman Lundberg & Gleiss KB, Sweden) and Joe Tirado (Garrigues UK LLP, UK) the panel focused on the interplay of arbitral tribunals and state courts.

Marieke van Hooijdonk referred to the comparison drawn by a former senior English judge who stated that the relationship between arbitration and the courts resembled a relay race. Before the case file reaches the arbitral tribunal, the baton is in the grasp of the courts. Then, the arbitral tribunal takes over the baton when it receives the case file and retains it until it renders the arbitral award. Once the arbitral award is rendered, the baton returns to the courts. In her opinion, nowadays, this relationship cannot be seen as a relay race anymore, as there is no strict line between when and where the courts and the arbitrators have the power.

Emilia Lundberg referred to the interplay between arbitral tribunals and courts as regards document production and witness examination. Nowadays court assistance is frequently requested. She stated that national courts do not want to interfere but only to assist when requested to do so.

Gisela Knuts referred to how the interplay could be further enhanced. In her view, courts should wear arbitration friendly glasses to support the work of arbitral tribunals. However, they should also be quick to deal with mala fide cases intended to derail arbitration proceedings. She put forward three practical measures to enhance the interplay: creating an understanding or common ground between arbitrators and state judges, creating centers of excellence in the state courts to deal with arbitration-related issues, and to use the English language before those specific courts if the arbitration is conducted in the English language.

The panel concluded that the interplay between state courts and arbitral tribunals is not a relay race but not a partnership of equals either. There is a growing competition between arbitration, on the one hand, and court litigation on the other hand. Therefore, cooperation is needed.

 

Interview: What Will International Arbitration/Dispute Resolution Look Like in 10 years?

In the last conference session, Anna-Maria Tamminen (Hannes Snellman Attorneys Ltd, Helsinki) interviewed Professor Maxi Scherer (Queen Mary University of London, School of International Arbitration; Wilmer Cutler Pickering Hale and Dorr LLP, UK) on the use of artificial intelligence (AI) in arbitration and dispute resolution in general.

Maxi Scherer elaborated on technology tools enhanced with AI currently available and in use to some extent in dispute resolution (e.g., AI tools to conduct legal research, AI programmes to detect outdated case law in a submission, AI interactive features for the sending of emails). She believes that AI will affect the dispute resolution industry and the arbitrator’s profession fundamentally. AI will affect the legal profession by supporting and enhancing the work performed by counsel and arbitrators. For instance, through programmes estimating and monitoring the costs of the arbitration as the case goes along, programmes interpreting witness statements or translating documents instantly, AI tools helping in the drafting of submissions or of the procedural history section of the arbitral award. She further reported on studies that are dealing with legal predictive analytics—i.e. computer programmes developed to predict the legal outcome of cases—which poses questions as to whether AI should have a role in decision-making and if AI could replace arbitrators in the future.

Maxi Scherer was rather sceptical that AI could affect decision-making in arbitration. This is due to technical reasons related to the way AI learns, updates itself and arrives to an outcome. At the moment, AI cannot provide a reasoned decision. Further, machines are not more neutral, objective or biased free than arbitrators. AI is based on data fed by human beings, reflecting any biases in the data (data vulnerability). Accepting AI for decision-making would mean departing from a rule-based logical application and replacing it with a probabilistic analysis.

Maxi Scherer finalised the interview asserting that data is the new gold and appealed to arbitration institutions to develop systems that make use of this data for the benefit of arbitration before others do or in collaboration with them.

 

The 15th IFCAI Biennial Conference in Helsinki

Closing Remarks

Effective conflict management requires striking the right balance between the interests of different stakeholders, on the one hand, and the use of different dispute resolution mechanisms, on the other hand. It was stressed that, for arbitration to be efficient, arbitrators need to manage the arbitration effectively, while respecting that the process belongs to the parties. Further, the event brought to the fore the need for cooperation between courts and arbitral tribunals to retain arbitration’s competitive edge. Finally, as for AI innovations, it was stated that they will support arbitration but not substitute decision-makers. As the context of conflict resolution changes, the strive for effectiveness continues and remains central to all methods and for all stakeholders.

 

The conference photos, video and materials are available under the following links:

 

 

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Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures: Interpretations from a Mainland China Perspective – Part I

Tue, 2019-07-23 21:00

Wei Sun

Introduction

On April 2, 2019, the Supreme People’s Court (“SPC”) and the Department of Justice (“DOJ”) of the Hong Kong Special Administrative Region (“HKSAR”) signed the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“Arrangement”). This post provides some views on the Arrangement as informed by the laws of Mainland China (see earlier discussions on this by Yuen, Shi, McDonald et al here and by Coënt and Thong here).

 

A. Court Practices Pre-dating the Arrangement

First, in terms of applications prior to the arbitral proceedings or at the stage of recognition of arbitral awards, there was no public precedent where the party applied for property preservation and succeeded. There were no specific laws or regulations on this point either.

Second, courts in the Mainland would not grant the application submitted during an arbitral proceeding. For example, Shanghai First Intermediate People’s Court rejected such an application in DONGWON F&B [2014] Hu Yi Zhong Shou Chu No.2, ruling that since the applicant had submitted the request for arbitration to the Korean Commercial Arbitration Board and the arbitration was not in China, it lacked legal basis for accepting the application for property preservation.

As an exception to this rule, Article 21(2) of the Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China (Fa Shi [2003] No.3, “Interpretation on Maritime Procedure Law”) stipulates that “Where …… the relevant dispute has already been submitted for arbitration while the involved property is within the People’s Republic of China, if a party applies for property preservation to the maritime court of the place where the property is located, the maritime court shall accept the application”. Accordingly, courts in the Mainland could accept the application for property preservation submitted during an extraterritorial maritime arbitral proceeding. For instance, in 2010, Ningbo Maritime Court in its ruling ([2010] Yong Hai Fa Zhong Bao No.1) granted the application for property preservation in accordance with Article 17 of the Special Maritime Procedure Law of the People’s Republic of China and Article 21(2) of the Interpretation on Maritime Procedure Law. In 2016, Wuhan Maritime Court, after the party to the arbitral proceeding administered by Hong Kong International Arbitration Center (“HKIAC”) having provided guarantees, held in its ruling ([2016] E 72 Cai Bao No.427) that the application for property preservation was consistent with the existing laws and supported the application in accordance with Article 28 of the Arbitration Law of the People’s Republic of China (“Arbitration Law”) and Article 103 of the Civil Procedure Law of the People’s Republic of China (“Civil Procedure Law”). However, it should be noted that according to Article 18 of the Interpretation on Maritime Procedure Law, the property to be preserved was limited to vessels, cargos carried by a vessel, and fuel and supplies of a vessel.

Third, courts in the Mainland did not apply a consistent approach in deciding applications for property preservation at the award recognition stage. In 2016, Haikou Maritime Court initially granted the application for property preservation in a case of recognition of an arbitral award rendered by London Maritime Arbitrators Association. However, after the respondent appealed for reconsideration, the court revoked its previous ruling due to the lack of legal basis ([2016] Qiong 72 Xie Wai Ren No.1). On the contrary, in 2018, Guangzhou Maritime Court granted the application for property preservation prior to the application for the recognition of a Hong Kong arbitral award on the ground that the party had provided sufficient guarantees and met the legal requirements ([2018] Yue 72 Cai Bao No.72) under Article 100, 102 and 103(1) of the Civil Procedure Law and Article 487(1) of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China.

 

B. Comments and Suggestions on the Approach of the Arrangement

  1. Exclusion of Ad-hoc Arbitration

According to Article 2 of the Arrangement, “Arbitral proceedings in Hong Kong” shall be seated in Hong Kong and administered by an institution or permanent office, which means that the Arrangement only applies to institutional arbitrations, excluding ad hoc arbitrations.

The reason of exclusion may be the relatively conservative attitude of the judicial practice in the Mainland towards ad hoc arbitration. At present, the judicial practice in the Mainland allows parties to submit their disputes to ad hoc arbitrations under very limited circumstances. Article 9(3) of Opinions of the Supreme People’s Court on Providing Judicial Guarantee for the Building of Pilot Free Trade Zones (Fa Fa [2016] No.34) stipulates that “If two enterprises registered in Free Trade Zones agree that relevant disputes shall be submitted to arbitration at a particular place in the Mainland, according to particular arbitration rules, or by particular personnel, the arbitration agreement may be determined as valid”. Although this provision does not explicitly define “arbitration at a particular place in the Mainland, according to particular arbitration rules, or by particular personnel” as ad hoc arbitration, it is widely accepted that the SPC has allowed ad hoc arbitration in the Mainland between enterprises registered in the Free Trade Zones through the above provision. However, the provision is a mere guideline. There is still a long way for the full acceptance of ad hoc arbitration in the Mainland.

  1. Jurisdiction of the Courts

The Arrangement does not state whether the intermediate people’s courts, which accept the applications for court-ordered interim measure, shall have jurisdiction over foreign-related matters.

I suggest that the SPC should make clarifications on this matter. Although the cases involving foreign elements regulated under the Provisions of the Supreme People’s Court on Some Issues Concerning the Jurisdiction of Civil and Commercial Cases Involving Foreign Elements (Fa Shi [2002] No. 5, “Jurisdiction Provisions”) do not include applications for court-ordered interim measure in extraterritorial arbitral proceedings, the intermediate people’s courts under Article 2 of the Arrangement should be limited to those with jurisdiction over cases involving foreign elements.

First, it would suit the purpose of the Jurisdiction Provisions of submitting cases involving foreign elements to courts with better experience and professional competence by specifying the jurisdiction of relevant courts.

Second, the Jurisdiction Provisions specify that only courts with jurisdiction over cases involving foreign elements may hear cases on revocation, recognition and enforcement of international arbitral awards. Considering the close connection between enforcement of arbitral awards and court-ordered interim measures, it would impede the enforcement procedures if the matters were heard before different courts (i.e. courts that hear the applications for court-ordered interim measures and courts that hear cases of enforcement). For instance, Hebei Tangshan Intermediate People’s Court has no jurisdiction over cases involving foreign elements. The foreign-related cases within its territorial jurisdiction are submitted to Hebei Langfang Intermediate People’s Court instead. Therefore, if a party to an arbitral proceeding in Hong Kong intends to request for property preservation against certain assets located in Tangshan, it must submit the request to Hebei Langfang Intermediate People’s Court.

  1. List Specifying the Courts and the Corresponding Territorial Jurisdiction

If the intermediate people’s courts under the Arrangement are indeed limited to those with jurisdiction over cases involving foreign elements, the SPC should make a list specifying the courts and the corresponding territorial jurisdiction.

To begin with, the parties or attorneys to arbitral proceedings in Hong Kong may have little knowledge of the rules or judicial practice in the Mainland. It will eliminate uncertainty if a list is available as guidance. Further, according to Article 1(1)(4) of the Jurisdiction Provisions, the SPC is entitled to appoint courts which originally have no jurisdiction over cases involving foreign elements to hear foreign-related cases. In the decade since the promulgation of the Jurisdiction Provisions, quite a few intermediate people’s courts have exercised jurisdiction over foreign-related cases after applications were submitted to the SPC. However, the parties must look up to relevant responses or replies by the SPC to ascertain whether a specific intermediate people’s court is competent to hear foreign-related cases.

Second, it is not clear whether the concentration of jurisdiction for certain courts in the Mainland will affect the applications for court-ordered interim measure in arbitral proceedings in Hong Kong.

For example, according to the Regulations on the Jurisdiction of Beijing Fourth Intermediate People’s Court (2018 Revision), Beijing Fourth Intermediate People’s Court shall have jurisdiction over the following cases: (i) cases of recognition and enforcement of foreign arbitral awards which are within the territorial jurisdiction of courts in Beijing; and (ii) cases of recognition and enforcement of Hong Kong, Macao and Taiwan arbitral awards. Considering that Beijing Fourth Intermediate People’s Court will hear cases of recognition and enforcement of Hong Kong arbitral awards, Beijing High People’s Court may wish to clarify whether the parties to arbitral proceedings in Hong Kong should also submit applications for court-ordered interim measure to Beijing Fourth Intermediate People’s Court.

Further, the Arrangement does not provide for possible remedies of a party to arbitral proceedings in Hong Kong when a court in Mainland refuses to accept the case of application for court-ordered interim measure based on lack of jurisdiction. It is suggested that the SPC issue relevant rules to specify the remedies under this circumstance.

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Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures: Interpretations from a Mainland China Perspective – Part II

Tue, 2019-07-23 20:50

Wei Sun

In Part I of this post I discussed how the Arrangement excluded ad-hoc arbitration and how it raised certain issues on jurisdiction of the courts. In Part 2, I discuss other aspects of the Arrangement.

 

  1. Interaction between Arrangement and CICC

The interaction between the Arrangement and the China International Commercial Court (“CICC”) is also worth close attention.

The SPC set up the CICC in 2018 according to the Opinion Concerning the Establishment of the Belt and Road International Commercial Dispute Resolution Mechanism and Institutions. The CICC is competent to hear applications for court-ordered interim measure in arbitral proceedings administered by certain international commercial arbitration institutions.

Specifically, the SPC published the Notice on Determining the First Group of International Commercial Arbitration and Mediation Institutions Included in the “One-Stop” Diversified Mechanisms for Resolving International Commercial Disputes (Fa Ban [2018] No.212), announcing the first group of international commercial arbitration and mediation institutions.

It should be noted that HKIAC is currently not among the first group of arbitration intuitions. If HKIAC is listed in the arbitration institution under the Provisions on Establishment of the CICC in the future, the parties to arbitral proceedings administered by HKIAC may submit applications for court-ordered interim measure to more than one competent court in the Mainland.

I suggest that the parties be permitted to submit their applications for court-ordered interim measure to competent intermediate people’s courts instead of the CICC. Firstly, pursuant to Article 2 of the Provisions on Establishment of the CICC, the CICC can hear cases nationwide. It may bear a big caseload with a relatively small number of personnel. Secondly, Article 6 allows the CICC to designate a lower court to enforce its ruling on the court-ordered interim measure. It is possible that the enforcement of the ruling will be carried out by a lower court even if the parties have submitted their applications to the CICC, which will prolong the enforcement procedure. Considering that time is of essence, it may better serve the interest of parties to submit the applications for court-ordered interim measure to competent intermediate people’s courts.

 

  1. Failure of Arbitration Institutions

Article 3(2) of the Arrangement writes “Where an application for interim measure is made after the relevant institution or permanent office has accepted the arbitration case, the party’s application shall be passed on by the said institution or permanent office”. We encountered in previous practice that the arbitration institutions in the Mainland refused to pass on applications for court-ordered interim measure. We suggest that the SPC should promulgate rules to specify relevant remedies.

 

  1. Judicial Approach towards Property Preservation

In my experience most courts in the Mainland are likely to issue property preservation applications with broad boundaries. For example, it is not uncommon to find a ruling that “the property worth X RMB should be preserved” without specifying the types of asset or the method of preservation, which makes it easier for the enforcement judge to exercise considerable discretion in issuing preservation measures against various assets located by the judge or the applicant. However, some courts in the Mainland have their own “local policies” for property preservation, which may create uncertainty for applicants under the Arrangement uncomfortable. For example, unlike most of the courts in the earlier example, the Beijing Third Intermediate People’s Court will list in the ruling the specific type of the asset and the method of preservation. Some courts are also reluctant to allow certain assets such as inventory to be preserved because it is difficult to identify the ownership of the inventory. I think it will be helpful to parties if the SPC takes the opportunity of the signing of the Arrangement to provide more detailed guidance to all kinds of court-ordered interim measures.

 

  1. Duration of Court-ordered Interim Measures

The existing laws, regulations and judicial interpretations fail to specify the duration of conduct preservation. Article 13 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Examining Cases Involving Conduct Preservation in Intellectual Property Disputes (Fa Shi [2018] No. 21) prescribes that “Where a people’s court rules to take conduct preservation measures, it shall reasonably determine the duration of the preservation according to the applicant’s request or the specific circumstances of the case. The validity of the ruling to stop the infringement of intellectual property shall generally be maintained until the judgment for the case takes effect”. Although this rule is for conduct preservation in intellectual property disputes, it can be inferred for the Arrangement that courts will similarly take into account the applicant’s request, the nature of the conduct to be preserved and other factors to determine the duration of preservation.

 

  1. Burden of Proof

Further to Article 11 of the Provisions of the Supreme People’s Court on Several Issues concerning the Handling of Property Preservation Cases by the People’s Courts (Fa Shi [2016] No.22, “Provisions on Property Preservation”), the courts in the Mainland will sometimes use the online system to search for the property. However, based on our experience, the courts normally will not do so for cases of property preservation in arbitral proceedings. The applicant needs to provide information of the property. The courts are also cautious that this does not turn out to be a fishing expedition.

 

  1. Guarantee for Court-ordered Interim Measures

Article 5(1)(5) of the Arrangement requires the party to provide information about the property to be used as a guarantee. The guarantee for preservation during litigation or arbitral proceedings usually will not exceed 30% of the value of property to be preserved while the guarantee for preservation prior to litigation or arbitral proceedings should be equivalent to the requested amount of property to be preserved.

Cash and guarantee insurance are the most common types of guarantees. Real property shall be located in the Mainland if it is used as a guarantee. The court will seize the real property after which it cannot be transferred or be set on more encumbrances. Some courts refused to accept real property as a guarantee due to the possibly long period of time for appraisal of the value of such real property.

Courts in the Mainland usually will not accept guarantees provided by non-financial institutions such as a parent company guarantee. The concern relates to practical enforceability of these parent companies.

 

  1. Retrospective Effect of the Arrangement

The Arrangement does not provide whether it has retrospective effect, i.e. whether it applies to arbitral proceedings prior to the Arrangement coming into effect or only to arbitration agreements signed or arbitral proceedings initiated afterwards. The purpose of the Arrangement is to support the arbitrations in both the Mainland and Hong Kong. Accordingly parties should be allowed to apply for court-ordered interim measures to courts in the Mainland in accordance with the Arrangement even if the arbitral proceedings commenced before the Arrangement comes into force.

 

Conclusion

As the first legal document on assistance in court-ordered interim measures in arbitral proceedings signed by the Mainland with another jurisdiction, the Arrangement signifies the close collaboration between the Mainland and Hong Kong, which will further strengthen the competitive edge of Hong Kong to render services in international arbitration and will support Hong Kong on its construction of the Asia Pacific International Dispute Resolution Service Center.

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Recent Clauses Pertaining to Environmental, Labor and Human Rights in Investment Agreements: Laudable Success or Disappointing Failure?

Tue, 2019-07-23 02:02

Nour Nicolas

Ever since its inception, investment arbitration has benefited from a perception of self-contained ecosystem that does not interact with any other normative subject matter. Investor-State tribunals for the most part have been reluctant to accommodate the application of non-investment obligations and treaties, claiming either lack of jurisdiction over such claims, or affirming upfront that non-investment international obligations have no bearing on the State’s liability towards the investors, despite the availability of many avenues for the injection of human rights concerns. This hostility has exacerbated the backlash against investment arbitration’s legitimacy, as it has woefully impacted both the host State and its individuals on multiple fronts. To name a few, it has constrained any public policy-making envisioned by the State, has given complete – undeserved and illegitimate – immunity to the investor and has inevitably caused the State to consistently breach its international obligations under multiple treaties on the international sphere.1)See Bruno Simma & Theodore Kill, Harmonizing Investment Protection and International Human Rights: First Steps Towards a Methodology, in International Investment Law For The 21st Century: Essays In Honour Of Christophe Schreuer, 678, 679 (Christina Binder, Ursula Kriebaum, August Reinisch & Stephan Wittich, 2009); UNCTAD, Selected Recent Developments in IIA Arbitration and Human Rights, IIA Monitor No. 2 (2009), International Investment Agreements, available at https://unctad.org/en/Docs/webdiaeia20097_en.pdf. jQuery("#footnote_plugin_tooltip_1621_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1621_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

It is against this backdrop, which is explained by earlier commentaries, that a number of investment agreements as well as model investment agreements have recently adopted progressive provisions imposing upon investors upfront compliance with a set of environmental, labor and human rights, and having the immense merit of clarity and security. These provisions depart from the existing 3,000 IIAs that fail to impose any obligation upon the investors, and even from the recent trend of BITs which merely state their commitment to conform to Corporate Social Responsibility standards, without more. Although truly revolutionary in this sense, some of these provisions remain more effective and readily enforceable than others.

It is worthwhile noting on a preliminary note that in order for the reform however to see its full potential, the most straightforward formulation for such a provision aims at: addressing investors directly; imposing upon them obligations rather than aspiring for their best endeavors; specifying the scope and content of these obligations; and finally, securing their enforceability.

 

Obligation of Result or Best Efforts Clause?

Taking note of the provisions already proposed, one discerns two categories of obligations imposed:

  1. Mandatory obligation or obligation of result upon the investors and/or investments to respect the international environmental, labor and human rights obligations binding on the host State (SADC Model BIT); and
  2. Best efforts clause to comply with Corporate Social Responsibility and sustainable development (Indian Model BIT of 2015; Morocco-Nigeria BIT).

Whereas the SADC’s language is conclusive as it purports to impose upon investors the “duty” to respect human rights, the formulation of the Morocco-Nigeria BIT and the Indian Model BIT is far less satisfying. The SADC’s emphasis on a firm formulation such as “shall not undertake or cause to be undertaken”, “have a duty to respect”, and “shall act in accordance with” along the three sections of the provision, reflects a serious undertaking of incorporation of human rights and building a bridge between the investors themselves and the host State’s human rights instead of relying on the Contracting States’ regulatory authority acting as conduit. The Morocco-Nigeria BIT however, is tipping too far on the end of caution, as it merely requires the investors to “strive” to contribute to the sustainable development of the Host State and its local community, to “strive” to adopt high levels of socially responsible practices and to “strive” to apply and achieve the higher-level standards of corporate social conduct. Should a dispute arise between the host State and the investor in relation to the latter’s compliance with such a clause, the arbitral tribunal will engage in an extensive analysis as to whether the investor’s conduct amounts to a violation of the clause and of its best endeavors obligation. Unlike an obligation of result, an obligation of best-endeavor is more amenable to attenuations. Proving a breach of a “best-efforts” clause requires evidence of a failure on the duty holder’s part to exhaust in good faith all reasonable efforts to achieve the obligation imposed. This in turn entails on one hand the marshalling of arguments relying on good faith, that is, the least palpable and most abstract standard in the legal world, and on the other hand, practicing an exercise of balancing between the different choices available to the investors to comply with the obligation at issue and those which the investors have opted for. It would not be cynical to assume that the investors will be given the benefit of the doubt and continue to prevail on this ground in the future. It therefore becomes necessary to impose mandatory duties upon the investors and corporations to go a full step further than what has been achieved so far, and offer a full panoply of accessible remedies in case of a violation and are legally enforceable. A meaningful reform consists of imposing a duty to comply with – a model followed solely by the SADC Model BIT – and not simply encouraging observance of rights. In fact, articulating the investors’ obligations in the form of a best endeavor clause wouldn’t add anything to the already dense international portfolio of voluntary codes of conduct, guidelines and regulations emanating from international organizations such as UNCTAD, OECD, UNGP,2)E.g. U.N. Human Rights Council, The Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, HR/PUB/11/04 (2011), available at https://www.ohchr.org/documents/publications/GuidingprinciplesBusinesshr_eN.pdf . jQuery("#footnote_plugin_tooltip_1621_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1621_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); etc. which have failed to hold investors liable.

Some authors have nevertheless seen the silver lining in these attempts, positing that they “capture a commitment to the recent trend favouring corporate social responsibility”.3)Grant Hanessian, Kabir Duggal, ‘The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See?’ ICSID Review – Foreign Investment Law Journal, Volume 32, Issue 1, Winter 2017, 216-226, available at https://academic-oup-com.ezp-prod1.hul.harvard.edu/icsidreview/article/32/1/216/2738869?searchresult=1. jQuery("#footnote_plugin_tooltip_1621_3").tooltip({ tip: "#footnote_plugin_tooltip_text_1621_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Is a bad deal ultimately better than no deal? Furthermore, could a ‘best-efforts’ approach also be justified as being a pragmatic compromise between investment-importing States and investment-exporting States? Yielding a best endeavor obligation could garner corporate support for these types of provisions in investment agreements, especially given that corporations constitute powerful lobbies capable of influencing the political class. If we were to assume that capital-importing States have less bargaining power than capital-exporting countries, and that negotiations will unfold mostly in favor of the stronger-positioned countries, then it is commonsensical to deduce that the investment agreements would contain mediated clauses of human rights obligations rather than full-fledged duties. By the same token, it is therefore reasonably understandable to argue in favor of a more balanced human rights obligations clause if one were to attain a realistic reform.

 

Who is the Burden Holder of these Obligations: The State or the Investor?

Whereas the Morocco-Nigeria BIT human rights provision addresses States, the SADC Model BIT has opted for directly imposing the obligations upon the investors. The latter, in its Article 15 entitled “Minimum Standard for Human Rights, Environment and Labor” reads as follows:

Investors and their investments have a duty to respect human rights in the workplace and in the community and State in which they are located. Investors and their investments shall not undertake or cause to be undertaken acts that breach such human rights.”

This choice of policy is determinative of the provision’s reach. For the clause’s application to reflect the increase of liability upon the investor, it should have as direct burden holders the investors themselves, instead of the contracting State parties. Otherwise, States could mutually undertake to improve their respective human rights regulations and regime, altogether while leaving out the investors from the equation. At most, the tribunals dedicated to the human rights cause could weigh in these concerns when entertaining the fair and equitable treatment standard, in order to tip the balance slightly in favor of the host States. It goes without saying however, that this solution falls short of an actual remedy for either the host State or its local communities affected by the investors’ activities. This inevitably raises the legal question as to whether treaties could conceptually impose obligations on non-State third-party actors, a topic of study in itself.4)Michael Waibel, The Principle of Privity, in CONCEPTUAL AND CONTEXTUAL PERSPECTIVES ON THE MODERN LAW OF TREATIES, 201 et seq. (Michael J. Bowman, Dino Kritsiotis eds., 2018). jQuery("#footnote_plugin_tooltip_1621_4").tooltip({ tip: "#footnote_plugin_tooltip_text_1621_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

 

What are ‘Environmental, Labor and Human rights’, Anyway?

What are the appropriate environmental, labor and human rights standards to incorporate for a meaningful reform and enforceable clause? The question owes its relevance and significance to the many treaties that have been ruled as not self-sufficient or self-executing because they lack the precision required to render them directly applicable.5)See in this regard, Karen Kaiser, Treaties, Direct Applicability (2013) available at http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1468; Essays on the Law of Treaties: A Collection of Essays in Honour of Bert Vierdag, 8 (Jan Klabbers & René Lefeber eds., 1998); Marc J. Bossuyt, The Direct Applicability of International Instruments on Human Rights (with special reference to Belgian and U.S. law), Revue Belge de Droit International, 317, 317-344 (1980). jQuery("#footnote_plugin_tooltip_1621_5").tooltip({ tip: "#footnote_plugin_tooltip_text_1621_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The novel clauses above mentioned all follow the same pathological all-inclusive, globally-generic formulation pattern. This is likely to encumber the due diligence the investors conduct prior to making their bids. Not to mention that the treaties may ultimately not be applicable in the domestic legal regime, in which case the foreign investors will have been treated less favorably than their domestic counterparts, who, placed in the same situation before a domestic court, will not be found bound by inapplicable international treaties for lack of self-sufficiency. This reflexively begs the question as to whether the weight and uncertainty surrounding these obligations inhibit foreign direct investment, given that the investors will lose interest and incentive to make profit in what has become an onerous investment climate. Given that there are rare mechanisms of dispute resolution and human rights courts to enforce these rights, one could easily explain why the delimitation of economic, social and cultural rights is still absent.

 

What Enforcement Mechanism Secures the Provision?

It goes without saying that for the provision to be enforceable, it requires an enforcement mechanism to back it up. More precisely and most importantly, arbitral tribunals should be able to exercise their mandate to sanction the abusive investor conduct through ways that go beyond merely taking into account the investors’ breach of human rights when assessing the fair and equitable treatment or when determining compensation. Examples potentially take the following forms: denial of benefits provision operating as exceptio non adimpleti contractus; enabling counterclaims by the host State (Indian Model BIT); subjecting the investor to civil actions before the judiciary of the home State (such as the Morocco-Nigeria BIT); allowing the host State to initiate arbitration proceedings on the violation by the investor of the obligations, etc.

 

Conclusion

Several configurations for the environmental, labor and human rights provisions are conceivable. While the most robust formulation effectively achieves their incorporation, for the reform to remain realistic, reaching a certain compromise for the corporations’ sake may be advisable. States are left to experiment based on experience, comparative analysis and discourse such as this post. It is subject of contention however, whether arbitration is suitable for these types of claim and, if answered in the affirmative, it remains subject to speculation what future amendments of arbitration proceedings are needed to adapt to this shift in policy.

References   [ + ]

1. ↑ See Bruno Simma & Theodore Kill, Harmonizing Investment Protection and International Human Rights: First Steps Towards a Methodology, in International Investment Law For The 21st Century: Essays In Honour Of Christophe Schreuer, 678, 679 (Christina Binder, Ursula Kriebaum, August Reinisch & Stephan Wittich, 2009); UNCTAD, Selected Recent Developments in IIA Arbitration and Human Rights, IIA Monitor No. 2 (2009), International Investment Agreements, available at https://unctad.org/en/Docs/webdiaeia20097_en.pdf. 2. ↑ E.g. U.N. Human Rights Council, The Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, HR/PUB/11/04 (2011), available at https://www.ohchr.org/documents/publications/GuidingprinciplesBusinesshr_eN.pdf . 3. ↑ Grant Hanessian, Kabir Duggal, ‘The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See?’ ICSID Review – Foreign Investment Law Journal, Volume 32, Issue 1, Winter 2017, 216-226, available at https://academic-oup-com.ezp-prod1.hul.harvard.edu/icsidreview/article/32/1/216/2738869?searchresult=1. 4. ↑ Michael Waibel, The Principle of Privity, in CONCEPTUAL AND CONTEXTUAL PERSPECTIVES ON THE MODERN LAW OF TREATIES, 201 et seq. (Michael J. Bowman, Dino Kritsiotis eds., 2018). 5. ↑ See in this regard, Karen Kaiser, Treaties, Direct Applicability (2013) available at http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1468; Essays on the Law of Treaties: A Collection of Essays in Honour of Bert Vierdag, 8 (Jan Klabbers & René Lefeber eds., 1998); Marc J. Bossuyt, The Direct Applicability of International Instruments on Human Rights (with special reference to Belgian and U.S. law), Revue Belge de Droit International, 317, 317-344 (1980). 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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Investment Arbitration in Latin America is Here to Stay

Sun, 2019-07-21 21:00

Rebeca Mosquera and Alejandro Chevalier

The Latin Lawyer – GAR Live 3rd Annual Arbitration Summit took place on Tuesday, April 30, 2019 (the “Summit”). Practitioners from the United States and Latin America gathered for a third consecutive year in Miami to discuss the importance of dispute boards in constructions contracts, the issue of social licenses, the challenges facing the energy sector in Latin America, and the status of renewable energy disputes in Spain. The Summit, chaired by Jonathan Hamilton of White & Case LLP and Jose Daniel Amado of Miranda & Amado Abogados, showcased a US senate committee style hearing where the panelists explored the question of whether investment disputes in Latin America are phasing out or are here to stay.

Before introducing the first panel, Jonathan Hamilton emphasized the fact that Miami offers a solid ground for arbitration, and that the region has come a long way since the first ever treaty arbitration case, Santa Elena v. Costa Rica (ICSID Case No. ARB/96/1).

The first panel, moderated by Carlos Concepcion, Shook, Hardy & Bacon, dealt greatly with the issue of social license, specifically, Carlos Concepcion referred to the relationship between the community, the sovereign, and the investor/contractor. He stressed the importance of the community to endorse the investment or project for its entire duration. The Bear Creek v. Peru arbitration was mentioned as an example of the importance that investors and the host state involve the local community to ensure that the community is receptive to the project.

Marco Tulio Venegas, Von Wobeser y Sierra S.C., explained the issue of social license from the perspective of Mexico. He noted that in reaction to President Trump’s immigration policies, Mexico has been focused on developing the south of the country, but there it found resistance from local communities to new construction megaprojects. Mexico has tried to address the issue by imposing on the local government the duty to obtain the consent from the community before the project is undertaken. Ana Maria Legendre, White & Case, commented that, in Panama, the issue of social license is primarily left to the investor, which is to engage with the community. After securing a concession, the investor must obtain the consent from the Saila—a political and religious leader in certain indigenous communities in Panama. Carlos Ortega, FTI Consulting, focused on whether fines paid to the local government/community due to violations of the social license could be included by the investor as part of its claim. Carlos Ortega discussed that the unquantifiable value of the license and the project must be measured in light of the benefits that the project gives to the country and the community. Lastly, Katherine Gonzalez Arrocha, International Chamber of Commerce, introduced the subject of dispute boards in arbitration. Katherine Gonzalez Arrocha said that there has been an increasing use of dispute boards in construction arbitration. The rest of the panelists agreed that dispute boards are increasingly used in construction arbitration in Latin America.

The second panel, moderated by Jose Daniel Amado, focused on the latest developments in the energy sector in Latin America. Gino Sangalli, Inkia Energy, discussed his experience as a general counsel for an energy company. He and his team perform what he calls a “BIT due diligence”. This due diligence allows the company to form an idea of which jurisdictions have the best protections for investors and potentially foresee how a regulatory change may affect their project. On the other hand, Isabel Kunsman, AlixPartners, focused her presentation on the renewable energy cases involving Spain. When the Spanish government decided to revoke incentives designed to attract investors to the country’s renewable energy market, a series of legal battles and international arbitrations ensued. Isabel Kunsman highlighted that, with respect to the calculation of damages, the RREEF v. Spain award refused to follow the “all or nothing” approach that had been followed by tribunals in other ECT-based claims against Spain. The RREEF tribunal held that because Spain had the right to endorse “reasonable” changes to its regulatory regime, the investor should only be compensated on his reasonable expectation on return.

On a slightly denser issue, Christian Leathley, Herbert Smith Freehills, discussed the interface of criminal actions in international arbitration and the gathering of evidence in these types of claims. Leathley stressed the fact that investments related to energy giga-projects could most likely be exposed to corruption given that they are typically handled or require the involvement of many people. This speaker reminded the audience how States have used allegations of corruption as a defense. In this context, he affirmed that during the gathering of evidence, tribunals, in commercial arbitrations, are likely to grant the request for documents and hear allegations of corruption within the merits phase; while in investment arbitration, tribunals deal with this issue at the jurisdictional stage. Co-panelists commented that these document requests might sometimes evolve into a fishing expedition. They also agreed that corruption has had a ripple effect in the region. On the other hand, Silvia Marchili, White & Case, noted that energy projects normally involve complex, long-term, high-stakes investments that are frequently located in challenging jurisdictions, and are sensitive to changes to volatile variables like commodity prices, making them prone to high-stakes disputes. She noted that when it comes to what the future holds for energy disputes, elements that may be relevant include public-private partnerships (PPPs), the renewables subsector, and environmental issues.

Jose Astigarraga, Reed Smith, moderated the third panel. This panel focused on lessons learned from disputes in the mining sector. Patricia Arrazola Bustillo, Gomez-Pinzon, delivered a practical approach regarding arbitration clauses in mining concession contracts with the Colombian government. Arrazola Bustillo noted that, although the concession agreement is an adhesion agreement, there is a possibility of including a dispute resolution clause through negotiation with Colombia. From an institutional perspective, Luis Martinez, International Centre for Dispute Resolution, discussed several factors, such as licensing and mobilization, surrounding project finance transactions, particularly EPC contracts. In addition, Martinez stressed the importance of parties to reach a consensus on the dispute resolution mechanisms that will be adopted by them. Furthermore, Martinez addressed the use of step or tier clauses and their possible benefits. He reasoned that by incorporating multi-tier dispute resolution clauses in their contracts, parties could get familiar with the issues giving rise to possible disputes through early negotiations or mediation, before reaching arbitration proceedings or alternatively, resolving these issues before reaching arbitration. The figure of “amigable componedor” used in Colombia was mentioned as an example.

On the other hand, Adolfo Jimenez, Holland & Knight, stressed the importance of taking into account while developing a project, the interests and well-being of the local communities. Jimenez noted that politics have transitioned to corruption in different cases, especially in the mining industry in which multiple ministries are involved. Thus, he recommended that the investor must make sure that it delivers on its promises. The next speaker, Jose Antonio Rivas, Vannin Capital, discussed the life-cycle of a mining project, which, he said, comprises five (5) main stages. With the support of visual aid consisting on a timeline showing the events giving rise to several investment disputes in Latin America, Rivas compared and contrasted different placements of quantum results, thus showing the audience possible damages valuation scenarios. Finally, extending the conversation on valuation and damages issues, Chris Milburn, Secretariat International, spoke about the different approaches that Tribunals could take while analyzing damages in the context of mining claims – income approach, market approach, and cost-asset approach. Milburn also stated that environmental issues might give rise to mining claims. In fact, when asked where the social license enters into a valuation, Milburn generally recommended the following: (i) a base line industry risk level could be included for discount rate, depending on case specifics, and (ii) risk may be diversified by the investors by developing projects in different jurisdictions where the risks assumed are equally diverse.

The fourth panel, moderated by Jonathan Hamilton, White & Case, focused on the destiny of investment disputes in Latin America and asked whether it is a historical moment or it is here to stay. He notes that original objectives of investment arbitration were to have lawyers resolve foreign investment problems instead of soldiers or politicians and asked whether that still exists today. Additionally, the panel discussed the dispute resolution clauses contained by new and renegotiated treaties and the future of regional treaties and arbitration centers. Mark Kantor, Independent Arbitrator, stated that dispute resolution and dispute settlement are inevitably political in part. Kantor noted that it is difficult to predict the future of investment arbitration given U.S. policies under the current Administration and recent E.U. Court of Justice decisions further supporting the idea that with sovereignty in re-ascendance, new challenges for foreign investments could arise. In other words, the future of foreign investments is uncertain given a rise in nationalism, as advanced by policies developed by different administrations and rulings by different courts, located in more than one continent. Kantor further stated that there is a fundamental rationale: not an evolution towards military control, but populism, and the idea of people rejecting the establishment system. Marike Paulsson, Albright Stonebridge, discussed whether politics used to try to resolve investment disputes aggravates proceedings. Patrick Pearsall, Jenner & Block, discussed the current role of the U.S. in the investment treaty regime. Ignacio Torterola, GST, discussed the approaches of regional governments in transition. Juan Marchan, Perez Bustamante & Ponce, posited that politicians interfere with arbitration. However, Marchan emphasized, economic development most probably depends on access to arbitration given that new investments are of a contractual nature.

Jonathan Hamilton shared his experience and reasoning on how investment arbitration has supported the development of projects such as the Quito Airport in Ecuador. The panelists and the audience further proceeded to discuss other topical issues: (i) is Washington backtracking from its pro investment treaty position? (ii) Who is investing and in which projects in the current regulatory environment? (iii) Do foreign direct investments face a new battleground? Having explored the question of whether investment disputes in Latin America are phasing out or are here to stay, the audience and panelists agreed that investment treaty arbitration is here to stay!

 

 

The authors would like to thank Estefania San Juan, White & Case, for her invaluable input in the drafting of this blog post and for her assistance in organizing a successful Summit.

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Developments in Financial Services Arbitrations in Shanghai

Sat, 2019-07-20 21:00

Li Tingwei and Xu Zhihe

Arbitration is often used to resolve financial disputes in China. For example, China’s financial regulation organs, i.e., People’s Bank of China, China Securities Regulatory Commission, China Insurance Regulatory Commission and China Banking Regulatory Commission, each have made efforts in promoting the use of arbitration in their regulated areas of business. Data released by the Ministry of Justice of China shows that 544,535 arbitration cases were accepted by the 255 Chinese arbitration institutions in 2018. Among these, 120,358 (roughly 22.1% and the highest) were financial disputes. The total amount of these financial disputes reached some 233.4 billion RMB (roughly 33.6% and the highest). Several Chinese arbitration institutions, like Shanghai Arbitration Commission (“SAC”), Guangzhou Arbitration Commission and Jinan Arbitration Commission, have also set out arbitration rules specially tailored for resolving financial disputes.

In major financial centers like London and Hong Kong, data shows that London Court of International Arbitration (“LCIA”) accepted 317 cases in 2018, where 29 percent of them are banking and financial disputes; while Hong Kong International Arbitration Center (“HKIAC”) accepted 460 cases (262 arbitrations), where 29.3% of them are financial disputes. An earlier post discussed, amongst others, LCIA’s traditional role in derivatives arbitrations.

 

Arbitrating Financial Services Disputes in Shanghai

 

  1. Strong Government Support and Increasing Numbers of Cases

Finance is a core sector in the city of Shanghai. The Chinese government has offered strong support in developing Shanghai as both a finance hub and an arbitration hub.

Back in 2009, the State Council of China announced the national strategy of Shanghai International Financial Center. In order to realize the goal, Shanghai introduced an action plan, which includes 32 actionable policies in 6 aspects. In particular, the action plan sets the tone of the city to become an international hub for asset management.

As to arbitration, in 2015, the State Council of China mentioned in its Plan for Furthering Reforms of the Shanghai Free Trade Zone to accelerate the pace of building Shanghai as an Asian arbitration center for the globe. In October 2017, Shanghai released an action plan to lead the country’s “One Belt, One Road” (OBOR) Initiative, in which the goal to build OBOR international arbitration center was set. In January 2019, the Committee of Comprehensively Furthering Reforms of Shanghai announced an implementation opinion on perfecting the arbitration mechanism, improving the credibility of arbitration and accelerating the pace of building Shanghai as an Asian arbitration center for the globe (“Implementation Opinion”), in which the task of becoming an international arbitration center was included as a major part of the overall mission of constructing Shanghai as a global city with excellent legal and business environment.

In the past three years, the percentage of financial arbitrations has consistently been the highest among the disputes submitted to the two arbitration institutions based in Shanghai. For Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Center, “SHIAC”), 636 financial arbitration cases were filed in the past three years, which is roughly 26% of all cases. In 2018, the amount of financial disputes in SHIAC reached 7,888 million RMB. Those financial disputes involved stock, bond, fund, futures, insurance, financial leasing, derivatives, trust, factoring, credit card, Internet finance, bank entrusted loan, share-holding entrustment and valuation adjustment agreements.

 

  1. International Pool of Specialized Arbitrators

Currently, SHIAC and SAC have made some progress in promoting arbitration for resolving financial disputes in Shanghai. For example, SHIAC updated its panel of arbitrators in May 2018. There are 367 (roughly 38%) arbitrators with financial expertise in the new panel. Among these, 294 of them are from Mainland China, the remaining 73 arbitrators are from HK, Macau, Taiwan and other jurisdictions. Those financial arbitrators have experience with both traditional financial matters and newly emerged ones.

 

  1. Support from the Courts

Over time, the Chinese courts have enhanced the mechanism of judicial review on arbitral awards, through a number of judicial interpretations and regulatory opinions. With the same efforts, an alternative dispute resolution system for resolving financial disputes has been created. By the end of 2018, the Financial Court of Shanghai accepted 1,897 cases. Their dispute amounts reached 25.2 billion RMB. The types of disputes include false statement in securities transactions, financial lending contract, corporate bond trade, pledged securities repurchasing, financial leading contract and business trust, etc.

In particular, according to Rule on the Jurisdiction of the Shanghai Financial Court promulgated by the Supreme People’s Court on 7 August 2018, the Financial Court of Shanghai is charged with the judicial review on arbitration-related issues as the intermediate people’s courts of first instance in Shanghai over financial civil and commercial cases, such as confirming the validity of the arbitration agreement and reviewing the application for setting aside arbitral awards. In the light of the case data published on the China Judgements Online, amongst the 16 decisions on arbitral awards to date, 7 decisions were made on the validity of fundamental arbitration agreements; 7 decisions were made on the jurisdictional challenges; 2 decisions were on the revocation of awards. In all the 7 cases on the validity of fundamental arbitration agreements, the applicant’s requests against the validity were rejected by the court. In the 7 cases on the jurisdictional challenges, the court confirmed in 3 cases that a valid agreement excludes the jurisdiction of a court. In the 2 cases seeking revocation of awards, the court rejected the applicant’s requests for revocation in both cases.

It is worth noting that the first case accepted by the Financial Court of Shanghai on the validity of arbitration agreement (2018 Hu 74 Min Te 3 Hao) was about a pledged bond repurchasing contract dispute, and the court confirmed the agreement on SHIAC arbitration in the contract was valid. In 2019 Hu 74 Min Te 1 Hao, the Financial Court of Shanghai also heard an application on the revocation of an arbitral award rendered by SHIAC for an insurance contract dispute, and the court rejected the applicant’s request of revoking the award. Therefore, it can be concluded that the abilities of Shanghai arbitration institutions to arbitrate financial disputes have been testified and the Shanghai courts’ supportiveness in enforcing arbitral awards have been demonstrated. Together, they lay a solid foundation for Shanghai to establish itself as an international financial and arbitration center.

 

Future of Shanghai for Financial Disputes

Though financial arbitration in China has made rapid development in these years, the number of disputes accepted by arbitration institutions is incomparable to that by the courts. A 2017 survey report issued by the ICC reveals that, in the 50 respondents of financial institutions and bank consultants, 70% of them have no experience of international arbitration. The room for arbitration to grow and resolve financial disputes in China is huge. The aforementioned Implementation Opinions urges Shanghai to “put forth efforts in innovating arbitration mechanism”, “perfect a coordinated system for arbitration, litigation and mediation”. In this sense, the task of building Shanghai as an international financial center would require not only the thriving of arbitration, but also the engagement of other alternative dispute resolution methods, in particular, to increase the usage of arbitration and mediation for emerging financial disputes.

There has been progress in forging a “litigation-mediation” working capacity in Shanghai. In 2017, the Joint Mediation Committee for the securities, funds and futures was established in Shanghai. Shanghai High Court and China Securities Regulatory Commission signed a memorandum on building “litigation-mediation” working mechanism for disputes in securities, funds and futures. As summarized in this article, compared with litigation, the values relied upon by the mediation process, i.e. voluntary, equal, inclusive, efficient and cost-saving, are more easily realized through arbitration.

Taking SHIAC arbitration rules as an example, in SHIAC’s 2014 version of Free Trade Zone Arbitration Rules, SHIAC was the first Chinese arbitration institution to provide for “mediation before the constitution of the arbitral tribunal” and formed a panel of mediators for the disputants. In practice of SHIAC, a joint venture dispute worth an amount over 500 million RMB was submitted to arbitration under the SHIAC Free Trade Zone Arbitration Rules, and successfully settled through mediation.

The future of combining arbitration with mediation for dispute resolution purposes may be written in the two following ways.

First, the model in Singapore may be adopted. The Singapore International Mediation Center (“SIMC”) would recommend the disputants to seek mediation after they have submitted the case to Singapore International Arbitration Center (“SIAC”) and SIAC has constituted the arbitral tribunal. If the disputants agree to SIMC mediation, SIAC and the tribunal would stop the arbitration process and give the disputants a maximum of 8 weeks to mediate their disputants with the help from SIMC. If the mediation is successful, SIMC would request SIAC to enter the mediation agreement into an arbitral award, which can be enforced through the courts.

Second, arbitration institutions, mediation institutions and industrial organizations may jointly conduct training for commercial dispute resolution experts. In Shanghai, most of the mediators sitting on the panels of commercial mediation institutions are legal experts and they also sit on the panel of arbitrators. But the fundamental requirements of a successful mediation may depend more on industrial experience and knowledge than legal expertise. Top-notch training is important. Since SHIAC formed its panel of mediators in 2014, over 30 mediators from legal, economic and trade sectors have received professional training in this respect.

 

Conclusion

In the new area, the basic policy orientation of the Chinese financial regulators goes for: “serving the real economy”, “preventing and controlling financial risks” and “furthering financial reforms”. Against this background, a modern dispute resolution mechanism must be created to resolve and prevent financial disputes, and to embrace and encourage financial innovation. For commercial arbitration, it must cope and grow with the new trend of financial development in China.

The building of Shanghai as an international financial center relies on three basic elements: innovation, risk-prevention and one-stop ADR services. Under the correlation between financial activities and the arbitration, the legal communities represented by arbitration institutions, practitioners and mediation institutions are faced with great opportunities.

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Do the Prague Rules Provide for an Efficient Resolution of Construction Arbitration Disputes?

Sat, 2019-07-20 03:00

Fabian Bonke (Assistant Editor for Europe)

The main concerns of parties when considering arbitration are the costs and length of arbitration proceedings (see, e.g., Queen Mary University of London 2018 International Arbitration Survey). The popularity of arbitration as a method of resolving construction disputes thus depends largely on whether costs can be reduced and efficiency maintained. This is particularly the case for construction cases of major international energy or infrastructure projects which are often very complex and lengthy due to certain key features: high factual and technical complexity, time pressure caused by the progress of the works that shall not be suspended, the involvement of multiple parties with a fragmentation of responsibilities, the involvement of voluminous evidence to be examined, and many witnesses and experts to be heard.

Whether arbitration proceedings can accommodate the particular features of construction disputes depends largely on the procedures for taking evidence which the arbitral tribunal applies. In this regard, the IBA Rules on Taking of Evidence in International Arbitration (“IBA Rules”) take precedent, and in the years since their launch have been widely used within the arbitration community. However, there have been concerns over the IBA Rules being common law influenced in their approach by allowing for a too expansive approach to evidence.

Against this background, the Rules on the Efficient Conduct of Proceedings in International Arbitration (“Prague Rules”) were drafted and published in December 2018 (for related posts on the Prague Rules on Kluwer Arbitration Blog click here, here, here, here and here). The Prague Rules aim at increasing the efficiency of arbitral proceedings by adopting a more inquisitorial style of proceedings. As opposed to the adversarial approach by the IBA Rules, the tribunal is to take a more active role in managing the proceedings, as is traditionally done in many civil law countries. However, do the Prague Rules provide a suitable set of rules for the efficient adjudication of arbitration cases in the construction sector with its particularly complex disputes? Are these Rules able to add to the appeal of arbitration as forum for major construction disputes? These questions will be addressed in view of the key features of the Prague Rules.

 

The Role of the Tribunal

The key feature emphasized by the Prague Rules is the proactive role played by the arbitral tribunal. The arbitral tribunal may “take an active role in establishing the facts of the case which it finds relevant for resolution of the dispute” (Art. 3.1). The IBA Rules, on the contrary, do not expressly bestow an active role on the arbitral tribunal for the gathering of evidence. This, on the one hand, has the advantage that the parties are not limited in how to establish their facts. On the other hand, this adversarial approach bears the risk that the parties may provide too much evidence which would thus result in unnecessary costs.

Whether disputes in the construction industry are resolved in a more efficient way under the guidance of a proactive tribunal proves difficult to project. In particular, an arbitral tribunal experienced in construction disputes might be able to give directions as to which aspects of the case it finds relevant and which issues may require further elaboration. This might avoid lengthy descriptions of the irrelevant facts (e.g., for an extension of time claims on events that were not time-critical for the project completion). This would then in turn contribute to also limiting legal counsels’ fees, which make up for a major portion of the overall costs of arbitration.

Some additional features of the active role of the tribunal set forth in the Prague Rules seem less relevant, in particular for arbitrations under institutional rules. This applies, for example, to the tribunal’s authority to hold a case management conference without undue delay, in which the tribunal provides, if it deems appropriate, preliminary indications to the parties and fixes a procedural timetable (Art. 2). These issues are usually addressed in institutional rules which would supersede the Prague Rules (Art. 1.3).

 

Document Production

Document Production is a controversial topic between civil law and common law jurisdictions (for latest posts on Kluwer Arbitration Blog click here, here and here). In contrast to countries adopting a civil law approach, parties from a common law background apply a more extensive approach when requesting documents or electronically stored information as deemed necessary to prove ones case. Likewise, the IBA Rules oblige a party to produce the documents requested to the counter party (Art. 3.4). Yet, the documents requested must be detailed (Art. 3.3) and may be objected based on the grounds in Art. 9.2.

Although the Prague Rules follow a more restrictive approach, the concept of document production is not entirely excluded. As a general rule, “the arbitral tribunal and parties are encouraged to avoid extensive production of documents”, Art. 4.2 Prague Rules. According to the civil law rationale, the tribunal is to decide based on the facts as presented by the parties, Art. 4.1. If a party chooses to request documents, it needs to address such request to the arbitral tribunal at the latest in the Case Management Conference, Art. 4.3. Thereby, it must explain the reasons why document production may be necessitated and refer to specific documents only (Art. 4.5).

Document production can be a costly and time-consuming process. Particularly in construction proceedings, which habitually include copious drawings, notices of defects and contract documents, restrictions may contribute to efficiency. With their restrictions, the Prague Rules may thus be beneficial in terms of efficiency. However, it seems as if the Prague Rules went a step too far, by abdicating methods such as e-discovery, particularly nowadays when most documents, also in construction projects, are only saved electronically. As to the IBA Rules, it needs to be pointed out that they merely allow that parties may request the production of only “narrow and specific” categories of documents (Art. 3.3 lit. a. ii.). As another limitation, the tribunal may exclude those documents from production without relevance to the case (Art. 9.2). If the condition of “relevance” is interpreted in a narrow sense, and if the document production is generally managed properly by the arbitral tribunal, document production also under the IBA Rules can be an efficient exercise.

 

Expert Evidence

A key issue in almost all construction disputes is the resolution of complex technical issues which require expert evidence.

The IBA Rules regulate in detail both the use of party appointed and of tribunal appointed experts. Yet, in practice, under the IBA approach, the proceedings are generally only attended by party appointed experts who often provide the tribunal with conflicting reports. The Prague Rules, on the contrary, have a focus on tribunal appointed experts and only mention party appointed experts incidentally (Art. 6.5-6.7 of the Prague Rules). This preference for a tribunal appointed expert has the benefit of being cost-saving. The sole reliance on tribunal appointed experts is, however, not without its downsides. Critiques argue that tribunal appointed experts gain too much influence on the decision since their findings are almost taken as dispositive. To address this issue, the Prague Rules allow the parties to appoint their own experts who can be called upon for examination during the hearing (Art. 6.5 of the Prague Rules). It can be expected that also under the Prague Rules, parties will thus appoint their own experts in order to challenge the tribunal-appointed expert in the hearing, where necessary.

It is thus not very clear whether the choice of the Prague Rules will bring about an increased efficiency in the use of experts. Independent of the applicable rules it seems key in the context of efficiency to identify the areas of agreement and disagreement. To this end, one might defer to the use of tools such as expert conferencing (Art. 8 Abs. 3 lit. of IBA Rules and Art. 6.7 Prague Rules) or joint-party expert reports (see e.g. Art. 6.5 Prague Rules), which have proven to be particularly helpful in finding a solution to multifaceted construction disputes.

 

Hearings

According to the IBA Rules, an evidentiary hearing must be held – whether in person, by telephone conference, or another method of oral evidence. In practice, a hearing requires large amounts of time, personnel and costs. In line with the stronger emphasis in civil law jurisdictions for written proceedings, the arbitral tribunal and the parties shall on the contrary, under the Prague Rules, seek to resolve the dispute on a documents only basis (Art. 8.1). Yet, the Rules allow a party to request a hearing, while they remain silent on whether this request must be granted or whether it lies within the discretion of the tribunal.

Whether or not a hearing is necessary and considered as appropriate in construction disputes must be decided on a case-by-case basis. Regularly, a hearing will be indispensable since factual witnesses and expert witnesses need to be heard and complex issues need to be discussed. In order to have an efficient hearing in construction disputes, written witness statements are often useful, a fact which is also recognised in the Prague Rules (see Art. 5.2-5.8). The hearings themselves should then focus on the examination of witnesses and experts and avoid the repetition of legal arguments that were made in written submissions.

 

Conclusion

The Prague Rules undoubtedly contain some beneficial aspects for the efficient resolution of complex construction arbitration disputes in major projects. The more proactive role of the arbitral tribunal, as well as certain limitations on document production, seems preferable particularly for civil law practitioners. In that sense, the Prague Rules provide a valuable supplement for the IBA Rules offering the parties additional options. However, it needs to be pointed out that an efficient dispute resolution very much depends on how the arbitral tribunal uses its wide discretion to proactively manage the proceedings. With a robust arbitral tribunal experienced with the complexity of construction disputes this efficiency can without a doubt be realized under the IBA Rules.

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Expect the Unexpected: A Report from the 31st Annual ITA Workshop on Adjudicating Changed Circumstances in Commercial and Treaty Arbitration

Thu, 2019-07-18 22:47

David J. Stute

Reflecting on fallout from economic and geopolitical turmoil since the financial crisis of 2008, the 31st Annual ITA Workshop and Annual Meeting, held in Dallas on June 19-21, 2019, focused on how to adjudicate changed circumstances in international arbitration.

Keynote speakers and panelists engaged in lively debates on how domestic and international legal principles on changed circumstances have evolved in response to major events, such as the imposition of tariffs and sanctions, political upheaval, sustained swings in commodity prices, coercive pressures from rent-seeking state actors, and the particular challenges associated with long-term contracts in light of such changes. Co-chairs Dean Céline Lévesque (University of Ottawa), Tomasz Sikora (Exxon Mobil), and Gaëtan Verhoosel (Three Crowns) led the two-day Workshop, which featured a stellar faculty of practitioners, academics, and in-house counsel from around the world, including keynote speakers Yas Banifatemi (Shearman & Sterling) and Professor Klaus Peter Berger (University of Cologne), as well as a lively debate with active audience participation.

Among other examples, the Workshop drew on the transformation of the natural gas economy. Before 2009, natural gas prices were strongly correlated with oil prices. But this changed with the fracking boom in the United States and elsewhere, which led to a shift in the economics of producing, selling, and purchasing natural gas. Moreover, the boom in natural gas production, its commoditization, and increased global trade in LNG (liquefied natural gas) also affected the prices of other energy sources—chief among them lignite or brown coal. Massive swings in currency exchange rates due to sanctions (e.g., on the Russian Federation and Iran) or monetary crises (e.g., in Argentina and Turkey) also proved troublesome for contracting parties located or invested in affected markets. Geopolitical developments—from the Arab Spring, to Brexit, to China’s Belt and Road Initiative—likewise led to disputes over the continued enforceability of previous contractual arrangements.

Faced with these and many other developments bearing on long-term transnational contracts and investments, the international arbitration community has routinely been tasked with considering the extent to which changed circumstances should affect bargains reached before such circumstances were, or could have been, foreseen.

This question poses a classic dilemma for legal systems, pitting the ancient Roman legal doctrine of pacta sunt servanda (sanctity of contracts, or stability of contractual relations) against that of clausula rebus sic stantibus (recognizing the need for change in light of evolved conditions). Put simply, should legal certainty prevail even if continued performance of the contract on its original terms would no longer be fair vis-à-vis the circumstances present at the time of the contract’s formation? There was broad agreement among Workshop panelists that the answer lies in striking a balance between the two doctrines—a balance that must be based on the particular circumstances of a given case. A decade of tremendous volatility appears to have bolstered awareness—both at the contract formation stage and in arbitral disputes—that the governing law must address changed circumstances in some manner.

Professor Klaus Peter Berger, in his keynote address, examined developments in substantive law as well as international arbitral practice. He discerned a trend away from formalistic insistence on the sanctity of contracts and toward a more pragmatic approach that has as its primary objective the maintenance of the “contractual equilibrium”, which takes into account not only the terms of the contract but also the parties’ assumptions when the contract was formed. In other words, if circumstances change to such an extent as to disturb this equilibrium, the applicable law should provide mechanisms for recourse.

Force majeure and hardship exceptions,1) For a recent analysis of ICC awards addressing the interplay of force majeure contract clauses and domestic law, please refer to Klaus Peter Berger, Force Majeure Clauses and Their Relationship With the Applicable Law, General Principles of Law and Trade Usages, in Hardship and Force Majeure in International Commercial Contracts 137 (Fabio Bortolotti & Dorothy Ufot eds., 2018). jQuery("#footnote_plugin_tooltip_7422_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7422_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); whether as contractual provisions or as operative legal doctrines found in domestic law or international contract principles, are such mechanisms. While the former is generally limited to circumstances that render performance impossible, the latter tends to be more permissive in scope—performance may be technically possible yet onerous. Civil law countries once resisted the inclusion of hardship provisions in their codified contract law. As Professor Berger pointed out, however, Germany was among the first to reevaluate its stance, or as he put it, Germany allowed “what [was] thrown out through the door [to] reenter through a window”. Although the German Civil Code of 1900 had failed to recognize changed circumstances as an exception to legal certainty, the hyperinflation of the early 1920s gave rise to a codified right to terminate a contract in particular circumstances, which is now contained in Civil Code Section 313. More recently, in 2016, French Civil Code Section 1195 came to recognize a similar, albeit narrower, right when changes in circumstances have rendered performance “excessively onerous”. Other jurisdictions, among them Italy and the Netherlands, have similar provisions. The same principle is reflected in the UNIDROIT Principles of International Commercial Contracts (Articles 6.2.1 and 6.2.3).

From these and other developments, Professor Berger discerned a trend that, while arguably running the risk of undermining legal certainty, may give better effect to the parties’ commercial intent, particularly in long-term contracts of ten years or more requiring large front-loaded investments that are only recoupable over the life of the contract.

Professor Berger proposed that, in tackling changed circumstances, tribunals should adopt a three-step analytical framework:

  1. Tribunals should verify that the lex arbitri provides procedural authority for adapting a contract to changed circumstances. This authority, according to Professor Berger, may be derived from either an explicit statutory warrant, such as the gap-filling provisions in Swedish and Dutch law, or as a function of plenary arbitral powers granted to tribunals in jurisdictions such as Germany.
  2. Tribunals should confirm that they have explicit substantive authority to adapt the contract—either in the contract itself or in the contract’s governing law. If not, tribunals must ask whether the governing law provides an implied duty of good faith that could support adapting the contract. According to Professor Berger, an implied duty of good faith provides a tribunal with sufficient authority to adapt a contract in light of changed circumstances under the clausula.  Because such a duty is recognized broadly, with at least one notable exception, Professor Berger’s rationale would lead to widespread acceptance of a duty to renegotiate,2) See Klaus Peter Berger, Renegotiation and Adaption of Int’l Investment Contracts: The Role of Contract Drafters and Arbitrators, 36 Vand. J. Transnat’l L. 1347, 1357 (2003) (asserting that “there are good reasons to assume the existence of such a transnational legal principle”). jQuery("#footnote_plugin_tooltip_7422_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7422_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); as well as recognition of arbitral tribunals’ authority to adapt contracts in light of changed circumstances.
  3. Finally, what standard should govern the adaption of a contract? Drawing on several ICC awards, Professor Berger argued that the governing standard should consist of reestablishing the parties’ contractual equilibrium. He acknowledged that hardship and force majeure may introduce uncertainty into commercial relationships, but emphasized that principles of good faith and reasonableness “can promote commercial predictability and efficiency, provided that their application remains within the confines of the parties’ initial bargain”.

 

Beyond doctrinal considerations, the ITA Workshop presented a host of perspectives on changed circumstances in commercial and investment arbitration across the globe. For example, Laura Sinisterra (Debevoise & Plimpton) explained how arbitral tribunals have recognized, at least in principle, Ecuador’s right under established contracts to effect significant increases in oil-revenue percentages payable to the government. Considering changed circumstances from yet another angle, a panel, comprised of current and former government officials and moderated by Dean Lévesque, considered states’ efforts to protect their right to regulate. In negotiating recent multilateral agreements, such as the TPP and CETA, governments were reported to have worked toward that objective by maximizing the specificity of investor protections.

In an ideal world, parties could foresee all future eventualities at the contract formation stage and tailor their contracts accordingly. Short of such clairvoyance, conference participants generally agreed that a modicum of contractual flexibility is arguably unavoidable. Recognizing this alone, of course, would be only an initial step in defining the legal doctrines addressing changed circumstances; ultimately, their application by arbitral tribunals will be determinative.

References   [ + ]

1. ↑ For a recent analysis of ICC awards addressing the interplay of force majeure contract clauses and domestic law, please refer to Klaus Peter Berger, Force Majeure Clauses and Their Relationship With the Applicable Law, General Principles of Law and Trade Usages, in Hardship and Force Majeure in International Commercial Contracts 137 (Fabio Bortolotti & Dorothy Ufot eds., 2018). 2. ↑ See Klaus Peter Berger, Renegotiation and Adaption of Int’l Investment Contracts: The Role of Contract Drafters and Arbitrators, 36 Vand. J. Transnat’l L. 1347, 1357 (2003) (asserting that “there are good reasons to assume the existence of such a transnational legal principle”). 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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The Intersection of Corruption in International Arbitration and Discovery Pursuant to 28 USC § 1782

Thu, 2019-07-18 00:03

Ava Borrasso

Corruption in the context of international arbitration is at the forefront of current discussion and analysis. At the same time, innovative efforts to obtain evidence in the U.S. through 28 USC § 1782 to support or counter a wide variety of international (i.e. non-U.S.) cases continue to evolve (including its recent extraterritorial application discussed more fully here). A recent case from the D.C. District Court highlights the interplay of access to evidence for foreign proceedings in connection with claims of corruption against the backdrop of an ongoing ICSID arbitration and a pending foreign state criminal investigation.

In re Application of The Islamic Republic of Pakistan v. Arnold & Porter Kaye Scholer, LLP, analyzes The Islamic Republic of Pakistan’s (Pakistan) request to obtain evidence located in the U.S. from Arnold & Porter Kaye Scholer, LLP (Arnold & Porter) in connection with a pending ICSID arbitration and a proceeding before Pakistan’s National Accountability Bureau (NAB).  The request related to dealings between Pakistan and Arnold & Porter’s client, a Turkish company called Karkey Karedeniz Elektrik Uretim A.S. (Karkey).

Karkey obtained a large contract from Pakistan in 2008 to provide Powerships pursuant to Rental Power Projects contracts to aid Pakistan during its 2006-2007 energy crisis. Following complaints of prima facie corruption in procuring those agreements, the Supreme Court of Pakistan held them void ab initio and ordered the NAB to investigate possible corruption. Pakistan froze Karkey’s bank accounts and vessels pending the NAB inquiry. In 2012, the NAB essentially cleared Karkey of liability under Pakistan’s anti-corruption laws.

The Supreme Court of Pakistan disagreed. It unilaterally abrogated the NAB’s determination and required $120 million USD from Karkey to release its vessels while directing the NAB to pursue criminal charges against individuals involved in the underlying projects. When the NAB objected, the Court held it in contempt. The NAB then instituted proceedings into possible corruption during which several of Karkey’s vessels were detained.

As stated, the dispute resulted in two ongoing proceedings: the NAB investigation and the 2013 ICSID arbitration initiated by Karkey alleging that the Supreme Court of Pakistan’s ruling (that the contract was void ab initio) was arbitrary. In response, Pakistan argued that the tribunal lacked jurisdiction to hear the claim due to Karkey’s fraudulent and corrupt procurement of the underlying contract.

Documents were exchanged in the course of the arbitration proceeding. While Karkey produced documentation, it advised Pakistan that some electronic documentation prior to April 2010 was contained on inaccessible backup tapes that were unduly burdensome to search. In an effort to obtain evidence to support its claims, Pakistan brought three separate motions before the ICSID tribunal to obtain the backup tapes – each of which was denied. The tribunal entered an award in favor of Karkey in August 2017 after which Pakistan filed a request for annulment.

In August 2018, Pakistan filed an ex parte Section 1782 application in the United States District Court for the District of Columbia, seeking the backup tapes from Karkey’s counsel, Arnold & Porter. In September 2018, that application was denied and service of the application on Arnold & Porter required. Pakistan sought information regarding negotiations of the underlying agreements and documents reflecting payments or items of value by Karkey to various Pakistan agents or employees. In addition, Pakistan propounded interrogatories seeking the manner in which the tapes were preserved and stored as well as identification of Arnold & Porter’s client document retention policies. Importantly, Arnold & Porter attested under oath that it was not in possession of the backup tapes.

The Court then analyzed Pakistan’s application pursuant to both the ICSID proceeding and the criminal investigation. First, the Court easily determined that it had authority to grant the relief and found that the prima facie factors necessary for Section 1782 were satisfied with respect to both proceedings. Namely, (a) the request was made by an “interested person” or a foreign or international tribunal (b) sought evidence (c) for use before a “foreign or international tribunal” (d) from a person residing or found in the district where the application was made.

Next, the Court analyzed the discretionary factors implicated by Section 1782: (a) whether discovery is sought by a participant in the foreign proceeding; (b) review of the nature of the foreign tribunal, the status of the proceedings and receptivity of the foreign court, government or agency to judicial assistance from a U.S. federal court; (c) whether the applicant is seeking to circumvent foreign proof-gathering restrictions or policies; and (d) whether the discovery requested is unduly burdensome.

As to the ICSID arbitration, the Court determined that the discretionary factors were somewhat split. The factors weighing against granting relief included that the matter was within the jurisdictional reach of the ICSID tribunal and would circumvent its proof-gathering policies (because Karkey was a party and the tribunal had repeatedly denied Pakistan’s request for the tapes). Most significantly, the fact that Arnold & Porter was not in possession of the backup tapes strongly militated against Pakistan’s application. By contrast, the tribunal’s announced receptivity to additional evidence with respect to ongoing proceedings weighed in favor of granting the relief.

As to the pending NAB investigation, the Court similarly determined that Karkey was within the jurisdictional reach of Pakistan to the extent its assets were located there, including three of its ships. This factor weighed against granting the application as the information could be compelled in that proceeding. However, the parties failed to present evidence with respect to the NAB’s proof-gathering practices. The lack of evidence weighed in favor of granting the application.

The Court then determined that the foreign court would likely be receptive to the evidence. The contention that the foreign proceeding was incompatible with U.S. standards of fairness was balanced against the strong U.S. policy favoring international comity. While caution was warranted due to the conflicting postures of the case taken by the NAB and the Pakistan Supreme Court, the fact that the relief requested was limited to a request for civil discovery further tipped this factor in favor of granting relief.

After weighing the various factors, the Court ultimately denied the subpoena for documents and request for the backup tapes (that, nonetheless, were not in Arnold & Porter’s possession). However, the Court granted Pakistan’s request for interrogatories regarding issues related to inquiry of the storage methods, access and possession of the tapes (recognizing that privilege issues would likely be implicated due to the fact that the application was directed to a law firm). By including the interrogatories in its application, Pakistan broadened the scope of relief requested and access to evidence.

This case illustrates the flexibility of discovery pursuant to 28 USC § 1782 to obtain evidence for a variety of claims (here, to locate potential evidence regarding corruption) as well as the importance of framing the application in a manner to maximize the potential for relief (by seeking not only the tapes or documents but information by way of interrogatory as well).

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Interviews with Our Editors: Cairo in the Spotlight with Dr Ismail Selim, Director at CRCICA

Tue, 2019-07-16 23:07

Zahra Rose Khawaja (Assistant Editor for the MENA Region)

Dr Ismail Selim, thank you for joining us on the Kluwer Arbitration Blog! We are grateful to have the opportunity to share your unique perspective with our readers.

 

1. Could you give our readers a brief introduction to yourself and your route to becoming Director at CRCICA?

I graduated from Cairo University in 1997 with an LL.B., where I also obtained an LL.M in International Business Law from the Institut du Droit des Affaires Internationales (I.D.A.I) in 1999. I then moved to France and earned my Master’s degree in Public Administration (MPA) from the National School of Administration (E.N.A.) in 2001. I was seconded to the CRCICA from 2003 until 2007, where I acted as Legal Advisor. I also earned a Certificate in International Commercial Arbitration from the School of International Arbitration, Queen Mary University of London in 2005. In 2007, I did an internship at the ICC Court of International Arbitration. In 2009, I earned my PhD with highest honours from Burgundy University (Dijon – France). The title of the thesis is “L’ordre public international in favorem arbitrandum – Etude de droit Comparé” (International Public Policy in favor of Arbitration – a Comparative Study). The thesis was published by Edition Universitaire Européenne.

I started off my career as a Public Prosecutor, then a civil Judge, until I joined Zulficar & Partners Law Firm in 2009, as a leading member of its Arbitration Group and where I was promoted to Partner in 2013. Further, in May 2015, I joined Nour and Selim in association with Al Tamimi and Company as Partner and Head of Dispute Resolution, Cairo. Further, I became a member of CRCICA Advisory Committee as of 1st May 2016. Then, I became Director of CRCICA in January 2017.

Today, I am Vice-President of the Egypt Branch of Chartered Institute of Arbitrators (MCIArb). I also teach at the I.D.A.I. in Cairo, Sorbonne University (and at the Sorbonne University Middle East) – Laws LLM in Paris. I frequently sit as an arbitrator and I am also a certified Mediator from the London School of Mediation.

 

2. GAR has previously described CRCICA as the “granddaddy” of arbitration in the MENA region. Does CRCICA still identify with that description?

Indeed, CRCICA is still identified as the “granddaddy” or the “Godfather” (I would say) of arbitration in the MENA region and Africa. It has been operating for 40 years, during which time it has administered more than 1,337 cases, many with an international or at least a regional element. CRCICA, through its late Director (Dr. Mohamed Abul-Enein), has created a pro-arbitration environment in the Arab world and we are doing our very best to maintain such stature.

CRCICA has signed, since its establishment until now, around 90 Cooperation agreements with international arbitration institutions and Chambers of Commerce. More than 550 conferences and seminars have been held under the auspices of CRCICA, dealing with different subjects such as construction, state courts, finance and banking, investment and others. CRCICA has also held, co–organized and participated in more than 180 training courses and workshops in both arbitration and mediation.

 

3. What do you perceive as being the top three advantages to users of administering an arbitration via CRCICA, as opposed to other international arbitration centres?

The first advantage is the selection of highly experienced counsels, who have been long-serving at the Centre, along with highly educated new generation case managers who are able to administer cases in Arabic, English and French languages. The number of administered cases per counsel/case manager usually does not exceed 25-30 cases, which shows that they are not overloaded. They are therefore able to provide efficient services under the supervision of the Director of CRCICA and/or its Deputy Director, as well as CRCICA’s Advisory Committee, whose functions include:

  1. deciding on requests for challenge of arbitrators;
  2. requests not to proceed with arbitration proceedings; and
  3. in exceptional circumstances, and in order to prevent the frustration of the arbitral proceedings, the Advisory Committee may authorize the tribunal to proceed on truncated basis or deprive a party from its right to appoint a substitute arbitrator.

The second advantage is the cost effectiveness of the administrative fees charged at the Centre compared to other arbitration institutions in the world, as illustrated in Global Arbitration Review (GAR)’s 2019 survey of arbitration costs. This is because CRCICA is not financed by any entity and is fully self-sustained. In addition, the average income salary in Egypt is lower than in Western and GCC countries, especially since the floatation of the Egyptian pound in 2016, which is a factor that permits CRCICA to monitor its running costs.

The third advantage is the neutrality of the Centre, which is manifested through its headquarters’ agreement ensuring its neutrality and immunity vis-a-vis the host state, to the extent that the Centre has been recommended by the Lalive/African Development Bank Report published in 2014 to administer cases filed against public entities of the host state. The neutrality of the Centre is also manifested through guaranteeing party autonomy in appointing arbitrators. When the Centre is requested to appoint a sole arbitrator or a presiding arbitrator, it endeavours to do so through the “Identical List Procedure” being sent to the parties, thereby maximizing the parties’ control over the process of the constitution of the entire arbitral tribunal.

 

4. Since the launch in 2017 of the CRCICA Rules in French (in addition to the English and Arabic versions that were already in place), have you seen an increase in the numbers of users from North Africa and in the number of cases being administered in French?

The issuance of the French version of the CRCICA Rules is responsive to users’ needs as well as global criterial reviews. The development came specifically after the issuance of a report by the African Development Bank ranking CRCICA as one of the best arbitration centres across the African continent and elsewhere, and which recommended that CRCICA should consider issuing a French version of the Rules to facilitate administering cases in French. Releasing the French version of the Rules strikes a chord with the Centre’s strategic vision to exceed its level of cooperation within Africa.

Last year, the CRCICA registered a case involving a party from Algeria, but the language of the arbitration was English. During the Arab spring, the CRCICA also registered an investor-state case based on the BIT between Libya and Morocco, but the language of the arbitration was Arabic. However, to date we have not had any cases registered in the French language, despite the regular use of CRCICA by French parties. However, we are trying to raise more awareness in Francophone Africa that CRCICA has very capable and competent case managers fluent in the French language. For the language of arbitration to be French, it seems that all the parties (not only one of them) shall be Francophone.

 

5. What was the driving factor behind CRCICA entering an agreement with the Permanent Court of Arbitration, and has CRCICA benefited from this agreement in terms of sharing facilities and expertise?

For the Centre, there will be more visibility, especially from the parties to investment arbitration, as CRCICA features in about 32 Bilateral Investment Treaties (BITs). Also, CRCICA enjoys immunities and privileges which will encourage the holding of hearings at the state of the art hearing facilities of the CRCICA. Finally, the agreement permits the parties to CRCICA proceedings to hold hearings at the stunning premises of the PCA at the Peace Palace.

 

6. Since CRCICA’s signing of the Pledge for Equal Representation in Arbitration in 2017, what initiatives has the centre undertaken to uphold its commitment to ensuring unbiased gender and age diversity in appointing arbitrators?

In application of the Pledge for Equal Representation in Arbitration, the Centre now includes in its reports data on female arbitrators and arbitrators under the age of 40.

In 2018, 11 female arbitrators were appointed by the Centre, as well as by the parties and the co-arbitrators. We also witnessed the appointment of an all-female tribunal this year.

Additionally, 13 arbitrators under the age of 40 were appointed.

 

7. Are there any upcoming CRCICA developments that you would like to share with our readers?

Well, we are working on revising our CRCICA Arbitration Rules by amending the actual rules and including certain matters that are not currently in the Rules, such as provisions for emergency arbitrators, consolidation and expedited rules. We are also working on promoting other ADR services such as our mediation rules, and we are currently working on Dispute Board Rules (DAB & DRB).

 

8. CRCICA is celebrating its 40th birthday in 2019. How will it be marking the occasion? What milestones would you like to see CRCICA reach by its 50th birthday?

In relation to CRCICA celebrating its 40th birthday, there is a film project that we are currently working on including short interviews with some of the pioneer practitioners and arbitrators relating to the role of international arbitration in the development of the Afro-Asian region. We hope to show the movie next year in a special celebratory conference.

A milestone that CRCICA would wish to reach by its 50th anniversary is having considerable accreditation in the number of cases being registered at the Centre from parties performing contracts all over the region, and gaining the utmost international recognition.

On the one hand, it is quite vital that Cairo as a seat of arbitration be quite receptive to international arbitration cases and the role of the state courts in Cairo, prior to the commencement of the arbitration case, during the lifetime of the arbitration and after the arbitration award is rendered (especially when handling the setting aside and enforcement procedures). This will enable it to be helpful, cooperative and understanding of the procedures in arbitration. CRCICA wishes to maintain its stature in educating the younger generations (future lawyers, law students, in house counsels and future judges) through organizing seminars, conferences, events, ICCA New York Roadshows and training courses educating them in arbitration and its procedures in Egypt. By accomplishing that goal, this would in turn increase foreign investors and parties when negotiating contracts with the Egyptian Government in choosing Cairo as the seat of arbitration, as it would be perceived as extremely receptive of arbitration awards and its procedures.

On the other hand, CRCICA is raising awareness as to the possibility of being chosen to administer arbitration cases where the seat of arbitration is not Cairo, but in other friendly seats such as Kigali, Paris and London.

 

Dr Ismail, thank you for your time and perspectives – we wish you and CRCICA continued success!

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

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IP Arbitration on the Rise

Mon, 2019-07-15 23:12

Michael Woller and Michaela Pohl

The relevance of intellectual property in business is on the rise, in particular concerning cross-border transactions. Accordingly, the willingness to defend such rights is also becoming stronger.

Disputes concerning intellectual property rights are traditionally mainly dealt with before national courts. Yet, in recent years there has been a considerable shift towards arbitration. The acknowledgement that national courts are not always the appropriate forum for IP disputes is driven by the fact that comprehensive technical knowledge is required to decide those cases. Paired with the ever more common multi-state components of such disputes, companies increasingly prefer disputes to be resolved by arbitral tribunals in lieu of state courts.

To meet the particular needs in IP and technology disputes, the World Intellectual Property Organisation (WIPO) established the WIPO Arbitration and Mediation Center (WIPO-Center) and specific arbitration (expedited and non-expedited), mediation and expert determination regimes. Key figures published by the WIPO Center show widespread use of its services in the fields of TMT and IP (WIPO Mediation, Arbitration and Expert Determination Cases) and the number of cases handled by the WIPO Center is consistently growing, showing rising demand for such specialized services:

In a nutshell, the key aspects of the WIPO arbitration regime are:

  • WIPO Neutrals: the WIPO Center administers a comprehensive list of experts specialised in various fields acting as arbitrators;
  • Specific rules on interim injunctions: quick suspension of infringements is often key in IP disputes – thus, the WIPO arbitration regime provides specific focus on interim decisions;
  • Confidentiality regime: IP and technology arbitration often involves secret know-how and trade secrets; the WIPO Rules provide for a specific set of provisions dealing with confidential information introduced in arbitration proceedings;
  • Evidence proceedings: the WIPO Rules provide specific sets of provisions on taking evidence via expert witnesses, including arranging for experiments to be conducted during arbitration.

But: IP disputes and arbitration – how do these fit together? When talking about IP arbitration, two main issues must be considered:

  • Is an arbitration clause in place? A core element of many IP disputes is the IP owner’s right to prevent others from using its IP (cease and desist claim). As a matter of fact, usually there is no contract in place between the rival parties. And even if there is (for instance licence agreements, technology agreements, trademark co-existence agreements or even transaction agreements also containing IP-related issues), such agreements often do not contain IP-specific arbitration clauses or any arbitration clauses at all.
  • Is the matter of the dispute arbitrable? In IP disputes, the existence, validity, ownership or scope of certain IP rights are at least preliminary questions to be resolved before the merits of a case can be determined. With regard to registered IP (such as patents, utility models, trademarks or designs), the question of whether such IP right has been lawfully registered by the authorities is typically resolved in front of the national courts and authorities, and not by private arbitrators.

This can lead to a situation where company A, which owns patent registrations in several countries, is faced with a competitor, company B, which is marketing potentially infringing products in several markets. A and B become involved in patent infringement litigation before several national courts in order for A to prevent the sale of the competitor’s product and in the end to obtain appropriate damages. This may lead to inconsistent national decisions as to (i) the validity of the very same patent in different countries, (ii) whether or not the competitor product infringes the patent, and (iii) the calculation of damages in each market.

Concerning the arbitrability of disputes about the validity of registered IP rights, as long as the preliminary question could also be subject to a settlement between the parties, it is commonly held that this question should be arbitrable.

Here we come full circle: the possibility to arbitrate IP disputes is shown by the ever-increasing number of IP cases solved by WIPO arbitrations. Nevertheless, the question of whether IP disputes are arbitrable in principle recurs time and again. This is historical owed to the assumption that IP rights are of public policy interest. These days it is beyond dispute that the vast majority of cases are arbitrable – at least when it comes to an international context.

This also has to do with the fact that the objection of a lack of arbitrability is not raised as often as assumed in the academic discussion. The reasons for the rather rare objection of non-arbitrability are as follows (see T. Cook and A. Garcia, International Intellectual Property Arbitration, 2010, p. 52/53):

  • Most IP disputes brought as arbitrations revolve around contractual problems. Contractual disputes, however, are regularly regarded as being arbitrable in most countries, even if they are related to intellectual property rights (the validity and scope of which may be a preliminary question also in contractual disputes).
  • The area of IP disputes that invites the objection of lack of arbitrability is further limited by the fact that only certain categories of IP rights are prone to be excluded from the scope of arbitrations. These rights are, as mentioned above, all those that revolve around the (in)validity and (in)existence of a registered IP right.
  • The last limitation of the problem-prone area is that the parties often do not contest the validity of the underlying IP right because they cannot or do not want to. This happens quite often because many IP arbitrations are based on licensing agreements. Yet relatively often these have “non-contest” or “non-challenge” clauses which prevent the validity of the IP right from being attacked. If the validity of IP rights is not in itself a question of arbitration, arbitrability related problems are prevented from arising.

It becomes clear: if certain criteria are met, disputes over IP rights may very well be decided by arbitral tribunals. Of course, the result of such arbitration cannot cause any third-party effect and cannot bind national register authorities to carry out any specific acts as to the registration of the IP rights that were subject to arbitration. But an arbitrator may well decide with inter partes effect whether a patent can be enforced against the defendant or not. However, due to uncertainties in this respect, it is important to check whether such circumstances may render an arbitration award unenforceable under certain national laws.

When drafting arbitration clauses in IP contracts, oftentimes the question arises whether claims for injunctive relief (or preliminary injunctions) should also be subject to arbitration or whether such should be decided on by ordinary courts. However, a limited arbitration clause applying arbitration to any dispute arising under or related to a specific agreement, but excluding actions for specific performance, such as injunctive relief (which particularly in IP disputes usually is a key claim), could turn out to be tricky in practice. In a recent decision in Henry Schein, Inc., et al. v. Archer & White Sales, Inc., 586 U.S. (2019), the Supreme Court of the United States held that the preliminary question as to whether such excluded claims brought by the claimant in front of the ordinary courts itself would have to be determined by arbitration. This leads to a situation (at least in the US) where firstly, it may have to be determined in arbitration proceedings whether a particular claim (e.g. for injunctive relief) is to be heard in arbitration or in front of the ordinary courts, and secondly, such claims may then need to be pursued in front of the ordinary courts (or maintained in arbitration, as the case may be).

When drafting IP and technology agreements or even when being confronted with a (multijurisdictional) dispute scenario, parties should consider specialised IP arbitration as a valid alternative to court litigation. Nevertheless, careful thought must be given to whether this option indeed is fit for the intended purpose.

 

 

 

 

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Interviews with our Editors – In Conversation with Dr Emilia Onyema, Senior Lecturer at SOAS

Mon, 2019-07-15 03:38

Sadaff Habib (Assistant Editor for Africa)

Dr Emilia Onyema, Senior Lecturer at SOAS

A common concern for parties when opting for an African country as a seat of arbitration is the extent of judicial intervention in the arbitration. Whilst certain African national courts have swayed back and forth between exercising sovereignty and upholding party autonomy in arbitration there is a positive inkling that African national courts are more keen to recognize arbitration agreements and take a more “supportive” approach to arbitration.

Kluwer Arbitration Blog invited Dr Emilia Onyema, senior lecturer at SOAS in the UK, pioneer of the SOAS Arbitration in Africa Conferences and editor of the recently published book Rethinking the Role of African National Courts in Arbitration, to share her experience as an academic in arbitration and share her insight on African national courts and arbitration.

 

1. What attracted you to disputes and arbitration?

The fact that disputes can be resolved by professionals outside of the court system with the time saving this entailed.

 

2. There have been a number of recent developments across the African continent. What in your view has been one of the most significant developments in arbitration in Africa to increase its appeal as a seat in international arbitration?

Africa is a continent of 54 independent states of different hues. It is more apt to look at developments across each state or group of states (e.g. the OHADA region). When we talk of seat of arbitration, we generally look at specific cities. For me, one of the most significant developments across the continent as it relates to arbitration, is the momentum our SOAS Arbitration in Africa conferences have generated. Our conference series has provided the opportunity for an identifiable community of African arbitration practitioners to meet and engage with each other in an African city annually. The conferences have held in various African cities: Addis Ababa, Lagos, Cairo, Kigali, and Arusha with Douala, Accra, Nairobi and Cape Town in tow to host the conference in the next years.

 

3. In your view, what more needs to be done to improve the visibility of different countries in Africa as an international arbitration hub?

Continued promotion or publicising of what is already happening in the different and major states (and cities such as Cairo, Casablanca, Johannesburg, Cape Town, Kigali, Nairobi, Addis Ababa, Abidjan, Lagos, Accra, Abuja, etc.). This include the growth of a vibrant arbitration community in these states, engagement of the judiciaries of the states, modern arbitration laws and the existence of viable arbitration centres that administer arbitration references in these cities.

 

4. It is acknowledged that African arbitration practitioners are underrepresented in arbitration.

 a. Do you see this particularly challenging as a female arbitrator and academic?

Arbitration is still dominated by males (whatever their colour/race) but female arbitration practitioners are beginning to make an inroad. In my opinion, the break comes when a female is given that first opportunity to sit as arbitrator. We generally excel and this opens the door to more appointments. As an academic, I (in similar fashion to other academics) have an added advantage of being ‘perceived’ as having greater expertise of a subject and analytical skills. I must add that such perception is not misplaced. Being female (and an academic) gives me the opportunity to bring different skills to the arbitral tribunal.

b. What steps do you think need to be taken to improve the representation of Africans in African arbitrations?

If I can rephrase this question; fairness and equality demand not just that African arbitrators are considered for appointment in Africa-related disputes (though this is a minimum) but that the best candidates are appointed for any dispute regardless of gender, race, nationality, etc. This is the goal. I must mention that there are African arbitrators who sit over disputes that have no connection to Africa. My first arbitration in which I sat as arbitrator had no connection to Africa. However, this is not the norm. To answer your question, I agree with the qualitative comments to this question from our SOAS Arbitration in Africa survey report 2018:  “change the narrative which leads to the negative perception of African arbitration practitioners (as lacking in expertise) and one way to do this is for those who have had positive experience of African counsel, expert, tribunal secretary, institution, or arbitrator to also say so”. The second is for Africans to appoint Africans as counsel and arbitrator. The third for me is the growth of the domestic arbitration market in African states. It is at the domestic level that aspiring arbitrators can gain experience and help develop an arbitration consciousness among the domestic and intra-African businesses, in particular, the small and medium enterprises. This is a fertile ‘disputes mine’ waiting to be exploited.

 

5. What would be your key advice to fellow female practitioners in the field?

Excel at your primary profession and be the best you can be at your job while continuing to seek that appointment. It will come. And remember that arbitration is a marathon race. Finally, enjoy your job/career pursuits. Life, surely, is more than getting appointed an arbitrator.

 

6. You recently edited a book Rethinking the Role of African National Courts in Arbitration where you also write about the Role of African Courts and Judges in Arbitration. What do you think African national courts can do to make them more arbitration friendly?

The first for me is for the courts/judges to understand the arbitration process and its relationship with the courts. This requires continued dialogue between both professions. The second is to have a clear understanding of what we mean by ‘arbitration-friendly’. This does not mean that a judge basically rubber stamps all arbitration related issues before her. In my view, being arbitration friendly refers to judges deferring to arbitrators within the provisions of their laws. For example, it is not for a judge to annul an award simply because s/he disagrees with the decision of the arbitrator.

 

7. Do you think a balance can be struck between national sovereignty amongst African nations and party autonomy in choosing arbitration as an alternative dispute resolution mechanism?

Yes and this is already evident in the number of African states that are parties to various international investment agreements, for example, containing arbitration clauses; those that have ratified the ICSID Convention, and conclude arbitration agreements in commercial transactions whether with foreign or domestic entities. Therefore, as an alternative process, I can confidently claim that African states recognize and themselves, use arbitration. There are still economic sectors in different jurisdictions which need to be opened up to arbitration – this is work in progress. Participation in the arbitration process, as parties, in my opinion is not the problem. For me, the gap is in African states and their entities accepting the outcomes of arbitrations they participate in and as good citizens, paying up on valid awards.

 

8. During arbitration, a party may seek to obtain an interim measure such as an attachment against the other. Such measures are often sought on an urgent basis. Do you see that the African courts are equipped to adequately deal with such interim measures during an arbitration? Have you come across any practical examples?

National courts in African states have experience of granting urgent applications and in most common law jurisdictions on an ex parte basis. In my view, most courts in African states will grant interim measures in support of arbitration: the question is whether they will grant this to arbitrations seated outside their jurisdiction and the speed of granting such applications. For cases on this see Part II of Rethinking the Role of African National Courts in Arbitration (edited by Emilia Onyema) and published by Wolters Kluwer, 2018.

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

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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