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The 9th Asia Pacific ADR Virtual Conference Recap: 2020 and Beyond

Sun, 2020-11-29 00:53

On 5-6 November 2020, reputable arbitration practitioners joined together for the 9th Asia Pacific ADR Conference and shared their experiences and insights on the latest developments in the arbitration landscape. Due to the ongoing COVID-19 pandemic, the annual conference took place virtually. It successfully attracted approximately 15,000 participants across 50 countries. The event was co-hosted by UNCITRAL, the Ministry of Justice of the Republic of Korea, KCAB INTERNATIONAL, the International Chamber of Commerce (“ICC”), and the Seoul International Dispute Resolution Center.

 

Session 1: Year One of the New Normal: What Has Changed, What Must Change, and Are These Changes Here to Stay?

In the first session, speakers representing leading arbitral institutions reported on various measures the arbitral institutions have undertaken in coping with the challenges caused by the pandemic. Despite the global pandemic, arbitral institutions have continued to operate seamlessly by swiftly adapting their procedures and case management to the current challenges.

Alexis Mourre shared the ICC’s experience in ensuring the continuation of the services of the court and its secretariat and in implementing mitigating measures to avoid unnecessary delays.  In response to the pandemic, the ICC also released a Covid-19 Guidance Note and made its pre-existing rule regarding tribunals’ power to hold virtual hearings more explicit.

Annette Magnusson, representing Stockholm Chamber of Commerce (“SCC”), acknowledged the importance of keeping close communication with users as well as other arbitral institutions. In response to the pandemic, leading arbitral institutions, including the KCAB INTERNATIONAL and SCC, joined in a truly cross-institutional initiative and released a joint statement to their end-users.

Kevin Nash, representing the Singapore International Arbitration Centre (“SIAC”), agreed on the importance of close connection with its users. To improve the accessibility to arbitration, SIAC added a chat function on its website to consult with users on SIAC procedural matters. Moreover, SIAC created a practical checklist for users to help them assess their circumstances.

The pandemic has also affected the preference of users and institutions in the arbitrator selection process. Nils Eliasson of Shearman & Sterling, speaking on the Hong Kong International Arbitration Centre experience, identified flexibility, adaptability, and proactiveness as preferred qualifications of arbitrators, all of which may indicate the arbitrator’s ability to stay on top of the case.

Fedelma Smith of Permanent Court of Arbitration-Singapore agreed that being prompt, accurate, and flexible is desirable. She expected these qualifications would meet higher demand as time goes by, assuming that the virtual world would not end soon and that technology would stay in the arbitration community. Particularly, the benefits of the digitalization of arbitration proceedings with the enhanced cyber-security were echoed by other speakers.

Meg Kinnear of the International Centre for Settlement of Investment Disputes (“ICSID”) shared ICSID’s pioneering efforts in the digitalization of arbitration proceedings. Even before the pandemic, ICSID had embraced the digital future by encouraging parties to conduct electronic filings and use electronic hearing bundles instead of hard copies.

 

Session 2: Time for a New Momentum in Commercial Arbitration?

The second session was driven by five speakers representing a user, counsel, institution, and tribunal. Panelists highlighted certain drawbacks of the old-fashioned approach to arbitration proceedings that led to inflexibility and high costs.

From the tribunal’s perspective, Chan Leng Sun SC of Essex Court Chambers Duxton expressed the view that tribunals should be mindful of the different circumstances of each party in holding virtual conferences and should be proactive in case management.

Robert Wachter of Lee & Ko introduced ideas to enhance the efficiency of the arbitration process from the counsel’s perspective. He expressed hopes that, as a result of the pandemic, the arbitration community can fundamentally restructure arbitral proceedings. For more efficient arbitration, he suggested having an oral hearing after the main submission and a limited document production period before the main submission. He further proposed to separate the opening statement from cross-examination to reduce the burden on counsels.

From the user’s perspective, Narae Kim of Daewoo Shipbuilding & Marine Engineering Co., Ltd. explained that users will likely seek more cost-effective resolution methods as a result of their experience with the pandemic and the economic downturn. The proactiveness of tribunals, procedural flexibility, and increased access to arbitration indicate that arbitration is becoming faster and less expensive.

Following the discussion, the moderator Sae Youn Kim of Kim & Chang voiced concern about a possible risk that certain users might opt out of arbitration during the economic downturn. In response to such a risk, Francesca Mazza of the German Arbitration Institute (DIS) addressed that the pandemic can serve as an opportunity for “de-legalization” of the arbitration and that such “de-legalization” can mitigate the drawbacks caused by the arbitration’s tendency to mimic litigation. Jae Sung Lee from UNCITRAL echoed Ms. Mazza’s assertion and further proposed “de-arbitration” of disputes given the availability of other efficient dispute resolution tools, particularly mediation.

 

Session 3: Current Status and Progress of Reforms in the Investor State Dispute Settlement and Its Impact on Investment Treaty Policies

Opening Day 2, session 3 was tailored to a discussion of investor-state dispute settlement (“ISDS”) reforms, particularly projects led by UNCITRAL Working Group III, and countries’ responses to such reform efforts.

Anna Joubin-Bret of UNCITRAL shared updates on the activities of UNCITRAL Working Group III in amending the ISDS procedures. In recent years, the foreign investment regime has been subject to an increasing amount of criticism. UNCITRAL has been, inter alia, exploring the feasibility of introducing an appeal mechanism as proposed by the EU.

Patrick Pearsall of Allen & Overy predicted the US government under the new administration would take a position of “Local Multilateralism” in response to ISDS. That is, the new administration would shift back to a multilateral approach but with local sensitivity. The new administration would first consider the impact of ISDS reform on local people in terms of various issues, such as labor and environment.

Maria Malaguti of UNIDROIT presented the EU’s policies on ISDS.  She shared her view on far-reaching reform which introduces a proper appellate body mechanism within the EU. The goal of the reform is to protect and attract more foreign investors.

Guiguo Wang of Zhejiang University provided an overview of China’s policy on ISDS by categorizing its approach into five categories. He explained that China has become more tolerant and progressive in dealing with international legal standards.

Lastly, Sae Rom Yoo of the Republic of Korea’s Ministry of Justice explained Korean investment treaty practice and policy. Korea continues to negotiate investment treaties to strike the right balance between providing adequate investment protection for investors and preventing abusive use of ISDS. The Minister of Justice regularly holds a series of special training sessions for state agencies to prevent them from violating Korea’s obligations under Korea’s investment agreements. Korea also opened the Ombudsman office under the Korea Trade-Investment Promotion Agency (KOTRA) dedicated to investment support and has been providing additional legal protection by working with professionals from all sectors relevant to investment. Further, the general policy of the state is aimed at promoting dispute avoidance, therefore, most of the investment agreements signed by Korea contain alternative dispute resolution provisions.

 

Session 4: Innovative Suggestions for Virtual and Remote Hearings

The final session focused on proposing creative ways to improve the efficiency of arbitration. Sue Hyun Lim from KCAB INTERNATIONAL started the discussion by giving a brief overview of the Gangnam Principles and Seoul Protocol. The Gangnam Principles were proposed by Kevin (Kap-You) Kim of Peter & Kim, the moderator of this session, as a means of increasing the efficiency of arbitration.

Two distinctive features of the Gangnam Principles are having a first substantive oral argument during the case management conference and having 1-3 intermediate hearings before the main hearing in the form of a group discussion. Both of these are intended to push for interactive communication between the tribunal and parties so that each party dedicates time to the issues that matter.

Toby Landau QC of Essex Court Chambers opened the discussion by identifying significant benefits associated with remote hearings, particularly avoidance of certain financial expenditures. He acknowledged that virtual hearings have challenged the Anglo-US approach to hearings in international arbitration and have forced tribunals to actively participate in managing their cases. However, an inevitable drawback of virtual hearings is that counsel may not be able to build good rapport with the tribunal.

Speakers entered into a discussion of creative ideas of how to maintain and augment the efficiency of virtual hearings. By focusing on various innovative projects, including Gangnam Principles and Prague Rules, Yu Jin Tay of Mayer Brown addressed the confluence of opinions voiced in the arbitration community in terms of what the future holds for international arbitration. Ingloong Yang of Latham Watkins stressed the use of technology in arbitration (electronic bundles, cloud-based data storage server) to think about how to redesign the process. Lars Markert of Nishimura & Asahi suggested scheduling an early hearing after the first round of submissions and disclosure of the tribunal’s preliminary view at the end of such hearing, both of which emphasize more frequent and interactive communication. Similarly, Chie Nakahara of Nishimura & Asahi introduced the idea of short interactive sessions after main hearings and of an initial or preparatory hearing. Agreeing on the benefits of technology to arbitration, SeungMin Lee of Peter & Kim posed a question on whether setting virtual hearings as a default form would infringe the fundamental due process right to be heard.

Changes might feel frightening, but it is also extremely exciting to predict what the future holds for international arbitration. Looking to the future, the arbitration community will benefit from the advances in technology, whilst parties in international arbitration will likely be eager to use various electronic tools more prominently even in the post-COVID era. It is hoped that this pandemic will be the driving force to develop a more efficient system of international arbitration.

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When the Answer is Becoming the Question: Impact of Arbitrations on the Environment

Sat, 2020-11-28 21:54

For a long time, the word ‘environment’ occurred in the realm of arbitration only when disputes between parties had some connection to it. Lately, however, there has been a shift from environment only being a subject-matter specific issue in arbitrations to a more diverse theme of discussion among the global arbitration community. Credit for this shift goes to, among others, the awareness raised by the GAR’s “Best Development Award 2020” winning initiative – the Campaign for Greener Arbitrations – an initiative spearheaded by International Arbitrator, Lucy Greenwood along with members of the Steering Committee, on the issue of the negative impact of arbitrations on the environment.

 

Resolving Environment Related Disputes through Arbitration

Environmental protection has been the underlying theme of a series of regulatory frameworks, including international declarations, treaties and national legislations. Disputes over environmental issues were earlier often seen in State-to-State context (under international treaties such as United Nations Convention on the Law of the Sea (UNCLOS), or bilateral relationship between nations), but swiftly made their way into other domains including investor-State (often concerning disputes where the protections granted to investors under a bilateral or multilateral investment treaty clashed with the host State’s regulations aimed at environment protection) and commercial contractual disputes.

Given that there is no permanent international court for resolution of environment-related disputes, the International Court of Justice (ICJ), since its establishment in 1945, was often perceived to be the primary forum for resolving such disputes. With the evolving nature of environmental laws and global recognition for the need to provide an effective dispute resolution framework, however, there has been a rise in the number of forums for resolving environment-related disputes – to name a few, Permanent Court of Arbitration (PCA); International Tribunal for the Law of the Sea (ITLOS); WTO Dispute Settlement Body; ICSID arbitral tribunals, etc. A steady increase in environment-related disputes witnessed formulation of specialised arbitral rules to deal with such disputes (See PCA Optional Rules for Arbitration of Disputes Relating to the Environment and/or Natural Resources). Various associations and bodies also volunteered to be at the vanguard of legal and institutional reforms to integrate the existing environmental framework with the dispute resolution procedure (See IBA Climate Change Justice and Human Rights Task Force Report). Certain arbitral institutions have also made notable efforts to “enhance the existing procedures to further improve their effectiveness for resolving climate change related disputes” (See ICC Commission Report on Resolving Climate Change Related Disputes through Arbitration and ADR).

A cumulative effect of having advantageous features such as flexibility of choosing specialised and experienced arbitral tribunal; choice of procedural rules (including specialised rules for environment-related disputes); robust enforcement mechanism for arbitral awards globally (under enforcement mechanism of ICSID Convention or New York Convention); and the above-mentioned efforts made at multiple fronts, has certainly made arbitration an attractive forum for resolving environment-related disputes and its use is likely to go up in the future.

 

Environmental Impact of Arbitration 

At this juncture, it may seem that the arbitration community is effectively playing its part in resolving environment-related disputes. However, due to its negative impact on the environment, as will be seen below, that part is only half addressed. One might wonder how arbitration can harm the environment. When looked in isolation, carbon emission figures of one arbitration may not seem that drastic, however, when the cumulative effect of all the arbitrations is taken into account, the numbers are alarming. To put things into perspective, a study conducted by Dechert LLP last year revealed that carbon footprint of one medium-size arbitration could be around 418,531 Kg CO2e – which may require planting up to 20,000 trees to offset its effect on the environment. This figure was reached by adding the carbon emissions of various individual constituents of an arbitration such as long and short-haul flights; printing of hearing bundles; couriers; hotel stays etc. The study noted that flying contributed the most to carbon emissions. Whilst this figure may not be the same for every arbitration and would go higher or lower depending on the underlying constituents, nature and size of the arbitration, but it certainly gives a sense of how high the carbon emission of one arbitration could be.

The scale of carbon emissions in environment-related disputes – which usually involve complicated technical issues often requiring parties to present expert evidence – are set to be even higher, since a higher number of expert witnesses (either appointed by the parties or by the arbitral tribunal) would invariably require more number of flights for cross-examination hearings and therefore would add up carbon emissions. Even looking conservatively at the yearly number of institutional arbitrations in the year 2019 (leaving aside ad hoc arbitrations and arbitration events etc.), it is clear that the overall impact of the arbitral community on the environment is significant.

Anecdotally, a photograph reproduced in the Decision on Counterclaims (at pg. 22) in Burlington Resources Inc. v. Republic of Ecuador, showing a ‘site visit’ to the Amazon region of the Ecuadorian Oriente by the tribunal, its secretary and assistant, party representatives, counsel, experts, witnesses, and interpreters, could give a clear idea of the complicated nature of environment-related disputes, requiring the involvement of multiple technical experts, witnesses etc. The level of carbon emissions released from only flying for that one single ‘site visit’, may come as surprise to some.1)As per the Authors’ calculation, the air travel for the ‘site visit’ would have released around 159,451 Kg CO2e – requiring planting of more than 7000 trees to offset its impact on the environment. jQuery("#footnote_plugin_tooltip_7868_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7868_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

 

Way Forward

The mammoth scale of carbon footprint of the arbitral community poses a serious question, now more than ever, as to whether, and if so, how it can be reduced. The short answer to the former is a big ‘yes’. The latter requires examination of some solution-driven options, which can help in achieving that goal. In the present times, where the world is facing the profound impact of COVID-19 pandemic, the arbitral community is not untouched. However, unlike others, it has remarkably embraced the ‘virtualization’. An important aspect here is whether the fundamental changes brought in conducting arbitrations due to the pandemic are there to stay when the pandemic is over? The answer to this surely lies in the future, but from the carbon emissions point of view, it is imperative that at least some (if not all) changes are seamlessly embodied in the conduct of arbitrations even in the post-COVID-19 era.

 

  • Avoid flying unless necessary 

Flying, as noted above, is the most carbon emission contributing constituent of an arbitration. Whether done for hearings, evidence preparations meetings, or any other aspects of the arbitration, flying could be (or rather should be) avoided, or at least done only where absolutely necessary. As has been seen in the past few months, conducting all aspects of the arbitral process (including witness cross-examinations and even final hearings) virtually is seamlessly possible. In arbitrations of environment-related disputes, where the number of technical experts and witnesses can be substantially higher than usual, conducting witness examinations virtually through video conferencing could rein in the need of flying. Even for circumstances where, due to the technical nature of disputes, flying to take stock of the situation on the ground is unavoidable, use of technology – such as videography or live streaming from the site (as opposed to flying the entire team to the site), could avoid flying and ultimately help in reducing carbon emissions.

 

  • Avoid printing of documents 

Printing is another aspect of arbitration, which adds up to carbon emissions. Need for paperless arbitrations has been urged in the past here. In practice, however, it seemed like a unicorn dream, until the advent of the unprecedented COVID-19 times, which turned this dream into reality (or at least brought it closer to reality). Printed hearing bundles, which were commonplace in the practice of arbitration globally, are substituted by the filing of soft copies through online e-filing platforms and other electronic means. This practice, even though a result of necessity imposed by the pandemic, if continued to be followed, will go a long way in reducing the carbon footprint of arbitrations. Particularly, in arbitrations of environmental-related disputes, where the disputes are technical and usually involve presentation of evidence in the form of scientific data by the parties – which can run into thousands of pages, soft copy filing would certainly help in saving paper and in-turn reducing carbon emissions from printing.

 

  • Offsetting your carbon footprint 

Achieving ‘net-zero’ arbitrations (with zero carbon emissions) may be a tad too optimistic – especially because it may not be possible to completely cut-down carbon emissions released in arbitrations by energy consumption, use of emails and other means of communications etc. To reduce its carbon footprint, the arbitral community has to therefore consider offsetting the remaining carbon emissions, which despite best efforts may still be released into the environment. Offsetting should be considered at both individual (by arbitrators, counsels, witnesses, experts etc.) as well as the organisational level (by law firms, arbitral institutions, arbitrator chambers etc.). Offsetting can be tricky and it is important therefore to identify genuine offsetting projects being offered by a surfeit of service providers in this field (a study conducted by Öko-Institut (Berlin) in partnership with Infras (Switzerland) and Stockholm Environment Institute (USA) suggested that “85% of the covered [offsetting] projects and 73% of the potential 2013-2020 CER supply have a low likelihood of ensuring environmental integrity”. It is also important to bear in mind that offsetting should not be equated to the medieval notion of ‘indulgences’ (a way to reduce the amount of punishment one has to undergo for sins) and the primary focus should be on reducing the carbon footprint by changing the way arbitrations are conducted.

 

Conclusion

To be an effective and efficient dispute resolution forum for environment-related disputes, the time has now come for the global arbitral community to realise the negative impact of its activities on the environment and act to reduce it. Small behavioural changes at the individual level i.e. avoiding flying and printing can be a good start. At an organisational level, more comprehensive and robust steps to reducing carbon footprint of arbitrations, such as the use of renewable and clean energy; reuse and recycling; reducing and composting of food waste etc., should be considered.

Recently, the Financial Times reported that even emails are responsible for thousands of tonnes of carbon being pumped into the atmosphere. The arbitration community must be mindful of this reality as well.

 

The Authors being part of the Steering Committee encourage the readers to support the Campaign for Greener Arbitrations by clicking here

References   [ + ]

1. ↑ As per the Authors’ calculation, the air travel for the ‘site visit’ would have released around 159,451 Kg CO2e – requiring planting of more than 7000 trees to offset its impact on the environment. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Interviews with Our Editors: Understanding CIICA, Pakistan’s First International Arbitration Centre, with Mr. Rana Sajjad Ahmad, Founder & President

Sat, 2020-11-28 00:28

Mr. Rana Sajjad Ahmad, thank you for joining us on the Kluwer Arbitration Blog! We are grateful to have the opportunity to learn more about the Center for International Investment and Commercial Arbitration (CIICA) and your experience with enhancing the role of international arbitration in Pakistan.

 

  1. Could you briefly introduce yourself to our readers?

In two words, I would describe myself as an “arbitration enthusiast”. In terms of background and professional experience, I am a dual-qualified lawyer (licensed in Pakistan and New York) based in Lahore, Pakistan. At my law firm, Rana Ijaz & Partners, my practice areas include contracts, cross-border transactions, commercial litigation and domestic and international arbitration. I learned about international arbitration while pursuing an LL.M. at Columbia Law School, New York, back in 2001-2002 and also had the opportunity to practice international arbitration at a leading large law firm in the U.S. In 2015, I launched the Center for International Investment and Commercial Arbitration (CIICA), Pakistan’s first and only international arbitration center.

 

  1. Can you take us through your journey in launching CIICA five years ago and tell us about its achievements thus far?

CIICA is a manifestation of my passion for shining a light on international arbitration in Pakistan. My primary motivation for setting up CIICA was the glaring lack of awareness of international arbitration in Pakistan and how the misplaced views about it were adversely affecting the outcomes of the cases in which Pakistan was involved.

Since its launch, CIICA has tried to address this issue by organizing several groundbreaking conferences with a view to discussing and analyzing critical issues in connection with international commercial and investment arbitration. The Pakistan component of the Belt and Road Initiative (BRI), commonly referred to as the China Pakistan Economic Corridor (CPEC), has also been extensively discussed at these conferences. I believe change happens one conversation at a time and CIICA has set in motion the process of raising awareness of the important issues and proposing recommendations for modifying Pakistan’s approach to international arbitration.

As part of its mission of capacity building, CIICA and its officials have conducted training workshops at leading universities in Pakistan, the Lahore High Court, Pakistan Engineering Council and the Punjab Judicial Academy that are aimed at training and building capacity of law students, lawyers, engineers and commercial court Judges.

Earlier this year, CIICA became the first and only dispute resolution organization in Pakistan offering online filing services. Amidst the COVID-19 pandemic, in order to facilitate dispute resolution involving Micro, Small and Medium Sized Enterprises (MSMEs), CIICA lowered its fees substantially and raised the upper limit of the amount in dispute for its expedited arbitration services.

To further its objective of modernizing Pakistan’s legal framework for arbitration, a few months ago, CIICA launched its legislative reforms committee.

 

  1. You have previously written about developing a culture of arbitration (both investor-state and commercial) as a parallel mode to judicial dispute resolution in Pakistan. From your perspective, what are the top three challenges to enhancing the use of arbitration in Pakistan?

The first and foremost challenge is the judiciary’s lack of a deep understanding of the substantive and procedural aspects of arbitration, which impairs its ability to develop a pro-arbitration mindset and approach. The second is the inadequate framework for domestic and international arbitration. The third is the lack of awareness or misperception of the advantages of arbitration over litigation.

In one respect, these three challenges are inter-linked because certain provisions of the outdated arbitration law are misinterpreted by Pakistani Judges who do not have an adequate understanding of the law’s nuances and implications. This leads to either undue court interventions to stay arbitral proceedings or unsatisfactory court decisions that refuse enforcement of arbitral awards. Consequently, a vicious circle is set in motion whereby the value of the arbitration process is undermined and the users are dissatisfied with the entire process that in turn engenders a reluctance to arbitrate disputes in the future. A common complaint of some disgruntled users of arbitration in Pakistan is that it is pointless to arbitrate if the court still wields such broad powers and virtually unfettered discretion to delay and derail the process, a clear case of “once bitten, twice shy”.

 

  1. We have previously published on the Blog about the burning need to modernize Pakistan’s Arbitration Act 1940 (“Act”). We understand that national efforts to do so are now underway and you are involved in the Committee appointed to spearhead the Act’s redesign. Can you walk us through some of the Committee’s major considerations and how it aims to achieve this important goal?

As mentioned, a few months ago, CIICA  formally constituted a legislative reforms committee. The committee’s broad objectives include:

  • Examining Pakistan’s current legal framework for domestic and international arbitration to identify specific provisions that need to be amended;
  • Providing the reasons for and the language of the proposed amendments;
  • Proposing enactment of the UNCITRAL Model Law; and
  • Engaging with relevant government bodies and private sector entities to lobby/advocate for the reforms.

 

  1. Asia is home to both leading arbitration jurisdictions like Singapore and Hong Kong as well as India and Pakistan, where the framework for (and use of) arbitration is in flux. What do you think has led to this unequal development of arbitration in Asia and, in particular, why is South Asia lagging behind some of its neighbors?

I think the primary reason for the difference is the vision of the governments and the will to bring that vision to fruition. I believe that if the government of a country itself spearheads or supports reforms in connection with the law, practice and procedure of arbitration, it creates an enabling environment for the growth and success of globally recognized arbitral institutions such as the ones in Singapore and Hong Kong. In the absence of such a vision or policy of the government, members of a country’s business and legal community need to step up and play a pivotal role to promote and adopt arbitration. In Pakistan, there certainly are bright spots in both these communities and CIICA continues to bring them together to facilitate discussions with the goal of creating a vibrant ecosystem for arbitration in Pakistan.

 

  1. You represented CIICA at recent meetings of UNCITRAL Working Group II. What are some unexpected highlights of your experience?

It was an invaluable learning experience in international relations, especially in the context of international trade and commerce. Specifically, I witnessed how States engage in a back-and-forth on critical issues of national interest. In some cases, the degree to which political considerations underpinned the discussions was a bit unexpected and I found the divide between certain States fairly pronounced. Nonetheless, it was also fascinating to see how the efficient mechanisms designed by UNCITRAL enabled States to reach an agreement on contentious issues and avoid potential impasse.

 

  1. Earlier in this interview you mentioned CIICA as a platform for resolving BRI disputes, particularly those relating to CPEC and you have written about the various such options previously. Indeed, in 2019, to support the resolution of such disputes, CIICA signed a Memorandum of Understanding with the China International Economic and Trade Arbitration Commission (CIETAC). Do you consider that international arbitration offers the most suitable mechanism for resolving such disputes? With the Singapore Convention on Mediation coming into force recently, does it make mediation a viable alternative for stakeholders?

I think in the foreseeable future, international arbitration would still be the predominant method for resolution of disputes across the Belt and Road states. This is primarily due to its wider acceptance and recognition among the States participating in this initiative in particular and around the world in general. Although the Singapore Convention is a significant and welcome development in the realm of international dispute resolution, it may still take a few years before it gains wider adoption among the Belt and Road states. In view of the divergent approaches and preferences of certain States across the Belt and Road states, the hybrid dispute resolution methods of Arb-Med, Med-Arb and Arb-Med-Arb may also gain traction allowing parties more freedom to design the dispute resolution procedures based on their unique preferences and the particular context of their transactions and commercial relationships.

 

  1. Can you briefly discuss the impact of the COVID-19 pandemic on arbitral practice in Pakistan? Is there an increased demand for CIICA’s Online Arbitration and Mediation Filing System?  How has CIICA enhanced its virtual and online services to meet stakeholder demands?

Amidst the COVID-19 pandemic, CIICA launched its online arbitration and mediation filing system and is currently the only institution in Pakistan that is offering these online services. However, online arbitration and mediation do not appear to have gained much traction in Pakistan yet and consequently, there has been no significant impact on the demand for arbitration or mediation in Pakistan.

 

  1. As we look forward, can you tell us the top three goals you hope CIICA will have achieved by 2025, at the time of its tenth anniversary?

By 2025, I hope:

  1. CIICA is recognized as an innovative arbitral institution that can adapt its services to cater to the evolving needs of the users in Pakistan in particular and the region in general.
  2. CIICA is successful is bringing about the legislative reforms that its committee is currently working on.
  3. CIICA is able to create a fairly large pool of well-trained international arbitration practitioners and arbitrators in Pakistan. I hope CIICA has also had the opportunity to build the capacity of Judges in Pakistan to enable them to develop a deeper understanding of the context, nuances and implications of the substantive and procedural aspects of international arbitration. This would minimize undue court intervention and facilitate enforcement of arbitration agreements and awards that would ultimately help develop pro-arbitration jurisprudence in Pakistan and bolster its image as a favorable destination for foreign investment.

 

Thank you for your time and perspectives – we wish you and CIICA continued success!

 

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

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An Arbitration Paradise? The Importance of Dispute Resolution for Hainan’s Development

Fri, 2020-11-27 00:23

The designation of Hainan province as a Free Trade Zone (FTZ) in 2018 has sparked a great deal of interest for foreign investors. The proposal for a globally influential free trade port, by the middle of the century, makes Hainan an exciting prospect and a potential venue for new foreign investment. Such a proposal demonstrates a strong commitment by the central government, to turn Hainan into a highly developed centre for international trade. China’s plans for Hainan reveal that a great deal of thought has been put into dispute resolution, in order to make the island arbitration friendly to further attract foreign investment.  The guiding policy for Hainan’s development strongly emphasises the need for effective dispute resolution mechanisms and has specifically called for the “establishment of multiple dispute resolution institutions such as international economic and trade arbitration institutions and international dispute mediation institutions”.1)This is the author’s courtesy translation. jQuery("#footnote_plugin_tooltip_3641_1").tooltip({ tip: "#footnote_plugin_tooltip_text_3641_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This policy highlights the importance placed on building an effective dispute resolution network, which is needed to safeguard foreign investment.

 

The Hainan FTZ

Although the 1994 PRC Arbitration Law provides the legislative framework for arbitration in Hainan, the province is subject to several policies that make it unique, when compared to the conventional dispute resolution framework adopted in the mainland.

Firstly, as is the case with the Shanghai Pilot FTZ, the definition of ‘foreign related’ arbitration has been expanded in Hainan to permit the enforcement of arbitration awards made outside of China. Such awards may be enforceable in Hainan if they are made between or among FTZ registered wholly foreign owned entities, or between Hainan FTZ registered commercial entities. This policy differentiates arbitration in Hainan from standard practice in China, which provides no legal basis for Chinese domestic entities to submit domestic disputes to arbitration outside of China. The expansion of the term ‘foreign related’ to incorporate Hainan FTZ entities increases the scope for the enforcement of foreign arbitral awards involving a Hainan FTZ company. The 2018 Supreme People’s Court Opinion (Opinion)  on the provision of legal services in Hainan, appears to take a more flexible approach to the term ‘foreign related’ than has traditionally been adopted in the past. The Opinion states that extraterritorial arbitration between commercial or civil entities within free trade zones or free trade ports, “should not be deemed invalid on the grounds of no foreign-related factors”.2)This is the author’s courtesy translation. jQuery("#footnote_plugin_tooltip_3641_2").tooltip({ tip: "#footnote_plugin_tooltip_text_3641_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  This Opinion is important because it appears to widen the scope for the enforcement of foreign arbitral awards within the Hainan FTZ. This Opinion follows the trend within China which has seen an expansion of the term ‘foreign related’ in cases such as Ningbo and Shanghai Golden Landmark, both of which relate to contracts for the sale of goods in the Shanghai FTZ– more on these decisions can be found in a previous blog post here.

Secondly, in order to improve the efficiency in which foreign related disputes are dealt with, the Hainan government has created multiple tribunals, specifically established to deal with international cases. This policy is testament to the central government’s efforts to make Hainan a reliable venue for the resolution of international disputes. These tribunals will centralise the Hainan courts’ jurisdiction over foreign related civil and commercial cases, thereby creating a greater harmonisation in how such cases are dealt with. These tribunals are China’s first provincial-level cross-regional tribunals specifically created to hear first-instance foreign related cases. The establishment of such tribunals demonstrates that a lot of thought has gone into making Hainan’s legal system more international and better prepared for dealing with foreign cases.

Aside from dispute resolution, the Hainan FTZ has adopted several policies in order to further promote foreign investment. Such policies include lower rates of income tax, 30-day visa free access for foreigners and an attractive policy for the recruitment of overseas talent, which are all elements of a strategy, designed to turn Hainan into a centre for global trade. This strategy has also seen the establishment of the Hainan International Arbitration Court (HIAC) (sometimes referred to as the Hainan International Arbitration Commission), a new arbitral institution which was set up in 2018, to facilitate the resolution of international disputes and promote Hainan as a venue for arbitration.

 

The Importance of the HIAC

The HIAC was set up to administer arbitration and mediation cases through its team of over 60 staff. It has invested heavily into the recruitment of international arbitration practitioners in order to increase its global focus. As a result, the HIAC currently has access to around 600 arbitrators over 200 of which are foreign nationals.

A distinctive feature of the HIAC that differentiates it from other arbitration institutions relates to the permitted use of mediation at any stage of the arbitral process. The HIAC, like the China International Economic and Trade Arbitration Commission (CIETAC) and the Beijing Arbitration Commission (BAC), permits the use of Med-Arb during proceedings in order to facilitate a settlement between the parties. The HIAC follows the trend of dispute resolution in China, which includes the use of Med-Arb as a tool to resolve disputes. The legislative basis for the use of Med-Arb can be found in Article 51 of the 1994 PRC Arbitration Law which states that “[t]he arbitration tribunal may carry out conciliation prior to giving an arbitration award”.

Article 48 of the HIAC’s Arbitration Rules states that “[u]pon the request of or with the consent of the parties, the arbitral tribunal may conduct mediation during the arbitral proceedings”. If a settlement is reached, the parties can prepare a settlement agreement themselves, or ask the tribunal to either produce one or write an award by consent based on what is agreed in the settlement. If the parties fail to reach a settlement, the tribunal will proceed with issuing an award. However, under the HIAC Rules “[i]f the mediation fails to lead to a settlement, neither party shall be permitted to adduce evidence of or to refer to or use any statements, opinions, views or proposals expressed by the other party or by the arbitral tribunal during the mediation in support of any claim, defense or counterclaim in the subsequent arbitral proceedings, or as grounds in any judicial or other proceedings”. This requirement also extends to the arbitrators, who cannot produce an award based “on the opinions expressed by the parties during the mediation”.

A distinctive feature that differentiates the HIAC from arbitral institutions within China relates to the way the HIAC is governed. The HIAC is one of only two arbitral institutions within China that adopts a ‘corporate governance’ style of management. The other being the Shenzhen Court of International Arbitration Court (SCIA). This corporate governance style of management relates to a structure which incorporates a board of directors (some of whom are non-Chinese nationals) that operates at the core of the institution. Further to this, the HIAC is the only arbitral institution in China that has received Administrative Measures from a provincial government, which is the first provincial document released separately to an arbitration institution in China and they specify that the HIAC is a statutory body established for the benefit of the public as a non-profit organisation. The establishment of the HIAC is an important milestone for the development of Hainan, given that a global arbitration institution with a strong international focus would strengthen Hainan’s position as a potential venue for foreign investors. Although newly established, the HIAC will foreseeably play a key role in the rapid development of a province which recorded a GDP growth of 5.8% in 2018.

 

Looking Ahead

Hainan is a tropical island with a significant supply of minerals and over 70 types of natural resources, the island features large coastlines that are typical of any global trading port. It is therefore likely that as the island develops, disputes will arise that reflect the increased volume of investments typically made in the province. The construction, energy and maritime sectors are likely to experience an increase in demand for dispute resolution services as Hainan’s development advances. The HIAC’s sector specific offices specialising in financial and maritime arbitration are one answer to this trend.

Going forward, the establishment of Hainan specific FTZ dispute settlement rules may be an option in order to further develop arbitration on the island. Hainan could follow a similar path to the Shanghai FTZ in order to make itself more arbitration friendly, this could include the acceptance of foreign arbitral institutions to administer cases with a Chinese seat in the FTZ and the permissibility of ad-hoc arbitrations, which if enacted, could further develop arbitration within Hainan.

This is an exciting time for Hainan. The establishment of the Hainan FTZ alongside the HIAC represent significant steps that may well turn the island into an arbitration paradise.

References   [ + ]

1, 2. ↑ This is the author’s courtesy translation. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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International Law Talk Podcast and Arbitration: In Conversation with Professor Joshua Karton

Thu, 2020-11-26 22:46

Welcome to the second post in the series of International Law Talk. During a series of podcasts, Wolters Kluwer will bring you the latest news and industry insights from thought leaders and experts in the field of International Arbitration, IP Law, International Tax Law and Competition Law. Here at Kluwer Arbitration Blog, we will highlight the podcasts focused on international arbitration.

In the second podcast of the series, Dr Maria Fanou, Assistant Editor of Kluwer Arbitration Blog, interviews Joshua Karton, Associate Professor and Associate Dean at Queen’s University. Professor Karton is the General Editor of the Kluwer Arbitration Practical Insights, a new online research service for international arbitration practitioners (launched this year), and also the co-founder and the Managing Editor of the Canadian Journal of Commercial Arbitration.

 

Professor Karton generously offered his invaluable insights on his rich experience and on various relevant topics pertaining to international arbitration, including the following:

 

http://arbitrationblog.kluwerarbitration.com/wp-content/uploads/sites/48/2020/11/KLI-2.-trailer.mp4

 

  • His experience about his early years in law and his path towards becoming an international arbitration lawyer and scholar, emphasizing the role of the Vis Moot as a formative experience which contributed to his discovering the magical world of arbitration.
  • His experience as an editor, including in particular as one of the three General Editors (along with Simon Greenberg and Fan Yang) of the Kluwer Arbitration Practical Insights, a tool that is part of Kluwer Practice Plus set of resources. As Professor Karton explains, Kluwer Arbitration Practical Insights is like a treatise or a handbook but reimagined for the online environment.
  • The role of comparative law as a constituent (and not simply a set of techniques) of international arbitration, as inspired by his article ‘International Arbitration as Comparative Law in Action’.
  • Drawing on his significant work on diversity (see also here) Professor Karton builds on a popular post of his, and discusses the benefits that diversity brings in arbitration.

 

As a final thought answering a question that we will pose to all interviewees in this podcast series, Joshua Karton predicts that we will see more fragmentation of the international arbitration field as it grows and, hopefully diversifies, as well as more specialization, more regionalization and more arbitral institutions focusing on specific industries. He further foreshadows that international arbitration will continue to reflect the pluralism of its users.

Listen to the podcast ‘Comparative Law in Action in Arbitration’ with Joshua Karton.

 

Follow the coverage of the International Law Talk arbitration podcasts on Kluwer Arbitration Blog here.

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Enforcement of Foreign Arbitral Awards in the U.S. Post Daimler AG v. Bauman

Thu, 2020-11-26 01:53

In this post, we discuss some of the challenges created by the personal jurisdiction requirements under U.S. law (explained below) in enforcement of foreign arbitral awards in the U.S. We also delve into details of hurdles posed by the implementation of the personal jurisdiction standard as enunciated in Daimler AG v. Bauman to recognition and enforcement proceedings. Personal Jurisdiction is a U.S. law concept that signifies the power of a court to determine the rights and liabilities of a party involved in a lawsuit.

Given these challenges, we propose a potential solution to bypass these hurdles, to wit, modifying arbitration clauses to include a waiver of jurisdictional objections to the subsequent enforcement of an arbitration award.

 

A Primer: Enforcement of Foreign Arbitral Awards in the U.S.

While the vast majority of arbitration awards are voluntarily complied with, there are still many cases in which a losing party will refuse to satisfy an outstanding award against it. Because “[a]rbitral awards are not self-enforcing” in the U.S., they must therefore “be given force and effect by being converted to judicial orders by courts.” Power Partners MasTec, LLC v. Premier Power Renewable Energy, Inc., 2015 WL 774714 (S.D.N.Y. Feb. 20, 2015). To that end, many U.S. courts require a party seeking to reduce a foreign arbitral award to a judgment to establish compliance not only with the relevant provisions of the New York Convention and the Panama Convention (the “Conventions”) but also federal and state constitutional and legal requirements governing personal jurisdictional. In that connection, the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) has held that both Conventions limit the ways of challenging a request for recognition and enforcement of an arbitration award. Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393, 397 (2d Cir. 2009). However, the Conventions do not alter the fundamental constitutional requirement that the party against whom enforcement is sought be subject to personal jurisdiction of the court before which enforcement is sought. Id. The Second Circuit has also found that, even when jurisdictional requirements are satisfied, it has authority to dismiss an enforcement proceeding on the grounds that the state in which it was initiated is an inconvenient forum. Monegasque De Reassurances S.A.M. (monde Re) v. Nak Naftogaz of Ukr., 311 F.3d 488, 495-96 (2d Cir. 2002).

Broadly speaking, there are three ways that an enforcing party can meet U.S. federal and state constitutional and legal requirements governing personal jurisdiction. First, the enforcing party can seek to establish “general” or “all purpose” jurisdiction based on the award debtor’s ties to the state where enforcement is sought. Second, an enforcing party may seek to establish so-called “specific” jurisdiction based on the commission of some single or occasional acts of the corporate agent or individual in a state that gives rise to the lawsuit. Third, there is case law permitting a party to rely on the U.S. assets of the award debtor to establish so-called “in rem” (property based) jurisdiction. CME Media Enters. B.V. v. Zelezny, 2001 WL 1035138 (S.D.N.Y. Sept. 10, 2001).

 

Daimler Standard

In 2014, the U.S. Supreme Court (the “Supreme Court”) issued an opinion in Daimler AG v. Bauman 134 S. Ct. 746 (2014) which has been described here as “almost certainly its most important jurisdiction decision in some seventy years.” In that case, the Supreme Court essentially held that, in the absence of extraordinary circumstances, a party will only obtain “all purpose” jurisdiction over a corporation by suing it at its place of incorporation or principal place of business and, over a foreign individual, by suing the individual at her or his domicile. The Supreme Court’s decision is discussed to have “mark[ed] a dramatic change in the law” since it arguably abrogated “[t]he once familiar standard for general jurisdiction—corporate ‘presence’ in a state in which it ‘does business’ both ‘continuously and systematically.’” Naturally, it has had a significant impact on arbitration award enforcement proceedings in the U.S.

 

Implementation of the Daimler Standard

Federal appellate courts in the U.S. have applied the rule articulated in Daimler to recognition and enforcement proceedings. See, e.g., Sonera Holding B.V. v. Cukurova Holding A.S.,750 F.3d 221, 223 (2d Cir. 2014). This shift in the threshold requirement of “general” jurisdiction to a stricter threshold of having a place of incorporation from the erstwhile lower threshold of having continuous and systematic business activities has created potential hurdles for parties in such proceedings that cannot establish the kind of contacts with a state that would authorize “all purpose” or “general” jurisdiction. Consequently, foreign parties may find themselves potentially engaged in expensive and/or otherwise protracted litigation aimed at finding assets and/or contacts that will authorize a U.S. court to exercise “specific jurisdiction” with no ultimate guarantee of success. In practice, this means that a foreign party may be involved in a litigation in the U.S. over several years only to find out that they will be unable to enforce their arbitration award.

 

Does Property-based Jurisdiction Provide a Respite from the Daimler Standard?

As noted above, a party seeking to enforce a foreign award may rely upon the assets of a foreign award debtor to establish jurisdiction. However, there are certain limitations when relying upon such property-based jurisdiction. Generally, there is a limit on the recovery amount, as courts will confirm the award only to the extent of assets present in the jurisdiction. See, e.g., CME Media Enters. B.V. v. Zelezny, 2001 WL 1035138 (S.D.N.Y. Sept. 10, 2001). In addition, courts may be reluctant to order any kinds of additional remedies besides orders against the property. Id. Because such jurisdiction relies on the contemporaneous presence of the property in the forum state, award debtors can also potentially defeat in rem jurisdiction by moving their property out of the forum state. To preempt such situations the award creditors often obtain a pre-judgment attachment of properties under the applicable state law (For example: under N.Y. C.P.L.R. § 5305 (2016)) which is possible when the foreign arbitral award is converted into a foreign judgment, as explained below.

Thus, an enforcing party may also rely upon a double exequatur or dual enforceability approach as discussed in a previous post. This is an indirect route to enforce a foreign arbitration award by converting the award into a foreign judgment recognizing the award, and then seeking recognition of that foreign judgment in the U.S. The personal jurisdiction rules for recognition of foreign judgments are somewhat more flexible when there is no opposition to the enforcement proceeding but not when the defendant challenges or opposes the enforceability of the judgment on substantive grounds. AlbaniaBEG Ambient Sh.p.k v. Enel S.p.A., 160 A.D.3d 93 ( N.Y. 1st Dept 2018).

Although “specific” jurisdiction may offer an easier alternative to satisfying a party’s jurisdictional burden, an enforcing party seeking to rely on such a basis for asserting personal jurisdiction will generally need to show that the award debtor “transacts any business within the state or contracts anywhere to supply goods or services in the state” and the cause of action arises from this conduct. N.Y. C.P.L.R. § 302(a)(1).

 

A Plausible Way for Establishing Personal Jurisdiction 

Faced with the above conundrums, parties may want to include a provision in their arbitration clause addressing enforcement issues in the U.S.

Many U.S. courts have found consent of parties as a valid way of establishing personal jurisdiction for purposes of enforcing a foreign arbitral award, as courts have recognized that personal jurisdiction stems from due process rights of the parties itself, rather than Article III powers of the judiciary, and hence parties can consent to personal jurisdiction. Brown v. Lockheed Martin Corp., 814 F.3d 619, 625 (2d Cir. 2016). Parties usually express their consent through forum selection clauses or contractual consent provisions. For instance, in the case of EGI-VSR, LLC v. Huber, 2020 U.S. Dist. LEXIS 54405 (S.D.N.Y. Mar. 27, 2020) concerning enforcement of a Chilean arbitration award, the court held that the award debtor’s (a Chilean resident) agreement with a forum selection clause providing that “any dispute under this Agreement shall be resolved in a court of competent jurisdiction in New York, New York” conferred personal jurisdiction over the award debtor. Similarly, in the case of D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006), the court found that the award debtor (a Florida resident) was subject to personal jurisdiction of the court for purposes of a confirmation proceeding to reduce an award to a judgment, as the defendants had consented to personal jurisdiction through forum-selection clauses.

Contractual consent to personal jurisdiction should eliminate the need for a separate due process analysis required by the U.S. constitution. See, e.g., EGI LLC, 2020 U.S. Dist. LEXIS 54405 at *14; Recurrent Capital Bridge Fund I, LLC v. Isr Sys. & Sensors Corp., 875 F. Supp. 2d 297, 306 (S.D.N.Y. 2012). Forum selection clauses are especially useful insofar as courts have generally interpreted forum selection clauses broadly and enforced them, unless the clause was obtained through fraud, D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006) or enforcing it would be unreasonable or unjust, see, e.g., EGI LLC, 2020 U.S. Dist. LEXIS 54405 at *15-16. Thus, a party may be able to construct a forum selection clause designating New York as the seat of the arbitration which would permit it to enforce an award stemming from such an arbitration in New York. Similarly, a party may also theoretically designate a seat of arbitration in another, foreign jurisdiction while including a provision in their arbitration clause that would permit them to enforce their arbitral award in the U.S.

Thus, given that “general” jurisdiction is the preferred way of establishing personal jurisdiction in recognition and enforcement proceedings, and the U.S. courts have applied Daimler’s more stringent threshold of establishing “general” jurisdiction over foreign parties, parties may want to include a forum selection clause in their arbitration agreement to address enforcement issues in the U.S.

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New Terrain for International Arbitration: The International Dispute Resolution Track at the 99th Annual International Law Weekend

Wed, 2020-11-25 00:00

The 99th Annual Meeting of the American Branch of the International Law Association (“ILA (American Branch)”), known as International Law Weekend (“ILW”), took place virtually this year in New York City on 22-24 October 2020.  This year’s conference included 27 panels, as well as an Opening Plenary Panel, a United Nations 75th Anniversary Plenary Panel, and numerous virtual networking sessions hosted by ILA (American Branch)’s committees.  The conference continued to include a dedicated International Dispute Resolution track with a specific slate of panels in that area.

The keynote address was delivered by Catherine Amirfar (Co-Chair of the Public International Law Group, Debevoise and Plimpton LLP; President, American Society of International Law) and moderated by Chiara Giorgetti (University of Richmond School of Law).  Ms. Amirfar’s remarks were framed against the backdrop of the United States standing at a crossroads for the international rule of law.  She recalled that international lawyers have a commitment to the progressive ideal that international affairs should be governed by law, not merely power.  As she explained, it is the duty of international lawyers and institutions to ensure this ideal continues to advance even when backward steps are taken in the international sphere.

Ms. Amirfar observed that such backward steps do not constitute a failure of the entire enterprise, but instead allow international lawyers to take a hard look at what is not working and figure out ways to improve so we may move forward.  In her view, there are no inevitabilities in the story of international law; history is replete with examples of how institutions and individuals have made a difference.  At this important juncture in the history of international law, she left the audience with a powerful reminder: across party lines and political divides lies a set of shared norms and common interests that can unite us and allow us to progress slowly but steadily.

The panels forming part of ILW’s International Dispute Resolution track echoed these themes as they considered whether international legal mechanisms for dispute resolution should be extended to address new areas of conflict.  One overarching issue raised during these discussions is how to determine if a particular conflict calls for an international dispute resolution mechanism.  Key questions for this determination included:

  • Is there a need for any additional dispute resolution mechanism to resolve this type of conflict?
  • Is the proposed international mechanism an appropriate means to resolve the conflicts that arise in that area?
  • Can the proposed international mechanism be made accessible enough to contribute meaningfully to the resolution of conflicts in this area?

Two panels stood out as particularly illustrative of these questions and the debates that they engender: one on investor-state dispute resolution as a means to resolve disputes in the global banking and finance sector, and another on international arbitration as a means to resolve disputes over human rights abuses at sea.

 

The Role of Investor-State Arbitration in Regulation of Global Banking and Finance

“Investor-State Disputes, International Finance, and Economic Crisis,” was moderated by Virág Ilona Blazsek (Associate Legal Officer, United Nations Joint Staff Pension Fund).  This panel considered whether investor-state dispute settlement may contribute to the resolution of banking- and finance-sector disputes in times of economic crisis—particularly in light of the emergency measures that States often take to combat such crises.

The answer—as the panel developed it—boiled down to two separate issues: whether investor-state tribunals should address the substance of those disputes, and whether there is sufficient access to these types of tribunals for them to matter.

The panel’s initial discussion centered on the degree to which an investor-state tribunal should second-guess state regulatory measures taken in the face of economic crisis—when many, or even most, state regulatory actions are legitimate and essential.  Anna de Luca (Of Counsel, Macchi di Cellere Gangemi) took the view that tribunals should not evaluate state regulations in the banking and finance sector merely on the basis of their objective correctness.  Prof. Michael Waibel (University of Vienna) later added that because of the uncertainty surrounding which regulatory action is correct, the State should be afforded a margin of appreciation.

Nevertheless, the panel only scratched the surface, leaving unaddressed how, exactly, the standard of review should be calibrated—between the two extremes of review for absolute correctness and no review at all.

Next, the panel turned to whether banking and finance investors have broad enough access to investor-state arbitration for it to play an important role in regulating state crisis measures.  Prof. Waibel argued investor-state arbitration has a fairly limited role simply because any State measure taken during a crisis will affect domestic investors more than international investors.  Indeed, both he and Ms. de Luca underscored that investor-state arbitration may be further curtailed within the European Union, following the Court of Justice of the European Union’s Achmea judgment and subsequent termination of multiple intra-EU bilateral investment treaties.

However, David Attanasio (Associate, Dechert LLP; co-author of this post) noted that, given the lack of alternative avenues of international recourse for banking and finance investors, some may seek to restructure their investments in order to obtain access to international investment protections and to investor-state arbitration.

Despite identifying key factors affecting the scope of access to investor-state arbitration, the panel left open a range of questions affecting investor-state arbitration’s potential significance for resolving conflicts over crisis measures in the banking and finance sector.  These questions included whether international investors make up a meaningful portion of all investors in the banking and finance sector, and whether investors in that sector are able to secure access to international investment protection, including through investment structuring.

 

The Role of International Arbitration in Remedying Human Rights Abuses at Sea 

“Arbitration of Human Rights at Sea: Giving International Law Teeth by Empowering Victims to Enforce It” was moderated by Dr. Anna Petrig (Professor and Chair of International Law and Public Law, University of Basel).  This panel considered whether international arbitration can contribute meaningfully to accountability for human rights abuses committed at sea.

Resolving this issue—as the panel addressed it—requires answering two key questions: whether there is a need at all for accountability for human rights abuses committed at sea, and whether international arbitration, in particular, is the right mechanism to fill that need.

The panel first considered the need for accountability mechanisms for human rights violations at sea, addressing that need from both the supply and demand sides.

  • Regarding the supply side, Dr. Irini Papanicolopulu (Associate Professor, Università degli Studi di Milano-Bicocca) reported that the existing international fora have limited jurisdiction and are therefore ill-equipped to resolve many potential human rights disputes. To her point, even the European Court of Human Rights and the Inter-American Court of Human Rights often do not have jurisdiction to resolve cases of human rights abuses, such as those that are allegedly committed by corporations.
  • On the demand side, Elisabeth Mavropoulou (Lecturer in Law, University of Westminster; Trustee, Human Rights at Sea) set out basic statistics regarding maritime operations: There are 197 states included in this group, 1.6 million commercial seafarers, and at least 56 million people involved in fisheries and aquaculture. As she explained, the maritime sector, then, is a significant area of commercial and social activity that can generate a variety of human rights abuses.

Despite these key observations, the panelists did not delve into the nature and extent of actual human rights abuses occurring at sea, leaving unresolved the extent to which this is a problem calling for a solution.

The panel next took up whether and how arbitration can be made available to those who allege human rights abuses at sea.  As Dr. Ursula Kriebaum (Professor of Public International Law, University of Vienna) noted, the Hague Rules on Business and Human Rights Arbitration were designed precisely to enable arbitration to provide an appropriate forum for human rights disputes.

However, Prof. Emmanuel Gaillard (Head of Shearman & Sterling’s International Arbitration Practice; Visiting Professor of Law, Yale Law School, Harvard Law School) identified the root issue: consent.  As he explained, if victims of human rights abuses committed at sea cannot obtain consent to arbitration in the first place, then these disputes cannot be resolved through arbitration.  Without consent, international arbitral tribunals would lack jurisdiction to hear the disputes and to serve as an accountability mechanism for those human rights abuses.

In Prof. Gaillard’s view, the need for consent would not necessarily be a barrier to resolving disputes over human rights abuses at sea through arbitration.  He noted that States and corporations could be incentivized to give advance consent through political pressure from international organizations or simply civil society itself, or alternatively through economic pressure applied by banks and other financial-service providers.  If they gave such advanced consent with sufficient scope, then international arbitration might be able to play a meaningful role in the area.

That said, the panel did not hazard a guess about the degree to which consent would actually be forthcoming, even in a scenario where such incentives were used.  So it remains an open question whether pressure alone can ensure arbitration becomes available widely enough to act as a real accountability mechanism for human rights abuses committed at sea.

 

The Path Ahead

These and other panels at the 99th International Law Weekend provided a clear reminder of the opportunities for expanding the role of international dispute resolution in novel directions.   As the world looks ahead to possible changes in light of new American leadership, they may guide us toward further establishing an international community governed by law and not power.

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The Role of Arbitral Institutions in Cybersecurity and Data Protection in International Arbitration

Tue, 2020-11-24 01:00

Cybersecurity and data protection have been dominating conversations in the international arbitration community in recent years. From an analysis of how the stakeholders may be best equipped to address cybersecurity risks, to considerations on maintaining confidentiality in international commercial arbitration, as well as calls to address the impact of the General Data Protection Regulation (“GDPR”) on virtual arbitration proceedings, much scrutiny has been afforded to these issues. Discussions on this topic have been further enhanced following the release of the IBA Cybersecurity Guidelines (the “IBA Guidelines”), the ICC-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration, the latest being the 2020 Edition (the “Cybersecurity Protocol”), as well as the public consultation draft of the ICCA-IBA Roadmap to Data Protection in International Arbitration. The author opines that cybersecurity and data protection go hand in hand as both involve the receipt, usage, processing, transmission, and preservation of data in any given setting. The ongoing COVID-19 pandemic has further heightened the importance of these issues since more proceedings with high value and business-sensitive information are being conducted wholly online, are frequently held in different jurisdictions, and often involve unencrypted digital exchanges.

A previous article has highlighted how arbitral institutions are uniquely positioned to address cybersecurity risks both consistently and sustainably. This post now aims to further examine the measures that arbitral institutions may take to alleviate cybersecurity risks and to ensure that data protection principles are adhered to in institutional proceedings.

 

Institutional Rules and Case Management

Effectively, most arbitrations are currently managed, if not completely, through electronic and digital means, e.g. where correspondences and procedural papers are transmitted via email or digital file transfers. It is foreseeable that in time, more and more of these ‘paperless’ proceedings will take place. Undoubtedly, institutions should be up to date to the technological needs of the parties and their institutional rules and procedural guidelines should factor in cybersecurity concerns. One such example can be found in the Hong Kong International Arbitration Centre (“HKIAC”) 2018 Administered Arbitration Rules, where Article 3.1(e) specifically mandates the uploading of files “to any secured online repository that the parties have agreed to use” as a recognised means of communication. Another example is found in the London Court of International Arbitration (“LCIA”) 2020 Arbitration Rules that incorporate new provisions on data protection, cybersecurity and regulatory issues. Specifically, Article 30A provides that “at an early stage of the arbitration the Arbitral Tribunal shall…consider whether it is appropriate to adopt:

(i)        any specific information security measures to protect the physical and electronic information shared in the arbitration; and

(ii)       any means to address the processing of personal data produced or exchanged in the arbitration in light of applicable data protection or equivalent legislation.

In circumstances where such considerations have yet to be incorporated in the institutional rules or guidelines, possible steps to take would be for the administering institution to either alert the tribunal, upon confirmation of its appointment, of the existence of the Cybersecurity Protocol, or to include the protocol as part of the institution’s code of conduct of arbitrators.

The Cybersecurity Protocol neither lists any specific measures to be taken, nor does it establish any liability standards for any purpose (Principle 14). Instead, the Cybersecurity Protocol authorises the tribunal to determine the appropriate cybersecurity measures (Principles 11 and 12). Although the commentary to Principle 11 acknowledges such authority, determination of applicable information security measures should fall back to parties’ agreement.

In terms of case management, the arbitration community can look forward to the soon to be released Protocol for Online Case Management in International Arbitration by the Working Group on LegalTech Adoption in International Arbitration (the “LegalTech Working Group”). Having just released its Consultation Draft in July 2020, the focus of the LegalTech Working Group is the development of a consistent approach to the adoption and use of online case management tools that encompasses confidentiality, data protection, and sustainable values thereof.

 

Internal Management Systems

Arbitral institutions hold large volumes of valuable, highly commercial, and sensitive information pertaining to matters they administer, access to which may have far reaching impacts. This makes arbitral institutions a highly attractive target for cybercriminals. Previous incidents such as the intercepted correspondence in Libananco v Republic of Turkey (ICSID ARB/06/8), and the attack on the Permanent Court of Arbitration (PCA) website during the China–Philippines maritime boundary dispute, have further emphasised the need for arbitral institutions to have effective cybersecurity technology and mechanisms in place to safeguard the confidentiality of proceedings.

What steps then should arbitral institutions take? As a reference, the IBA Guidelines, although aimed at lawyers and legal firms, contains several recommendations which are worth considering by all stakeholders in the arbitral process. They include the following three areas:

  1. Technology: implementing endpoint protections, ensuring the use of secure networks, encrypting data and devices, strictly managing access control, implementing audit logs as well as implementing data retention, and loss recovery capabilities.
  2. Organisational processes: implementing strong username and password management with multi-factor authentication, implementing protection protocols, conducting periodic system testing, implementing a cybersecurity policy, implementing vendor and third-party provider risk management, and considering cyber liability insurance.
  3. Staff Training: educating employees about the importance of cybersecurity and common threats as well as providing staff with essential cybersecurity tips and advice.

In the Data protection, privacy, confidentiality and cybersecurity session at the 22nd Annual IBA Arbitration Day in 2019, Catherine Amirfar further posited some concrete prevention techniques and tips, which included limiting the collection and use of sensitive data, understanding the organisational assets and electronic architecture, as well as establishing a cyber threat mitigation plan in the early stages. Although limiting the collection of sensitive data may be impracticable for arbitral institutions, implementing cybersecurity and data protection measures by design within the institutional structure may limit any risk of breaches exponentially.

 

Virtual Proceedings

Since the outbreak of the COVID-19 pandemic, virtual hearings have become the norm in present times. It is likely that the trend will stay due to its efficiency and convenience. Many arbitral institutions have also introduced their own guidelines to manage and support the conduct of virtual hearings. A quick comparison across some of the protocols and guidelines issued indicates that the minimum standards of cybersecurity and data protection measures in virtual proceedings include, amongst others, usage of access-controlled video conferencing platform/software with an authentication process, usage of encrypted communications, clear identification of data storage facilities, and the applicable laws as well as robust administrative controls in order to maintain the security and integrity of data. The utility of checklists is also encouraged to ensure that the proceedings are conducted in compliance with local as well as regional data protection laws, such as the GDPR.

 

Conclusion

The benefits for arbitral institutions to push for greater emphasis and devoting resources towards cybersecurity and data protection cannot be understated. With the threats of cybersecurity constantly growing coupled with the profound impact of strict data protection laws, addressing these concerns through innovative means provides institutions with the advantage to promote institutional arbitrations particularly to security-conscious high-value commercial arbitration users. Most importantly, it considerably minimises the chances of untoward incidents such as the PCA website hack ever happening again. As the maxim goes, abundans cautela non nocet (abundant caution does no harm). 

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