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Australian Arbitration Week Recap: Functus Officio in Arbitration

Sun, 2021-10-31 00:40

On the final day of ACICA’s Australian Arbitration Week 2021, Level Twenty Seven Chambers presented a seminar on “Functus Officio in Arbitration”. The theme of the seminar was judicial intervention and functus officio, discussed by Shane Doyle QC (Barrister, Level Twenty Seven Chambers), Sarah Spottiswood (Barrister, Level Twenty Seven Chambers), and Chiann Bao (Arbitrator, Arbitration Chambers).

This article will address the discussion on whether a domestic court can intervene where a tribunal issues an award after becoming functus officio, in light of the recent decision of Chevron Australia Pty Ltd v CBI Constructors Pty Ltd [2021] WASC 323 (“Chevron v CBI”).

Judicial Interference

Mr Doyle began the discussion by outlining the theme of judicial intervention in commercial arbitration. As Mr Doyle noted, the extent to which a domestic court may intervene in an arbitration is provided for by the relevant institutional rules. For arbitrations brought under the UNCITRAL Model Law, Art 5 restricts the extent to which a court can intervene to “where so provided in this Law”. When the UNCITRAL Working Group considered Art 5 in 1983 (which was, at that point in drafting, Art 3), one view as to its appropriateness was that it “created the impression that court intervention was something negative and to be limited to the utmost”. Today, while the relevance of the former epithet might remain open for debate, the latter has been all but embraced, in practice, if not in principle.

As Mr Doyle stated, the modern trend in arbitration is one of limited judicial intervention. This, as Singapore Chief Justice Sundaresh Menon stated in AKN v ALC [2015] SGCA 18 at [37], is “a mainstay of the Model Law”. However, his Honour went on to observe (at [38]): “That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed”.

Chevron v CBI

These limited grounds of judicial intervention were the subject of dispute in Chevron v CBI. By way of a cursory summary, in 2011 Chevron contracted CBI and Kentz Pty Ltd (“CKJV”) for the construction of an oil and gas project off the coast of Western Australia. A contractual dispute arose concerning the interpretation of provisions requiring Chevron to reimburse CKJV for their employment of labour.

The dispute was referred to arbitration and, on application, the tribunal bifurcated the hearing into two stages: a hearing on liability followed then by a hearing on quantum and quantification. Following the delivery of the first interim award on liability, CKJV was ordered to amend its pleadings on quantum. Upon receipt of CKJV’s further pleadings, Chevron objected, submitting that the pleadings raised a new case and that the tribunal was functus officio having already decided all issues as to liability. The tribunal delivered its second interim award, in which a majority of the tribunal rejected Chevron’s submissions as to jurisdiction. Chevron subsequently applied to the Supreme Court of Western Australia to set aside the award.

Functus Officio

The first issue raised in Chevron v CBI was whether the Court could set aside an interim award made by a tribunal after becoming functus officio.

As Mr Doyle outlined, given an arbitral tribunal draws its jurisdiction from the agreement of the parties, such agreement is “the source of the tribunal’s authority, but also limits the authority”. Put simply, once the tribunal decides a final award on a matter submitted to it by agreement of the parties, then the tribunal has performed its function, that matter is res judicata, and the tribunal is functus officio. Accordingly, the tribunal will not have the authority to alter an award, subject to certain exceptions: see, for example, Arts 33, 34 of the Model Law.

The natural question that arises is whether a court has jurisdiction to set aside an award that is made outside of jurisdiction because it is functus officio. The relevant power is contained in Art 34, of which Art 34(2)(a)(iii) relevantly provides that a court can set aside an arbitral award where “the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration”. Relevantly, Gary Born observed in International Commercial Arbitration (3rd ed, 2021) at [3582]:

An arbitral tribunal may also exceed its authority if it makes an award after becoming functus officio. Thus, a few courts have held that the arbitral tribunal exceeded its mandate where, after issuing a final award, it reopened the case and issued another award (recalling or revising its earlier award).

In Chevron v CBI, Martin J held that such an award did engage the Western Australian statutory equivalent of Art 34(2)(a)(iii) of the Model Law. In so concluding, his Honour relied on the above observations of Gary Born, as well as the decision of CRW Joint Operations v PT Perusahaan Gas [2011] SGCA 33, in which the Singapore Court of Appeal held (at [31]) that Art 34(2)(a)(iii) “addresses the situation where the arbitral tribunal exceeded (or failed to exercise) the authority that the parties granted to it.”

Justice Martin concluded (at [97]) that a “multiple bites at the cherry” approach cannot be accepted as it “would violate a cardinal policy of finality, recognised as essential to a coherent process of arbitral and, indeed, to curial decision making.”

Arbitrator’s Jurisdiction

The second issue the Court had to decide in Chevron v CBI was the extent to which the Court should defer to the tribunal’s views as to what it intended by its own procedures.

Ms Spottiswood outlined the process of an arbitrator’s assessment of its own jurisdiction, the starting point of which is the principle of ‘Kompetenz-Kompetenz’: Art 16. The principle allows a tribunal to determine its jurisdiction without having to apply to a court for a ruling. Ms Spottiswood noted that the principle’s rationale is that it “prevents an uncooperative party from halting the arbitral process by challenging an arbitrator’s jurisdiction.” Accordingly, where a party challenges a tribunal’s jurisdiction on the basis of functus officio, it is for the tribunal to decide first whether it has jurisdiction, as was the case in Chevron v CBI.

Yet, to what extent will a court defer to such an assessment? In Australian courts, the tribunal’s assessment of its own jurisdiction is taken to be of no moment: the court is to make its own objective assessment as to the tribunal’s jurisdiction. Ms Spottiswood noted that the authority for this position in Australia can be traced to the decision of the UK Supreme Court in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46; [2011] 1 AC 763, in which Lord Mance JSC stated (at 813 [30]):

The tribunal’s own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority … This is so however full was the evidence before it and however carefully deliberated was its conclusion.

This passage was, most notably, cited with approval by the High Court of Australia in TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5 (at 547–548 [12]).

Returning to Chevron v CBI, CKJV submitted that the Court ought to defer to the tribunal’s stance on the issue of functus officio. Martin J held that it was open for Chevron to seek to have the Court examine afresh its arguments as to functus officio concerning the tribunal. In so reasoning, his Honour relied on the authority of Maersk Crewing Australia Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union [2020] FCA 595, in which Colvin J stated (at [28]) that the view of the tribunal as to its jurisdiction “is not final and binding because arbitrators cannot by their own decisions create and extend their own authority”.

Concluding Remarks

Mr Doyle concluded that the principle of functus officio engaging a court’s power to set aside an award under Art 34(2)(a)(iii) needs to be borne in mind whenever one drafts procedural orders to bifurcate a hearing. As the decision of Chevron v CBI illustrates, there is a need “for precision about what is and what is not to be the subject of the first hearing”.

More coverage from Australian Arbitration Week is available here.

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Australian Arbitration Week Recap: When Does Privacy Become Secrecy in Commercial Arbitrations?

Sun, 2021-10-31 00:00

On 19 October 2021, Mr Bret Walker AO SC delivered the 2021 CIArb Australian Annual Lecture as part of ACICA’s Australian Arbitration Week 2021. Mr Walker’s lecture, titled ‘Privacy or Secrecy? Open Justice Values as a Challenge to Arbitral Procedure’, offered a thought-provoking examination of what he termed the ‘problematic nature’ of secrecy in commercial arbitrations from an open justice perspective. This blog post provides an overview of some of the lecture’s main themes.

 

The origins of privacy and confidentiality in commercial arbitrations

The lecture began by highlighting that privacy and confidentiality have long been touted as self-evident and key advantages of commercial arbitrations.

In 2018, the Queen Mary University of London/White & Case International Arbitration Survey reported 36% of respondents rated ‘confidentiality and privacy’ as one of the three most ‘valuable characteristics’ of international arbitration – a finding on par with the previous 2015 report. An overwhelming 87% of respondents also attached some degree of importance to confidentiality (ranging from ‘somewhat’ to ‘very’ important).

The broad acceptance of privacy and confidentiality as a valuable or important characteristic of commercial arbitration is usually justified by the conceptually distinct foundation of arbitration to litigation. Arbitration is founded on a private bargain between autonomous and consenting parties, rather than on the compulsion of a State. That conceptual distinction is seen to justify parties to arbitration agreements being freely able to conduct and resolve their disputes in ‘secret’, despite those arbitrations being seated in jurisdictions founded on long-standing principles of open justice.

Mr Walker’s lecture revisited the supposed rationale for this different approach to litigation and, in doing so, queried whether privacy and confidentiality should still be viewed as essential ingredients in all commercial arbitrations.

 

Approaches to privacy and confidentiality in Australia and elsewhere

Unsurprisingly, the approaches to privacy and confidentiality in commercial arbitrations around the world lack uniformity.

Mr Walker provided an analysis of several Australian High Court decisions over the past 40 years that discussed the concepts of privacy and confidentiality in arbitration. The survey of cases included the seminal decision of Esso Australia Resources Limited v Plowman (1995) 183 CLR 10, which distinguished privacy from confidentiality, and held that absolute confidentiality of documents produced and information disclosed in an arbitration was not an essential characteristic of private arbitrations in Australia. Of course, since then, Australia’s approach has moved towards greater confidentiality in international commercial arbitrations through a series of legislative amendments to the International Commercial Arbitration Act 1974 (Cth) to provide a default ‘opt-out’ confidentiality regime.

Given the absence of privacy or confidentiality provisions in the UNCITRAL Model Law, other jurisdictions have also sought to regulate these issues through national legislation, such as in Malaysia, Brazil, the Philippines and New Zealand. Many arbitral institutions have also sought to include explicit provisions around privacy and confidentiality in their rules (e.g. Article 26 ACICA Rules; Article 30 LCIA Rules).

In contrast, for some years, the ICC International Court of Arbitration has taken bold steps in favour of transparency through the publication of certain information about arbitral tribunals, industry sectors and law firms involved in arbitrations administered by it (unless the parties otherwise agree). Importantly, since 2019, the ICC has published various awards, procedural orders, and opinions as a means of ‘facilitating the development of trade worldwide’. Moves, such as these, towards greater transparency in commercial arbitrations, reinforce a key point made in the lecture about the educative force of declared and enforced legal rights and obligations. They are an essential element of the rule of law and of open justice principles, which should be ‘seen and heard’.

 

Practical issues relating to the application of open justice principles in commercial arbitrations

The lecture (and following Q&A) touched on a range of issues relating to the practical application of open justice principles to commercial arbitrations. Some of the issues are highlighted below:

Identifying the ‘right’ kind of commercial arbitration disputes

One issue is the potential complexities in defining the features of commercial arbitrations that warrant greater transparency.

The lecture did not advocate for open justice principles to be applied to ‘all’ commercial arbitrations. In fact, Mr Walker saw no difficulty with most arbitrations retaining the parties’ intended position on privacy and confidentiality. However, Mr Walker acknowledged the expanding realm of disputes that have been found by national courts to be capable of arbitration, that leave fewer categories of disputes within the exclusive jurisdiction of those national courts to resolve.

Possible examples of commercial arbitrations included those involving public or government procurement contracts or related disputes, and other endeavours funded by public monies (e.g. large-scale infrastructure projects). The exact line in the sand however would likely be up for considerable debate, both as to the general rule of which proceedings should be caught, and as to the application of any necessary exceptions to that general rule. For now, as to the latter, Mr Walker identified at least one possibility, being cases concerning a genuine public interest immunity claim (e.g. where national security issues were involved).

Impact on the attractiveness of commercial arbitration

As we saw in the 2018 International Arbitration Survey results above, privacy and confidentiality remain to be seen as valuable or important factors in the use of commercial arbitration. Perhaps unsurprisingly, in-house counsel were singled out as placing more importance on confidentiality than other categories of respondents.

However, while these findings may seem dramatic, they tell us little about what specific aspects of privacy and confidentiality parties find important. They also provide little insight on how any departure from those aspects in commercial arbitrations might impact on the attractiveness of arbitration over litigation. In fact, both the 2015 and 2018 surveys found that the enforceability of awards, avoiding specific legal systems/national courts, flexibility, and the ability of parties to select arbitrators, are more frequently cited by respondents as within the three most valuable characteristics of arbitration, compared to privacy and confidentiality.

Mr Walker recognised a cultural change would be necessary among parties to commercial arbitrations. He also stressed that he did not underestimate the difficulty of such a change. One could argue that commercial parties may be more persuaded by factors such as greater efficiency and reduced legal costs, in addition to those characteristics listed in the survey, and rated more valuable than privacy and confidentiality. Public parties, on the other hand, may be less inclined to invite closer scrutiny, particularly where disputes could involve the examination of public maladministration. However, even then, Mr Walker noted that public officials could still benefit from greater transparency (e.g. in gaining greater access to details of previous disputes involving a business that seeks to contract with a public body).

 

Conclusion

Mr Walker’s insightful analysis in the 2021 CIArb Australian Annual Lecture brought home the concerns associated with well-established concepts of privacy and confidentiality in commercial arbitrations from an open justice perspective. Although these issues have long been the subject of debate, the lecture reiterated a useful perspective of viewing arbitration as part of an integrated justice system with litigation, and not separate from what many courts do on a daily basis.

 

More coverage from Australian Arbitration Week is available here.

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Denial of Justice by Mexican Courts to Canadian Investment Fund under NAFTA: the First of its Kind

Sat, 2021-10-30 00:54

Lion Mexico Consolidated v. Mexico1)Lion Mexico Consolidated L.P. v. United Mexican States (ICSID Case No. ARB(AF)/15/2). jQuery('#footnote_plugin_tooltip_39055_60_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39055_60_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); represents the first positive finding of denial of justice in the history of NAFTA2)In 1999, a NAFTA tribunal analysed and rejected for the first time a claim for denial of justice in Robert Azinian v. Mexico. jQuery('#footnote_plugin_tooltip_39055_60_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39055_60_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and one of the rearrest recent examples in investor-state arbitration.

On 20 September 2021, a NAFTA tribunal seated in Washington, D.C., held Mexico liable for denial of justice by the Mexican judiciary, ordering the State to pay US$ 47 million for “full reparation” (plus legal fees and arbitration costs) to Lion Mexico Consolidated L.P. (“LMC”), a Canadian entity incorporated in Quebec and domiciled in Texas, USA.

 

Background

LMC granted three loans totalling US$ 32.8 million to a Mexican businessman (the “Debtor”) to acquire land and develop two skyscrapers and a luxury ocean-front resort in Jalisco and Nayarit, respectively, secured by three mortgages over the properties in question.

After LMC attempted to foreclose a mortgage to recover the unpaid loans, it discovered that all mortgages had been cancelled by a judge in Jalisco (at the Debtor’s request) without its participation. This “Cancellation Judgment” was based on a Settlement Agreement allegedly signed by LMC, in which it accepted payment of the loans (and cancellation of the mortgages) in exchange of shares in the Debtor’s companies (the “Forged Document“). LMC tried to revert the illegal cancellation of the mortgages for almost three years before the Mexican courts, and falling to do so, it lodged an investment arbitration against Mexico.

 

Jurisdictional phase

Back in 2018, the Tribunal was confronted with a novel issue: whether or not mortgages qualify as an investment under NAFTA. The Tribunal found that mortgages meet the two-fold requirement of Article 1139(g): being “intangible” real estate, “used for economic benefit”. The Tribunal found that mortgages are in rem rights (derechos reales) under Mexican law, while treaty practice confirms the same understanding, as Mexico had concluded other 22 BITs where “mortgages” were expressly recognised as an investment (e.g., the Spain-Mexico BIT).3)Decision on Jurisdiction, 30 July 2018, paras. 229, 233, 240. jQuery('#footnote_plugin_tooltip_39055_60_3').tooltip({ tip: '#footnote_plugin_tooltip_text_39055_60_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });  In line with the Tribunal’s finding, the new NAFTA (known as “USMCA”) signed by the US, Mexico and Canada – in force as of 1 July 2020 – expressly includes “mortgages” as a covered investment under Article 14.1(h).

 

The Parties’ positions on the merits

LMC alleged it was not properly summoned in the proceedings that cancelled its mortgages in absentia (“Cancellation Proceeding”) and then, it was deprived of its right of defense to revert said cancellation before higher courts, which repeatedly denied any opportunity to prove the forgery of the Settlement Agreement upon which its investment was cancelled.

Mexico alleged that Mexican courts acted in accordance with the law, while LMC was negligent in its legal defence. Mexico alleged that it was also the victim of a sophisticated fraud by the Debtor, while LMC had not exhausted all the available remedies, as condition precedent to denial of justice. In its view, LMC could obtain compensation from criminal proceedings against the Debtor.

 

The Tribunal’s findings

 

  1. Standard of proof

The Tribunal followed the Mondev standard as a “guide”, albeit with some precisions. In its view, denial of justice involves an “objective test”, which: “requires a finding of an improper and egregious procedural conduct by the local courts (whether intentional or not), which does not meet the basic internationally accepted standards of administration of justice and due process, and which shocks or surprises the sense of judicial propriety.4)Award, 20 September 2021, para. 299. jQuery('#footnote_plugin_tooltip_39055_60_4').tooltip({ tip: '#footnote_plugin_tooltip_text_39055_60_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); In other words, the Tribunal clarified that a breach must be procedural and not substantive; rejected the need to prove an intentional conduct (e.g., bad faith); while required a level of gravity to shock or surprise, contrary to basic yet internationally accepted standards of justice.

 

  1. Denial of Justice

The Tribunal recognised three types of denial of justice claims related to: i) the right to access justice (e.g., lodge an appeal); ii) the right to be heard (e.g., to present evidence); and iii) undue court delay.

The Tribunal found unanimously that Mexico denied “procedural justice” (and FET) to LMC, in breach of Article 1105 of NAFTA, for the first two types of claims (referred to above), while considering it needless to address the claim for undue delay.

The Tribunal first gave deference to and presumed that the municipal courts had acted properly, while it did not pass judgment on the propriety of the entire Mexican judicial system. It then accepted Mexican courts acted in good faith (i.e., without colluding with the fraudsters or colluding in corruption, as this was not raised by LMC). However, the Tribunal held that the existence of a “sophisticated fraud” by the Debtor to cancel the mortgages, regardless how sophisticated this might be, did not excuse the State from its duty to have a properly functioning judicial system.

In particular, the Tribunal found that the courts of Jalisco failed to function properly during the first instance, appeal and amparo proceedings. First, the commercial judge cancelled the mortgages by default as a result of a “deeply flawed” service of process to LMC, and later foreclosed the possibility to appeal said judgment in disregard of municipal law. Second, the higher courts during amparo, queja and remand proceedings, denied LMC every opportunity to allege and submit relevant and material evidence to prove the forgery that resulted in the loss of its investment.

The Tribunal concluded that LMC was denied procedural justice in three respects:

a) LMC was denied access to justice: LMC was never given the opportunity to defend itself in the Cancellation Proceeding, due to a “deeply flawed” service of process that resulted in the cancelation of its mortgages in absentia. While this was the basis of the denial of justice claim, it was not the only defective act. The Judge also failed to examine ex officio and exhaustibly, whether the service was properly performed, before declaring respondent en rebeldía. This omission was “shocking” in view of the implications at stake: the cancellation of multi-million dollar mortgages of a US-based company over well-known and highly valuable real estate, when the Judge had before him evidence that LMC was US-domiciled and incorporated in Canada. Moreover, this was exacerbated by the unusual swiftness of the Cancellation Proceeding (which lasted only 170 days). As the Tribunal put it, the Mexican judiciary never corrected this situation, despite LMC’s multiple requests.

 

b) LMC was denied the right to appeal: A few weeks later, the same Judge arbitrarily precluded any opportunity of appeal, by giving a res judicata effect to its Cancellation Judgement (at the Debtor’s request), which constituted a second denial of justice. By doing so, the Judge barred any possibility of LMC, once it became aware of the Cancellation Judgement, to lodge an appeal. The Judge based its declaration of res judicata on an inapplicable procedural rule under which low-amount disputes are not subject to appeal (i.e., lower than 500,000 MXP (USD 25,000). This decision was unjustified as the evidence before the Judge showed the mortgages (cancelled by him) secured US$ 32.8 million loans.

 

c) LMC was denied the right to allege in amparo proceedings the “forgery” of the document upon which the mortgages were cancelled: LMC tried in multiple occasions and under different motions – for 3 years – to bring the relevant evidence that could easily prove the illegality of the service and justify the annulment of the Cancellation Judgement. However, the Mexican courts consistently refused LMC’s right to be heard and to present evidence, as follows:

 

i) Ampliación de demanda: A request to extend its amparo claim to include the highly relevant forgery was dismissed by the amparo court under the “wrong” argument that “these acts have already been specified” and failed to admit the key evidence.

 

ii) Queja: An incidental motion against the decision above, also rejected LMC’s ampliación de demanda as inadmissible, alleging that it was not properly signed on LMC’s behalf (as it should have been signed by LMC’s legal representative and not by the attorney empowered to act on its behalf in the amparo proceedings). LMC was not even allowed to cure the alleged procedural defect (when it submitted a new power of attorney), despite the ampliación de demanda aimed at proving that LMC, an alien company operating in Mexico, had been the victim of an elaborate fraud.

 

iii)     Incidente de falsedad de documento: A separate motion to prove the forgery, was dismissed on the grounds that the allegedly false document was not related to the subject-matter of the amparo proceeding. As a result, the amparo court assumed the Settlement Agreement was valid and binding, thereby reducing the scope of the amparo to the question of whether the service of process had or not been properly executed in accordance with Mexican law. And – congruently with this reduced scope of investigation – all evidence in the file seeking to prove the forgery was eliminated.

 

iv) Amparo: Notwithstanding a previous finding by the amparo court that at least on one occasion LMC’s signature had been forged (and that the Debtor was in prison for alleged forgeries of documents) the amparo judgement did not even discuss LMC’s argument that the Settlement Agreement was also forged, since the ampliación de demanda had been dismissed. The amparo judgement consequently assumed that the Settlement Agreement was validly executed by LMC.

 

v) Recurso de Revisión (Remand amparo): finally, LMC sough the revocation of the amparo judgment for the same reason that the amparo court erroneously disregarded its claim that the Settlement Agreement had been forged as it considered “unrelated to the dispute”. However, LMC was once again barred from claiming the forgery as expressly ordered by the Queja tribunal, which forbade the remand court to examine the issue.

 

Conclusion

As stated by the Tribunal, Mexican courts had four opportunities to address the question of the forgery of the Settlement Agreement but failed to do so. This constituted a denial of justice, by restricting its access to justice and its right to defend itself and present evidence. The Tribunal found that LMC had exhausted the reasonable available remedies that could have reversed the cancellation of the mortgages.

The implications of the LMC case may open new debates and may lead to the adoption of new approaches and decisions to contour the notion of denial of justice in the coming years.

Notably, in December 2020, Mexico received a notice of a new NAFTA legacy dispute alleging denial of justice by the State courts’ failure to recognise “mortgages” as collateral held by US creditors (AMERRA and JPMorgan) under insolvency proceedings. Another case initiated by US investors (B-Mex) in 2016, is calling a NAFTA tribunal to assess due process by Mexican amparo courts, as the investors claim they were “effectively and practically denied an appeal”.

References[+]

References ↑1 Lion Mexico Consolidated L.P. v. United Mexican States (ICSID Case No. ARB(AF)/15/2). ↑2 In 1999, a NAFTA tribunal analysed and rejected for the first time a claim for denial of justice in Robert Azinian v. Mexico. ↑3 Decision on Jurisdiction, 30 July 2018, paras. 229, 233, 240. ↑4 Award, 20 September 2021, para. 299. function footnote_expand_reference_container_39055_60() { jQuery('#footnote_references_container_39055_60').show(); jQuery('#footnote_reference_container_collapse_button_39055_60').text('−'); } function footnote_collapse_reference_container_39055_60() { jQuery('#footnote_references_container_39055_60').hide(); jQuery('#footnote_reference_container_collapse_button_39055_60').text('+'); } function footnote_expand_collapse_reference_container_39055_60() { if (jQuery('#footnote_references_container_39055_60').is(':hidden')) { footnote_expand_reference_container_39055_60(); } else { footnote_collapse_reference_container_39055_60(); } } function footnote_moveToReference_39055_60(p_str_TargetID) { footnote_expand_reference_container_39055_60(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39055_60(p_str_TargetID) { footnote_expand_reference_container_39055_60(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Hong Kong Arbitration Week Recap: Fraud in Arbitration – Overcoming Limitations on Tribunal Powers

Fri, 2021-10-29 00:00

On the second day of Hong Kong Arbitration Week 2021, Debevoise & Plimpton (“Debevoise”) hosted a virtual panel on “Fraud in Arbitration – Overcoming Limitations on Tribunal Powers”, exploring the strategies that may be employed to uncover and overcome fraud in an arbitration, including by invoking judicial power in support of arbitral proceedings.

Panelists included Mr David W. Rivkin (Debevoise, New York & London and Co-Chair of the Hong Kong International Arbitration Centre), Mr Mark Johnson and Mr Gareth Hughes (Debevoise, Hong Kong), Ms Natalie Reid (Debevoise, New York), Ms Swee Yen Koh (Wong Partnership, Singapore), and Ms Chiann Bao (Arbitration Chambers, Hong Kong). The panel discussion was moderated by Mr Cameron Sim (Debevoise, Hong Kong).

 

Fraud in Arbitration

Mr Rivkin started the discussion by exploring the significant impact of fraud on the victim’s rights and procedural norms. Generally, fraud has the same impact in arbitration as in litigation, but the key difference is the powers available to arbitral tribunals and courts to deal with the impact of fraud. Mr Rivkin illustrated the importance of taking preemptive steps in arbitral proceedings where fraud is suspected. He provided an overview of the difficulties that may be encountered in cases involving fraud at different stages of the arbitral process, including attempts to delay procedural steps, illegitimate counter-attacks, and parties engaging in further fraud to cover up existing fraud.

 

Fraud and Confidentiality

Mr Johnson discussed the risk of abuse of confidentiality protections in cases concerning fraud. He explained that the confidentiality restrictions may be invoked by the wrongdoer to avoid disclosing certain information, allege that the other party has breached confidentiality restrictions in the arbitration, bury relevant information in data rooms, or even abuse redactions to documents.

 

Arbitral Tribunal’s Powers: Adverse Inferences and Peremptory Orders

Turning to the powers of the tribunal in encouraging compliance with tribunal orders, Ms Reid highlighted the operation and effect of adverse inferences, a presumption made by a tribunal when a party fails to produce evidence it has been ordered to produce. Whether adverse inferences will be made ultimately depends on the party’s advocacy and credibility. If a tribunal accepts that a document has genuinely and innocently been lost or destroyed rather than deliberately withheld, then no adverse inferences are likely to be drawn. Ms Reid further noted the difficulty that often arises in defining the precise inference that should be drawn from an unseen document. She noted that, although adverse inferences may not be sufficient to encourage compliance with tribunal orders, it can be a useful tool to help obtain the result that a party needs from an arbitral tribunal in the form of a favourable award.

Ms Bao also explained from an arbitrator’s perspective the considerations that the tribunal will likely take into account when considering whether to draw adverse inferences, such as whether the non-production was intentional, any valid reason for the non-production, and the suitability and effects of the proposed adverse inferences on the final award. She suggested that the tribunal may, as a preemptive measure once noting any element of fraud in the arbitration, make reference to this power early in the proceedings to encourage evidence production.

Peremptory orders are another power available to tribunals to encourage compliance with their existing orders. Mr Hughes explained that they are orders that require compliance with an earlier order, failing which a specified sanction will apply (i.e., analogous to “unless” orders in common law courts). He stressed that the terms of the orders must be carefully considered and worded to avoid opening up awards to challenges. Mr Hughes further illustrated by a case he handled that peremptory orders, even if ignored by the respondent, may still be helpful in assisting further applications to court for stronger measures (such as appointment of receivers), as it may present the court with a history of non-compliance by the respondent.

Ms Bao echoed this view and noted that the tribunal will likely take into account considerations such as the nature, consequences, and utility of the proposed terms when making peremptory orders.

 

Court Applications Available

Disclosure Orders

Noting the limitation of the tribunals in compelling third party disclosure, Ms Koh summarized Norwich Pharmacal orders and Bankers Trust orders, two types of common law disclosure orders that may be available to obtain information about a wrongdoer. Norwich Pharmacal orders may be used to identify a third party who has information about the wrongdoer. Bankers Trust orders are more specific and concern a court’s jurisdiction to order a bank to disclose documents and correspondence relating to the account of a customer who is prima facie guilty of fraud.

Freezing Injunctions

Ms Reid further compared common law freezing injunctions and arbitral preservation orders. Both remedies are aimed at preventing a party from dealing with assets in dispute. She opined that the court-ordered freezing order is often preferable, because there is less of a tip-off risk—court applications may be made ex parte, and the freezing injunction is immediately and directly enforceable.

Receivership

Mr Johnson explained that the role of court-appointed receivers is to take control of assets in dispute and generally to hold the ring pending the determination of claims. Whilst receivership is considered the last resort by the courts, the appointment of receivers is highly desirable in the context of fraud, because they will ensure that untrue statements are no longer put forward and likely lead to rapid monetization of an award. He further noted that although Hong Kong courts have the power to appoint receivers in support of arbitration, this is not a universal option available in all jurisdictions.

Contempt of Court

In connection with parallel court proceedings, Mr Hughes introduced contempt of court as an avenue of redress if the opposing side has breached a court order or injunction, or otherwise made a false statement to the court. Depending on the severity of the contempt, it can be punishable by imprisonment, the threat of which can be very helpful to bring wrongdoers to the settlement table. However, Mr Hughes remarked that contempt of court applies only to statements made before the court, not before an arbitral tribunal.

Tension Between Tribunal and Court

Finally, Ms Bao provided valuable insights on the tension between the tribunals and courts, from an arbitrator’s perspective. She was of the view that if the application sought involves a third party or is better made ex parte, it may be preferable to make the application to the court, as such applications are not available in arbitration.

 

Conclusion

The panel discussion was very comprehensive in addressing the powers of arbitral tribunals in tackling cases involving fraud. Invoking judicial power in support of arbitral proceedings may be an important strategy in uncovering fraud. The presence of fraud risks derailing the arbitral process, but fraud can be unraveled in arbitration. By strategically utilizing the various tools available to both courts and tribunals, a party may be able not only to secure awards in their favour, but also to achieve the rapid monetization of awards obtained in these circumstances.

 

This concludes our coverage of Hong Kong Arbitration Week 2021. More coverage from Hong Kong Arbitration Week is available here.

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CJEU Extends Achmea to Ad Hoc Arbitration Agreements Identical to Intra-EU BITs’ Arbitration Clause

Thu, 2021-10-28 05:15

In the latest episode of the intra-EU investment arbitration saga, the CJEU ruled on 26 October 2021, in Poland v. PL Holdings (Case C-109/20), that EU Member States are precluded from concluding with investors from another EU Member State an ad hoc arbitration agreement identical to an arbitration clause of an international treaty deemed invalid under the CJEU’s Achmea case law (Case C-284/16).

It remains to be seen whether, and if so under which circumstances, this new ruling could be extended to other arbitration agreements contained in a contract between an EU Member State and an (EU) investor with respect to a dispute involving the interpretation or application of EU law.

Meanwhile, the European Commission is working on a legislative initiative aiming at improving the protections offered to intra-EU investment under EU law. A first proposal is expected on 22 December 2021. It is, however, still unclear whether such proposal will be ambitious enough. In any case, whatever its form and content, it would require years before being effective.

 

Background of the case

End of 2014, the Luxembourg company PL Holdings started arbitration proceedings before the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) against Poland under the 1987 bilateral investment treaty (BIT) concluded between Belgium and Luxembourg, on the one hand, and Poland, on the other. The investor claimed to be victim of the decision of the Polish Financial Supervision Authority to suspend the voting rights attached to the shares it held in a Polish bank.

In 2015, Poland initially challenged the jurisdiction of the arbitral tribunal on the basis that PL Holdings was not an “investor” in the meaning of the BIT. In a second stage, in 2016, and a few days after the request for a preliminary ruling was lodged in Achmea, it also raised the fact that the arbitration clause of the BIT would be incompatible with EU law. This jurisdictional challenge was dismissed by the tribunal, which declared itself competent and ruled in two awards, rendered in 2017, that Poland breached PL Holdings’ rights under the BIT.

Poland brought annulment proceedings against the two awards before the Svea Court of Appeal end of 2017. The Swedish court dismissed the action, holding that, if the arbitration clause under the BIT was indeed invalid on the basis of the CJEU’s findings in Achmea, such invalidity would not prevent Poland and PL Holdings from concluding an ad hoc arbitration agreement at a later stage in order to settle their dispute. The court found such an agreement in the case at hand, ruling that Poland tacitly accepted, on the basis of the applicable Swedish law, PL Holdings’ offer of arbitration, by refraining from challenging in good time the jurisdiction of the arbitral tribunal. It, therefore, concluded with PL Holdings an ad hoc arbitration agreement, which was distinct, but had identical content to the arbitration clause of the BIT.

Poland appealed the case before the Swedish Supreme Court, which requested the CJEU’s opinion on the compatibility of such an ad hoc agreement with Articles 267 and 344 TFEU (principle of autonomy of EU law, as interpreted by the CJEU in Achmea and its subsequent case law).

 

CJEU’s ruling

The CJEU (in Grand Chamber) extended its reasoning in Achmea (with respect to intra-EU BITs; see Blog’s coverage here) and Komstroy (Case C-741/19, as regards intra-EU disputes under the ECT; see this previous post) to ad hoc arbitration agreements identical to arbitration clauses of intra-EU BITs.

At the outset (§§38-42), while acknowledging that this factual question was for the referring court to decide, the CJEU casted doubts on its reasoning that Poland implicitly agreed to arbitrate as it directly challenged the jurisdiction of the arbitral tribunal (though initially on other grounds that the invalidity of the arbitration clause of the BIT under EU law).

Turning to the main question at hand, the CJEU relied on its Achmea case law (and the subsequent treaty of 5 May 2020 concluded by 23 Member States, including Poland, to terminate the intra-EU BIT; see this previous post) to consider that “[t]o allow a Member State, which is a party to a dispute which may concern the application and interpretation of EU law, to submit that dispute to an arbitral body with the same characteristics as the body referred to in an invalid arbitration clause contained in an international agreement such as the [BIT], by concluding an ad hoc arbitration agreement with the same content as that clause, would in fact entail a circumvention of the obligations arising for that Member State under the Treaties” (§47). The CJEU also relied on the Achmea precedent to dismiss the investor’s request for a limitation of the temporal effects of the Court’s judgment to arbitration proceedings initiated after the same, considering that its decision in PL Holdings was based on factors already set out in this precedent (§§64-66).

The main remaining question is whether this new ruling could be extended to other types of arbitration agreements contained in contracts between Member States and (EU) investors with respect to disputes involving the application and interpretation EU law, and if so under which circumstances. In Achmea, the Court drew a distinction between investment and commercial arbitration, on the basis that “[w]hile the latter originate in the freely expressed wishes of the parties, the former derive from a treaty by which Member States agree to remove from the jurisdiction of their own courts, and hence from the system of judicial remedies [under EU law], disputes which may concern the application or interpretation of EU law” (§55). In PL Holdings, the CJEU stressed that “as regards, first, the alleged impact that the present judgment might have on the arbitration agreements concluded by the Member States for various types of contract, the interpretation of EU law provided in the present judgment refers only to ad hoc arbitration agreements concluded in circumstances such as those at issue in the main proceedings” (§67). However, it also indicated that, even if the dispute at hand was an isolated case, “the legal approach envisaged by PL Holdings could be adopted in a multitude of disputes which may concern the application and interpretation of EU law, thus allowing the autonomy of that law to be undermined repeatedly” (§49).

 

European Commission’s review of investment protection under EU law

Against the background of the gradual dismantling of intra-EU investment arbitration, the EU institutions, however, have not turned a complete deaf ear to the EU investors’ concerns and the paradox created by the fact that extra-EU investment may be more effectively protected than intra-EU investment (since the CJEU confirmed – in Opinion 1/17, in the context of CETA – the validity of the investment court system provided for under some of the investment and trade agreement concluded by the EU with third states (see more in previous posts, here and here)).

Conscious, among others, of the vast sums of money which will be required for the EU’s strategic priorities (in particular the European Green Deal and the Digital Single Market) and the “momentum created by the termination of the intra-EU BITs”, the Commission is indeed working towards a comprehensive policy on intra-EU investments with the aim of better protecting and facilitating EU cross-border investment (see here). Following a 2020 public consultation, the Commission is considering making a new legislative proposal concerning the intra-EU investment system on 22 December 2021 (see here). The Commission contemplates, among others, setting out specific investors’ substantive rights in a new EU instrument, setting up an intra-EU investment court (similar to the EU’s proposal for a Multilateral Investment Court currently discussed at UNCITRAL), as well as extending and improving the “Solvit” mediation mechanism (on the latter, see Commissioner Mairead McGuinness’ EuroCommerce Policy Talk on “Finance and investment: driving green recovery and investment”).

However, any such proposal would require years to be adopted and implemented and, if ambitious enough, is likely to face political stumbling blocks. It also remains to be seen whether it will have sufficient “teeth” to ensure a proper deterrent effect and effective investment protection. This would be especially the case if the proposal were to focus on substantive protections rather than procedural remedies, at a time where the rule of law, the independence of the judiciary and the supremacy of EU law is under threat in certain EU Member States, including Poland (see e.g. here). Indeed, it is currently primarily up to domestic courts to ensure the enforcement of EU law (see also the CJEU’s comment at §68 of the ruling), as investors do not have direct access to the CJEU. Instead, investors must convince the Commission to start infringement proceedings and/or request domestic courts to make a preliminary reference to the CJEU (see more in this previous post).

 

The views expressed herein are the author’s only.

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Hong Kong Arbitration Week Recap: ADR in Asia Conference – HK-PRC Interim Measures Arrangement – 2 Years on

Thu, 2021-10-28 00:00

Hong Kong Arbitration Week 2021 is upon us, with a number of exciting in-person, virtual and hybrid events.  On 27 October 2021, the ADR in Asia Conference was held, focussing on “Tomorrow’s Disputes Today”. After opening remarks by The Honourable Secretary for Justice Teresa Cheng GBM, GBS, SC, JP, and an update on developments at the HKIAC by Ms Sarah Grimmer, Secretary-General of the HKIAC, four panel sessions were held:

  • HK-PRC Interim Measures Arrangement: 2 Years On.
  • Hong Kong Courts and Arbitration: Past, Present, Future, with a key-note speech by The Honourable Chief Justice Andrew K. N. Cheung GBM.
  • Crypto: Tomorrow’s Security, Currency, or Asset?
  • “Tomorrow’s” Arbitrator: Views from The Honourable Charles N. Brower.

Closing remarks were made by Mr David W. Rivkin, Co-chair, HKIAC and Partner, Debevoise & Plimpton.

This post focuses on the first panel session which examined how the HK-PRC Interim Measures Arrangement has worked in practice, two years after its launch (see an earlier blog post on the Arrangement here). This session was moderated by Mr Friven Yeoh of Sidley Austin, who was joined by the following panellists:

  • Dr Yanli Si, Deputy Chief Judge of the Research Office of the Supreme People’s Court of China;
  • Ms Sarah Grimmer of HKIAC;
  • Mr Paul Starr of King & Wood Mallesons;
  • Ms Yanhua Lin of Fangda Partners; and
  • Mr James Rogers of Norton Rose Fulbright.

 

Key features and figures of the Interim Measures Arrangement

Mr Yeoh kicked off the session by outlining the development of how parties to Hong Kong arbitrations have been able to seek interim measures to facilitate arbitration and safeguard enforcement: (1) originally, only from the Hong Kong courts and the arbitral tribunals; (2) more recently, through emergency arbitration procedures; and (3) now, through the new option to apply to the PRC courts directly, under the Arrangement.

Dr Si then delivered a keynote speech on the history of the implementation of the Arrangement from the perspective of a participant, promoter and witness. Dr Si highlighted the Arrangement as an important initiative for legal professionals in Mainland China and Hong Kong which demonstrates one country having benefits from two systems. Dr Si also provided key figures regarding the implementation of the Arrangement up to 22 October 2021:

  • Number of applications made to the PRC courts: 54 (37 progressed, out of which 34 were granted);
  • Types of preservation sought:
    • 51 for property preservation;
    • 2 for evidence preservation; and
    • 1 for conduct preservation;
  • Administering arbitration institutions: HKIAC;
  • Types of disputes: corporate, commercial, financial, maritime, sales and purchases of goods, and professional services;
  • Applicants: 23% from Mainland China, 77% from outside Mainland China;
  • Respondents: 58% from Mainland China, 42% from outside Mainland China;
  • Stage of applications: all ex parte after commencement of the arbitrations;
  • Securities: almost all the parties provided securities, mostly in the format of letter of guarantee; and
  • Length of time for court’s ruling: 19 days on average.

 

Practitioners’ observations of the past two years of experience  

Mr Yeoh opened the discussion by asking Ms Grimmer about the role HKIAC has played in the implementation process and her observation. Ms Grimmer described the HKIAC’s essential role as confirming key details for the Court, such as the seat and administering institution of an arbitration. One observation was that all applications under the Arrangement so far were made after the commencement of arbitrations. Ms Grimmer explained the differences in procedure for a pre-arbitration application, which she noted would be more challenging than a post-commencement arbitration.

Mr Yeoh then turned to Mr Starr and Mr Rogers about practical tips as counsel seeking applications under the Arrangement. Mr Starr outlined several key differences between Hong Kong and PRC practices: (1) asset clues are required by the PRC courts, for which private investigators are normally engaged; (2) translation and notarisation for the PRC require extra time; (3) there is a need for security in the PRC, often by way of insurance; and (4) service of the preservation order is effected through the PRC courts. Mr Starr shared that these differences would affect the time it takes to successfully be granted measures, so parties should bear these in mind and plan accordingly. Mr Rogers noted the importance of engaging good local PRC counsel as the latter played an active role in liaising with the PRC court throughout the process.

Another key observation was that different standards are adopted by the PRC and Hong Kong courts in considering whether to grant interim measures. Ms Lin observed that the PRC courts would normally adopt a board-brush approach. In contrast, Mr Rogers shared the relatively higher standard adopted by Hong Kong courts, i.e. that there is a likelihood of success on the merits, a risk of dissipation, urgency, and a risk that the applicant cannot be compensated by damages.

Mr Yeoh asked whether parties would choose the PRC route over the Hong Kong route for interim measures, in light of the lower standard in considering whether to grant interim measures. Mr Rogers said it was possible, but there were other avenues that Hong Kong courts could provide, for example, emergency arbitration which had become a powerful tool in preserving evidence and assets and in obtaining an early decision on key issues. Mr Starr noted however that: (1) ex parte applications might not be allowed in emergency arbitration proceedings, which might cause risk of dissipation; and (2) emergency relief faced enforcement difficulties.  He said the emphasis should be on where the assets were.

In light of the ex parte nature of applications, Mr Yeoh asked Ms Lin how the PRC courts protected parties’ interest where an application was wrongfully made. Ms Lin answered that this was done by applicants providing security. She noted that in practice, it was quite difficult to challenge a PRC court’s decision on assets preservation, so the risk of a security being called upon is not particularly high.

 

Conclusion

The panellists described that 2 years on, the Arrangement had been “a game changer, no brainer and rainmaker” for parties in Hong Kong arbitrations.  Given Hong Kong’s unique advantages under the Arrangement for resolving PRC-related disputes, the panellists agreed that Hong Kong had become a much more attractive arbitration seat, especially in light of the development prospects of the Belt & Road Initiative and the Greater Bay Area.

 

More coverage from Hong Kong Arbitration Week is available here.

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Hong Kong Arbitration Week Recap: Renewables in a Rapidly Changing World

Wed, 2021-10-27 01:30

On day one of the Hong Kong Arbitration Week 2021, Latham & Watkins LLP (“Latham & Watkins”) hosted a virtual workshop to explore the role of renewables in a rapidly changing world and how this growth will impact disputes in renewables and other energy markets.

Ing Loong Yang, Partner at Latham & Watkins (Hong Kong), opened the workshop with Nick Sims, Tactical Opportunities Managing Director at Latham & Watkins (London), with a brief discussion of the growth in investment in renewables during the pandemic and investors’ commitment to raising capital to boost this thriving sector.

 

Impact of Government Policies on Disputes in the Renewable Sector

The first panel discussion addressed how changes in government policies have played a role in triggering disputes in the renewables sector. The discussion was moderated by Sebastian Seelmann-Eggebert, Partner at Latham & Watkins (Hamburg). Panelists were:

  • Christopher Tan, Senior Counsel at Chevron Singapore;
  • Henri Baguenier, Chairman of Novenergia II Energy & Environment; and
  • Fernando Mantilla-Serrano, Partner at Latham & Watkins (Paris).

One panelist indicated that although European economic policies are underpinned by free market fundamentals, state action is required for combatting climate change and will vary from sector to sector.

Another highlighted the coal industry as a key area in which a number of states are taking action. Certain states have actively pledged to reduce their coal consumption, but this reduction will require modifications to legal frameworks such as negotiating phasing out of contracts or renegotiating current contracts with coal energy producers. For example, the German Bundestag adopted legislation to phase out the use of coal in Germany whilst simultaneously negotiating with coal producers, to mitigate the risk of potential disputes. By contrast, the Netherlands instigated an end to coal production without offering compensation for coal producers. This approach triggered claims by German investors against the Netherlands where proceedings are still in their early stages.

The panel considered renewables in the context of the oil and gas industry, with one panelist noting that carbon pricing likely will remain a long-term policy to reduce greenhouse gas emissions in a number of jurisdictions in the Asian Pacific region. The effect of carbon tax on long-term supply contracts will likely raise contentious discussions about which party should bear this tax; a consequence that was unforeseen when these contracts were entered into. In the face of such disputes, parties have attempted to implement different measures such as price review mechanisms, change of law, and force majeure clauses. The panelists considered that carbon pricing will become a long-term feature of the renewables space, noting that in contracts in which commercial relationships are important, parties should determine whether there is an amicable way to negotiate fair and equitable sharing of the tax burden, rather than focusing on the short-term effects and passing on the immediate tax.

Finally, the panelists discussed how the position and popularity of nuclear energy has decreased in the energy market in the last 20 years, whilst the cost of producing nuclear energy has increased. It was also noted that disputes could arise from policy changes that aim to decommission nuclear plants. Panelists pointed to a change of regulation on market tools as the key to success in the renewables industry and emphasized that the sector requires a clear and stable legal framework.

 

Renewables — The Next Frontier in Commercial Disputes?

The second panel was divided into two sections, the first section was moderated by Philip Clifford QC, Partner at Latham & Watkins (London), speaking with:

  • Paul Davies, Partner at Latham & Watkins (London); and
  • Stephen Markscheid, Chairman of Still Waters Green Technology.

The second section was moderated by Sophie Lamb QC, Partner at Latham & Watkins (London) speaking with:

  • Kai-Uwe Karl, Senior Counsel at General Electric; and
  • Lara Nicholls, Senior Legal Counsel at Shell.

The first section discussed the types of disputes likely to arise out of the transition to, and rapid expansion of, renewables in Asia. It was noted that commercial disputes are a likely consequence of changes in government policies, shifts in technology, as well as other traditional forms of disputes. The panel discussed contractual clauses, which can protect against supply shortages and pose the challenge of addressing every possible contingency during negotiations.

One panelist noted that, whilst identifying the most common areas of dispute is challenging, change in governmental policies is often at the heart of commercial disputes in the renewables space. They highlighted the value in looking at jurisdictions that are trying to amend regulatory regimes in an effort to increase investment in renewables. For example, Japan’s efforts to reduce previously favourable tariffs for renewable sector investors prompted an investor based in Hong Kong to bring the first known investment treaty claim against Japan in relation to renewables, which, if successful, could lead to further claims against Japan by other investors. It was also noted that similar disputes arising out of the renewables sector in Europe, particularly in Spain, largely consist of claims under the Energy Charter Treaty.

The panelists in the second section explored the role of mediation in the renewables industry. Panelists highlighted how mediation has been a feature of the industry for many years, though it has not played a significant role in resolving disputes. However, the panel considered that mediation could provide an efficient and useful mechanism if parties wish to resolve disputes swiftly. Swifter resolution of renewables-related disputes (via mediation) is potentially significant, as delivering these projects at pace may be key to ensuring an effective energy transition. This approach would require parties to look at the weaknesses of their own cases, the relationship between the parties, and other alternative solutions that can be brought into the settlement.

One panelist offered insight into the Campaign for Greener Arbitration, which aims to reduce the environmental impact of arbitrations. They emphasized the need for such an initiative, noting that a medium-sized arbitration carries a substantial carbon footprint and would require 20,000 trees to be planted in order to offset the negative impact of carbon emissions. The discussion highlighted a series of protocols that have been launched to target different stakeholders in an arbitration, which provide general guidelines to help parties to arbitrations decarbonize and promote sustainability in arbitration proceedings. In addition, the panel outlined some of the practical ways in which these protocols are being delivered, including holding remote hearings to avoid unnecessary travel and using electronic bundles during hearings.

 

More coverage from Hong Kong Arbitration Week is available here.

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Hong Kong Arbitration Week Recap: A Korean Take on Virtual Hearings

Wed, 2021-10-27 00:00

In the past year, there has been a paradigm shift from a norm of in-person hearings to a norm of virtual hearings. As part of the 10th Hong Kong Arbitration Week, KCAB INTERNATIONAL and the Korean Council for International Arbitration (KOCIA) invited arbitration practitioners, mostly based in the dynamic Korean arbitration market, to share their experiences and personal observations related to virtual hearings.

 

In the two-part session titled, ‘Can you hear me, Madame President? Oral Advocacy in Virtual Hearings in 2021: Lessons Learned and Strategies for the Future (Virtual),’ these practitioners provided their in-depth perspective on the virtual hearing experience and related practical challenges they have faced. The session prompted this author to consider another way in which virtual hearings have caused the arbitration world to adapt to a new reality – opening the doors of the hearing room to junior attorneys and relying on them for technical expertise.

 

Panel #1: Opening statements in virtual hearings

The first panel, ‘Making your case virtually: opening and closing statements in virtual hearings,’ was moderated by Ms Sue Hyun Lim of KCAB International, and featured insights from four panelists: Ms Hye Sung Kim of Kim & Chang, Mr Mino Han of Peter & Kim, Ms Hyun Ah Park of Yulchon and Mr John Rhie of Quinn Emanuel.

 

The panel first considered whether opening statements take on greater significance in virtual hearings compared to in-person hearings. Ms Park remarked – to the agreement of the others – that opening statements remain important in the virtual setting as they continue to provide a definitive indication of how each party is planning to prove its case through witness examination. While acknowledging the importance of oral advocacy in the virtual setting, Mr Han opined that written submissions have become even more important than in in-person hearings. In Mr Han’s experience, for cases involving a virtual hearing, tribunals have seemingly come to adopt the mindset of focusing more intently on written pleadings prior to the hearing.

 

In the discussion that followed on effective openings during virtual hearings, Ms Kim recommended delivering one’s most important messages to the tribunal by way of anchoring points. She also stressed the importance of effectively using technical tools during openings, e.g., using video clips to explain complex construction issues and zooming in on the relevant portions of documents to focus attention on key wording or phrases. Voicing agreement, Mr Rhie commented that it is effective advocacy to focus on both the auditory and visual senses.  He also suggested that, although it may be difficult, we need to adapt to technology and use it as expertly as we can.

 

The panelists also shared further suggestions for the virtual setting, such as making use of pauses to create pockets of silence and grab the tribunal’s attention and using one’s body language and facial expressions for effective communication.

 

Panel #2: Cross examination in virtual hearings

The second panel, ‘Cross-examination at virtual hearings: how to make the best of a difficult situation,’ was moderated by Mr John P. Bang of Peter & Kim, and the discussion was led by four panelists: Mr Anton Ware of Arnold & Porter, Ms Sun Young Kim of Lee & Ko, Mr Mike McClure of Herbert Smith Freehills and Mr Woojae Kim of Bae, Kim & Lee.

 

The question raised by Mr Bang at the outset was whether there is a fundamental difference in how one conducts cross examination in a virtual setting. The overarching consensus among the panel was that there is no fundamental difference.

 

Mr Ware emphasized that a cross examination – whether virtual or in person – is still cross examination. He explained that counsel’s preparation related to (i) identifying clear and achievable objectives for cross, (ii) mastering the factual record and organizing documents and (iii) preparing tightly focused questions backed by supporting documents remains the same.  While the actual conduct of virtual examinations also shares similarities to the in-person examination experience, Mr Ware commented that potential differences may arise in terms of making use of documents during cross due to the use of technology.

 

Mr McClure further highlighted ways in which counsel can take advantage of the use of virtual hearings for examination. He explained that he found the use of multiple documents on the screen and the use of operators to highlight certain points on documents helpful in directing the tribunal’s direction to the appropriate part. Mr McClure shared the same view that, regardless of whether the examination is conducted in person or virtually, the fundamentals remain the same, but he emphasized that there may be tricks we can use to our advantage to make it a more effective examination.

 

On the question of the role of the second chair in a virtual examination setting, Mr Kim stressed the importance of the second or the third chair’s role in terms of taking control of the documents as well as the screen. He said he finds that there are certain advantages for the second or third chair in virtual examinations but stressed the importance of being prepared.

 

While acknowledging the benefits of virtual examination, Ms Kim also warned about certain limitations of examining witnesses virtually. For instance, difficulties may arise if the witness is not fully visible on the monitor, and Ms. Kim suggested that for large cases or those cases that involve multiple witnesses, it would be more effective to conduct examinations in person rather than virtually.

 

Comments from the perspective of a junior arbitration attorney

Despite the initial concerns voiced in 2020 regarding the shift from traditional in-person hearings to “modern” virtual hearings, practitioners have found ways to adapt in order to maintain high-quality advocacy as confirmed by the panelists of this session. Another interesting aspect of virtual hearings that was touched on briefly by the panelists and has not been discussed as much in the overall assessment of virtual hearings is their impact on the development of junior attorneys.

 

From the author’s perspective, virtual hearings have given junior arbitration attorneys both a unique opportunity and a demanding level of responsibility to actively collaborate on a successful virtual hearing experience. As a junior arbitration attorney based in Korea who has taken part in several virtual hearings in the past two years, the author believes virtual hearings are a net positive for junior attorneys in the sense that they provide opportunities for junior associates to more actively participate in the hearing process. Whereas in the past, a junior associate might be expected to “man the home base” and potentially wait a substantial time before actively participating in an in-person hearing in a foreign seat, virtual hearings have opened an otherwise closed door to the hearing room. This has expedited the learning process for junior attorneys by enabling them to gain a better understanding of the most critical part of the process – the endpoint toward which the whole rest of the arbitral process flows: the hearing.

 

In addition, it is notable that virtual hearings have created a new niche role for junior attorneys that has arguably increased the importance of their role in hearings in general. In addition to completing more substantive work, throughout the pre-hearing and hearing phases, junior attorneys work closely with virtual hearing service operators to ensure that all technological aspects are in order and that the virtual hearing runs as smoothly as possible. This is a duty that did not even exist before virtual hearings became the norm, but it is now vitally important.

 

Prior to the hearing, junior attorneys help ensure that the virtual hearing protocol covers all critical technical aspects, that the online platform for hearing bundles is working properly and that test runs are completed effectively. During the hearing, junior attorneys ensure that documents and demonstratives are pulled up electronically on demand, that transcription and translation issues are dealt with effectively, and that helpful personalized annotations are jotted down within the real-time transcript and online platform for hearing bundles for use in the post-hearing brief. Effective performance of such tasks can lead senior attorneys to more quickly gain trust in junior attorneys’ potential to aid in the overall hearing process, leading to faster graduation to higher-level hearing tasks, like presentation and witness examination.

 

In this light, the panelists’ advice on advocacy in the virtual hearing setting was useful not only to experienced arbitration practitioners but also to juniors who may be expected to adopt such techniques and best practices sooner than they would have historically.

 

More coverage from Hong Kong Arbitration Week is available here.

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Interviews with Our Editors: In Conversation with Sarah Grimmer, Secretary-General of the Hong Kong International Arbitration Centre

Tue, 2021-10-26 01:30

Sarah has been HKIAC Secretary-General since September 2016. During her time at the helm, the HKIAC has, among other actions, released its 2018 Administered Arbitration Rules, overseen the changes arising from the 2019 arrangement between Mainland China and Hong Kong regarding interim measures for arbitration (“Interim Measures Arrangement”), became the first foreign arbitral institution to be granted permission to function as a permanent arbitral institution under Russia’s Federal Law on Arbitration in 2019, and has offered a breadth of audio-visual content, including the newly launched Interview Series with HKIAC council members.

Our Blog is providing live coverage of Hong Kong Arbitration Week (“HKAW”) for the fourth year running. We are privileged to interview Sarah as this year’s HKAW kicks off.

Thank you, Sarah, for joining us.

 

  1. Looking back, what made you decide to choose a career in arbitration?

In 2002, I left New Zealand to live and work in France for what I thought would be one year. Shortly after my arrival in Paris, I joined Shearman & Sterling. This was my introduction to international arbitration. From there, I joined the Secretariat of the ICC Court of Arbitration in Paris. After three years, I moved to the Permanent Court of Arbitration in The Hague where I worked for ten years. Five years ago, I moved to Hong Kong to take up the role of HKIAC Secretary-General. Looking back, it is clear that in 2002, I was in the right place at the right time meeting the right person (Dr. Yas Banifatemi). That meeting commenced my career in international arbitration, and there has never been a boring moment since.

 

  1. This year marks the tenth anniversary of HKAW, which has now become a staple in international arbitration events around the world. What have been some highlights of HKAW?

The first HKAW was held in 2011 and was the first of its kind. It was the brainchild of Karen Tan, Chiann Bao, and Michael Moser to discuss the latest developments and design events for the whole arbitration community.

Every year, we at HKIAC carefully design the program for our flagship event, the ADR in Asia Conference. Our goal is to make it substantive and entertaining. When we achieve that goal, it is a true highlight.

Another highlight of the week is the Charity Ball where amongst glitz and glamour, music, and rowdy bidding, we raise a lot of money for people who need it much more than us.

The idea of an arbitration week has since caught on, and now there are arbitration weeks in many cities. We might get to the stage where we have arbitration weeks in 52 cities, one for each week of the year.

 

  1. The HKIAC was the first institution to offer a Tribunal Secretary Training Programme, now in its seventh year. HKIAC also offers the Tribunal Secretary Service, whereby HKIAC legal staff can serve as tribunal secretaries in arbitrations under HKIAC’s auspices. HKIAC has reported an increase in such appointments in recent years, with 80% of the appointments being made since January 2018. What are your views on the value of tribunal secretaries and the “fourth arbitrator” concern?

I think that tribunal secretaries can add real value to the process. Their work saves costs because they shift an administrative burden off the arbitrator at lower hourly rates or no additional fee, and their contribution can improve the quality of the final product by adding a layer of clerical or linguistic review. This allows arbitrators to focus on the key procedural and substantive issues and render decisions faster. They are of particular assistance in proceedings conducted under time pressure (emergency arbitrations, for example) and in large, complex matters. Such appointments also provide younger lawyers with valuable experience. When the appointment is made from within an institution, it provides arbitral participants with a direct link to the institution’s experience and oversight and introduces an intermediary who can help with minor or innocuous but delicate issues.

I think the fears of a tribunal secretary acting as a “fourth arbitrator” can be overstated. In my experience, most arbitrators understand well that their appointment is personal and their responsibility is a serious one. I think it is generally unwarranted to think that a tribunal secretary can improperly influence the views of an arbitrator. There will be cases where an unconscientious arbitrator may delegate work involving judgment to a tribunal secretary and then rely on that work without doing his or her own. However, unconscientious arbitrators are problematic whether there is a tribunal secretary or not. I do think, however, that arbitrators should be careful as to which aspects of drafting they delegate as that exercise is important to the decision-making process.

While there is no perfect answer, there are various ways to control for these concerns, and, in practice, I think they are generally effective; for example, the parties can limit the tasks of a tribunal secretary, adopt guidelines like the HKIAC Guidelines on the Use of Tribunal Secretaries, and require detailed time sheets from the tribunal and secretary. Done right, the appointment of a tribunal secretary can bring benefits to all in a case and to the community more widely.

 

  1. The HKIAC’s 2018 Administered Arbitration Rules expressly address disclosure, confidentiality, and costs in relation to third-party funding in response to Hong Kong’s legislative amendment permitting the use of third-party funding for arbitration in Hong Kong. Has third-party funding taken off in Asia-Pacific as much as you thought it could have?

Our Rules require parties to disclose the fact of a third-party funding arrangement, including the identity of the funder. Since third-party funding became lawful in Hong Kong on 1 January 2019, HKIAC has seen eight cases in which a funding arrangement has been disclosed. These cases include diverse types of funders, ranging from private funding from entities affiliated with the funded party, to well-known funding providers. The cases have also ranged in size, from reasonably modest sums in dispute to billion-dollar cases.

As users in the Asia-Pacific region become more familiar with the benefits of third-party funding and aware that it is available, I have no doubt we will see more. The important point is that the legal infrastructure is in place to make it an option.

 

  1. The HKIAC has recently signed the Green Pledge to support the Campaign for Greener Arbitrations and is on the Campaign’s Steering Committee. What are some current or future efforts at the HKIAC to promote more environmentally friendly practices in international arbitration?

Contributing to the Committee and signing the Green Pledge formalized our commitment to reducing the environmental impact of our activities.

Other efforts in relation to case administration include (i) actively encouraging parties and tribunals to communicate by electronic means only; (ii) providing an online case management system to reduce paper and delivery waste; and (iii) offering comprehensive virtual hearing services to reduce the need for travel. Our rules also expressly exhort tribunals to use technology to save time and costs, and recognize the upload of a document to an online site as notification.

We also apply policies that reduce the environmental impact for HKIAC events and our internal operations, such as eliminating paper waste, increasing recycling, and removing single-use items. In the grand scheme of things, our efforts are modest but by making them, at least we become part of the solution.

 

  1. In July 2021, the Ministry of Justice of the People’s Republic of China published a consultation draft of revisions to the PRC Arbitration Law (“Draft”). If implemented, what are some impacts you expect to see for arbitration in front of the HKIAC?

The current Draft proposes important amendments to modernize the arbitration regime in Mainland China. Some of those proposed amendments are relevant to HKIAC arbitration. For example, Article 21 of the Draft removes the requirement for designating a Mainland arbitration commission in an arbitration agreement, which may suggest that it is permissible to designate a non-Mainland arbitral institution (such as HKIAC) in arbitration agreements governed by PRC law. Article 12 of the Draft recognizes that foreign arbitral institutions (such as HKIAC) may establish business offices on the Mainland to administer foreign-related arbitrations.

Some of the proposed provisions are also in line with the relevant provisions of the 2018 HKIAC Administered Arbitration Rules (“2018 Rules”). For example, both Article 28 of the Draft and Article 19.5 of the 2018 Rules empower the arbitral institution to decide whether to proceed with an arbitration on a prima facie basis before the constitution of an arbitral tribunal. Article 49 of the Draft permits a party to seek urgent relief from an emergency arbitrator pursuant to the applicable rules, and Schedule 4 of the 2018 Rules likewise provides a comprehensive emergency arbitrator procedure for that purpose.

 

  1. Could you speak about what HKIAC is doing to promote its capabilities vis-à-vis jurisdictions in East and Central Asia where arbitration is not as popular as in Hong Kong?

HKIAC as the flagship institution of Hong Kong is embedded in one of the most sophisticated arbitral jurisdictions in Asia and the world. We frequently see East and Central Asian parties in our cases.

We have done a lot of capacity-building in East and North Asian jurisdictions. We work typically with government officials, the judiciary, lawyers, and business groups.

For example, we have worked with UNCITRAL’s Regional Centre for Asia and the Pacific in outreach to micro, small, and medium-sized enterprises; Hong Kong’s Department of Justice to facilitate judicial training; the Asian-African Legal Consultative Organisation to train government officials; the Asian Development Bank for capacity-building in the Pacific Islands; and the U.S. Department of Commerce’s Commercial Law Development Programme to train arbitral institutions in the region.

We are also the only Asian institution to have administered investor-State arbitrations. We offer our hearing facilities free of charge in any case involving a State eligible for OECD financial assistance, which includes some East and Central Asian jurisdictions.

For younger lawyers, we recruit many interns from across Asia. We have also developed a Tribunal Secretary Training Programme that has now trained hundreds of candidates. The Programme is available online and thus accessible to those who cannot easily travel to Hong Kong.

 

  1. What are your hopes and visions for HKIAC in terms of case administration and its impact on the arbitration community in Greater China and beyond?

In terms of case administration, my goal is that for every case, the HKIAC Secretariat and decision-making bodies do their work intelligently and efficiently every day, consistently for years, such that the expectations of anyone who uses HKIAC are exceeded. We have systems in place to make this happen. We have hard-working, smart lawyers on the team. Our decision-making bodies are comprised of experienced practitioners, in-house counsel, and arbitrators, so decisions on cases are made by a collective of specialists who truly know what is at stake.

HKIAC is one of the leading arbitral institutions in the world. When users choose HKIAC, they can expect international best practices. HKIAC also occupies a special place in the landscape of arbitral institutions as it is the one that connects Mainland Chinese and non-PRC parties. Our role in that connection is perhaps best reflected by the 2019 Interim Measures Arrangement under which parties to Hong Kong-seated HKIAC-administered arbitrations can obtain interim relief from the Mainland Chinese courts (not available in any other foreign seat). Since 2019, 54 applications under the Interim Measures Arrangement have been processed by HKIAC, and Mainland Chinese court orders have preserved a total of USD1.8 billion worth of assets. Ultimately, international arbitration is about enforcement. The Interim Measures Arrangement ensures successful enforcement against assets in Mainland China (owned by PRC and foreign entities alike) and is therefore one of the most meaningful developments in international arbitration in recent years.

 

Sarah, thank you very much for your time and invaluable insights.

 

More coverage from Hong Kong Arbitration Week is available here.

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

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“Court-Packing” and Proposals for an EU Multilateral Investment Court

Mon, 2021-10-25 00:50

The Presidential Commission on Supreme Court of the United States, established earlier this year by President Biden, released a draft Report last week assessing recent proposals to restructure the U.S. Supreme Court.  Readers from outside the United States, as well as many within, can be forgiven for seeing no apparent connection between that Report and either international arbitration or on-going debates about the European Union’s multilateral investment court.  Despite that appearance, however, there are important observations in the Commission’s draft Report which provide instructive perspectives on the EU’s controversial proposals for abolishing international arbitration as a means of resolving cross-border investment disputes and instead creating new, state-selected panels of judges in such investment disputes.  In particular, many of the draft Report’s critiques of court-packing proposals apply, often with greater force, to the EU’s plans.

President Biden’s Supreme Court Commission was established in April 2021 in order to consider and assess proposals, most recently originating from the left of the U.S. political spectrum, to expand the size of the Supreme Court.  These proposals, sometimes referred to as “court-packing”, would alter the Court’s size, by increasing the number of Justices, for the implicit, and sometimes explicit, purpose of changing the substance of future decisions of the Court and ensuring that “progressive” legislation will be upheld, rather than struck down or narrowly interpreted.  In the words of Senator Ed Markey, court-packing proposals will “restore balance to the nation’s highest court after four years of norm-breaking actions” by its current membership, which, in the eyes of some proponents of court-packing, was improperly selected by manipulation of the judicial appointment and confirmation process.

The Supreme Court Commission’s draft Report was issued on October 14, and contains detailed discussions of recent court-packing proposals in the United States.  Some observers have described the Commission, whose members were selected by President Biden, as weighted in favor of the current Administration’s Democratic Party constituents.  Despite those criticisms, the Report’s authors include a relatively broad cross-section of contemporary American constitutional law scholars and practitioners.  The bulk of the Commission’s draft Report voices sympathy with concerns about the politics of past Supreme Court appointments, but is nonetheless sharply critical of court-packing proposals.  The Report concludes that, while Congress likely has the authority to expand the size of the Supreme Court, such proposals “are likely to undermine, rather than enhance, the Supreme Court’s legitimacy and its role in the constitutional system.”  (Draft Report, at 11)

In particular, in a thoughtful section putting U.S. court-packing proposals in a comparative perspective, the Report reasons that “[c]ourts cannot serve as effective checks on government officials if their personnel can be altered by those same government officials.”  (Draft Report, at 19)  The Report also observes that “[a]uthoritarian political leaders of various stripes have frequently consolidated their own power and weakened the effective constitutional checks on their power by expanding the size of the judiciary”, listing, as examples, the (left-wing) expansion of Venezuela’s constitutional court by Hugo Chavez and similar (right-wing) actions in Turkey and Hungary.  (Draft Report, at 19)  The Report concludes that “[s]table democracies since the mid-twentieth century, however, have not tended to make such moves,” which can “weaken national and international norms against tampering with independent judiciaries.”  (Draft Report, at 19)

Although made in a domestic American context, the Supreme Court Commission’s draft Report and its observations are highly pertinent to proposals by the EU (and other states) regarding investment arbitration.  Like U.S. court-packing plans, those proposals originated on the far left and right of the political spectrum (in particular, with the Osgoode Declaration and public statements by Hugo Chavez, Evo Morales and others), but later found a measure of centrist support in the EU.  And, like U.S. court-packing plans, critics of investment arbitration objected to the substance of decisions by investment tribunals; as Morales pithily, if inaccurately, summarized hostility to investment arbitration, “transnational corporations always win investment arbitrations,”1) See, e.g., European Parliament, Multilateral Investment Court. Overview of the reform proposals and prospects; Gary Born, The 1933 Directives on Arbitration of the German Reich: Echoes of the Past?, 38 J. Int’l Arb. 417 (2021). jQuery('#footnote_plugin_tooltip_39241_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39241_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); warranting, in the eyes of critics, a new means of adjudication.

The EU proposals for an investment court seek to provide such a means; those proposals have been discussed, and criticized, in detail elsewhere.  In summary, they would involve abolishing the long-standing, nearly universal use of three-person international arbitral tribunals, with independent and impartial arbitrators selected jointly by investors and host states, to resolve investment disputes.  Instead, the EU proposes to substitute a new, multilateral investment court, with judges selected (and re-selected) by states, without involvement by investors.

The EU’s proposals regarding investment arbitration and a multilateral investment court originated from the same extremes of the political spectrum as domestic American court-packing plans, and share many of the fundamental objectives of those plans.  Unsurprisingly, therefore, the EU proposals are also subject to the same criticisms, and threaten many of the same underlying values, as American court-packing proposals.  Those criticisms are well-stated in the Supreme Court Commission’s draft Report.

First, contemporary investment arbitration is designed as a check on arbitrary and discriminatory governmental actions against foreign investors – including the expropriation of property without compensation, arbitrary discrimination against foreign parties, and denials of fair and equitable treatment.  Investment arbitration, with independent and impartial arbitral tribunals, selected jointly by investors and states, was designed to ensure a de-politicized and objective resolution of disputes regarding compliance by state officials with the protections provided by international law against such actions.

The Supreme Court Commission’s draft Report’s criticism of court-packing plans, on the grounds that “courts cannot serve as effective checks on government officials” when those officials have the power to alter the composition of judicial bodies, applies with particular force to the EU’s proposals: the EU’s proposals would both abolish existing adjudicative mechanisms of investment arbitration, principally because of displeasure with the decisions of those bodies, and replace those mechanisms with courts whose judicial personnel are selected (and also reselected and compensated) entirely by government officials.  Those proposals thus envision almost precisely the same alteration of existing (and long-standing) adjudicative mechanisms, with the personnel of a new, successor court selected by state officials, as do American court-packing plans.  As the draft Report’s criticisms of court-packing proposals make clear, both sets of proposals therefore threaten to significantly undermine the ability of independent adjudicative bodies to check arbitrary or oppressive governmental behavior.

That is especially true because the investment court that the EU proposal envisions would not be a court of broad jurisdiction over multiple subject matters – like the U.S. Supreme Court and constitutional courts elsewhere – but would instead be a court with highly specialized mandates and jurisdiction. Such a multilateral investment court would resolve only a select set of claims of governmental abuse against foreigners.  Proposals to allow government officials (sole) authority to select the members of courts with only this type of limited mandate raise even more pointed concerns about judicial independence and constitutional checks on governmental actions.  In these circumstances, those selecting the members of a new court will be able, with greater and more targeted precision, to choose exactly those individuals whose views they wish the new court to adopt.  That poses an even greater threat to the promise of both independent adjudication and the rule of law than does packing the membership of a court of broad general jurisdiction – especially when the very reason for the proposals is to procure more favorable decisions for states.

Second, the draft Report’s observations that court-packing proposals have been adopted by authoritarian rulers, while being rejected by established democracies, are especially pointed in the context of the EU’s proposals to abolish investment arbitration.  Like court-packing plans, proposals over the past decade for shuttering investment arbitration tribunals have arisen from the far right and left wings of the political spectrum, generally where authoritarian instincts are most tangible.  Those proposals also often share the same basic objective – that is, to reduce or eliminate international and independent adjudicative limits on the exercise of sovereign authority.  Indeed, as already noted, the EU proposals target tribunals whose mandates are specifically focused on claims that such authority has been abused, and provide for state control over the selection of personnel of new bodies that would take over those mandates.  In all these respects, even more than court-packing plans, the EU’s proposals to abolish investment arbitration raise serious concerns regarding the rule of law and the risk of “weaken[ing] national and international norms against tampering with independent judiciaries.”

Third, the draft Report also warns against domestic U.S. court-packing plans because “the American example in the world matters,” and, in the Report’s words, “politicians at home and abroad who might wish to control their nation’s courts might find themselves emboldened to take such actions if the United States engages in Court expansion.”  (Draft Report, at 19)  That is an entirely reasonable concern, which would apply as well to tampering with judicial institutions in other major democracies.

Importantly, however, there is another aspect of this concern: just as domestic U.S. actions might affect international or foreign conduct, so international proposals can affect the actions of the United States and other countries.  Thus, the EU’s proposal to shutter international arbitral tribunals and to substitute state-selected judicial panels can also affect domestic actions in individual countries – whether in the United States or elsewhere.

In this regard, one must wonder whether and how EU proposals regarding investment arbitration have affected political calculations and popular responses concerning judicial independence and the rule of law in Hungary, Poland, Turkey and elsewhere.  A disregard by the EU, and others, for long-standing, independent adjudicative mechanisms, and a willingness to tamper with the selection process for dispute resolution, breeds contempt for those mechanisms and the rule of law and emboldens authoritarian rulers around the world.  That is again especially true where, as with investment arbitration, those adjudicative mechanisms are specifically designed to protect citizens against arbitrary state measures and governmental oppression.

As the Report observes, “[c]ourts across the globe – and in the United States – have seen their independence compromised in the wake of politically undesirable decisions.”  (Draft Report, at 19)  That is true, of course, with respect to Vattenfall in Germany, Yukos in Russia and Loewen in the United States – all of which fueled populist hostility to investment arbitration.  But, as the Report also correctly concludes, the threats to independent adjudication and the rule of law come at least as much from other quarters – and, in particular, from proposals to tamper with existing means of adjudication.  And, in this regard, one cannot help but ask how EU proposals to abolish investment arbitration and replace it with less independent, more compliant judicial panels, may have inspired and emboldened attacks on independent judiciaries in some EU Members States and abroad.

The authors of the draft Report warned in clear terms of the costs and potential consequences of court-packing to the rule of law and protections against governmental oppression.  Those warnings apply not just in the United States. They apply also to proposals, in Europe and elsewhere, to shutter international investment tribunals and to replace those tribunals with judges hand-picked only by states.  One hopes that, in time, more measured and mature reflection will lead, as it led the authors of the Report, to a reconsideration and rejection of this variant of court-packing proposals.

References[+]

References ↑1 See, e.g., European Parliament, Multilateral Investment Court. Overview of the reform proposals and prospects; Gary Born, The 1933 Directives on Arbitration of the German Reich: Echoes of the Past?, 38 J. Int’l Arb. 417 (2021). function footnote_expand_reference_container_39241_30() { jQuery('#footnote_references_container_39241_30').show(); jQuery('#footnote_reference_container_collapse_button_39241_30').text('−'); } function footnote_collapse_reference_container_39241_30() { jQuery('#footnote_references_container_39241_30').hide(); jQuery('#footnote_reference_container_collapse_button_39241_30').text('+'); } function footnote_expand_collapse_reference_container_39241_30() { if (jQuery('#footnote_references_container_39241_30').is(':hidden')) { footnote_expand_reference_container_39241_30(); } else { footnote_collapse_reference_container_39241_30(); } } function footnote_moveToReference_39241_30(p_str_TargetID) { footnote_expand_reference_container_39241_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39241_30(p_str_TargetID) { footnote_expand_reference_container_39241_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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The Turn to Fact or Fiction: Ad Hoc Arbitration in the Draft Amendment to PRC Arbitration Law

Sun, 2021-10-24 00:22

The proposed Article 91 in the Draft Amendment to PRC Arbitration Law (the “Draft Amendment”), which was issued by the PRC Ministry of Justice in July 2021, introduces ad hoc arbitration: “The parties to a commercial dispute involving foreign elements may agree on an institutional arbitration or directly agree that it shall be arbitrated by a specially established arbitration tribunal”. According to the PRC Ministry of Justice, the main consideration for permitting ad hoc arbitration is that the PRC has acceded to the New York Convention, and foreign-administered ad hoc awards can be recognized and enforced in PRC—and domestic-administered and foreign-administered arbitration should be treated equally. Nevertheless, considering the current national situation, the Ministry of Justice is proposing to limit the scope of ad hoc arbitration to domestic arbitration with foreign elements in PRC.

This introduction of ad hoc arbitration is expected to be a breakthrough development for the PRC Arbitration Law (the “Arbitration Law”). This post will analyse ad hoc arbitration in the context of current PRC law and in the global context to consider whether ad hoc arbitration will become a reality in the PRC or remain a fiction. This post does not explicitly address the separate issue of differentiating between purely domestic arbitration and domestic arbitration with foreign elements.

 

Ad Hoc Arbitration Under the Current PRC Law

Since officially recognizing arbitration as a means of ADR, the PRC only admitted institutional arbitration domestically. Under Article 16 of the existing Arbitration Law, which was promulgated in 1994, a valid arbitration agreement must contain three elements: (1) the parties’ intention to arbitrate; (2) the specific matter for arbitration; and (3) a designated arbitration commission. Thus, an arbitration agreement that does not designate an institution administering the arbitration procedure will be voided. During the 26 years since the promulgation of the Arbitration Law, more than 4 million cases have been completed through institutional arbitration in PRC, while ad hoc arbitration is not commonly contemplated by parties and arbitrators. The PRC Supreme People’s Court in 2016 promulgated the Opinions on the Provision of Judicial Safeguards for the Construction of Pilot Free Trade Zones, among other purposes, to promote awareness and potential application of ad hoc arbitration as a pilot measures in certain Free Trade Zones. However, due to many barriers posed by the legal framework and unique practising environment, reported ad hoc arbitration cases in those Free Trade Zones were rare.

The Draft Amendment has relaxed the statutory requirement on validity of arbitration agreement, particularly Article 16 of the existing Arbitration Law. It can be reasonably expected that more arbitration agreements will be given effect, at least those that stipulate institutional arbitration. But it still needs to be observed if ad hoc arbitration would indeed increase in PRC, given the historical dominance of institutional arbitration in PRC.

 

Comparative Analysis

Ad hoc arbitration has been facilitated by modern arbitration laws in some countries that have a longer track-record of arbitration, for instance, the English Arbitration Act and Singapore International Arbitration Act, as well as by the UNCITRAL, in particular the UNCITRAL Arbitration Rules, which are often referenced in arbitration clauses providing for ad hoc arbitrations. Compared to these rules and national arbitration laws, the existing Arbitration Law features more on institutional arbitration than on ad hoc arbitration.

First, most of the provisions are mandatory. Fifty-three out of the 80 provisions in the existing Arbitration Law uses mandatory expression, such as “should” or “ought to”. On the other hand, most provisions of the UNCITRAL Arbitration Rules are optional, which allows parties to opt out and facilitates ad hoc arbitration. The English Arbitration Act explicitly lists its mandatory provisions in Schedule 1, and the majority of provisions are considered non-mandatory.

Second, the contents of most provisions in the existing Arbitration Law refer directly to institutional arbitration. For example, Chapter 2 is named as “Arbitration Commissions” and focuses on arbitration institutions. Chapter 4 on arbitration procedure is also dominated by provisions related to arbitration institution, and even the commencement of an arbitration procedure is to be decided by the arbitration commission. On the other hand, the UNCITRAL Arbitration Rules, English Arbitration Act, and Singapore International Arbitration Act do not have a strong focus on institutional arbitration.

The Draft Amendment does not deviate from this general focus on institutional arbitration. This leads to the question of whether the ad hoc provisions in the Draft Amendment could effectively facilitate and sustain ad hoc arbitration in practice. Apart from Article 91, the Draft Amendment also incorporates Articles 92 and 93 to specifically regulate ad hoc arbitration, which provides basic norms, such as tribunal formation, arbitrator challenge, and court supervision over ad hoc arbitration, namely that awards shall be filed in the court of the place of ad hoc arbitration.

These three articles are all in the Chapter 7 on domestic arbitration with foreign elements, and Article 88 in this Chapter stipulates that “The provisions of this Chapter shall apply to the arbitration of disputes involving foreign factors. Where there are no provisions in this Chapter, other relevant provisions of this Law shall apply”. But, like the exiting Arbitration Law, the “other relevant provisions” in the Draft Amendment generally concern institutional arbitration and may be hard to apply to ad hoc arbitration. Therefore, it may be doubtful whether the three articles in the Draft Amendment could adequately facilitate ad hoc arbitration.

 

The Global Popularity of Institutional Arbitration

Traditionally, advantages of ad hoc arbitration are thought to be: (1) low costs; (2) speed; (3) flexibilities of rules of procedure; and (4) international acceptance.1)Harry L. Arkin, “International Ad Hoc Arbitration: A Practical Alternative”, International Business Lawyer, Vol. 15, No. 1 (January 1987). jQuery('#footnote_plugin_tooltip_39026_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39026_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

While ad hoc arbitration remains an important arbitration model, it is also noted that more parties prefer institutional arbitration as opposed to ad hoc arbitration. According to research by PwC and Queen Mary University of London in 2008, 86% of awards were rendered by arbitration institutions rather than through ad hoc arbitrations.

The same trend could also be observed in recent statistics from major arbitration hubs in Asia. For instance, of the 1,080 cases filed in 2020 at the Singapore International Arbitration Centre, 1,063 cases (98%) were administered by the institution and the remaining 17 (2%) cases were ad hoc appointments; of the 318 filings in 2020 at the Hong Kong International Arbitration Centre, 203 (64%) were administered by the institution.

The reason for the dominance of institutional arbitration is considered to be that arbitration has become increasing complex, thus requiring more effort to organize an international arbitration efficiently.2)Ulf Franke, “Arbitral Institutions: Trends and Developments”, 2009 Asian DR, p. 115. jQuery('#footnote_plugin_tooltip_39026_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39026_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Arbitral institutions have endeavoured to adapt to these challenges. In addition, the traditional advantage of ad hoc arbitration is less obvious than before, as cases have become more legally, contractually, and financially complicated. The situation is particularly obvious in some emerging markets without a long history of arbitration, like in the MENA (Middle East and North Africa) region, where ad hoc arbitration has not succeeded in gaining popularity.3)Essam Al Tamimi, “International Commercial Arbitration in the MENA: Institutional v Ad Hoc: A Wealth of Choice”, 83 Arbitration, Issue 1 (2017), p. 19. jQuery('#footnote_plugin_tooltip_39026_27_3').tooltip({ tip: '#footnote_plugin_tooltip_text_39026_27_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); By and large, ad hoc arbitration in the MENA region suffers from lack of process, a shortage of arbitrators to undertake ad hoc work, and the abundance of jurisdictional challenges.4)Id. jQuery('#footnote_plugin_tooltip_39026_27_4').tooltip({ tip: '#footnote_plugin_tooltip_text_39026_27_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Similar to MENA in the history of arbitration usage, the PRC may also face challenges in developing ad hoc arbitration.

 

Concluding Remarks

Given the history and tradition in arbitration usage, the dominance of institutional arbitration under the existing Arbitration Law and the Draft Amendment, and popularity of institutional arbitration worldwide, particularly in Asia, it is likely that more efforts in the Draft Amendment and related frameworks are needed before ad hoc arbitration in scale may become a reality.

References[+]

References ↑1 Harry L. Arkin, “International Ad Hoc Arbitration: A Practical Alternative”, International Business Lawyer, Vol. 15, No. 1 (January 1987). ↑2 Ulf Franke, “Arbitral Institutions: Trends and Developments”, 2009 Asian DR, p. 115. ↑3 Essam Al Tamimi, “International Commercial Arbitration in the MENA: Institutional v Ad Hoc: A Wealth of Choice”, 83 Arbitration, Issue 1 (2017), p. 19. ↑4 Id. function footnote_expand_reference_container_39026_27() { jQuery('#footnote_references_container_39026_27').show(); jQuery('#footnote_reference_container_collapse_button_39026_27').text('−'); } function footnote_collapse_reference_container_39026_27() { jQuery('#footnote_references_container_39026_27').hide(); jQuery('#footnote_reference_container_collapse_button_39026_27').text('+'); } function footnote_expand_collapse_reference_container_39026_27() { if (jQuery('#footnote_references_container_39026_27').is(':hidden')) { footnote_expand_reference_container_39026_27(); } else { footnote_collapse_reference_container_39026_27(); } } function footnote_moveToReference_39026_27(p_str_TargetID) { footnote_expand_reference_container_39026_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39026_27(p_str_TargetID) { footnote_expand_reference_container_39026_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Upheaval of Dispute Resolution Centres in the Gulf: Recent Developments in Qatar and Dubai

Sat, 2021-10-23 00:27

On 14 September 2021, a Decree (no. 34) by the government of Dubai (currently only available in Arabic)  (the Decree) abolished two of Dubai’s most successful arbitration institutions: the Dubai Maritime Arbitration Centre (EMAC) and the DIFC-LCIA Centre.1)The DIFC-LCIA was established as a joint venture between Dubai International Financial Centre (DIFC), Dubai Arbitration Institute (DAI), and the London Court of International Arbitration (LCIA). jQuery('#footnote_plugin_tooltip_39151_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39151_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); This was done without notice, and it meant that almost overnight, responsibility for regional arbitrations was transferred to the ‘onshore’ Dubai International Arbitration Centre (DIAC).

At or around the same time, the neighbouring state of Qatar issued Law No. 15/2021, which expanded the jurisdiction of the Qatar International Court, which is the competent court of the Qatar Financial Centre (QFC), to include disputes arising in respect of the Qatar Free Zones and Qatar Free Zones Authority (QFZA). With this development, the Qatari government appears to signal the ascendance of the QFC Court as a preferred forum for disputes, even to the detriment of arbitration.

Whilst Qatari Law 15/2021 appears to confirm a rising trend in the Gulf to enhance the remit of transnational commercial courts, the Dubai Decree seeks to eke away the competence of extra-territorial institutions, shifting power to regionally concentrated power bases instead.

For the sake of brevity, this post will focus on the recent developments in Dubai, its background, and the issues arising therefrom.

 

Context to the Decree

Following the Decree’s entry into force, a new DIAC branch will be established in the DIFC, but that will take more time. It is claimed that the Decree aims to promote onshore Dubai as a global arbitration hub, following the issuance of Federal Law No. 6 of 2018 on arbitration (Dubai’s relatively new arbitration law). The new arbitration law modernised Dubai’s archaic arbitration laws, which were (rather unsatisfactorily) contained within a chapter of Dubai’s Civil Procedure Code. However, as they say, the proof will be in the pudding.

 

Arbitration in the United Arab Emirates

One of the most important decisions made by commercial businesspeople when agreeing to arbitrate is deciding which arbitral institution will handle our potential disputes and under which set of rules. By agreeing to arbitrate, parties expressly circumvent the well-trodden route of whichever national court system is jurisdictionally appropriate to resolve disputes. Therefore, it is trite to say that two major requirements of negotiated arbitration agreements in the absence of such default procedures are foreseeability and certainty.

For businesses operating in the Arab world, the DIFC-LCIA Centre provided disputants familiar with Western arbitration practices the assurance that their arbitrations would be handled according to clear and foreseeable methods under the rules of an institution partnered with the LCIA, which carried years of experience of administering arbitrations in Europe. However, the certainty and foreseeability of arbitration in Dubai were called into question following the issuance of the Decree.

 

Transitional Period and Handover

In the immediate ‘handover’ period to the DIAC, and in the transitional period that will succeed it, there will be considerable uncertainty for businesspeople who have already negotiated, or are contemplating inserting, a clause remitting disputes to the DIFC-LCIA under its rules in their contracts.

For parties whose disputes are pending at the DIFC-LCIA, these will continue to be administered under the DIFC-LCIA Rules, but will be supervised by the DIAC pursuant to Article 6(B) of the Decree. For parties whose arbitration agreements contain a clause incorporating the DIFC-LCIA Rules, but whose disputes have not yet arisen, these will be administered under the DIAC Rules by DIAC, unless the parties agree otherwise, pursuant to Article 6(A) of the Decree.

The choice of seat of ‘DIFC’ by parties is not affected by the Decree: this (and the DIFC laws) will continue to apply.

 

Two Institutions, Two Sets of Rules

In theory, the Decree streamlines matters because there is now a centralised hub to deal with disputes (the DIAC) as opposed to two different institutions, one onshore (the previous DIAC) and one off-shore (DIFC-LCIA), operating under two different sets of rules. However, theory and practice do not always align. The homogeneity of the procedures does not always lead to the best result, notably for parties who chose the DIFC-LCIA Rules specifically to benefit from the experience and qualifications of the LCIA and who never signed up to DIAC. The discrepancy between the two sets of rules is the first challenge that parties will need to tackle; the DIFC-LCIA Rules were updated in 2021 whereas the DIAC Rules currently in force2)Pending adoption of the ‘2017’ DIAC Rules by the DIAC. jQuery('#footnote_plugin_tooltip_39151_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39151_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); date back to 2007 and do not contain many of the innovations in other modern institutional rules to which international parties have become used (such as on joinder and consolidation, expedited procedures, and the use of digital technology).

Having worked at a major arbitral institution administering cases in the past, my personal observations are the following. First, any choice of arbitral institution should be clear and unambiguous in order to avoid conflicts down the line, either between the parties, or between the application of opposing institutional rules. The ability to continue with DIFC-LCIA arbitrations but have them administered by DIAC is problematic. As such, for example, the ICC Rules now provide under Article 1(2) that only the ICC Court is competent to administer arbitrations under its rules. It is likely that this change, which was made following the case of Insigma Technology v Alstom, was created to prevent instances in which parties refer to an arbitral institution but ask it to apply the rules of another (such as the ICC) to the proceedings. It is to be recalled that in Insigma, the Singapore courts permitted a competing institution (Singapore International Arbitration Centre) to apply the ICC (i.e., not its own) rules, pursuant to the parties’ agreement.

At a very basic level, data protection issues might also arise as a result of conflation of two institutional processes, if information about disputing parties which had not intended for their details to be made accessible to anyone other than the DIFC-LCIA is shared with the DIAC. On a practical note, ‘institutional cooperation’ also fails to take into account the different charging structures of institutions, and ways of calculating arbitrators’ pay. For instance, under DIAC Rules, the arbitrators’ pay is subject to a discretionary procedure employed by the DIAC. Under Article 2.2, the DIAC “fixes the advance on costs corresponding to the amount of the dispute, in an amount likely to cover the fees and expenses of the Tribunal and the Centre’s administrative costs”. This is akin to the sliding scale system used at the ICC. However, the DIFC-LCIA Rules are different: the tribunal is remunerated according to an hourly rate determined by the LCIA Court, under Article 2 of the Schedule on Costs. It therefore fluctuates, and depends on fixed hourly fees. It is difficult to see how these systems will be reconciled or applied effectively from an administrative perspective if the accounts department of DIAC is tasked to apply different charging methods to different cases administered by the centre in the transitional period.

Further, the DIFC-LCIA Rules contain multiple references to the LCIA taking supervisory decisions (such as on the appointment of arbitrators and arbitral challenges). This worked when the DIFC-LCIA Centre’s ‘umbrella’ supervisory entity was the LCIA Court. But the insertion of DIAC as administering institution for pending So, to take but one example, the DIFC-LCIA Rules  (Rule 26.9) provide that parties may agree to settle the dispute and thereby end the arbitration proceedings. Usually this is done through a consent award by the tribunal. However, there is a mechanism in the DIFC-LCIA Rules that allows parties to dispense with requesting a consent award, and instead leave it to the LCIA Court to conclude the arbitration proceedings after discharging the tribunal. The problem becomes: what happens when there is no LCIA Court to perform such function, and the DIAC does not have a residual, equivalent rule in such circumstances? It is concerning that this may be one of several ‘black holes’ that will only be discovered in due course, after the handover period, when the time comes to cross such bridges.

Furthermore, it is clear that each arbitral institution has an ethos and methodology that is specifically chosen by its users. At least in the case of the larger and more established institutions, that personality is rooted in a long history. It stands to reason that the parties chose DIFC-LCIA arbitration for a reason; not just for the content of the rules. They considered the depth and breadth of its knowledge in specific sectors and types of disputes, and its management team and direction. An abrupt transition from one institution to another does not entail a sudden ‘brain transplant’: the move to a new DIAC will be a gradual process in which the identity and directional approach of the ultimate entity is yet to be formulated. This is not what DIFC-LCIA would-be users signed up for.

 

Concluding Remarks

In conclusion, parties contemplating inserting an arbitration clause into contracts with a Dubai-based counterparty would be well-advised to take advice on whether and how to amend their existing contracts if they contain a DIFC-LCIA clause. In the interests of clarity and foreseeability, in light of the potential issues touched upon in this post, it is suggested that parties who have not yet entered into a dispute under their contract enter into a separate amendment agreement by which they clarify which rules they intend to be applicable in the DIFC-LCIA clause (for the avoidance of any disputes in due course). The other option would be to replace the disputes clause altogether (for instance, with one that either referred to the LCIA, or another regional institution likely to stand the test of time, preferably not the result of a joint venture, straddling two jurisdictions.

Similarly, in the future, when deciding upon which arbitration clause to insert into a commercial contract, it may be prudent to choose an institution that has been around, not just for a long time, but also in a jurisdiction where the rule of law is rarely called into question and where institutions with a judicial character are unlikely to be deleted with the stroke of a pen.

 

*The views expressed herein do not constitute legal advice. The views are the author’s and do not reflect those of the firm or the firm’s clients.

References[+]

References ↑1 The DIFC-LCIA was established as a joint venture between Dubai International Financial Centre (DIFC), Dubai Arbitration Institute (DAI), and the London Court of International Arbitration (LCIA). ↑2 Pending adoption of the ‘2017’ DIAC Rules by the DIAC. function footnote_expand_reference_container_39151_30() { jQuery('#footnote_references_container_39151_30').show(); jQuery('#footnote_reference_container_collapse_button_39151_30').text('−'); } function footnote_collapse_reference_container_39151_30() { jQuery('#footnote_references_container_39151_30').hide(); jQuery('#footnote_reference_container_collapse_button_39151_30').text('+'); } function footnote_expand_collapse_reference_container_39151_30() { if (jQuery('#footnote_references_container_39151_30').is(':hidden')) { footnote_expand_reference_container_39151_30(); } else { footnote_collapse_reference_container_39151_30(); } } function footnote_moveToReference_39151_30(p_str_TargetID) { footnote_expand_reference_container_39151_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39151_30(p_str_TargetID) { footnote_expand_reference_container_39151_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Highlights from CanArb Week 2021: The 2021 ICC Canada Conference – Leaning into the Future

Fri, 2021-10-22 00:34

As part of Canadian Arbitration Week, the 2021 ICC Canada Conference, titled Leaning into the Future, was designed to facilitate critical thinking and debate on several important topics in international arbitration. The focus of the conference was decidedly post-pandemic, exploring fault lines and cleavages in the system of international arbitration as we know it today, potential developments in arbitration as artificial intelligence becomes more familiar and trusted to deliver a fair process capable of fair outcomes, and additional regulation of third party funding to address conflicts and other concerns.

 

The Guardians of the Arbitral Universe

The first conference session, a panel discussion titled Guardians of the Arbitral Universe, was moderated by Martin Doe, Senior Legal Counsel with the Permanent Court of Arbitration. Four panelists, Alexander Fessas, Secretary General of the ICC International Court of Arbitration, Dr Patricia Shaughnessy, Professor at Stockholm University, Tina Cicchetti, Independent Arbitrator, and George Vlavianos, partner with DLA Piper LLP in Doha, explored the role of arbitral institutions in ensuring the integrity of arbitration as a global system of justice.

The topic was inspired by an address delivered by Alexis Mourre, former President of the ICC International Court of Arbitration, at the 2019 GAR Live conference in Istanbul. Mourre’s address was preceded by a warning issued five years earlier by Sundaresh Menon at ICCA 2012, that our industry needed to get its house in order, to self-regulate or be regulated, and a further omen from Gary Born who proclaimed the “sky is falling”. The panelists considered and debated several questions within this universe: Is arbitration a transnational system of justice? What are the most pressing threats to the system? What role do arbitral institutions play in that system – do they serve as its backbone? To what degree does the robustness of this “backbone” shape the legitimacy and predictability of international arbitration?

A deeper question emerged in the dialectic among the panelists. That is, whether there exists a common understanding of international arbitration or a common misunderstanding of international arbitration. Is there an absence of a true transnational ethos? There are threats to be sure – regionalism and parochialism – but perhaps a system nevertheless does exist? There may be types of disputes for which arbitration may need new solutions, as exemplified by the collapse of supply chains during the pandemic. As to what the path forward might be, there is a lot that arbitral institutions can do in terms of capacity-building and enhancing transparency, such as through the publication of awards. A counterpoint to this may be that published awards could be used as persuasive authorities by counsel, which may recreate a common-law litigation-style system.

Dialing the dialogue back from the perspective of seeking to expand the system, perhaps it is in attempting to reach everyone that international arbitration reaches no one. Perhaps it is arbitral institutions doing everything and anything that is causing a real crisis of trust and credibility with users. This has led some stakeholders and States to call for an increase of the regulatory supervision to ensure that arbitral institutions are in fact credible, have integrity, and result in delivering effective service to users. The issue may be a common misunderstanding of international arbitration: everyone thinks that arbitration can solve their problem, regardless of what the problem is. Is it wise to “collect” labour disputes, class actions, consumer problems, non-business disputes, and to some extent investor-state disputes, and bring all into one large universe or forcing into a small planet?

As an apropos segue into the next segment of the conference, the panel also recounted the late Emmanuel Gaillard’s Freshfields lecture on the sociology of arbitration, which presented on one chart the stakeholders in arbitration, all revolving around the users at its center. To properly guard this galaxy, perhaps the focus ought to be on the users, keeping in mind that the value for them is an enforceable outcome. Institutions are the face of arbitration to the users and they shoulder the responsibility to ensure that arbitration lives up to the promises made to the users.

 

Fireside Chat with Claudia Salomon

Following the opening panel, Stephen Drymer, a partner with Woods LLP, hosted the new President of the ICC International Court of Arbitration, Claudia Salomon, in a fireside chat. Ms Salomon spoke about the role of the ICC historically and today, as well as some of her core initiatives.

Ms Salomon recalled that the ICC was established roughly a century ago with a view to promoting peace and prosperity through global trade, and that an efficient dispute resolution mechanism was necessary to facilitate trade. Today, the ICC aims to ensure that its dispute resolution services meet the needs of global business, but also small and medium enterprises and micro-medium enterprises.

Under Ms Salomon’s predecessor, the ICC Court reached gender parity in 2015. Prior to 2015, only 10% of the Court’s membership was female. Today, the ICC Court is the most diverse in its history, with 195 members from 125 countries, more women than men, and more court members from African countries than ever before. The next step among the ICC’s diversity initiatives, under Ms Salomon’s leadership, is to create a taskforce on disability and inclusion.

Ms Salomon also spoke about her goal to reengage with users. Technology can greatly assist in facilitating this for those with busy schedules and who may need or want to be involved in some parts of a proceeding but not others. This ties directly into ensuring that the ICC remains at the forefront of meeting the needs of global business.

 

Debate #1: Our Brave New World – the ‘Artificial Arbitrator’

The first debate focused on artificial intelligence (AI) and considered whether AI is capable of achieving the same or better dispute outcomes than human decision-making. Sarah McEachern, partner with Borden Ladner Gervais LLP, moderated a debate between Sophie Nappert, Arbitrator, 3 Verulam Buildings, and Todd Wetmore, partner with Three Crowns.

While one view is that AI reduces the bias in human decision-making, can biases really be eliminated altogether through AI? Algorithms are coded by humans, ergo human bias infiltrates algorithms. Yet, human judgment is also chronically unreliable: take the example of parole board decisions, which have been found to vary depending on whether a case is heard before or after lunch. AI promises to solve the frailty of human judgment, as exemplified by the algorithm called Prometea, which has been applied by prosecutors in Buenos Aires for years.

Some also believe that an erosion of user trust will eventually lead to the demise of artificial adjudication. Parties will not trust the system if they do not know the decision-makers. While the inner-workings of an arbitrator’s mind will never fully be known, how could one ever “know” the entirety behind the AI programming?

AI adjudication would require parties to jettison everything they hold dear about the process today – no advocacy, no advocates, no process whereby a tribunal could be persuaded. This would be replaced by an antiseptic process of decision-making – data would be generated and collected for a data specialist to feed into a computer. Ultimately, AI adjudication may well be our future for certain types of disputes. Simple and binary disputes lend themselves more easily to an AI adjudicator than complex and non-binary disputes.

Audience polling before and after the debate showed an increase in those audience members responding “no” to the proposition that AI cannot remove decision maker’s bias, and “yes” to the proposition that AI will erode user confidence in arbitration.

 

Debate #2: Third Party Funding – ‘Show me the Money Trail’

The second debate focused on whether the issues associated with third party funding in international arbitration have been adequately dealt with through our current rules framework, or whether greater normativity is required. Geoff Moysa, Investment manager and legal Counsel with OmniBridgeway, moderated this debate between Andrea Bjorklund, Professor at McGill University Faculty of Law, and Wesley Pang, partner at Eversheds Sutherland.

This debate proceeded more as a discussion than a formal debate. A key focus of the discussion was the question of what is third party funding. Different jurisdictions have different levels of sophistication and familiarity with third party funding, and have different visions for the appropriate regulatory framework. These differences can and do lead to forum shopping (which is not necessarily a negative as it is allowing the parties choice).

There appears to be consensus on the potential need for disclosure in respect of a claimant’s ability to cover adverse costs in light of the risk of a funder overextending funding. It also appears to be non-controversial that there are legitimate issues around disclosure for conflicts purposes, and who controls the process at settlement.

Apart from the need (or lack thereof) for greater State regulation applicable to third party funding, the debaters considered whether arbitral tribunals have the power to regulate third party funding. There remains a debate as to whether the older rules are sufficient in their generality, or whether there is a need for newer more specialized and particularized rules. A further complication arises in that the latter potentially imply that the former are deficient and therefore arbitrators are bereft of powers to regulate third party funding in the absence of applicable State regulation.

Polls issued before and after the debate revealed that some members of the audience were persuaded that existing rules and regulations applicable to third party funding are adequate, and that the only reason for regulating third party funding is to manage arbitrator conflicts and adverse costs.

***

The conference brought together Canadian practitioners from around the world and saw a lively discussion in the chat feature throughout. In keeping with its theme, it did indeed lean into the future on a number of topics in international arbitration and for the international arbitration community as a whole.

 

Other posts covering CanArbWeek can be found here

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Highlights from CanArbWeek 2021: Lukewarm on Hot-tubbing – Effective Expert Collaboration Goes beyond the Joint Report

Thu, 2021-10-21 00:34

Just about everyone in the legal profession has made a small mathematical error in front of others and quipped, “well, that’s why I went to law school”. Clients hire lawyers for our legal reasoning, not for our abilities in arithmetic. For this reason, supplementing skilled legal analysis with input from industry and quantum experts is an essential component of effective advocacy in the majority of commercial arbitrations. Yet, knowing that experts are useful, and knowing how to work with them, are two entirely different concepts.

This post considers some of the insights shared by the moderators and the distinguished panel that hosted “Effective Expert Testimony: An Expert’s Guide” at CanArbWeek 2021. The moderators were  Michael Schafler, Paul Tichauer, and Janet Walker, while the panel members were Enzo Carlucci, Scott Davidson, Neal Mizrahi, Robert Patton, Rachel Ryman, and Peter Steger. In particular, this post will highlight the panel’s thoughts on “hot-tubbing”, the potential value of allowing experts to collaborate on joint reports, and the scope of an expert’s role throughout the arbitration.

 

Creativity is an essential tool in counsel’s toolbox

Spurred on by the ongoing COVID-19 pandemic and the consequential suspension of Court hearings and backlog of cases, arbitration is experiencing a rise in popularity in Canada as a means of efficiently resolving disputes. Along with the incumbents whose practice is solely focused on arbitration, the increasing number of arbitrations allows opportunities for litigators to act as counsel in arbitrations as well. Lawyers with a litigation-focused background are encouraged to leave behind the Rules of Court that they are comfortable with and consider arbitration’s more flexible, and potentially less adversarial, approach to dispute-resolution. Against this backdrop, the panel suggested that working creatively with an expert may not only minimize the cost of dispute resolution, but may also increase a party’s chances of success when used appropriately.

The panel’s insights apply equally regardless of background, as the unexpected arrival of COVID-19 has galvanized change across the arbitration community by expediting the adoption of virtual hearings, allowing technological innovation to germinate, and, potentially, giving an advantage to counsel that are (or are willing to become) tech-savvy and work with experts in novel ways.

With arbitration’s dynamic nature in mind, we examine the panel’s discussion from counsel’s perspective and consider potential challenges that practitioners may face when balancing tradition with innovation.

 

Ideas to implement in—or to eliminate from—your practice

There’s a time and a place for hot-tubbing, but when and where require a case-by-case approach

Conferencing between expert witnesses either in advance of or at the hearing is known colloquially as “hot-tubbing,” and the panel explored this method as a creative form of cooperation among experts in arbitration. Providing evidence in this manner may result in several practical effects, including:

  • A narrowing of the issues and a focus on the issues that are truly in dispute;
  • A more convivial and less adversarial approach to expert testimony;
  • Real-time discussion of technical issues amongst the experts, allowing for a more refined consideration of the issues; and
  • Reduced costs and increased efficiencies during the hearing.

Based on the panellists’ discussion, it appeared that the consensus of the experts was that hot-tubbing, in theory, achieves the goals of arbitration of being a less adversarial, more efficient, and more cost-effective means of resolving disputes. However, the panellists had mixed opinions as to the actual effectiveness of the process.

The panellists noted that the effectiveness of hot-tubbing is likely dependent upon how cooperative the experts are willing (or able) to be and at what stage of the proceeding the hot-tubbing occurs.  One expert, Robert Patton, noted that hot-tubbing can be a “free-wheeling experience” that may not be particularly useful to the tribunal or counsel unless it is subsequently reduced to writing (as in a joint report, discussed below). Another expert, Neal Mizrahi, proposed that hot-tubbing at the hearing may be more fruitful than hot-tubbing before the hearing as it allows the experts an opportunity to respond directly to each other and may allow your expert to shine when contrasted directly with another expert.

When making a decision about whether or not to embrace hot-tubbing the experts, counsel may want to ask such questions as:

  • What is the stage of the proceedings?
  • Will there be a joint report filed after hot-tubbing?
  • Is the nature of the dispute highly technical or is it easily accessible for the tribunal?
  • How do I expect my expert’s testimony will hold up against her peers?

These questions and more are the type counsel must be prepared to face moving forwards. And the answer to these questions may depend as much on the facts as they do on the expert chosen.

 

Counsel may need to take their hands off the wheel if they want to arrive at a useful joint report

Much as with hot-tubbing, the panel appeared to be aligned that the utility of a joint report comes down to whether experts are in a position to cooperate. The panel discussed this and some panellists suggested that having the experts meet early on—before drafting the reports and reply reports—may serve to encourage cooperation. This may allow the experts to meet and discuss before becoming convinced by, and entrenched in, their own analyses. However, the tribunal often does not request that a joint report be prepared until a few weeks before the hearing, at which time the experts (and counsel) may be too rooted in their position to render a joint report of much use to the tribunal.

While joint reports may seem like an attractive tool to use in all arbitrations, it is more likely that their efficacy will be dependent upon the parameters of the expert conferences that precede the joint report and upon the instructions provided by the tribunal (or agreed to by counsel) for drafting. Specifically, counsel must consider whether lawyers will be allowed to attend and participate in the pre-hearing conference and the joint report. While many counsel might be instinctually reluctant to take a hands-off approach, the presence of counsel may disrupt the collaborative intent underlying such meetings, reducing the likelihood of success and potentially adding time and expense. Beyond the meeting itself, would counsel be willing to hand over complete control of the report to the experts? If they are, counsel would then need to consider further questions, such as:

  • Should counsel appoint a primary expert to pen the joint report? If so, which expert is best suited for this position?
  • Is my expert likely to stand her ground, or will she be outmatched?
  • Are counsel allowed to interact with their experts during the drafting stage? If so, what are the parameters of these conversations?

Ultimately, counsel is faced with the task of providing clear instructions that simultaneously protect her client’s interests while also granting her expert enough rope to effectively collaborate with her counterpart. It is a delicate balancing act and one that counsel may be reluctant to engage in. But if successful the tribunal may have access to a lucid, less partial report that just may tip the scales in your client’s favour.

 

Be thoughtful about both the expert’s retainer and her role

A final consideration the panellists noted that counsel may not give sufficient thought to at the outset: How involved does she want her expert to be and for how long? If the records are complicated and the assessment of causation or damages is especially technical or speculative, she may benefit from engaging an expert early. Doing so would also allow her expert to get up to speed on the file well before any potential joint report, hot-tubbing, or other interaction with the opposing expert. The client’s appetite for disbursements, as well as other factors mentioned above, may dictate how early to engage an expert.

Another point for the nascent arbitration practitioner to keep in mind is one that the panel gave significant air time: assuming the expert gives oral evidence at all, the expert may only have 30-45 minutes to present her report, not days for an examination-in-chief. As a result, counsel should allow her expert considerable time to prepare and practice (potentially as a mock examination-in-chief) the summary presentation of her written report to be presented to the tribunal.  In the words of Blaise Pascal, “I would have written a shorter letter, but I did not have the time”.

While counsel (and the tribunal) may benefit from having experts involved from the commencement of the dispute through to written submissions, monetary and time constraints may prevent this from occurring as often as we might like.

 

Conclusion

Challenges stemming from the new world that we find ourselves in have served to demonstrate the adaptability not just of arbitration as a means of dispute resolution in Canada, but of arbitration practitioners themselves. When considering how an arbitration will proceed, we encourage counsel to consider not just whether it will be in 2D or 3D, but to take a first-principles approach to all aspects of the arbitration.

Ask yourself: in this dispute, how will the experts best assist counsel and the tribunal? You might end up pouring cold water on opposing counsel’s calls for hot-tubbing.

 

Other posts covering CanArbWeek can be found here

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Highlights from CanArb Week 2021: “New World New Rules” Tackles Transparency, Efficiencies, and Canadian Developments in Arbitration

Wed, 2021-10-20 00:34

Canadian Arbitration Week ran online from September 20 – 24, 2021 under the theme of adaptation and acceleration.  A timely focus as the pandemic continues to accelerate sweeping changes in the legal world.

The 2021 YCAP Fall Symposium titled “New World, New Rules” took place on September 23 and addressed the theme in a session moderated by Sarah Firestone  (associate, Osler, Hoskin & Harcourt). The panelists, Tamryn Jacobson (partner, Goodmans), James Plotkin  (lawyer, Caza Saikaley LLP), and Patricia Snell  (associate, Covington & Burling LLP) discussed recent changes to arbitral institutional rules through three main lenses: 1) ethics and transparency; 2) procedural efficiency and creative mechanisms for the taking of evidence; and 3) Canadian trends and developments.

 

Ethics and Transparency

The first discussion explored rule changes in relation to the popular topic of third-party funding. Notably, the International Chamber of Commerce (ICC) Rules of Arbitration now require parties to disclose the existence of any third-party funding arrangements in order to avoid conflicts and allow greater transparency (see further discussion in previous post). Similar disclosure requirements are featured in the new generation of foreign investment protection agreements, such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) (Article 8.26).

The panelists further discussed transparency trends, noting that the ICC has been, once again, leading the charge in that respect. The 2021 Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration provides that awards, procedural orders, dissenting and/or concurring opinions will be published by the ICC in their entirety, including the names of the parties and of the arbitrators, unless the parties specifically opt out of the publication. Many other institutions still hold on to the norm that parties must opt-in on publication.

Although privacy and confidentiality are deeply entrenched in the arbitration world, one panelist noted the need for balancing between confidentiality as the cornerstone of arbitration and publication as a means to ensuring the development of the law suggesting that parties should be encouraged to choose publication in cases where confidentiality is not paramount or where appropriate redactions could protect the parties.

In response to the concerns about the law going “stale”, it was suggested that the substantive development of the law was continuing, and would always continue, through the courts. The panelists agreed that the lack of publication of procedural rulings and orders contributes to the lack of understanding of arbitral procedures by litigators who only occasionally dabble in arbitration. The panelists acknowledged that solving this issue and encouraging publication of awards and procedural orders was complex given a key value of arbitration is confidentiality. This void of procedural precedents is perhaps a greater issue in Canada than other jurisdictions, where Canadian litigators who take the occasional arbitration often look to the court’s procedural decisions as precedents without fully appreciating the arbitral process.

 

Procedural Efficiencies and Creative Mechanisms of Taking of Evidence

With respect to changes in procedural efficiencies, the discussion focused on the increase in “early determination” provisions,  starting with Rule 29 of the Singapore International Arbitration Centre (SIAC) Rules. This rule allows a party to apply for early dismissal of a claim that manifestly lacks legal merit or is manifestly outside the tribunal’s jurisdiction. Similar rules have followed, such as Article 22.1(viii) of the London Court of International Arbitration (LCIA) Rules. Under the LCIA Rules, the arbitral tribunal has the authority to dismiss claims upon the application of any party or the arbitral tribunal’s own initiative.

Perhaps the reason for adding this new early determination procedure is comparable to early dismissal procedures that are available in Canadian courts to help clear “hopeless” claims. This power can be seen as one supporting a fair and efficient dispute resolution process. On the other hand, early determination of a claim may mean that the decision is made before a party has presented any evidence. In such cases, the procedural protections differ significantly from that available in Canadian courts, where a right of appeal remains available to correct errors. However, proponents of arbitration would argue that the parties’ rights would remain sufficiently protected as relevant arguments may be asserted during set aside or enforcement proceedings.

The rise of virtual hearings and the electronic taking of evidence has also been much discussed in the arbitral world, and outside. Although these changes have allowed for gains in efficiency, there are also challenges of cyber security and data collection that come with the remote model. Preserving confidentiality and complying with data protection is increasingly challenging and costly, which weighs against the simplicity and efficiency afforded by technology. The audience was pointed to developments in the International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration, where the tribunal shall consider whether it is appropriate to adopt security measures to protect electronic information (Article 2.2) and, at the request of parties, can exclude evidence obtained illegally (Article 9.3). As it is an unresolved issue in arbitration as to whether evidence illegally obtained as a result of hacking should be admitted and what factors a tribunal should consider, it is interesting to see this development in the IBA Rules and we can likely expect more of it in the future.

 

Canadian Trends and Developments

The panelists highlighted the significant technology advancements being made with the not too subtle push of the pandemic, noting that arbitrators and practitioners were being dragged into the 21st century, where the panelists all agreed, we would be forced to stay.  The panel encouraged all practitioners and arbitrators to check out the Campaign for Greener Arbitrations to see how choosing greener initiatives can translate to cost savings for clients.

The panelists also tackled the emerging trend of a mediation-arbitration hybrid model which is gaining attention following the domestic 2020 ADRIC Med-Arb Rules. Though 2020 ADRIC Med-Arb Rules were designed to assist in resolving domestic commercial disputes, they can be widely used and applied provided parties wish to adopt them. In med-arb, the arbitrator has a dual role, in which they first act as the mediator and, if issues remain unresolved, they remain as the decision-maker in the second phase of arbitration, unless parties agree from the start to have a separate mediator and arbitrator. In addition to the provincial statutes which allow parties to agree to a hybrid mediation and arbitration process, there are now detailed and thoughtful rules laid out to assist in guiding practitioners through balancing mediation, followed by binding arbitration. Despite the Med-Arb Rules attempting to deal with a number of fundamental issues surrounding arbitrator bias and procedural fairness, the panelists vocalized a common concern among practitioners about the overall effectiveness of the Med-Arb process; specifically, whether or not the parties would truly be forthcoming with a mediator who may ultimately determine their dispute as arbitrator.

There is an incredible amount of time and energy being devoted within the arbitration sphere to understanding unconscious biases of both arbitrators and practitioners in an effort to expand diversity initiatives and to ensure the arbitration sphere correctly and fully reflects the complex diversity of its users. For example, Racial Equality for Arbitration Lawyers (REAL) focusses on racial equality within international arbitration and aims to create platforms that recognize and address issues of systemic discrimination and implicit bias. As discussed in a previous post, diversity in adjudicative bodies directly impacts how claims are evaluated by decision makers.  Given the hesitation of practitioners to embrace the Med-Arb process, it may be prudent to invest some time and resources in better understanding the unconscious biases experienced by mediators who later find themselves the decision-maker. Arbitration is rooted in the idea that arbitrators will be independent and impartial. It is this idea that pushes the new ADRIC Med-Arb Rules to suggest that arbitrators should not allow the information gained in the mediation to influence their decision in the arbitration. For those who attended Professor Craig E. Jones’ lecture on “Biases in Adjudication in the age of Zoom” (forming part of WCCAS’ conference for Canadian Arbitration Week), you know that even where the decision maker has separated the information in their mind, and believes they relied solely on the facts in evidence before them, the unconscious mind is always there to subtly influence and sway them.

The final discussion point on the topic of Canadian developments was related to the dominance of ad hoc arbitrations in Canada and a question of whether, as a result of that, the rule changes might have less of an impact.  One of the reasons provided for the prevalence of ad hoc arbitrations is that many Canadian litigators participating in occasional arbitrations tend to favor ad hoc, into which they can import familiar court rules, over institutional arbitration with obscure rules. Although ad hoc arbitration is meant to allow the parties the freedom to create their own process, in Canadian practice it oftentimes evolves the process and becomes a litigation-look alike. The more arbitration mirrors litigation, the less parties get the benefit of the faster, cheaper, more effective promise of arbitration. Therefore, what is important in ad hoc domestic arbitrations is first, educating litigators and, second, being careful and deliberate about arbitrator appointments. Whether an arbitrator runs an arbitration like a court litigation or takes advantage of the flexibility of arbitration, arguably has more of an impact on the procedure than any particular change to the institutional rules, at least with respect to domestic arbitrations. According to the panelists, one of the silver linings of the pandemic is an increase in the use of arbitration and, as a result,  litigators are swiftly being immersed into the arbitration culture.

This final discussion leaves a number of unanswered questions, such as: With the rising number of Canadian litigators joining the arbitration process what future adaptations are in store? Can existing arbitration practitioners educate and inspire litigation counsel to embrace arbitration as an efficient, effective, and creative process of dispute resolution? Will these additional litigators dilute the advancement of arbitration and hinder the adaptation through their continued reliance on litigation precedents and court procedures?  As the panelists aptly pointed out, arbitration is so much more than “litigation sitting down”. To not only embrace the existing changes but to motivate the next round of adaptations, arbitration practitioners are being called on to showcase and clearly demonstrate the strengths of arbitration to our curious, open-minded, litigation colleagues.

 

Other posts covering CanArbWeek can be found here

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Asset Freezes and the Payment of Advances on Costs: Are the Proceedings Bound to End Before They Have Even Begun?

Tue, 2021-10-19 00:27

This post is the first in a series of three regarding the potential impact of economic sanctions on arbitral and financial institutions. The series addresses critical issues faced by such institutions as a result of restrictions on transfers of funds under primary and secondary sanctions programmes. This first entry discusses the potential effects of asset freezes. Subsequent entries will focus on US secondary sanctions against Iran and against Russia.

While some sanctions programmes make certain types of claims inadmissible and/or prohibit the satisfaction of claims arising out of contracts affected by these programmes, economic sanctions do not, as a matter of principle, prohibit the submission to arbitration of disputes involving one or more targeted parties. Over the last few years, representatives of many major arbitral institutions have readily made public statements to this effect.1) See, for instance, ICC, News: International Economic Sanctions, 1 July 2015, accessible at <https://iccwbo.org/media-wall/news-speeches/international-economic-sanctions/>, and the Joint Statement of the ICC, LCIA and SCC entitled “The Potential Impact of the EU Sanctions Against Russia on International Arbitration Administered by EU-Based Institutions” dated 17 June 2015, accessible at <https://sccinstitute.com/media/80988/legal-insight-icc_lcia_scc-on-sanctions_17-june-2015.pdf>. jQuery('#footnote_plugin_tooltip_39002_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

That said, arbitral institutions and banks that maintain accounts in which advances on costs are deposited are subject to the sanctions laws and regulations of their respective jurisdictions.2)Interestingly, in 2015, the ICC went so far as to declare itself bound to operate in accordance even with US sanctions – see ICC, News: International Economic Sanctions, 1 July 2015, accessible at <https://iccwbo.org/media-wall/news-speeches/international-economic-sanctions/>. jQuery('#footnote_plugin_tooltip_39002_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); To determine the obligations of arbitral and financial institutions, the specific terms of each sanctions programme must therefore be examined on a case-by-case basis, and arbitral and financial institutions must have in place screening processes that allow them to identify whether any of the parties to an arbitration is (or is owned or controlled by) a person or entity specifically targeted by a sanctions programme (a “Designated Person”).

Payment of a Registration Fee or of an Advance on Costs

Typically, asset freezes are two-pronged: they prescribe the blocking of assets and economic resources owned or controlled by Designated Persons, hence prohibit, in particular, any action that would allow the management or use of such assets; in addition, they prohibit making assets or economic resources available to or for the benefit of Designated Persons. Some programmes also provide that persons and institutions that hold or manage funds or have knowledge of economic resources which ought to be deemed to fall within the ambit of an asset freeze, have a reporting obligation.

It goes without saying that if a party to an arbitration is (or is owned or controlled by) a Designated Person whose assets are frozen, none of its assets in the sanctioning state may be transferred. Furthermore, even if an order to transfer funds is effectively processed (for instance, by a bank in the country against which sanctions are in place), these funds must be frozen by any recipient bank in the sanctioning state, and the competent authorities might have to be informed of the existence of frozen funds. Similarly, if a party becomes a Designated Person in the course of an arbitration, advances on costs already transferred to the account of an arbitral institution (and of which the party in question usually remains the owner or beneficial owner) must in principle be immediately frozen and the existence of frozen assets might have to be reported to the competent authorities.

In sum, “the arbitral tribunal, or institution, shall, as would any entity falling under the scope of the sanctions, report to the competent authorities any transfer of funds from a blacklisted individual or party domiciled in a sanctioned country [should transfers from and to a party domiciled in a sanctioned country be prohibited]. Similarly, the bank that receives the advance on costs shall freeze the portion of the advance it received from [a] blacklisted individual or entity, irrespective of whether the advance was paid before or after the entry into force of the sanction.”3)Elliott Geisinger/Philippe Bärtsch/Julie Raneda/Solomon Ebere, The Impact of International Trade Sanctions on Contractual Obligations and on International Commercial Arbitration, International Business Law Journal, 2012(4), pp. 431-432. jQuery('#footnote_plugin_tooltip_39002_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

This being said, under many sanctions programmes, payments from blocked accounts and transfers of frozen assets may exceptionally be authorised.

Certain EU sanctions programmes contain explicit carve-out provisions for the payment of legal services, allowing Member States to release frozen funds if it has been determined that these funds are intended exclusively for payment of reasonable professional fees or reimbursement of incurred expenses associated with the provision of legal services. As to Swiss sanctions, they stipulate that payments from blocked accounts and transfers of frozen assets may exceptionally be authorised inter alia if this is necessary in order to avoid hardship or to honour an existing contract. Situations of hardship are considered by certain authors to cover situations in which assets are required for the payment of legal fees, advances on costs, court costs or the like, and in which a party’s procedural rights could be irreparably harmed should the required funds not be released.4)Olivier Thormann/Anne-Claude Scheidegger/Nicolas Bottinelli/Robert Zimmermann/Alain Chablais, Séquestre, blocage et sanctions, in Giroud/Rordorf-Braun (eds), Droit suisse des sanctions et de la confiscation internationales, 2020, fn. 371. jQuery('#footnote_plugin_tooltip_39002_30_4').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); It has also been convincingly argued that a release of funds for the payment of a registration fee and advances on costs would allow a Designated Person to honour an existing contract, namely an arbitration agreement.5)Mathias Audit, L’effet des sanctions économiques internationales sur l’arbitrage international, in Loquin/Manciaux (dir.) L’ordre public et l’arbitrage, Actes du colloque des 15 et 16 mars 2013 (Dijon), 2014, p. 147. jQuery('#footnote_plugin_tooltip_39002_30_5').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

It may thus be possible to obtain, on a case-by-case basis, a specific authorisation (or specific license) for the payment of registration fees and advances on costs. Note, in this respect, that it has been suggested that both the party subject to sanctions and the arbitral institution might need to apply for such an authorisation, in order to access and to receive frozen funds, respectively.6)Evgeniya Rubinina/Romina Rivero/Mali Torres/Daniel Mills/Xenia Kalognomas/Carlos Arrebola/Krupa Vekaria, Impact of Sanctions on Arbitration, Practical Law UK Practice Note w-030-4886, 2021, p. 8. See also on this question Mathias Audit, L’effet des sanctions économiques internationales sur l’arbitrage international, in Loquin/Manciaux (dir.) L’ordre public et l’arbitrage, Actes du colloque des 15 et 16 mars 2013 (Dijon), 2014, pp. 146-147. jQuery('#footnote_plugin_tooltip_39002_30_6').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_6', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

A licence is in principle required even for payments made by a non-designated third party on behalf of a Designated Person. EU sanctions programmes typically prohibit EU operators from taking part, knowingly and intentionally, in any activity the object or effect of which is to circumvent an EU asset freeze, including transactions conducted at the direction of a Designated Person. In Switzerland, while only some programmes explicitly refer, in addition to assets owned or controlled by Designated Persons, to assets owned or controlled by persons or entities acting on behalf of the latter or upon their instructions, it has been determined by the State Secretariat for Economic Affairs (SECO), the supervisory authority appointed by the Swiss government, that assets of such third parties must in any event be deemed to fall within the definition of assets “controlled” by a Designated Person.7)Financial Action Task Force/Groupe d’action financière, 3ème Rapport d’évaluation mutuelle de la lutte anti-blanchiment de capitaux et contre le financement du terrorisme, Suisse, November 2005, p. 58. jQuery('#footnote_plugin_tooltip_39002_30_7').tooltip({ tip: '#footnote_plugin_tooltip_text_39002_30_7', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Caution is therefore advisable: should a party be a Designated Person, funds transferred on its behalf, be it by a third party that is itself neither listed nor owned/controlled by the party in question, must in principle be frozen unless and until a specific authorisation has been granted, and any reporting obligation must be abided by.

Substitute Payment of an Advance on Costs

If a party does not pay its share of the advance on costs on the ground that its funds are frozen, is the other party entitled, from a sanctions law perspective, to make a substitute payment? Could such a substitute payment for a Designated Person (or for a party owned or controlled by a Designated Person) be regarded as a way of making assets indirectly available to a Designated Person, in breach of prescriptions on asset freezes?

This question has significant practical relevance, in particular if it is the respondent’s assets that are frozen, as this party might have no incentive to seek their release for the purpose of paying its share of the advance on cost. Should a substitute payment be considered to fall within the scope of proscribed activities, the proceedings might well be paralysed.

Indeed, while sanctions programmes imposing asset freezes set out mechanisms to authorise, in certain circumstances, transfers of frozen funds, they usually do not afford a non-designated person the right to seek an authorisation to make (non-frozen) assets available to a Designated Person.

The only way out of such a deadlock might therefore be to reach out to the competent authority and seek confirmation that a substitute payment would be lawful. It should of course be made clear that preventing a substitute payment might ultimately serve the interests of the designated party.

Return of an Unused Portion of an Advance on Costs

As noted above, programmes which impose an asset freeze usually prohibit making available to Designated Persons, directly or indirectly, any assets or economic resources.

In light of this, it might be unlawful to transfer back the unused portion of an advance on costs to a Designated Person (or a person or entity owned or controlled by, or acting on behalf or upon the instructions of, a Designated Person), even if such an advance was actually released, by means of a specific authorisation or licence, for purposes of the arbitration proceedings.

The only way of lawfully returning an unused portion of an advance on costs might therefore be to place the amount in a blocked account and, if required, to report all relevant information to the competent authority.

 

References[+]

References ↑1 See, for instance, ICC, News: International Economic Sanctions, 1 July 2015, accessible at <https://iccwbo.org/media-wall/news-speeches/international-economic-sanctions/>, and the Joint Statement of the ICC, LCIA and SCC entitled “The Potential Impact of the EU Sanctions Against Russia on International Arbitration Administered by EU-Based Institutions” dated 17 June 2015, accessible at <https://sccinstitute.com/media/80988/legal-insight-icc_lcia_scc-on-sanctions_17-june-2015.pdf>. ↑2 Interestingly, in 2015, the ICC went so far as to declare itself bound to operate in accordance even with US sanctions – see ICC, News: International Economic Sanctions, 1 July 2015, accessible at <https://iccwbo.org/media-wall/news-speeches/international-economic-sanctions/>. ↑3 Elliott Geisinger/Philippe Bärtsch/Julie Raneda/Solomon Ebere, The Impact of International Trade Sanctions on Contractual Obligations and on International Commercial Arbitration, International Business Law Journal, 2012(4), pp. 431-432. ↑4 Olivier Thormann/Anne-Claude Scheidegger/Nicolas Bottinelli/Robert Zimmermann/Alain Chablais, Séquestre, blocage et sanctions, in Giroud/Rordorf-Braun (eds), Droit suisse des sanctions et de la confiscation internationales, 2020, fn. 371. ↑5 Mathias Audit, L’effet des sanctions économiques internationales sur l’arbitrage international, in Loquin/Manciaux (dir.) L’ordre public et l’arbitrage, Actes du colloque des 15 et 16 mars 2013 (Dijon), 2014, p. 147. ↑6 Evgeniya Rubinina/Romina Rivero/Mali Torres/Daniel Mills/Xenia Kalognomas/Carlos Arrebola/Krupa Vekaria, Impact of Sanctions on Arbitration, Practical Law UK Practice Note w-030-4886, 2021, p. 8. See also on this question Mathias Audit, L’effet des sanctions économiques internationales sur l’arbitrage international, in Loquin/Manciaux (dir.) L’ordre public et l’arbitrage, Actes du colloque des 15 et 16 mars 2013 (Dijon), 2014, pp. 146-147. ↑7 Financial Action Task Force/Groupe d’action financière, 3ème Rapport d’évaluation mutuelle de la lutte anti-blanchiment de capitaux et contre le financement du terrorisme, Suisse, November 2005, p. 58. function footnote_expand_reference_container_39002_30() { jQuery('#footnote_references_container_39002_30').show(); jQuery('#footnote_reference_container_collapse_button_39002_30').text('−'); } function footnote_collapse_reference_container_39002_30() { jQuery('#footnote_references_container_39002_30').hide(); jQuery('#footnote_reference_container_collapse_button_39002_30').text('+'); } function footnote_expand_collapse_reference_container_39002_30() { if (jQuery('#footnote_references_container_39002_30').is(':hidden')) { footnote_expand_reference_container_39002_30(); } else { footnote_collapse_reference_container_39002_30(); } } function footnote_moveToReference_39002_30(p_str_TargetID) { footnote_expand_reference_container_39002_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39002_30(p_str_TargetID) { footnote_expand_reference_container_39002_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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To Our Friend Martin (MI)

Mon, 2021-10-18 05:34

We lost a friend on 9 October 2021. While the news of Martin Hunter’s death filled us with grief, our memories of Martin are quite the opposite. It seems right to share them with you on the Kluwer Arbitration Blog, which he supported from its creation.

 

We are the “M”s – Martin’s research assistants, whom he numbered from M II to M XXVIII.  The legend goes that this numbering was born of Martin’s first two research assistants sharing his first name. After much confusion, to identify which Martin was who, Martin decided to call himself M I, the first research assistant M II, and the next M III. By the time his third research assistant turned out to be named Roman rather than Martin, the tradition had been set, and Roman became M IV. The practice lasted through his 27 successive research assistants.

 

Readers of the various texts written in recent days about Martin will have noticed that the word “friend” appears and reappears frequently. One of his most profound contributions to the (legal) world is a sentence we have heard him say many times when speaking about lawyers, barbers, hotel bartenders, and pretty much everyone who crossed his path:

“Yeah, I know them: a good friend!”

In fact, he was so prolific with the term “friend” that, at first, more than one of us thought he was being facetious. Turns out he was not – far from it! While intellectually brilliant and equipped with clarity of legal mind that kept stunning his peers and students, he radiated a warmth, joviality, and a joie de vivre that made him bridge cultural and social divides and win even more hearts than his mind had already conquered.

Whenever there will now be talk of his legacy, we feel it is our duty to Martin to continue paying forward the gift that he gave to us across continents and cultures: friendship and generosity towards younger lawyers and peers with mentorship and guidance.

Martin’s approach was the same wherever he went. He wanted to “leave things better than you find them”. Some 14 years ago, at the Vis Moot in Vienna, Martin said: “My dream is that one day, when there is yet another conflict between two countries, the legal representatives sent to negotiate will recognise each other from the Vis Moot they did decades ago, where they faced the same problem and forged friendships. This, I think, will allow them to resolve that conflict.” Today, this message rings truer than ever.

Martin had a knack for profoundly influencing the many people who crossed his path, be it at Freshfields, Essex Court, KCL, KIIT, the Vis Moot, through his book, or at a barber shop near the Lemon Tree pub where he held his “Friday Clinics”. Jovially, Martin always enjoyed suggesting a new hairstyle.

His mentorship and guidance went beyond international arbitration. Once, after a class at King’s College, just outside the Strand building, he stopped by an elderly man who looked like a rough sleeper feeling sick, ignored by all students and  passers-by. Martin helped him up and made sure the man was well before letting him go. The M present then, who was ready to walk past the man, had just learned the most valuable lesson of that school year.

More lightly, one of his friends recalled that “Martin once wrote on a photocopy of his book Redfern & Hunter, made for a class with him because I could not afford to buy it: ‘Dues are to be paid in beer at Essex Court Chambers!’ However, he later changed it to say that the dues were due in Gin&Tonics!”. Martin, from then on, insisted that there always be an affordable version “student edition” of his book, with identical substantive content.

Martin loved being surrounded by young minds. They inspired him, and he never felt threatened by them. Always empathetic and taking personal interest in the lives of people around him, his humane spirit indelibly impacted all who knew him, most of all, his “M”s.

He and his wife Linda (and their cats, whom Martin adored) would always keep the doors of their home open to us. We cannot count the numerous days and nights we spent at their house in Walton-on-Thames. His study, the walls filled floor to ceiling with books and journals on international dispute resolution, witnessed hard work as well as many joyful moments (always a glass of G&T in our hands). Fond of technological developments, he would often purchase the latest technical marvels at airports, and not only excitedly share his latest acquisition when we visited him at Walton, but also give away the previous iteration to a student or a friend.

Martin once told us that he had made it his personal project to support aspiring arbitration enthusiasts from the BRICS countries. In particular, his activity in the past two decades evidences his love for India and Brazil. He was a devoted supporter of KIIT University and of the University of Sao Paulo, as well as of various other universities in both countries; many of the Ms are Indian or Brazilian nationals. His generosity and zeal gave his younger friends wings to fly and the self-belief to succeed.

Of course, the world knows Martin as one of the founders of modern international arbitration, which he helped develop through sheer intellectual brilliance and remarkable contributions, such as the book Redfern & Hunter on International Arbitration. Make no mistake – Martin would often repeat that it is important to distinguish arbitration and “international” arbitration.

Such conversations were often held on the back of one of his various boats — Martin had “always” owned a boat, the latest one called Chamois. Together with Joe, one of Martin’s best friends from his neighbourhood, we would drive down to Lymington harbour, set sail (or turn on the engines) and discuss a case, draft a new section for Redfern & Hunter, comment on the latest developments in international dispute resolution, or prepare a class for one of the many university modules he taught.

His favourite teaching style was skills-based teaching. He deemed practical skills more important than niche theoretical knowledge. Using the Kaspenistan or Abukarabia case study (which he had drafted with an M in his car on the way to Lymington), he would teach thousands of students from all over the world how arbitration proceedings materialise in real life, how to properly cross-examine a witness, or how to plead convincingly.

Oral advocacy was important to Martin – he was a regular at the Vis Moot in Vienna, the most important date in his calendar. He would stay at the Vienna Marriott Hotel or the Hilton Plaza for people to be able to visit after the mooting sessions and have lunch, G&T or dinner with him. For us, the highlight of that week was the “supper” (the word mattered to Martin) he hosted every first Saturday of the Vis Moot week at Plachutta Wollzeile, an occasion to which he would invite the “M”s (and “honorary ‘M’s”) to share Tafelspitz accompanied by much Grüner Veltliner. Typical of Martin, his parting gift to us is a supper to be held there in his honour.

Martin wanted to create a legacy that would outlast him. He believed in impacting the lives of people, who would in turn impact people around them. As we look back to the memories that Martin gifted us, there is no doubt that he succeeded. He leaves behind an ever-expanding bond of camaraderie between all those who crossed his path. If you are reading this, chances are you are one of them.

 

In memory of M I, the Ms are:

M II – Martin Lau, London

M III – Martin Eimer, Munich

M IV – Roman Brnčal, Olomouc

M V – Tomislav Nagy, Zagreb

M VI – Alexander Lütgendorf, Dubai

M VII – Guy Conde e Silva, Lisbon

M VIII – Anne Hoffmann, Sydney

M IX – Florian Cahn, Nuremberg

M X – Alexis Martinez, London

M XI – Yves Wolters, London

M XII – Edin Karakas, Zagreb

M XIII – Alexandre Vagenheim, Paris

M XIV – Sameer Chaudhary, New Delhi

M XV – Sonal Kumar Singh, New Delhi

M XVI – Katia Finkel, London

M XVII – Gregory Travaini, Paris

M XVIII – Ziva Filipic, Paris

M XIX – Javier Garcia Olmedo, Luxembourg/London

M XX – Platon Guryanov, Moscow

M XXI – Ranamit Banerjee, London

M XXII – Alipak Banerjee, New Delhi

M XXIII – Valério Salgado, São Paulo

M XXIV – Abinash Barik, Bhubaneswar/Kuala Lumpur

M XXV – Vítor Castro, Porto Alegre/London

M XXVI – Renan Frediani Torres Peres, Sao Paulo

M XXVII – Adriano Stagni, London

M XXVIII – Simon Weber, London/Zurich

 

This post was co-authored by Martin Lau, Martin Eimer, Tomislav Nagy, Alexander Lütgendorf, Guy Conde e Silva, Florian Cahn, Alexis Martinez, Edin Karakas, Alexandre Vagenheim, Sameer Chaudhary, Sonal Kumar Singh, Katia Finkel, Gregory Travaini, Ziva Filipic, Javier Garcia Olmedo, Platon Guryanov, Ranamit Banerjee, Alipak Banerjee, Valério Salgado, Abinash Barik, Vítor Castro, Renan Frediani Torres Peres, Adriano Stagni, Simon Weber.

 

 

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How to Manage Work-Life Balance in Context of First Arbitral Appointments

Mon, 2021-10-18 00:52

I recently co-chaired with Gustav Flecke-Giammarco a Delos roundtable on this topic, at the kind invitation of its President and Co-Founder, Hafez Virjee. The topic links to a broader theme: how to be an international arbitration practitioner and manage some balance while at it? It can be tricky, and I am conscious that especially during the pandemic the opportunities for a human connection and frank discussion are rare.

I therefore wanted to take the opportunity to blog my views in case they help anyone. To understand the challenge, I begin with a quick look at my personal smörgåsbord:

I have had a busy practice for 14 years at leading international arbitration teams at Freshfields, Latham & Watkins and Quinn Emanuel, and have recently launched my own label to act as an international disputes counsel and arbitrator. I have seen a fantastically interesting and busy portfolio of disputes, and have learnt from brilliant colleagues. I love my clients and meeting new people, and therefore seek out opportunities to bring in new cases and run them. Which then adds to my work-load. I sit as arbitrator. I publish. I lecture as external professor. I try to make time to mentor my team, and have recently agreed to mentor law students at the University of Oxford where I hail from. I have two little boys, aged eight and four, and a puppy who is invariably caked in mud from the morning school run and makes a mess everywhere. I sit on the board of my boys’ school because education is key. I try to look after my health, friendships and sleep. My husband is an oculoplastic surgeon with a Harley Street practice. He handled the boys and their schooling during the pandemic. We have no family in London to help. At night I get kicked and punched by a child who is dreaming of dragons. I am breaking a slight sweat even writing this paragraph.

 

If your set-up is anything like mine, and you are thinking about getting your first appointment as arbitrator, the question arises: With what time? And how to do a good job? Some of my pointers, from a pool of my experience and inevitably some pain:

  1. Harness the institutions: Chances are that your first appointment comes from an arbitral institution. Institutions such as the ICC, LCIA and SCC are very focused on achieving a diverse roster of arbitrators. The institutions are also a gold mine of support. Don’t hesitate to draw on it. They will have great practical pointers on how to formulate procedural timetables and orders, and communications to a non-responsive Respondent to ensure that you balance expeditious progress with giving each party an opportunity to be heard. They also have great insights on the contents of awards, down to details such as how to formulate an award of interest.
  2. Expect the unexpected: What took me by surprise was that my first cases as arbitrator were very different from the high-value counsel cases I have seen in my practice over the years. Put another way, your past career may not prepare you for the issues that crop up. I had unrepresented Respondents, and no help from sophisticated counsel in the way that Tribunals on high value cases benefit from. I had to go to first principles on the meaning of fairness in ensuing that the legally unsophisticated Respondent (who refused to engage counsel) understood what I was saying, and that I did not veer into acting as advocate for the Respondent and so prejudice the Claimant. On another dispute, a consensus award threw up the possibility of money laundering, which I had to investigate with very little guidance, conscious that serious consequences arise for those who miss attempts to white-wash. These experiences are great for skills, and ensure that you keep developing as a lawyer and practitioner. It can be uncomfortable at times, but I try to get comfortable feeling uncomfortable, because it means that I keep evolving.
  3. Choose your team with care: I have found the colleagues in my prior firms key to handling sole arbitrator appointments. You may need the support of senior colleagues to be able to clear conflicts and take the case on. And to bounce ideas off each other in a relaxed and creative way whilst maintaining confidentiality. I cannot emphasize enough how important this support has been to me. You need like-minded colleagues who see that first appointments add to your tool-kit and eventually will lead to chair appointments. Spot those mentors and sponsors quickly, seek them out and cherish them. (And then be that mentor and sponsor to others!)
  4. Be creative: The nut of work-life balance is real, and hard to crack. One positive challenge I have found in the pandemic is how to be creative and use the time previously spent travelling and commuting in ways that recharge me and allow me to deliver high quality work product over long days. I have seized on the culled morning commute to do a yoga, weights and ballet/barre classes via zoom. On a separate topic, I have tried to feed vegan foods to my kids to reduce our carbon footprint, but they recently asked in earnest if my minced quorn (a fungal product masquerading as meat) was “dog food”. I therefore started ordering Mindful Chef ready recipes for the evening to add variety and more vegetables to our diet. Some recipes only take 15 minutes to cook, which is how long one can spend wandering out to a sandwich or sushi shop to pick out dinner for a night at the office. We try to make time for dinner, light a few candles and play our boys’ “what animal am I thinking of” guessing game. Being recharged then allows for focused, productive time on counsel and arbitrator work. I am not saying it is easy. Often it is very hard. But approaching it as a creativity problem allows me to view it through a more positive lens.
  5. Keep evolving: Some of Winston Churchill’s quotes are out of step with the Zeitgeist. But this one I like: “To improve is to change. To be perfect is to change often”. I try to start the day by asking what I can change and improve, whether it is to pick up the phone to the institution earlier, or to think of a third way solution on how to deliver justice on a dispute. I also put myself out of my comfort zone by going to dance classes where I bumble around hopelessly. If I can get through it with a few new moves under my belt, I can surely master a new sector or a new legal issue. Being willing to be a humbled student every day is key to growth as arbitrator, counsel and I guess in everything.
  6. Challenge the premise: It was rightly pointed out to me during the round table that a full plate of life may not be desirable in the first place. Maybe it is not possible to do everything at once, and stay zen. Perhaps one should do it in stages, and say not try to publish with a six-week-old child nursing in one’s lap. This reflection is important, and the exact balance is personal to everyone. I would also challenge the premise of the arbitrations we run. I wholly endorse expeditious arbitrations. Speed is key, and I hear the end-users. However, I also think that a three-month goal for rendering an award from the last submission may sometimes be unrealistic. As diversity is a shared value, and we want arbitrators with diverse characteristics, we may want to build in an extra week here or there to accommodate the fact that lawyers with care responsibilities (for loud toddlers as well as for aging and unwell loved ones) need more than three months to deliver a high-quality award. See my diversity checklist which explores this in detail. On a separate theme of challenging the premise, if most of your arbitral appointments get blocked by conflicts, think about whether there is a better professional stable that results in fewer conflicts. This type of migration was very clear on our roundtable.
  7. Embrace solitude: This is an important one. One’s professional existence can feel lonely, drafting an Award solo and operating from home mid-pandemic. I am in charge of huge disputes, the family’s wellbeing, and expected to be a rock who handles everything calmly and smoothly. I witness the attrition of female peers – many seem to have left the profession. The loneliness is particularly real for arbitrator cases where you sit as a sole arbitrator and have no co-arbitrators or Tribunal secretary to brainstorm with. Whilst you can confer with colleagues on an abstract level, the legal analysis turns on detail which you must get right, alone, being very conscious that you have been asked to deliver justice, and that it will have a significant impact on entities and individuals. I have come to see these moments spent in the throes of the evidence and tricky points of law as invaluable: they can lead to great flow and excellent legal thought. I’ve also learnt to see loneliness as solitude – as a positive, creative space, pivoting off Aldous Huxley’s comment “[t]he more powerful and original a mind, the more it will incline towards the religion of solitude”. Once the flow has produced ideas, you can then bounce them off supportive and talented colleagues in your network, against whilst maintaining confidentiality.
  8. Work smart: On a related note, excellent lawyering is a creative exercise. Identify your regenerating space that crystallises your best ideas. For some it’s a walk amid greenery, for others a muddy run or cooking. Then come back to your draft with the fresh ideas.
  9. Promote your specialism through social media: You can harness social media to communicate your specialism as an arbitrator – institutional rules, sectors, commercial/treaty arbitration – to secure further appointments. I had the pleasure of speaking recently about this very topic at an ICC YAF and Quadrant Chambers event, and many participants expressed anxiety over being present in social media in the “right way”. It’s actually very straight forward, with little magic involved.  One of my top tips is to lead with content rather than with yourself.  What I mean is that it is good to give your reader something of value – inspiration, insights, ideas, legal news etc – rather than just ask the reader to celebrate your personal achievements, worthy though they are.  And I would always keep it relatable and honest, to avoid putting on a gloss that creates unnecessary pressure for others.
  10. Find joy: When it all gets intense, I try to look back at my day and ask when I felt joy. At our roundtable, I felt joy at the excellent exchange of honest ideas. I got energy from the follow-on exchanges. And from the uninterrupted hours of drafting which followed and where solid ideas crystallised. I start my days with a run to Taylor Swift and Daft Punk so that I inhabit a confident and clear headspace. At this very moment I am hoping that the day can be wrapped up with President Obama’s chronicle. With that said, he does plough admirably from one intractable problem to the next, which is not exactly the lightest evening reading. I therefore couple it with a giggle with my boys over Julia Donaldson’s Snuggly Snerd and other children’s stories. I then look back at what brought me joy, and try to incorporate more and more of those moments into the days ahead.

 

In these times of disconnection, I would love to hear your experiences. Please get in touch.

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Jumpstarting Arbitration through Tax Incentives? Macau’s Tax Incentive Scheme for Choosing Arbitration

Sun, 2021-10-17 00:54

If you are a party to a lease agreement or a grant of right to use commercial space in Macau, tax considerations may now be critical for determining whether “to arbitrate or not to arbitrate”. In fact, aside from the typical advantages of arbitration over litigation, tax reduction has now become an additional advantage for choosing arbitration to resolve a dispute in Macau following the introduction of the amendment bill on Macau Stamp Duty on 16 December 2020.

 

The new arbitration law of Macau

More than a year has passed since Macau’s new arbitration law (Law No. 19/2019) came into force on 4 May 2020 (2019 Law). The new law incorporates the best practices in international commercial arbitration and is consistent with the goal of the Macau Special Administrative Region (SAR) government to promote Macau as a preferred Lusophone arbitration seat. Based on the UNCITRAL Model Law, the 2019 Law transformed the dual arbitration system in Macau into a unified system for both domestic and international arbitration. Also, the new law is more flexible than its predecessor with regard to the formalities of an arbitration agreement, allowing for the conclusion of arbitration agreements by electronic communications evidenced in writing. Under the 2019 Law, arbitral tribunals have wide-ranging powers to issue interim measures. In addition, both the parties and the arbitral tribunal may now seek the Macau courts’ assistance in obtaining evidence. All these characteristics have established an arbitration regime in Macau that is fully in line with international practice.

The 2019 Law has presented an opportunity in Macau to launch a new industry. The city has long been very dependent upon its gaming industry. As such, the drive for economic diversification has been one of the government’s political and economic goals. Macau’s unique position, international characteristics, and legal system have long suggested that legal services and dispute resolution in particular could serve as an economic niche that the city could explore further. Many of Macau SAR’s top officials have urged the need to vigorously promote the development of arbitration, so as to give full play to Macau’s advantages as a Sino-Portuguese platform and turn Macau into an arbitral platform for resolving disputes in the context of the PRC’s ambitious Greater Bay Area economic plan. In 2020, of 946 cases, ICC registered 199 disputes involving parties from Portuguese-speaking countries, and 21 awards were issued in Portuguese.

Still, those in Macau are well aware of the difficulties of establishing Macau as a major arbitral seat given the heavy competition from Hong Kong and Singapore. The current chief executive, Mr Ho Iat Seng, has pointed out that, given the relative underdevelopment of arbitration in Macau, faith in Macau as a reliable seat of arbitration can only be firmly established by increasing the number of cases and developing sufficient experience.  Indeed, Macau, albeit having shown ambitions in the arbitration field for a long time, has never been a major player in this area. While there is no doubt that the new law has provided a better legal framework for the development of arbitration in Macau, cases in the Macau SAR’s arbitral institutions (namely, World Trade Center (WTC) Macau Arbitration Center and Voluntary Arbitration Center of the Macau Lawyers’ Association) have remained scarce, with many of the businesses in Macau opting instead to use Hong Kong as their preferred seat of arbitration.

 

Macau’s new Stamp Duty regime

In view of this, the Macanese legislature has decided that if arbitration is to become a more commonly used dispute resolution mechanism, more radical supporting measures are needed. Most innovatively, tax incentives have been introduced in the recent amendments of the Stamp Duty Law (Law no. 24/2020), which entered into force on 30 March 2021, to attract and encourage individuals to use the Macanese arbitration system to resolve disputes. More specifically, a 50% tax reduction in Stamp Duty is offered if an arbitration clause stipulating that a dispute should be resolved through an arbitral institution in Macau is included in (i) a lease contract for immovable property or (ii) a grant of right to use commercial space (see Articles 27(3) to (5) and 30B(4) to (6), Stamp Duty Law).

This tax advantage is especially significant in the context of the grant of right to use commercial space, which, under the new Stamp Duty law, is now subject to a 0.5% stamp duty like normal lease agreements. In Macau, it is very common for gaming operators to include large-scale shopping malls within the complex (the so-called integrated resort model). In this case, the rent payable by the retailers can be rather hefty, as the taxable scope is extensive and includes annual remuneration resulting from the grant of right to use the commercial space, machines, furniture or other movable assets within the complex. The introduction of an arbitration clause, however, halves the payable stamp duty on such agreement.

It should be underlined that the tax benefit is only applicable if the arbitration clause submits the dispute to one of the recognized arbitration centers in Macau. This means that an arbitration clause that provides for ad hoc arbitration will not be relevant for the purposes of the tax reduction. Currently, for resolving matters arising from lease or grant of right to use of commercial space agreements, parties can resort to (1) the WTC Macau Arbitration Center or (2) the Voluntary Arbitration Center of the Macau Lawyers Association.

Also, importantly, the law sets out several situations that will lead to the loss of this tax benefit, namely:

  1. The arbitration agreement is revoked or expired;
  2. There is a decision, with res judicata effect, from a court or arbitral tribunal that rules that the arbitration agreement does not exist, is ineffective, or does not produce any effects;
  3. The landlord or the grantor filed a lawsuit with the court on an issue that falls within the scope of the arbitration agreement;
  4. The landlord or the grantor, as the defendant in a court case, failed to raise the jurisdictional objection that the case should be heard by the arbitral tribunal.

If one of the above circumstances occurs, the landlord or the grantor must pay back the reduced stamp duty to the Financial Services Bureau within 30 days of the date of the occurrence.

 

Conclusion and expectations

The introduction of the tax incentive at issue shows how serious the Macau government is with regard to not only encouraging and promoting the use of arbitration but also developing the arbitration industry in Macau. The usage of this tax reduction is ingenious, with Macau taking a radical step toward making sure that its own arbitral institutions will see a steady and growing number of cases. Although the full effectiveness of the measure remains to be seen, this measure has aroused much interest especially for retailers operating in the many large shopping malls and outlets in Macau.

It should be noted that the development of arbitration in Macau is still hampered by its relative lack of experience in this field and that of its arbitral institutions. In this respect, it is worth noting that the rules of Macau’s two main arbitral institutions were heavily revised and updated, with the changes having come into effect earlier this year. Still, in comparison with the HKIAC and SIAC rules, they have not incorporated some of the recent arbitral developments such as provisions addressing third-party funding, disputes involving multiple contracts and/or multiple arbitrations, and the possibility of an arbitral tribunal making an early determination regarding a point of law or fact that is manifestly without merit or manifestly outside of the tribunal’s jurisdiction.

At the same time, seeking recognition and enforcement in Macau of an award rendered in an arbitration seated outside Macau presents its own challenges. Aside from the parties not being able to benefit from the tax incentives described above, the recognition and enforcement process of a foreign arbitral award in Macau is substantially lengthier than that for a domestic (Macau) award, and it is procedurally more complicated than in Hong Kong. The two-step procedure is first initiated by an application for the recognition of the foreign arbitral award filed with the Macau Second Instance Court. It typically takes at least between three and six months for the court to recognize a foreign award, while in Hong Kong this takes a matter of days. Then the applications for enforcing the reviewed award should be filed with the Macau First Instance Court, which will in turn take at least 12 to 18 months to conclude the enforcement proceedings.

Altogether this means that Macau’s more ambitious goal of becoming the main Sino-Portuguese arbitral platform and a major arbitral player is still, somehow, a remote dream. Nonetheless, with its new legislative setting, Macau is now one step closer to developing a more mature arbitration practice.

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“Breaking In: How International Arbitration Becomes More Diverse” – A Report from the GAR Connect Event

Sat, 2021-10-16 00:29

On 1 September 2021, Global Arbitration Review (GAR) launched a new diversity-themed addition to its GAR Connect series, “Breaking In: How international arbitration becomes more diverse.”1)The authors would like to thank Racial Equality for Arbitration Lawyers (R.E.A.L.) for providing a scholarship to attend the event. jQuery('#footnote_plugin_tooltip_39140_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39140_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The event, co-chaired by Adriana Braghetta (Adriana Braghetta Lawyers), Nayla Comair Obeid (Obeid & Partners), Vladimir Khvalei (Baker McKenzie), and Kevin Kim (Peter & Kim), showcased individuals and ideas from seats or regions newer to international arbitration, along with some of the challenges that newcomers to the world of international arbitration face.

 

Keynote Address

The keynote address was delivered by Gaston Kenfack Douajni (Director of Legislation, The Ministry of Justice, Cameroon). Mr. Douajni raised criticisms on appointments of arbitrators specifically in Africa. He shared his exchange with the late Emmanuel Gaillard, who agreed with him that arbitration will only be “truly international” when renowned arbitral institutions appoint African arbitrators in cases that do not necessarily involve African parties.

He remarked that the “condescension and paternalism” with which some practitioners view African arbitrators and institutions are “not likely to promote diversity in international arbitration.” He also observed that a small pool of international arbitration practitioners from developed countries are regularly appointed in international arbitration. As a result, the arbitrations take longer as it is “not humanly possible” for arbitrators sitting simultaneously in several cases to manage them.

In concluding his address, Mr. Douajni quoted Winston Churchill: “criticism can be disagreeable, but it is necessary. It’s like pain to the human body: it calls attention to what’s wrong.” He explained that calling attention to the lack of geographical diversity in the appointment of arbitrators emphasizes that this deficit impacts the effectiveness of international arbitration.

 

Building a Local Arbitration Bar

The panel was moderated by Adriana Braghetta (Adriana Braghetta Lawyers) and featured speakers Lucas Britto Mejias (TozziniFreire), Una Cho (Kim & Chang), Ahmed Ibrahim (Independent Arbitrator), and Sanjeev Kapoor (Khaitan & Co). Each speaker explained the steps taken in their jurisdictions—Brazil, South Korea, Egypt, and India—that led to the rise of international arbitration and the establishment of a local arbitration bar.

For Brazil, Mr. Mejias stated that there are four main factors: (1) modern and strong arbitration law; (2) courts supporting arbitration; (3) a strong arbitration community; and (4) a large and diverse business community that favors arbitration, particularly due to delays in decision by the courts and arbitration being a better mechanism to resolve specialist disputes.

Ms. Cho stated that the same factors helped the development of international arbitration in South Korea. She stated that the Asian financial crisis in 1997 also played a role, as insolvencies of companies were resolved through arbitration.

Mr. Ibrahim highlighted the fact that all four countries were business hubs in their region. In Egypt, the economy relies heavily on sectors like telecom, which in turn promotes dispute resolution through arbitration.

Mr. Kapoor also noted that similar factors led to the expansion of international arbitration in India. He added that a very reactive legislature and reduction of court interference in arbitral awards have played a major role. Mr. Kapoor mentions that talented Indian lawyers who study and train abroad have returned to India to develop the market. High-proficiency in English and the fact that India follows the common law system have also helped.

 

Barriers to Real Diversity; How to Expand the Arbitrators Pool?

Clients, institutions, counsel, and arbitrators argue that the pool of arbitrators should reflect the world it serves. However, it is easier said than done to introduce young faces, particularly from less popular legal systems. Speakers Diamana Diawara (Africa Director for Arbitration and ADR, ICC), José Feris (Squire Patton Boggs), Kevin Nash (Deputy Registrar & Centre Director, SIAC), Emilia Onyema (Professor, School of Oriental and African Studies, University of London), and moderator Vladimir Khvalei (Baker McKenzie) discussed methods to do so while maintaining international arbitration’s reputation for excellence.

There are three types of diversity issues to becoming an arbitration practitioner: gender, age or experience, and ethnic diversity.

As for gender, based on 2020 ICC Dispute Resolution Statistics, the number of women arbitrators increased by 2.3 percent. However, there is regional disparity, and female arbitrators in Europe lead in the number of appointments compared to female arbitrators in other regions.

As for age and experience, while prior knowledge and trust are essential in arbitral appointments, there has been a tendency to appoint younger practitioners as arbitrators in institutions, as seen in the ICSID list of arbitrators. They will provide fresh ideas that would encourage the parties to appoint them instead of traditional names. For practitioners in some regions with fewer arbitrations, achieving the requisite experience level may require practicing abroad—but that changes once arbitration becomes more popular.

However, as to national origin, while French, English, or American arbitrators often practice anywhere, there is an obstacle for arbitrators from other jurisdictions to practice outside their regions. Even though there is a talent pool of arbitrators in Latin America, developing them in the other areas requires more time. Local arbitration institutions could offer a solution by appointing young arbitrators with diverse characteristics as arbitrators, for example, on behalf of the non-participating respondent in cases or nominating young arbitrators as chairs of arbitral tribunals.

Diverse students and practitioners should also consider internships in international organizations such as the United Nations Conference on Trade and Development (UNCTAD), joining young arbitration groups, publishing or speaking at events, and differentiating themselves by getting a degree in international law or obtaining a Ph.D. to build their way in the arbitration world.

Even though education in other jurisdictions helps students and young practitioners build a global network of future arbitrators, there are some obstacles to pursuing these goals, such as financial difficulties. In this regard, several initiatives such as the Racial Equality for Arbitration Lawyers (R.E.A.L.) aim to provide opportunities to diverse students and practitioners.

 

Debate: Is the Future of International Arbitration Regional?

Nakul Dewan SA (Twenty Essex), Mustafa Hadi (Berkeley Research Group), Ucheora Onwuamaegbe (Arent Fox), and Janet Walker (Independent Arbitrator) argued for and against the debate motion. The debate was judged by Sheika Haya Rashed Al Khalifa (Haya Rashed Al Khalifa), Nayla Comair Obeid (Obeid & Partners), and Elie Kleiman (Jones Day).

The first group argued that international arbitration in the future would focus on regional hubs, as shown in the 2021 Queen Mary report that found that the regional seats in arbitration are increasing. In this regard, Singapore and Hong Kong are as popular arbitration seats as Paris or London. The key reasons that made the regional seats more attractive are more support for arbitration by local courts, improved neutrality, impartiality of the local legal system, and a better track record in implementing agreements to arbitrate and arbitral awards.

BITs have also caused the development of regional arbitration centers, such as in the case of Turkey for the China-Turkey BIT. The customers determine the future, not the suppliers, and the parties prefer some centers with shared languages and business cultures. Parties engaging in regional transactions are keen to find someone who understands their needs and the business environment.

The second group argued that the future of international arbitration is not regional. Arbitral awards are enforced globally through the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Technology and new types of transactions will make participation in arbitration easier, and arbitration over these new transactions (such as cryptocurrency) is often focused on subject matter, not geography. All countries must come together to protect the future of international arbitration, and students and young practitioners can benefit from learning from those in other regions.

 

Concluding Thoughts

The event shed light on several questions and issues that are not often touched upon in international arbitration conferences and literature. One issue that was briefly addressed was access to training for junior lawyers from newer arbitration jurisdictions. One of the participants mentioned that only one arbitration center is currently running a virtual internship. Inequalities in access to training exist and have long-term ramifications. More initiatives and broader discussions on reducing inequality in access to training are the need of the hour.

The discussions, especially with people who likely share the same experiences relating to diversity, allowed attendees to reflect not only on the current shortcomings but also the ways forward to achieving more diversity—whether in race, gender, or age—in international arbitration. There is no dearth in initiatives on the part of organizations in achieving diversity. To name a few, organizations such as ArbitralWomen, Rising Arbitrators Initiative and the Racial Equality for Arbitration Lawyers (R.E.A.L.) were launched towards this goal. Recently, Arbitrator Intelligence also launched a diversity campaign to collect feedback that will make it easier for parties, counsel, and institutions to appoint diverse and newer arbitrators.

The event gave a unique opportunity to connect practitioners from across the world and hear inspirational figures share their experience in tackling the challenges to “break in” the world of international arbitration. The authors believe that although there is still much work to be done, the recent increase in the number of initiatives and events like this show that we are moving in the right direction.

References[+]

References ↑1 The authors would like to thank Racial Equality for Arbitration Lawyers (R.E.A.L.) for providing a scholarship to attend the event. function footnote_expand_reference_container_39140_30() { jQuery('#footnote_references_container_39140_30').show(); jQuery('#footnote_reference_container_collapse_button_39140_30').text('−'); } function footnote_collapse_reference_container_39140_30() { jQuery('#footnote_references_container_39140_30').hide(); jQuery('#footnote_reference_container_collapse_button_39140_30').text('+'); } function footnote_expand_collapse_reference_container_39140_30() { if (jQuery('#footnote_references_container_39140_30').is(':hidden')) { footnote_expand_reference_container_39140_30(); } else { footnote_collapse_reference_container_39140_30(); } } function footnote_moveToReference_39140_30(p_str_TargetID) { footnote_expand_reference_container_39140_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39140_30(p_str_TargetID) { footnote_expand_reference_container_39140_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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