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The Rising Arbitrator’s Challenge: Navigating the Premise and Perils of Your First Appointment(s)

Kluwer Arbitration Blog - Tue, 2021-02-16 23:49

On 27 January 2021, the Rising Arbitrators Initiative (RAI) hosted the second webinar of its series “The Rising Arbitrator’s Challenge: Navigating the Premise and Perils of Your First Appointment(s)”.

The aim of the series of events is to support practitioners who are seeking or tackling their first appointments and each webinar is focused on a different jurisdiction. The 27 January 2021 event focused on Europe and was moderated by Victoria Pernt (Schoenherr Attorneys at Law). After the opening remarks by Ana Gerdau de Borja Mercereau (Derains & Gharavi), co-founder and co-chair of RAI’s Executive Committee, introducing RAI’s initiative, the panel featuring Alice Fremuth-Wolf (VIAC); Milena Djordjevic (University of Belgrade), and Simon Gabriel (Gabriel Arbitration), commenced the discussion.

 

How to get your first appointment and what criteria do institutions take into account in the selection process?

Alice Fremuth-Wolf gave her insight and practical advice on the issues related to first appointments and the criteria for selection by VIAC. She highlighted that it is one of VIAC’s duties to look for new talents, to increase the arbitrators’ circle and look for more diversity in the arbitration market. It was clear from the discussion that one of the goals of VIAC is to promote young talents and give them the possibility to get their first appointments. Ms. Fremuth-Wolf’s advice on how to get the first appointment was for young practitioners to be confident and make themselves visible by attending conferences or seeking speaking opportunities. This, in her opinion, will make the decision-makers become aware of the new talents. Another important consideration mentioned was for aspiring arbitrators to keep publishing on specific topics, not only procedural, but also particular areas of substantive law. She mentioned that it is good to consider focusing on niche areas such as for example environmental law. In today’s pandemic reality it is important to make use of different online platforms such as LinkedIn and meet online with other peers and engage in discussions.

First appointments are usually realistic after gaining some experience as a party representative or as a tribunal secretary. Securing an internship with an arbitral institution may also be a valuable experience. Ms. Fremuth-Wolf mentioned that it is worth considering having one’s name included on so-called lists of practitioners, such as the one VIAC has, especially designed to make profiles visible.

 

Is it appropriate for arbitrators to seek support from arbitral institutions?

The discussion also touched upon the importance of asking for support from arbitral institutions. This is because there are many issues that can be raised even in small cases, in particular because these types of cases usually involve numerous procedural issues, less experienced counsel, or non-responsive parties. Ms. Fremuth-Wolf noticed that not only young practitioners seek such advice, but also experienced arbitrators ask many questions, and, as such, there should be no shame in asking for support. Many issues may be related to procedural aspects or best practices as to for example the costs of arbitration, and for which the institutions are well equipped to assist with. Moreover, as Ms. Fremuth-Wolf explained, there is always a designated case manager who is on the top of the case, monitoring and able to step in, in problematic situations. Furthermore, there is, in many institutions, the review procedure (ICC or VIAC) where another look at the arbitral award is taken. Of course, this is without any interference in the legal analysis and the outcome, but, for example, it would concern the issues related to the procedure or a double check on whether all of the issues have been dealt with and the clarity of the dispositive. Ms. Fremuth-Wolf encouraged young practitioners to “fight for their first appointments and be confident that they can do it”. Being young does not mean being inexperienced, she said.

 

Efficient Setup and Tribunal Secretaries

Milena Djordjevic gave further insights on how to get and keep first arbitral appointments. One of the problems young arbitrators face is big competition in the arbitration job market. It is difficult for practitioners to get the positions they deserve. Ms. Djordjevic highlighted that it is important to take the advantage of the pandemic situation and, in particular, the accessibility of the online events, webinars and conferences. Further, young aspiring arbitrators should seek to enhance their skills, which may include the knowledge of foreign languages. Studying in a different legal system than one’s own would be another consideration in terms of first appointments. The mix of common and civil law cultures may be helpful in understanding the arguments brought before the tribunal by the parties. Ms. Djordjevic also referred to a well-known dilemma: which came first: the chicken or the egg, with reference to the vicious circle of the first arbitral appointments. One may not be appointed because of lack of experience but if a person will not get appointed, she or he will not get any experience. However, Ms. Djordjevic believes that positions such as tribunal secretary make it possible for young practitioners to gain experience and become “visible”. She further raised a problem of lack of visibility of the tribunal secretaries and the fact that while institutions have started to publicize the arbitrators sitting in their cases, this has not been done for tribunal secretaries. Milena Djordjevic announced that this is changing, and as of 1 July 2021, the ICC will publish the names of administrative secretaries.

Regarding keeping the appointments coming, Milena Djordjevic mentioned that arbitrators must maintain efficiency, responsibility, avoidance of conflicts and diligence in ensuring that the award would not be set aside afterwards. Another important aspect to consider according to Ms. Djordjevic is to have a “good start” with counsel representing the parties. It is important to ensure that the relations between the members of the tribunal, between tribunal and counsel and between counsel of both parties are right. This also leads to ensuring that procedural order number one outlines all major issues. An important observation made by Ms. Djordjevic was that being a young arbitrator together with more-experienced arbitrators may be somewhat challenging in terms of trust from other arbitrators, but young arbitrators should be confident and, after prompt analysis of the issues, they should not be afraid to present their opinion.

 

Defaulting parties

Simon Gabriel continued with considerations related to defaulting parties and first arbitral appointments, which, as he stressed, may be quite disappointing situations for arbitrators in their first appointments. There are different reasons for default, including parties’ lack of experience with arbitration, false belief that arbitration is a dispute resolution similar to mediation, or even a procedural strategy or guerrilla tactic. Arbitrators facing default proceedings should search for guidance in the lex arbitri, institutional rules (for example Article 29.2 of VIAC Rules or Article 26.2 of the ICC Rules), legal scholarship, the New York Convention (Article V(1)(b) regarding minimum requirement for notification of the parties) or UNCITRAL Model Law (Article 25, which reflects a broad consensus on the issues of defaulting parties). Mr. Gabriel made reference to the song “The Show Must Go On” (Queen) explaining, that unlike many national courts’ practices, the arbitration must go on and arbitrators cannot simply rule against the defaulting party but consider all the issues at hand together with the evidence and promptly notify and inform both parties during the proceedings. This is of utmost importance especially for purposes of recognition and enforcement of arbitral awards.

 

Conclusion

The event has been a great opportunity for young practitioners to get an insight on how to seek the first arbitral appointment and how to maintain it. Speakers shared a very personal and practical experience of their own and also talked about the challenges faced along the way. RAI’s initiative is blooming and has a great significance for young arbitrators as well as for aspiring practitioners. Finally, one should follow the speakers’ advice: get yourself out there, be confident and do not think too much of the chicken and egg dilemma!

 

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ADR’s Place in Navigating a Polarized Era

ADR Prof Blog - Tue, 2021-02-16 16:36
In the middle of the impeachment trial last week, I received a Westlaw email with links to the symposium on ADR’s Place in Navigating a Polarized Era, organized by Texas A&M and published in the Ohio State Journal of Dispute Resolution. The symposium could not be more timely and is well worth reading (though the … Continue reading ADR’s Place in Navigating a Polarized Era →

I Actually Like Teaching on Zoom

ADR Prof Blog - Tue, 2021-02-16 07:06
That’s the title of a thoughtful op-ed in the New York Times by Viet Thanh Nguyen, a professor of English, American studies and comparative literature at the University of Southern California. Take a look.  (Click the title of this post to read the article.)

The 10 Year Anniversary of the PCA Outer Space Rules: A Failed Mission or The Next Generation?

Kluwer Arbitration Blog - Mon, 2021-02-15 23:08

Nearly a decade ago, the Permanent Court of Arbitration (“PCA”) published its Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (“PCA Outer Space Rules” or “Rules”).  Unlike the five United Nations treaties on outer space, the Rules provide for a voluntary and binding dispute resolution process accessible to all space actors.  Notably, they are specifically tailored to the space industry and represent a significant development in the field of space law.  Curiously, however, the PCA Outer Space Rules have not made much traction in the space industry.

This article explains key provisions of the PCA Outer Space Rules, discusses their limited success to date, and explores opportunities for their use in the future.  As the traditional 10-year anniversary gift is meant to symbolize preservation, longevity, and the ability to last through time, this article explores whether the Rules have been a failed mission or are the next generation for resolving space disputes.

 

Overview of the PCA Outer Space Rules

The PCA Outer Space Rules are based on the 2010 UNCITRAL Arbitration Rules (“UNCITRAL Rules”), which are well-established procedural rules that parties commonly use in international arbitration.  The introduction to the PCA Outer Space Rules notes that the Rules reflect “the particular characteristics of disputes having an outer space component involving the use of outer space by States, international organizations and private entities” and “the public international law element that pertains to disputes that may involve States and the use of outer space, and international practice appropriate to such disputes.”  The most notable aspects of the Rules account for the highly technical nature of space disputes:

  • Specialized Panel of Arbitrators:  Under Article 10(4) of the Rules, “[f]or the purpose of assisting the parties” in appointing arbitrators, the PCA Secretary-General shall maintain a list of individuals “considered to have expertise in the subject matters of the dispute at hand for which these Rules have been designed.” The PCA’s Specialized Panel of Arbitrators currently lists 12 lawyers and non-lawyers from Argentina, Australia, Brazil, Chile, China, the Dominican Republic, Israel, Korea, Paraguay, Spain, and Thailand.  In appointing arbitrators, the parties to the dispute or the appointing authority may, but are not obliged to, choose persons from the list.  Relatedly, pursuant to Article 6 of the Rules, only the PCA’s Secretary-General may serve as the appointing authority (unlike the UNCITRAL Rules which leave this choice to the parties).
  • Specialized Panel of Scientific Experts:  Under Article 29(1) of the Rules, an arbitral tribunal may appoint experts on “specific issues to be determined by the arbitral tribunal.”  Under Article 29(7), the PCA Secretary-General maintains “an indicative list of persons considered to have expertise in the scientific or technical matters in respect of which these Rules might be relied upon.”  The PCA’s Specialized Panel of Scientific Experts currently lists 10 scientific and technical experts from Austria, Brazil, Chile, China, Israel, Korea, the Netherlands, Paraguay, and Thailand.  The tribunal may, but is not obliged to, choose expert witnesses from the list.
  • Non-Technical Documents:  Under Article 27(4) of the Rules, the tribunal “may request the parties jointly or separately to provide a non-technical document summarizing and explaining the background to any scientific, technical or other specialized information which the arbitral tribunal considers to be necessary to understand fully the matters in dispute.”  This non-technical document can assist the tribunal in understanding the complex technical issues involved and deciding whether it would be useful to appoint a scientific or technical expert in accordance with Article 29 of the Rules.
  • Confidentiality:  Under Article 17(6) of the Rules, a party may apply to the tribunal to have certain information in the arbitration classified as confidential.  The tribunal will determine whether the information should be classified as confidential based on whether “the absence of special measures of protection in the proceedings would be likely to cause serious harm to the party or parties invoking its confidentiality.”  Alternatively, instead of a party disclosing the confidential information in the arbitration, the tribunal may appoint a confidentiality adviser as an expert (in accordance with Article 29) to review the confidential information and report to the tribunal on specific issues designated by the tribunal.

 

A Failed Mission?

States, international organizations, and private entities use international arbitration to resolve outer space disputes.  In fact, several space-related disputes have been resolved through institutional and ad hoc arbitration rules and procedures, including those of the International Chamber of Commerce (“ICC“), the London Court of International Arbitration (“LCIA“), and the International Centre for Dispute Resolution (“ICDR“).

However, there currently are no publicly reported arbitrations that have been resolved using the PCA Outer Space Rules.The PCA has administered disputes relating to outer space, but in those cases, the parties arbitrated their disputes under the 1976 UNCITRAL Arbitration Rules rather than the PCA Outer Space Rules. (See, e.g., CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Ltd., & Telcom Devas Mauritius Ltd. v. Republic of India, PCA Case No. 2013-09; Deutsche Telekom AG v. The Republic of India, PCA Case No. 2014-10)

What explains the low demand for the PCA Outer Space Rules?  We believe that analyzing the successes and failures of the Rules involves further exploring three areas of inquiry.

First, who are the parties that currently use international arbitration to resolve their space-related disputes?  Early evidence demonstrates that the current landscape of space-related disputes is overwhelmingly dominated by private entities in the satellite and telecommunications sector.  This raises the question of whether private entities are aware of, and refer to, the PCA Outer Space Rules and the PCA’s International Bureau (Secretariat) in their commercial contracts and agreements, or alternatively, at the advent of a dispute in cases of existing contracts and agreements.  Although the PCA is a well-established institution that enjoys the confidence of States and international organizations, do private entities know of – and hold – the PCA in the same regard?  At least one informal survey of industry respondents suggests insufficient awareness of the PCA.

Second, what is the nature and complexity of such disputes?  An analysis of the type and subject matter of disputes suggests that the disputes to date have primarily related to satellite launch and delivery, regulatory measures, and lease of satellite capacity.  Are the PCA Outer Space Rules well suited to resolve the types of disputes arising out of existing legal relationships?  What are the comparative advantages of the Rules in today’s highly competitive dispute resolution market?

Third, do existing arbitration agreements and treaties adequately accommodate the Rules, which are optional in nature?  The current United Nations treaties on space law hardly contain effective dispute resolution provisions.  Although the Annex of the PCA Outer Space Rules contains a model arbitration clause for contracts, how often do parties incorporate such model clauses to resolve their disputes?

These questions require further research as part of this growing field.

 

The Next Generation!

Do the PCA Outer Space Rules hold any future promise?  In our opinion, yes.  We believe that the use of the PCA Outer Space Rules will likely increase as the types of disputants and the complexity of space disputes continue to evolve.  This is because the future of international space law is rapidly transforming – as too is the space industry as a whole.  To this end, and as discussed here previously, the recently signed plurilateral Artemis Accords signal the interest of several spacefaring States in promoting the “civil exploration and use of outer space,” including resource extraction and utilization conducted under the auspices of the 1967 Outer Space Treaty.  Domestically, a number of States, including the United States, have established legal and regulatory frameworks for space exploration and use of space resources.

If successful, this shift away from State monopolization will create new opportunities and relationships for private entities around the world and, in the process, generate scientific, technical, and legal advancements that are likely to surpass the scope of procedure envisaged in the generic institutional rules used today.  Likewise, in order to keep up, future space treaties and governance mechanisms will require more robust dispute resolution mechanisms.  Like the visionary drafters of the PCA Outer Space Rules, industry respondents overwhelmingly support a preference for arbitration in resolving space-related disputes.  The Rules are well suited to meet this preference and resolve the next generation of space disputes.

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Student Paper Topics

ADR Prof Blog - Mon, 2021-02-15 11:29
Have you sat across a desk (or zoom screen) from an earnest student who is trying to figure out what to write for a paper in your course?  Probably every instructor who has required students to write papers has had this experience. I certainly did.  These often were interesting conversations in which I helped students … Continue reading Student Paper Topics →

To Annul or not to Annul: The Constitutional Court of Ecuador Finally Set Clear Rules for the Annulment of an Arbitral Award

Kluwer Arbitration Blog - Sun, 2021-02-14 23:44

I .The Annulment of an Arbitral Award under Ecuadorian Law

Pursuant to article 30 of the Arbitration and Mediation Law (AML), arbitral awards are final and binding for the parties. In other words, parties cannot file recourses to challenge an award, with the exception of a clarification or extension petition before the arbitral tribunal. However, article 31 of the AML allows parties to file an action for annulment against an arbitral award under the following grounds: A) One of the parties has not been legally notified with the claim and the arbitration has been conducted in violation of said party´s rights; B) One of the parties has not been legally notified with the procedural orders issued by the tribunal and this fact has prevented them from exercising their rights; C) Evidence has not been produced or a party has not been legally notified of a hearing in which said evidence was going to be produced; D) The award refers to matters not submitted to arbitration or grants beyond what is claimed; and E) The procedures to appoint the arbitrators established under AML or agreed by the parties have been violated. According to the AML, the President of the Provincial Court where the award was rendered is the competent authority to decide on the annulment action. The annulment action was conceived for correcting in procedendo and incongruence vices contained in an arbitral award under the previously referred circumstances.

In 2012, a case under the number 169-12-SEP-CC was brought before the Constitutional Court regarding the possibility to file an annulment action on a ground (constitutional violations) different from the ones established under article 31 of the AML. The Court reasoned that the grounds for annulment under article 31 of the AML are exhaustive and that the President of the Provincial Court is not legally entitled to set aside an award under grounds not established in the aforementioned provision.  With respect to constitutional violations during an arbitral proceeding, the Court explored the applicability of constitutional remedies against arbitral awards. The Ecuadorian Constitution recognizes the right to challenge any final judgement in which constitutional rights have been violated, through a constitutional remedy called acción extraordinaria de protección. In this case, the Court concluded that given the arbitrators have jurisdictional faculties1)See article 7 of the Ecuadorian Code of the Judicial Function. jQuery('#footnote_plugin_tooltip_36110_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_36110_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and their decisions are similar to judicial ones, arbitral awards can also be reviewed through a constitutional remedy. Moreover, the Court reasoned that although arbitration is an alternative mechanism of dispute resolution, it has to observe the rights recognized under the Ecuadorian Constitution and, for this reason, constitutional review of arbitral awards is valid.

In 2015, the Constitutional Court changed its previous reasoning and issued the decision 302-15-SEP-CC concluding that the grounds for annulment under article 31 of the AML are not exhaustive and that an award can be set aside in other cases, for instance, when a tribunal lacks competence or when the award has not been sufficiently reasoned. According to the Constitutional Court, the due process rights to a reasoned decision and to be judged by a competent authority, which are recognized under article 76 of the Ecuadorian Constitution, also constitute grounds of annulment although they have not been expressly mentioned under article 31 of the AML. In its decision, the Court also required the exhaustion of an annulment action before a party attempts to challenge an award through a constitutional remedy. This decision certainly set a negative precedent for the development of arbitration in the country, particularly because it opened the door for an excessive judicial interference in arbitral proceedings and denaturalized the purpose of the annulment action. In light of this ruling, confusion among arbitration practitioners and local courts reigned with respect to the grounds for annulment of an award and the remedies available to challenge arbitral decisions.

 

II. Local Courts Annulled Awards under Grounds not Established in the AML

Given the lack of clarity regarding the annulment action, in 2017 the President of the Provincial Court of Pichincha decided to set aside two awards on different grounds from those established under article 31 of the AML. In case 17100-2017-00008 the President of the Provincial Court of Pichincha annulled the award, mostly, because he disagreed with the merits of the decision. According to the President of the Provincial Court, the award lacked legal reasoning and thus it violated constitutional rights recognized under article 76 of the Constitution. This decision is not in accordance with the AML, as the judges do not have the legal faculty to call into question the merits of an arbitral decision. As we mentioned earlier, annulment actions were conceived only for correcting in procedendo and incongruence vices and should not be used by local courts as vehicles to interfere in the autonomy of an arbitral proceeding.

In case 17100-2017-00005, the President of the Provincial Court annulled the award by taking a liberal interpretation of article 31 (d) of the AML, which refers to incongruence vices. The President of the Provincial Court of Pichincha basically questioned the merits of the award and the legal reasoning of the arbitrators in light of the evidence presented during the course of the arbitration. This conduct by the President of the Provincial Court of Pichincha constitutes a violation of the principle of judicial non-interference in arbitral proceedings and denaturalized the purpose of the annulment action. Moreover, this decision, which is more similar to an appeal judgement rather than to an annulment action, contradicts the legal certainty right of the parties submitting their dispute to final and binding arbitration.

Both of these decisions violate the doctrine of the autonomy of the parties´ will, as well as the legal certainty and legality principles recognized under the Ecuadorian Constitution.

 

III. The Constitutional Court Finally Set Clear Rules for the Annulment of an Arbitral Award

In 2019, the Constitutional Court issued three of the most relevant and positive decisions (31-14-EP, 323-13-EP, and 1703-11-EP) for the development of arbitration in the country, because they finally clarified the treatment of the annulment action.

In November 2019, the Constitutional Court issued decision number 31-14-EP, in which  it reasoned that:

  • The constitution recognizes arbitration as an alternative mechanism of dispute resolution, but it is still subject to constitutional review. This reasoning does not violate the judicial non-interference principle, but rather ensures that arbitral proceedings will respect constitutional rights.
  • The constitutional remedy known as acción extraordinaria de protección is applicable to control and correct constitutional violations in arbitral awards. Given the extraordinary nature of constitutional remedies there is a legal requirement to exhaust any ordinary available recourses before filing them. However, a party shall not be forced to file an annulment action in order to comply with this legal requirement before filing a constitution remedy in cases where the grounds of annulment are not sufficient to correct the constitutional violation.
  • An award shall only be set aside on the exhaustive grounds established under article 31 of the AML because this guarantees the legal certainty principle in arbitration. Hence, a party shall not invoke different grounds to annul an award.
  • In order to correct potential constitutional violations in an arbitral proceeding, such as lack of competence of the tribunal or lack of reasoning in the award, parties shall resort to the constitutional remedy known as acción extraordinaria de protección. In consequence, the review that the Constitutional Court makes during a constitutional remedy is different from the one in the annulment action.

This decision shows a different approach from the one contained in case 302-15-SEP-CC, in which the Court concluded that the grounds for annulment under article 31 of the AML were not exhaustive.

In November 2019, the Constitutional Court issued decision number 323-13-EP, in which it dissented from the case 302-15-SEP-CC and reasoned that:

  • Although it is not necessary to exhaust the annulment action before filing the constitutional remedy, it is worth noting that the lack of notification with the arbitration claim is considered under article 31, (b) of the AML for the annulment action. Hence, the respondent did have an ordinary recourse available (annulment action) to challenge the award on the grounds of lack of notification.
  • The annulment action imposes a civil sanction to the award. Hence, it shall only be applicable on the grounds established under article 31 of the AML, because this guarantees the legal certainty and legality principles. Depending on the situation, parties can either choose the annulment recourse (under the specific grounds of article 31 of the AML) or the constitutional remedy (constitutional violations not contained under article 31 of the AML).

In December 2019, the Constitutional Court issued decision number 1703-11-EP in which it reasoned that:

  • The annulment action is an especial procedure reserved for the grounds established under article 31 of the AML. The annulment action will only correct in procedendo or incongruence vices contained in the award.
  • Due to its very nature, parties cannot resort to other ordinary recourses (e.g. appeal or cassation) during the annulment process. However, if there has been a violation of constitutional rights during the course of the arbitration, particularly, lack of competence of the tribunal or lack of reasoning in the award, then a constitutional remedy could be filed in order to correct said violation.

 

IV. Conclusion

Article 31 of the AML provides only 5 grounds for annulment of an arbitral award in Ecuador, all of which are related to procedural matters, such as lack of notification with the arbitration claim or violations in the procedures for an arbitrator´s appointment. Since 2012, the Constitutional Court issued contradictory decisions on whether these grounds were exhaustive or not, which not only caused confusion among practitioners and arbitrators, but also opened the door for local courts to interfere in the merits of arbitral awards. Fortunately, this situation came to an end in 2019, when the Constitutional Court developed jurisprudence clarifying that awards may only be annulled under any of the grounds contained in article 31 of the AML. In case the award contains another vice (e.g. constitutional rights violation) not specifically established in article 31, then it was subject to be challenged through a constitutional remedy.

References[+]

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What Really Matters When an Arbitration Award is Made

Kluwer Arbitration Blog - Sat, 2021-02-13 23:00

Season two, episode twelve of Delos Dispute Resolution’s esteemed “Tagtime” webinar and podcast series is titled ‘Inside the Black Box: What Happens During the Deliberations and Drafting of an Award.’ The episode features Professor Pierre Tercier who is, among others, one of the most respected legal scholars in Switzerland. He is the Honorary President of the ICC International Court of Arbitration, author of more than 250 legal writings focusing on contract law and international arbitration, and chairperson of more than 100 international arbitrations.

As the episode title indicates, Professor Tercier and the TagTime hosts discussed what factors really matter during the deliberation process and drafting of an arbitral award, although they also touch upon other parts of the arbitration process from time to time. TagTime is a live webinar series showcasing discussions of substantive issues in international arbitration with leading figures in the field. At the end of the discussion and an audience Q&A, the guest speaker “tags” a guest speaker who will appear in a subsequent episode. TagTime is hosted by Amanda Lee and Dr Kabir Duggal. Below are some of the highlights from this episode.

 

Themes

The discussion was prefaced by three caveats or disclaimers that also served as the underlying themes of the episode.

First, it was emphasized that there are many ways to decide an individual case because arbitration is not as reliant on tradition or institutions as it is on the individuals that comprise the tribunals. As such, outcomes depend greatly on the composition of the tribunals.

Second, having different cultures and traditions involved in an arbitration means that there is no standardized way of deciding cases. This is part of the specificity and diversity of arbitration.

Third, what comes out of the “black box” is a result of what the parties put into it. In other words, the award is largely determined by the quality of the parties’ submissions, because these determine what the tribunal can do.

 

The Effect of Arbitrator Backgrounds

It is normal for a tribunal to be composed of members of different legal traditions and cultures, and this part of the arbitration is effectively in the parties’ control because they usually appoint the tribunal. It was explained that the way that justice is rendered by a tribunal is linked to the culture of its members.

From that vantage point, it was further explained that a good arbitrator understands that his or her law may not be the only way to solve the dispute. Every arbitrator comes from a different culture and legal tradition, and it is important to accept and be aware of this. But this does not mean that good arbitrators compromise; rather, it means that they work together to come to a solution that is acceptable to the tribunal and is adapted to the dispute. The key virtue in this instance is tolerance. Arbitrators are human. They come with their own views that each must strive to reconcile with the views of others. The most difficult arbitrator to work with is one who decides that he or she knows everything, has no doubts, and/or is narrow-minded.

The tribunal strives for a unanimous award because it is less likely to be overturned and is easier to enforce. Nevertheless, dissents and separate opinions are normal. It is to be expected that different people have their own reasons for deciding the way that they do. The role of the chairperson is to orient the discussion to allow the tribunal to come to a decision. The chairperson should build rapport among the members, allow the members to get to know each other, and prepare a procedure for answering the questions arising from the case in order to ensure smooth case management. However, one cannot impose their point of view.

It was confirmed that there are some party-appointed arbitrators intent on demonstrating, to the party that appointed them, their efforts in influencing the tribunal and preparing the award, and this can sometimes take the form of a dissenting opinion. However, this is a normal occurrence and by no means implies that the tribunal makes compromises during the deliberations.

 

“Splitting the baby”

Despite the common belief that tribunals tend to “split the baby,” so to speak, by finding a middle ground between the relief requested by the parties, compromise is rarely, if ever, the order of the day during deliberations. A study conducted by the ICDR debunked this idea. In fact, awards are often given completely in favour of one party.

The aim during deliberations is always to come to a decision, not a compromise. There is no “averaging” of opinions. An award that appears to be a compromise is merely a reflection of the difficult legal questions posed by the case, the varying views of the arbitrators, and the differences in the way that they evaluate the evidence. There may be some compromises during drafting, given that the tribunal strives as far as possible to write an award that is agreeable to each of its members.

 

Changing Practices

It was observed that, in the past, tribunals were generally active participants in the arbitration proceeding. Nowadays, the case is more in the hands of the parties. For example, the tribunal used to be more empowered to directly ask the witness questions – increasingly, the use of witness statements to elicit direct testimony is far more common. Moreover, the procedure of the arbitration used to result from a dialogue between the tribunal and counsel – increasingly, these matters are determined by the parties themselves while the arbitrators are more passive and adhere to what the parties decide. It was further observed that this is an area of arbitration that could use some improvement.

Virtual hearings are difficult. Besides the technical problems, communication has become more problematic. It has become challenging to assess a witness’ credibility and body language over a screen. Deliberations are also more difficult. There are certainly some advantages, such as the ability to see everybody’s faces easily. Interestingly, both counsel and witnesses seem to take much less time to speak at virtual hearings. But many of the personal touches that comprise the chemistry of arbitration, such as the ability to receive immediate reactions from the hearing’s attendees, as well as informal corridor discussions, are gone. That said, virtual hearings are very doable and necessary at present.

 

Differences between Deliberation and Drafting for Commercial and Investment Arbitration Awards

Two differences were mentioned at the outset concerning deliberation and drafting practices for awards in commercial as compared to investment arbitration. First, the process or the way the arbitrators decide the case and, second, the basis of the decision. Whether the arbitration is brought via a contract, an investment, or by a submission agreement makes a real difference. With respect to investment arbitration, it was observed that it may be necessary to have a mix of commercial and international law experts on the tribunal because of their differing expertise. Finally, investment arbitrations have been said by some to require more discussions and result in more disagreement and dissenting opinions. However, all told, the way commercial and investment arbitrations are addressed was considered to be the same, and one cannot easily differentiate between them. At the end of the day, these cases all involve businesses and money, with the implication that these cases are more alike than they are different.

 

Best Practices for Addressing the Lengthy Process of Deliberation and Drafting Awards

Drafting an award takes time. The tribunal must engage with the exhibits and footnotes of submissions before producing an acceptable draft. Sometimes, an arbitrator is not entirely convinced by the majority and is given some time to reconsider their position. Unlike counsel, who often have an army of support staff at their disposal, the tribunal is often relatively less well-resourced, and in many cases could use more assistance. Longer submissions can also lead to longer awards, which take more time to draft.

But the drafting of the award can be started ahead of time. The list of documents, the chronology, the arguments, and the relief sought are examples of matters that can be prepared in advance of a hearing. Deliberations can likewise begin early, not just after receiving the final submissions from the parties or after the hearing. The use of the Reed Retreat, where the arbitrators meet and discuss relevant topics prior to the hearing, was recommended. Discussions can be held during hearings. It was also advised that there be an immediate exchange of post-hearing first impressions.

Ideally, a shorter, straightforward award that does not touch on all the issues would also be quicker to draft and would be of superior quality to a longer one. But drafting such an award would take courage due to the risks it may bring of challenge or non-enforcement.

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A Happy New Year with the 2021 DIFC-LCIA Rules

Kluwer Arbitration Blog - Fri, 2021-02-12 20:44

At the dawn of the New Year, following their adoption in November 2020, the revised DIFC-LCIA Rules of Arbitration (the “2021 DIFC-LCIA Rules”) have now entered into force with effect from 1st January 2021. Readers of this blog will recognise the DIFC-LCIA as the free zone sister organization of the London Court of Arbitration (LCIA) which is headquartered in the offshore Dubai International Financial Centre (DIFC) in the Emirate of Dubai, United Arab Emirates. Closely related to and taking guidance from the London-based LCIA, the DIFC-LCIA tends to follow any revisions to the LCIA Rules of Arbitration (the “LCIA Rules”): The 2021 DIFC-LCIA Rules are no exception and take after the recent revisions introduced to the recently adopted 2020 LCIA Rules (previously discussed on the blog here).

The 2021 DIFC-LCIA Rules introduce a number of important changes, which – in their majority – are intended to assist the effective and efficient conduct of an arbitration process within a DIFC-LCIA forum. Such changes include the introduction of a so-called “early determination” procedure, improvements to the existing consolidation mechanism, and the digitalisation of the arbitration process coupled with the adoption of enhanced confidentiality measures and the establishment of a new data protection regime. Other changes include the formalisation of the role played by administrative secretaries in DIFC-LCIA arbitration, the expedition of tribunal appointments, the clarification of the emergency arbitrator’s powers, and enhanced transparency around the nationality requirement and ex parte communications with the Registrar. In the following, we briefly discuss these and other changes for some initial guidance.

 

Early determination

The 2021 DIFC-LCIA Rules allow summary treatment of claims, counterclaims, and defences by introducing a regime of early determination. More specifically, according to Article 22.1(viii) of the 2021 DIFC-LCIA Rules, a DIFC-LCIA tribunal has the power to “determine that any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is manifestly outside the jurisdiction of the Arbitral Tribunal, or is inadmissible or manifestly without merit; and where appropriate to issue an order or award to that effect.” This will facilitate an early disposal of vexatious cases that do not stand a reasonable chance of success, whether by reason of a tribunal’s manifest lack of jurisdiction or a manifest lack of merit.

 

Consolidation

The 2021 DIFC-LCIA Rules allow for the submission of so-called composite Requests and Responses: These allow parties to file a single request for arbitration for a multi-party or multi-contract arbitration (involving more than one arbitration agreement), inviting, in turn, a composite Response (Articles 1.2 and 2.2, 2021 DIFC-LCIA Rules) albeit that it does not facilitate automatic consolidation (a subject that might benefit from closer scrutiny in a future revision of the existing rules).

In a related context, a new Article 22A introduces an enhanced consolidation regime which allows the consolidation of arbitrations that deal with related transactional disputes, there being no strict requirement for the identity of the parties and/or the underlying arbitration agreements. Consolidation is also facilitated upon express party agreement.

 

Digitalisation

The 2021 DIFC-LCIA Rules introduce the use of technology across the arbitration process, thus accommodating in particular requirements that have arisen from the currently pending pandemic. By way of example, the Request for Arbitration and the Response are now required to be submitted electronically, rather than in hard copy, (Articles 1.3 and 2.3) “either by email or other electronic means including via any electronic filing system operated by the DIFC-LCIA Arbitration Centre” (Article 4.1, 2021 DIFC-LCIA Rules). Further, written communications with respect to the arbitration must be delivered “by email or any other electronic means of communication that provides a record of […] transmission” unless otherwise advised by the Registrar or the tribunal as the case may be (Article 4.2, 2021 DIFC-LCIA Rules).

Article 19.2 of the 2021 DIFC-LCIA Rules expressly authorises the remote conduct of hearings, stating that “a hearing may take place in person, or virtually by conference call, videoconference or using other communications technology with participants in one or more geographical places (or in a combined form).”

Finally, Article 26.2 of the 2021 DIFC-LCIA Rules allows an award to be signed electronically, with the electronic copy of the award prevailing over any inconsistent paper copy (Article 26.7, 2021 DIFC-LCIA Rules).

Taking account of the heightened use of digital communication under the 2021 DIFC-LCIA Rules, a new Article 30A introduces a set of powers and duties that require a DIFC-LCIA tribunal and the DIFC-LCIA to protect personal data by adopting information security measures as appropriate with respect to references pending before them.

 

Administrative secretaries

The 2021 DIFC-LCIA Rules introduce a new Article 14A, which transposes in relevant part the provisions on tribunal secretaries contained in the LCIA Notes for Arbitrators into the Rules. Article 14A strictly prohibits delegation of the tribunal’s decision-making function to tribunal secretaries, the tribunal remaining responsible for any tasks performed by them (Article 14.8, 2021 DIFC-LCIA Rules), and makes the appointment of a tribunal secretary subject to party approval (Article 14.10, 2021 DIFC-LCIA Rules). Like arbitrators, administrative secretaries are under a standing disclosure obligation with respect to any conflicts of interest and must declare their availability to devote sufficient time to the reference (Articles 14.9 and 14.14, 2021 DIFC-LCIA Rules).  Any change in the scope of the tribunal secretary’s works or increase in his or her fees (ranging hourly between AED 370 and AED 860) must be approved by the parties (Article 14.11, 2021 DIFC-LCIA Rules). Importantly, the costs of the administrative secretary qualify as Arbitration Costs within the meaning of Article 28.1 of the 2021 DIFC-LCIA Rules (Article 14.13, 2021 DIFC-LCIA Rules) and are as such readily awardable to a winning party in the arbitration.

 

Expedited tribunal appointments

The 2021 DIFC-LCIA Rules reduce the time within which the LCIA Court is to appoint a tribunal in the event of a respondent’s failure to submit a Response: As a result, the LCIA Court must now appoint the tribunal promptly after 28 days – as opposed to 35 days under the old Rules – from the date of official registration of the reference (i.e., from receipt of the Request and the registration fee).

 

Nationality requirement

Nationality has now been further defined to allow a more precise assessment of the nationality requirement in the appointment of arbitrators. By way of reminder, a sole arbitrator or a chair must not share the nationality of either of the parties where these are of different nationalities unless agreed otherwise by the parties in writing (Article 6.1, 2021 DIFC-LCIA Rules). Pursuant to Article 6.2 of the 2021 DIFC-LCIA Rules, nationality means a natural person’s citizenship and a legal person’s seat of incorporation or effective management; where these differ, the legal person is treated as a national of both.

 

Communication with the Registrar

The strict prohibition to engage in unilateral communications with other stakeholders, in particular the tribunal members, the administrative secretary, and the administrative staff of the DIFC-LCIA, in the arbitration in the terms of Article 3.3 read together with Article 13.4 of the 2021 DIFC-LCIA Rules is relaxed in favour of ex parte communication with the DIFC-LCIA Registrar with respect to “administrative matters” (Article 13.4, 2021 DIFC-LCIA Rules). This will allow less experienced parties to engage in unilateral conduct with the Registrar for, e.g., a better understanding of the operation of the 2021 DIFC-LCIA Rules.

 

Amendments to Request/ Response

Under the 2021 DIFC-LCIA Rules, parties may now make amendments to the Request or the Response, as the case may be, with the permission of the LCIA Court prior to the constitution of the arbitral tribunal. Such amendments are expressly stated to be limited to the correction of “any error in computation, any clerical or typographical error, any ambiguity or any mistake of a similar nature” and are subject to the parties having been afforded “a reasonable opportunity to state their views” and to “such terms as the LCIA Court may decide.” (Articles 1.5 and 2.5, 2021 DIFC-LCIA Rules) Provided this provision is exercised to the letter, it is to be welcomed as no more than procedural commonsense, there being no benefit to wait until later in the arbitration process for any correction of clerical mistakes (especially such that could materially affect the nature or value of the arbitration and thus the choice of arbitrators).

 

Confidentiality

In the interest of safeguarding the continued confidentiality of the arbitration process (and more specifically the deliberations of the tribunal, the arbitral award, and any material divulged in the arbitration), confidentiality undertakings are now imposed on all participants in the arbitration: arbitrators, administrative secretaries, party representatives, both fact and expert witnesses, and third-party service providers (Article 30, 2021 DIFC-LCIA Rules).

 

New time-limit for awards

Article 15.10 of the 2021 DIFC-LCIA Rules seeks to expedite the issuance of awards, requiring a DIFC-LCIA tribunal to render an award “as soon as reasonably possibly” (replicating the old wording of Article 15.10), with an endeavour to do so “no later than three months following the last submission from the parties” (additional new wording).

 

Tribunal’s powers to expedite

The 2021 DIFC-LCIA Rules confer a number of powers on a DIFC-LCIA tribunal to expedite the proceedings. This includes a power to limit or dispense with a party’s written submissions, oral testimony or a hearing and to employ technology to promote the expeditious conduct of the proceedings, including the hearing (Article 14, 2021 DIFC-LCIA Rules). The tribunal is more generally empowered to “make any procedural order it considers appropriate with regard to the fair, efficient and expeditious conduct of the arbitration.” (Article 14.5, 2021 DIFC-LCIA Rules) Evidently, to the extent that any of these powers limit a party’s right to be heard, they must be exercised with caution.

 

Emergency arbitrator’s powers

Under the 2021 DIFC-LCIA Rules, emergency arbitrators have been empowered to award costs, including legal costs, in the emergency arbitration proceedings, to revoke/vary/discharge any order they make, to issue additional orders, correct any clerical mistakes in any award rendered by the emergency arbitrator, and to render additional awards with respect to emergency relief previously overlooked (Article 9, 2021 DIFC-LCIA Rules).

 

Conclusion

The 2021 DIFC-LCIA Rules further enhance the free zone arbitration regime on offer in the offshore DIFC. It is encouraging to see that the DIFC-LCIA continues to promote increased efficiency and flexibility in order to meet requirements for more effective dispute resolution. How the new Rules will fare over time remains to be seen. That said, with the advent of the new Rules at the very beginning of 2021, arbitration users in the UAE and in the Middle East more generally will, more likely than not, have a Happy New Year ahead!

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Jackie Font-Guzmán Will Take New Position

ADR Prof Blog - Fri, 2021-02-12 12:32
Dr. Jacqueline Font-Guzmán will move to Eastern Mennonite University as the inaugural executive director of diversity, equity, and inclusion as of April 1. Currently, she is a professor of law and conflict studies and director in the Negotiation and Conflict Resolution Program in the Department of Interdisciplinary Studies at Creighton University in Omaha, Nebraska. Click … Continue reading Jackie Font-Guzmán Will Take New Position →

Anti-Suit Injunctions in the EU: Are They Finally Back on the Menu?

Kluwer Arbitration Blog - Thu, 2021-02-11 22:24

While the United Kingdom (“UK”) was a member of the European Union (“EU”), the power of the English courts to grant anti-suit injunctions was considerably constrained by EU law. Now that the UK has left the EU, it is worth asking the question: are anti-suit injunctions back on the menu?

This blog post provides a snapshot of the English courts’ power to grant anti-suit injunctions, both before and after Brexit. In doing so, it will look at the question whether, and the extent to which, these types of injunctions might be revived in the light of the most recent legislation.

 

Brexit and the transition period

The UK left the EU on 31 January 2020. The UK’s departure from the EU led to the repeal of the European Communities Act 1972 (“1972 Act”), which, essentially, made EU law directly applicable in the UK.

The 1972 Act was repealed by the EU Withdrawal Act 2018 (“EUWA 2018”), which, inter alia, was intended to ensure an orderly period of transition post-Brexit. The EUWA 2018 was subsequently amended by the European Union (Withdrawal Agreement) Act 2020 (“EUWAA 2020”).

Part 1 of the EUWAA 2020 formalised the adoption of a period of transition (otherwise known as the implementation period). The implementation period started when the UK left the EU and ended on 31 December 2020.

During such period, the vast bulk of EU law, including decisions of the Court of Justice of the European Union (“the CJEU”) continued to have effect in the UK, and the same can be said about the rules relating to the CJEU’s jurisdiction over the UK.

 

The position pre-Brexit (in a nutshell)

Before Brexit, the limitations on the powers of English courts to grant anti-suit injunctions were well understood. Those limitations can be easily explained by reference to a handful of cases, namely West Tankers, Gazprom, and Nori Holding. The pre-Brexit position may be summarised as follows:

In West Tankers, the CJEU decided that court-connected anti-suit injunctions were incompatible with Council Regulation (EC) 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (“Brussels I Regulation”).

In Gazprom, the CJEU adopted a more flexible approach by concluding that the Brussels I Regulation did not preclude Member State courts from recognising and enforcing an arbitral tribunal’s award granting an anti-suit injunction.

The Brussels I Regulation was later repealed by Regulation (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Recast) (“the Recast Brussels Regulation”).

In Nori Holding, the English High Court was asked to consider, among other things, whether the CJEU’s judgment in West Tankers remained good law.

The High Court held that it did. It also held that the position as regards the granting of anti-suit injunctions was no different under the Recast Brussels Regulation.

 

The position after the implementation period and the notion of retained EU law

The EUWA 2018 has been accurately described as ‘a giant “copy and paste” exercise’, meaning that what was once regarded as EU legislation would later become a new form of domestic legislation, i.e., retained EU law. Yet the notion of retained EU law is to be treated with caution, not least because not all EU law has been fully retained.

The West Tankers case, for instance, has gained the status of ‘retained EU case law’, a new concept which is defined by Section 6(7) of the EUWA 2018. Whereas the Recast Brussels Regulation has been revoked by Regulation 89 of the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 No 479 (as amended).

As a matter of English law, the High Court, as a first-instance court, is not bound by its previous decisions, with the consequence that the Nori Holding case may be cited (whether in the High Court, the Court of Appeal, or the Supreme Court) as persuasive — but not as binding — authority.

Furthermore, Section 6(4)(a) and (ba) of the EUWA 2018, in conjunction with Regulation 3(b) of the European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 (“the 2020 Regulations”), make clear that neither the Supreme Court nor the Court of Appeal are bound by any retained EU case law.

Thus, the Supreme Court or the Court of Appeal may, potentially, depart from the West Tankers case and resuscitate anti-suit injunctions (if it appears right to do so), within the meaning of Regulation 5 of the 2020 Regulations and Practice Statement (Judicial Precedent) 1966.

Because the Supreme Court and the Court of Appeal (viz., the Civil Division) bind all lower courts, it is clear that, if they were to depart from West Tankers, the High Court would be bound to follow suit.

 

To depart, or not to depart, that is the question

In The Front Comor, the House of Lords (now the Supreme Court) stated that: ‘It is in practice no or little comfort or use for a person entitled to the benefit of a London arbitration clause to be told that (where a binding arbitration clause is being — however clearly — disregarded) the only remedy is to become engaged in the foreign litigation pursued in disregard of the clause’ (as per Lord Mance).

The CJEU’s ruling in West Tankers does nothing to address this problem. Quite the opposite, it deprives the party against whom foreign court proceedings have been brought of the opportunity to seek court relief in order to put an end to those proceedings, thereby thwarting that party’s right to obtain judicial protection against the party in breach.

However, West Tankers was decided under the Brussels I Regulation. Unlike the Brussels I Regulation, Article 73.2 of the Recast Brussels Regulation expressly states that it ‘shall not affect the application of the 1958 New York Convention’ (“the NYC”). Although the NYC does not explicitly refer to the availability of anti-suit injunctions, it can be said that anti-suit injunctions are certainly not incompatible with it.

On the contrary, it can be argued that anti-suit injunctions fall within the scope of UNCITRAL’s recommendation regarding the interpretation of Article VII(1) of the NYC, which provides for an all-embracing protection of the various different rights that a party to an arbitration agreement may have, whether under domestic or international law.

This is consonant with the UNCITRAL Secretariat’s Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which indicates that ‘a Contracting State will not be in breach of the Convention by enforcing arbitral awards and arbitration agreements pursuant to more liberal regimes than the Convention itself’ (at page 2).

As far as English law is concerned, the right to apply for an anti-suit injunction is embedded in Section 37 of the Senior Courts Act 1981. It is submitted that a party seeking to rely on this section in order to obtain injunctive relief in respect of the commencement or continuation of court proceedings in the courts of a Member State should no longer be deprived of such right.

 

Conclusions

So, what does the future hold for the English courts’ power to grant anti-suit injunctions in the EU?

The High Court’s decision in Nori Holding, albeit highly persuasive, is not binding on other High Court judges. Nonetheless, there is no doubt that good reasons will be needed to persuade the Court to depart from such a decision.

De lege data, it is plain that, should the circumstances so require, both the Supreme Court and the Court of Appeal may now grant an anti-suit injunction so as to restrain a party to an arbitration agreement from commencing or continuing legal proceedings before the courts of a Member State.

It remains to be seen, however, whether the Supreme Court or the Court of Appeal will eventually depart from the existing case law.

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Nonsignatories Unmasked

This Commentary begins, innocently, with a report of a new decision in the US Ninth Circuit Court of Appeals, about choice of law in the arbitrability realm. I realize you are watching lot of daytime TV these days. The Edge of Night, etc. So I will try to make it interesting. Settle in, remove your mask, stay awhile. This story actually begins with the Outokumpu case. You remember Outokumpu, from last June. It is famous for a few reasons. One is that Justice Thomas wrote the opinion for a unanimous US Supreme Court. How often has that happened in 30...
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The post Nonsignatories Unmasked appeared first on Marc J. Goldstein - Arbitration & Mediation.

Could an Appellate Review Mechanism “Fix” the ISDS System?

Kluwer Arbitration Blog - Wed, 2021-02-10 21:11

Introduction

In the past few years, the world has been following the Investor-State Dispute Settlement (ISDS) reform debate under the aegis of the United Nations Commission on International Trade Law (UNCITRAL). This discussion started in 2017, when the UNCITRAL Working Group III began its work on ISDS reform.

Among the proposals submitted by member States and other stakeholders, two systemic reform proposals call for the particular attention of academics and practitioners, as they may involve the replacement (total or partial) of the ISDS system. These are proposals for: (i) the establishment of a multilateral investment court; and (ii) the creation of an appellate mechanism.

Already, the European Union has successfully negotiated the inclusion of a permanent first instance tribunal and an appellate tribunal in its recent International Investment Agreements (IIAs). For some commentators, disputes arising out of the new EU IIAs could end in the destruction of the basic principles of neutrality, finality, and party autonomy. For others, the incorporation of an appeal mechanism in IIAs is not novel. In fact, in 2004 the International Centre for Settlement of Investment Disputes (ICSID) explored the possibility of creating an ICSID appeals facility, noting that at least 20 countries may have included an appeal mechanism in their IIAs.

I have argued elsewhere that the establishment of an appeal mechanism is more likely to be accepted by the international community than the creation of a multilateral investment court. This is in part because the proposal for a multilateral investment court presently envisages giving investors little role in appointing a first instance tribunal. Indeed, an appeal mechanism would allow the parties to continue selecting the decision-makers at first instance, while ensuring consistency and predictability in the system. But, while an appeal mechanism might be preferable over a multilateral investment court, is it the panacea for addressing ISDS concerns?

In this post, I contend that an appeal mechanism is not the panacea to all primary concerns associated with ISDS; namely, concerns pertaining to: (i) the lack of consistency, coherence, predictability, and correctness of arbitral decisions by ISDS tribunals; (ii) the lack of impartiality, independence and diversity of arbitrators and decision-makers; and (iii) the cost and duration of ISDS cases. As one commentator has noted, there is a need for holistic reform. Indeed, a holistic approach could address the broader legitimacy concerns over ISDS more effectively.

 

Why Implement an Appeal Mechanism?

The overarching purpose behind the establishment of an appellate review framework for investment arbitration is to enhance coherence and consistency in the ISDS system by creating an appellate body able to review manifest errors in the interpretation and application of treaty law. As highlighted by some commentators, such an appeal mechanism is expected to improve the quality and consistency of investment arbitration awards by moving towards a precedent-based system.

That being said, the establishment of a multilateral appeal mechanism is controversial. For some, the creation of an appellate mechanism could have a negative impact on the duration and costs of proceedings, thereby creating uncertainty in ISDS. I disagree.

While the appeal proceedings may entail additional time and costs (particularly if the tribunal is vested with the power of reviewing findings of fact), the appeal mechanism would substitute the annulment/set-aside proceedings, without adding an additional layer of control to the process. In other words, once the investor chooses to appeal the award, it would not be subject to annulment under the ICSID Convention nor could it be set aside or annulled by a court in the seat of the arbitration under the ICSID Additional Facility Rules or the UNCITRAL Arbitration Rules.

Furthermore, contrary to what has been argued, an appeal mechanism could avoid the additional costs produced by a second arbitration following the annulment of the decision of a first instance tribunal. Indeed, unlike in the domestic context where the remand of the issue to the lower instance is the general rule in some jurisdictions, an appeal tribunal in the arbitration context should be able to modify or reverse the legal findings and conclusions of the first tribunal without the need to remand the issue to a new tribunal.

 

What Should the Scope and Standard of Review Be?

In treaty-based arbitrations, arbitral tribunals are called on to interpret a wide range of standards included in IIAs, as well as a larger spectrum of principles and norms under public international law. The concerns are not the same where the basis for ISDS is a contract or domestic legislation. These factors would justify limiting the appeal option to treaty-based ISDS.

Appeals based upon errors of law are necessary in order to correct errors in treaty interpretation. Yet, this power should be limited and carefully drafted. There is, as has been highlighted, a need to clarify the scope of the ʻlawʼ in ISDS. Should it be limited to an error of law that is material and prejudicial? Should it include the application or interpretation of any applicable law (not restricted to investment treaties and notions in public international law)? Or instead, should it list specific treaty standards such as expropriation, fair and equitable treatment, and non-discrimination? The latter seems to be the most appropriate path to follow.

Similar to the notion of ʻlawʼ, there is a need to clarify the meaning of ʻfactʼ. I am of the view that errors in the appreciation of facts should be limited to manifest errors in the appreciation of the relevant domestic law and the assessment of damages, and not to any other error in the appreciation of the facts, even if this error is manifest. This would provide a substantial degree of deference to the findings of the first instance tribunal, reducing unnecessary costs and delays. Indeed, a complete de novo review of both law and facts could have a negative impact on the cost and duration of the proceedings.

In addition, the appellate tribunal should be able to grant or deny the appeal based on the annulment grounds of the ICSID Convention (Art. 52). This would ensure that the option for appeal was integrated into the ICSID system. By contrast, grounds for annulment or setting aside under the New York Convention may not be applicable to treaty-based arbitration.

UNCITRAL Working Group III is currently discussing possible scopes and standards of review for an appellate mechanism. In this context, the consolidated draft provisions on an appellate mechanism and enforcement include a reference to Article VI(1) of the New York Convention, which could leave room for intervention on domestic grounds of arbitrability and public policy. The New York Convention was not designed for investment arbitration. Keeping both lists of grounds (under ICSID and New York Conventions) could create a double standard, allowing the appellant to argue the most advantageous provision or combination of provisions to its case.

If the Commission decides to include grounds from the New York Convention that are not contained in the ICSID Convention, then it would be preferable to enumerate such grounds instead of referring to the relevant provisions of both Conventions, avoiding duplications. For instance, a departure from a fundamental rule of procedure under the ICSID Convention may cover Article V(1)(b) and V(1)(d) grounds of the New York Convention.1) Pursuant to Article V(1), the recognition and enforcement of the award may be refused, if: (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;… or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place. jQuery('#footnote_plugin_tooltip_36050_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_36050_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

 

When Should the Appellate Tribunal Dismiss the Appeal or Order Security for Costs?

Modelled on Rule 41(5) of the ICSID Arbitration Rules, the appellate tribunal should be able to dismiss the appeal where it is clear that the appeal is manifestly unfounded or frivolous. This has been included in recent negotiated IIAs (see, for example, the European Union-Singapore FTA).

Moreover, the tribunal should consider all relevant circumstances in determining whether to order the appellant to provide security for costs and the amount to be provided. Yet, the security for costs order should not unduly undermine the appellant’s ability to pursue its claim, as this may constitute a denial of justice. This would ensure a balanced approach, taking into account the different interests at stake.

 

Final Remarks

As I concluded in a recently published chapter focused on reshaping ISDS through an Appellate Review Mechanism,2)For further information, see The Investor-State Dispute Settlement System. Reform, Replace or Status Quo?, by Alan M. Anderson & Ben Beaumont (eds), (Kluwer International Law, 2020), 528 pp. jQuery('#footnote_plugin_tooltip_36050_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_36050_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); the introduction of an appeal system should favour “a balance between the finality and the correctness of arbitral awards.” Furthermore, the consistency and correctness of arbitral awards should not unnecessarily undermine the finality of arbitral awards by increasing the cost and duration of the proceedings.

This does not mean that an appeal mechanism would be the panacea for all the concerns related to ISDS, but it could at least be a significant step towards the improvement of the arbitration process. Other initiatives that are currently under consideration by Working Group III – for instance, a code of conduct for adjudicators, the adoption of specific rules on treaty interpretation, security for costs and frivolous claims, and third party funding – are also useful tools to further confirm the legitimacy of the ISDS system.

References[+]

↑1 Pursuant to Article V(1), the recognition and enforcement of the award may be refused, if: (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;… or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place. ↑2 For further information, see The Investor-State Dispute Settlement System. Reform, Replace or Status Quo?, by Alan M. Anderson & Ben Beaumont (eds), (Kluwer International Law, 2020), 528 pp. function footnote_expand_reference_container_36050_30() { jQuery('#footnote_references_container_36050_30').show(); jQuery('#footnote_reference_container_collapse_button_36050_30').text('−'); } function footnote_collapse_reference_container_36050_30() { jQuery('#footnote_references_container_36050_30').hide(); jQuery('#footnote_reference_container_collapse_button_36050_30').text('+'); } function footnote_expand_collapse_reference_container_36050_30() { if (jQuery('#footnote_references_container_36050_30').is(':hidden')) { footnote_expand_reference_container_36050_30(); } else { footnote_collapse_reference_container_36050_30(); } } function footnote_moveToAnchor_36050_30(p_str_TargetID) { footnote_expand_reference_container_36050_30(); 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 * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Applying Vidya Drolia’s “Four-Fold Arbitrability Test” to Antitrust Disputes in India

Kluwer Arbitration Blog - Tue, 2021-02-09 23:33

Despite traditionally being considered unsuitable for arbitration, recent practice evidence that the concrete lines separating antitrust disputes and arbitration have blurred. Ever since the US Supreme Court approved arbitrability of antitrust disputes in Mitsubishi Motors v Soler (“Mitsubishi Motors”) (discussed here and here), similar understanding has been accepted in EU (Eco Swiss v Benetton), England (Microsoft Mobile OY (Ltd) v Sony Europe Limited), discussed here), Germany (Judgement 8 O 30/16, discussed here), Switzerland (Tensacciai v Freyssinet Terra Armata), France (SNF v Cytec, discussed here), New Zealand (Gvt. of New Zealand v Mobil Oil), Italy (Nuovo Pignone SpA v Schlumberger), Sweden (Systembolaget v Absolut Company), Canada (Murphy v Amway, discussed here), among others. That said, a similar pro-arbitration stance concerning antitrust disputes is not mirrored in several jurisdictions, including India. This post examines the arbitrability of antitrust disputes in India, in light of the recently expounded “four-fold test” by the Supreme Court of India (SCI) in Vidya Drolia v Durga Trading Corporation (Vidya Drolia).

 

Indian standpoint

The arbitrability of antitrust disputes has not been directly addressed in any case in India to date. The closest an Indian court has come to deliberate on the issue was in Union of India v Competition Commission of India (2012). In this case, the Delhi High Court decided an objection to the maintainability of proceedings before the Competition Commission of India (CCI) in light of an existing arbitration agreement between the parties. The Court upheld the jurisdiction of the CCI, and opined that the scope of proceedings before the CCI and the focus of its investigation would be different from the scope of enquiry before the arbitral tribunal. The Court also held that the mandate of the arbitral tribunal was limited to the contractual clauses, and it would not have the mandate nor the expertise to conduct an investigation necessary to decide antitrust issues between the parties. As a result, though the Court did not comment on the objective arbitrability of antitrust disputes, it latently implied that the adjudication of antitrust claims was not suitable for arbitration.

Arbitrability, otherwise, has been discussed in several Indian cases, most notably in Booz Allen and Hamilton v SBI Home Finance (2011) (Booz Allen) (discussed here). In Booz Allen, the SCI listed six categories of disputes which were non-arbitrable in India. However, it did not include antitrust disputes. Thereafter, in Ayyasamy v Paramasivam (2016), the SCI mentioned a category of disputes that were generally treated as non-arbitrable, which did include antitrust disputes (para 9). As the primary issue in Ayyasamy pertained to the arbitrability of fraud (discussed here and here), the categorisation of antitrust disputes as non-arbitrable was not a binding pronouncement.

 

Applying the four-fold test to antitrust disputes

In an attempt to streamline the test for arbitrability in India, on December 14, 2020, the SCI in Vidya Drolia expounded a “four-fold test” to determine when a dispute shall not be arbitrable in India:

(i) when the cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem;

(ii) when the cause of action and subject matter of the dispute affects third party rights; have erga omnes effect; require centralised adjudication;

(iii) when the cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State; and

(iv) when the subject-matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

The SCI, by expressly acknowledging that subordinate rights in personam arising from actions in rem are arbitrable, paved the way for private adjudication of statutory claims in India. Applying this test, the SCI overruled Himangni Enterprises v Kamaljeet Singh Ahluwalia (2017) (discussed here) and held that landlord-tenant disputes, governed by the Transfer of Property Act, are arbitrable in India. Therefore, the arbitrability of antitrust disputes in India will depend upon the non-satisfaction of the aforementioned “four-fold test”.

Ordinarily, antitrust disputes carry a public character and concern adjudication of actions and rights in rem. This is reflected in Section 19 (1)(a) of the Indian Competition Act, 2002 (Act), which allows any person, regardless of whether or not such a person has suffered any damage, to approach the CCI to inform about contraventions of the Act. However, importantly, Section 53N of the Act also allows any aggrieved party to claim compensation arising from the in rem findings of the CCI, thereby requiring adjudication of subordinate rights in personam of the aggrieved parties. Similarly, antitrust claims arising in the context of pre-existing contractual relationships such as franchise agreements, joint-venture agreements, or distribution agreements will also require adjudication of subordinate rights in personam. In such cases, (i) and (ii) of the “four-fold test” will not be satisfied as the adjudication would concern rights inter se between the parties.

In this regard, a reference can be made to Murphy v Amway (2013), wherein the Canadian Federal Court of Appeal (FCA) ruled that a private claim for damages brought under Section 36 of the Canadian Competition Act is arbitrable. The FCA, to reach this conclusion, relied upon Seidel v Telus Communications (2011), in which the Supreme Court of Canada had distinguished between Section 171 (which allowed only the person who suffered damages to initiate a claim) and Section 172 (which allowed anyone to initiate a claim) of the Business Practices and Consumer Protection Act, 2004, and concluded that though claims under Section 172 would not be arbitrable, claims under Section 171 could go to arbitration. Drawing a parallel to India, private antitrust claims under Section 53N of the Act and pre-existing contractual relationships should similarly be arbitrable.

Moreover, as private antitrust claims do not ordinarily concern inalienable and sovereign functions of the State, (iii) of the “four-fold test” will also not be satisfied. In fact, inalienable and sovereign functions of the State are exempt from the mandate of the Act itself. Section 54 of the Act provides that enterprises may be exempted from the application of the Act if such exemption is necessary for public interest or such enterprise is engaged in the performance of sovereign or inalienable functions of the State.

The impediment to the arbitrability of antitrust disputes will still arise owing to the satisfaction of (iv) of the “four-fold test”. As CCI is a specialised statutory forum enjoying exclusive jurisdiction over antitrust disputes (Section 61 of the Act), it makes antitrust disputes non-arbitrable. This renders even subordinate rights in personam arising out of the Act to be non-arbitrable. The rationale behind this criteria, as highlighted by the SCI in Vidya Drolia, is to protect the special rights created by statutes and give effect to the legislative intent of stipulating an exclusive forum for the determination of such rights and liabilities.

Nevertheless, the suitability of this criteria to determine the arbitrability of disputes is questionable as arbitrators can give effect to the special rights and obligations created by the Act by applying the mandatory antitrust laws to the disputes. The SCI, in Vidya Drolia, acknowledges that considerations such as the need to apply mandatory law, the public policy objective of the statute, and the complexity of disputes do not preclude arbitration (paras 39-41). Parties have the freedom to appoint arbitrators with expertise in antitrust law, such that their rights can be efficiently determined. This was also highlighted in Mitsubishi Motors, wherein the US Supreme Court opined that arbitrators can be trusted to accord suitable remedies to the aggrieved parties by applying the substantive antitrust laws of the country (473 US at 635). Therefore, the creation of a specialised forum, i.e., the CCI, should not be the sole factor to preclude arbitration in antitrust disputes.

However, given that courts in India have previously strictly applied these criteria to hold disputes as non-arbitrable (see here, here, and here), it is likely that antitrust disputes will also be held as non-arbitrable in India.

 

Arbitrability in the international context

Non-arbitrability is a ground, distinct from public policy, for refusing enforcement under Section 34 (2)(b) (Part I; domestic awards) and Section 48 (2)(a) (Part II; foreign awards) of the Indian Arbitration & Conciliation Act, 1996 (IACA). Both the Sections provide similarly worded provisions. Importantly, the SCI in Vidya Drolia began its analysis with the caveat that the judgement does not examine or interpret the transnational provisions of arbitration in Part II of the  IACA (para 7). Therefore, in view of Vidya Drolia, the “four-fold test” is only applicable to arbitrations under Part I of IACA, and not to foreign awards.

In light of the “four-fold test,” the position in India concerning arbitrability of domestic antitrust disputes resembles the position in the US prior to Mitsubishi Motors, wherein the need for specialised adjudication of antitrust disputes precluded arbitration (American Safety doctrine). In this regard, it was pointed out by the US Supreme Court in Mitsubishi Motors that even if antitrust disputes are not considered arbitrable domestically in the US, they must be held to be arbitrable in the international context, with respect to international arbitration awards. It was stated that “concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties’ agreement, even assuming that a contrary result would be forthcoming in a domestic context” (473 US at 629).

Similarly, it is likely the test to gauge the arbitrability of disputes for foreign awards in India, under Section 48 (2)(a) of the IACA, will be narrower than the “four-fold test” for domestic awards (similar to the distinction between domestic and international public policy, discussed here). A narrower test is sensitive to the need to give effect to transnational agreements, international comity, and predictable framework for global business and trade.

 

Abhisar Vidyarthi is Advocate enrolled with the New Delhi Bar.

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Arbitrators as Flamingos of Many Colors

Kluwer Arbitration Blog - Mon, 2021-02-08 23:58

This post summarizes the International Court of Justice President Joan Donoghue’s discussion, on Delos Dispute Resolution’s TagTime series, with Dr. Kabir Duggal and Amanda Lee regarding cognitive biases of arbitrators, which are also applicable to judges. Judge Donoghue analogized the origin of those cognitive biases to how flamingos obtain their pink color, provided some examples where such cognitive biases occur, and suggested ways to respond to these biases.

 

The Literature on Cognitive Biases

The literature on cognitive biases suggests that all of us experience cognitive biases in our everyday lives. Therefore, it is inevitable that arbitrators are also subject to cognitive biases in their professional work. These biases are very difficult to overcome.

Examples of cognitive biases include, amongst others, confirmation bias and anchoring bias. Confirmation bias arises when an arbitrator gives more weight to evidence that supports his or her provisional view while downplaying other evidence. Anchoring bias often arises when numerical figures are introduced into evidence and thus is particularly relevant in questions of quantum.

The term “bias” has a pejorative connotation in the arbitration world. However, “bias” here refers only to the mere predilections and subtle influences on how each individual approaches the task before the tribunal, without suggesting an independence and impartiality issue that would give rise to a legitimate challenge of the award.

Cognitive sciences suggest that counsel, in their advocacy, may try to lure a tribunal towards a particular conclusion on two levels: (1) attracting the tribunal with a general impression that a specific outcome or conclusion is correct and (2) furnishing all exhibits supporting that general impression.

In this case, cognitive scientists recognize two modes of cognition that are in play for tribunal members. The first one is intuitive thinking, sometimes called “System 1” thinking, which draws arbitrators to feel that a particular conclusion is the right one. The second mode is sometimes called “System 2” thinking, which is a more deliberate and analytical form of thinking processes.

Arbitrators often react to parties’ arguments by forming a System 1 impression that something feels right. The literature suggests that arbitrators would do well to check this intuitive response with System 2 thinking. Close reflection is necessary because this proposed solution faces a risk that an arbitrator will succumb to confirmation bias, thereby, with the arbitrator’s feather colors, overvaluing the evidence that supports the conclusion reached in his or her System 1 thinking.

 

Arbitrators are Flamingos of Many Colors

Tribunal members often have to decide based on complex, incomplete, and inconsistent information. To make such a decision, arbitrators individually and collectively have to use mental shortcuts or heuristics, which are ideas, methods of reasoning, or approaches that have emerged from their professional experiences.

In that sense, arbitrators are like flamingos of variant colors. Flamingos in nature are all pink. However, they are not born with this color, but their diets, such as shrimps and other small organisms, gradually turn their feathers pink.

As a comparison, each tribunal member also has his or her own color of feathers, and such “color” was acquired through his or her professional “diet.” The color here represents the perspective and thought process that each arbitrator has. The professional diets refer to, for example, where one gets his or her legal education, whether one is trained in common law or civil law system, or his or her area of expertise.

It should be emphasized that the variation of arbitrators’ feather colors here refers only to those of professional experiences, without detracting from the importance of diversity and full representation concerning fundamental characteristics, for instance, geographic region, level of development, capital export/import, and gender.

 

Example 1: Common Law and Civil Law Distinction

Arbitrators from common or civil law backgrounds may have been exposed to different training. Such training might produce differences, for example, as regards the use of experts in legal proceedings. Training in the common law system is very focused on litigation and, thus, on law as an adversarial process in which each party gets a chance under a fair and balanced procedure to prove its case. Consequently, the concepts of the burden of proof and the standard of proof are crucial for decision-makers to deal with questions of facts. For arbitrators trained in the civil law system, on the other hand, there is a greater emphasis on the court reaching its own appreciation of the right answer.

This distinction in training can lead to different perspectives on a tribunal’s role in appointing scientific and technical experts. A civil law court would typically appoint an expert to advise or answer complex, technical questions and rely on that advice. However, court-appointed experts are not widely used in the common law system. Instead, consistent with the notion of an adversarial process, a party’s basic task is to prove the facts, or engage its own experts to do so, as an ordinary course of its pleadings.

The second common distinction between the two systems is the style of legal drafting. The decisions of civil law courts generally describe the parties’ positions in a detailed and isolated manner and then state the court’s conclusion without much detailed explanation of the reasoning. Common law courts do the exact opposite as they usually do not lay out in detail the arguments of each party but give very detailed reasonings of their conclusion.

Although trained in the common law system, Judge Donoghue has come to agree that having court-appointed experts in some situations is the right way to proceed. Regarding the style of legal drafting, while continuing to believe that it is vital for tribunals to provide explicit and detailed reasonings, Judge Donoghue has come to support the civil law practice of setting out clearly and in an isolated manner the arguments of each party. This description gives clarity to the losing party that the court understands the counsel’s arguments but disagree or decides otherwise regardless.

 

Example 2: Use of Key Terms and Principles

The same terms and principles may not have the same meanings to different people. For example, there is a long-standing jurisprudence within the European Court of Human Rights (ECtHR) on the phrase “margin of appreciation.” While European-trained lawyers may be used to utilizing that phrase without giving explanation, the phrase may not have the same meaning to lawyers trained outside of systems influenced by the European Convention on Human Rights (ECHR).

Another example is the term “manifest.” Under Article 52 of the International Centre for Settlement of Investment Disputes Convention (ICSID Convention), one ground of annulment of the award is “that the Tribunal has manifestly exceeded its powers.” In addition, Rule 41(5) provides an expedited procedure if a claim is “manifestly without legal merits.” Even in this situation where both provisions are within the ICSID ecosystem, the term “manifestly” does not necessarily have identical meanings. Outside of the ICDSID context, the term may be understood in a very different way.

In these instances, arbitrators should be mindful that others may not share the same understanding or appreciation of the use of specific terms or principles. They should be prepared to explain what a term or principle means and why it is applicable in a given situation while being ready to accept that others may disagree.

 

Suggested Approaches to Arbitrators’ Cognitive Biases

Arbitrators should not strive to have their “colors” bleached out, and as the cognitive bias literature suggests, it is challenging to do so. Instead, they should invest more time, effort, and energy into examining and acknowledging the effects that their individual “diets” have on the “colors” of their feathers, such as:

  • analyzing and questioning their own in-built perspectives with great care and reflecting on what drives them towards a particular conclusion or instinct; and
  • opening their minds and listening carefully to understand why their colleagues have different conclusions or instincts and the “diets” that cause such differences.

The tribunal secretary might also play an important role in responding to cognitive biases amongst arbitrators. For example, the tribunal secretary may point out that the tribunal may also wish to consider exhibits X, Y, and Z, which may not support a given conclusion.  This is particularly helpful in mitigating arbitrators’ confirmation biases in their System 2 thinking processes as cautioned above.

 

Conclusion

A flamingo acquires its pink color through its diet, while arbitrators acquire their perspectives and heuristics through their professional experiences. Since arbitrators have different professional experiences, in a way, they are like flamingos of varied “colors” conceived by their distinct professional “diets.” These “colors” may heighten cognitive biases, such as confirmation bias and anchoring bias. To cope with these cognitive biases, Judge Joan Donoghue suggests that arbitrators should make efforts to examine and question their own cognitive biases and the reasons thereof internally. In addition, within the tribunal, a tribunal secretary may question those biases as well. Both internal and external forms of questioning arbitrators’ cognitive biases are necessary to ensure that the best result is reached in every case.

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Lawyers Are From Mars, Clients Are From Venus – and Mediators Can Help Communicate in Space

ADR Prof Blog - Mon, 2021-02-08 11:50
I just wrote this post on the Kluwer Mediation Blog on this subject.  It summarizes empirical research showing the huge chasm in perspectives between many lawyers and their clients.  Lawyers often focus only on monetary issues in legal disputes, which drives many of their clients crazy because they are also very concerned about a wide … Continue reading Lawyers Are From Mars, Clients Are From Venus – and Mediators Can Help Communicate in Space →

Arbitration or Court Proceedings in Emergencies: Tipping the Scale from a German Perspective

Kluwer Arbitration Blog - Sun, 2021-02-07 22:40

Introduction

An emergency by definition is a “sudden serious and dangerous event” that requires “immediate action”. For instance, shareholder A needs to prevent shareholder B from publicizing confidential information that will negatively affect the share price. Shareholder A finds herself in an emergency situation and needs to act immediately. According to a recent decision of the Bavarian Higher Regional Court arbitral emergency measures are enforceable in Germany. If the shareholder agreement contains an arbitration clause, shareholder A therefore has to choose whether to commence emergency arbitration or proceedings for preliminary relief in a national court.

This post provides a German perspective on some of the aspects an emergency-afflicted party may want to consider before applying for preliminary measures from a court or at an arbitration institution.

 

Step 1: Do You Have a Choice?

The first step for the emergency-afflicted party will be to find out whether the rules applicable according to the arbitration agreement foresee the possibility of commencing emergency arbitration proceedings. So far, almost all institutions have established rules for emergency arbitration. The German Arbitration Institute (DIS) along with the Vienna International Arbitral Centre (VIAC), however, decided against the introduction of rules for emergency arbitration. Even though the DIS reform commission thoroughly discussed the inclusion of emergency provisions in the 2018 revision of the DIS Rules they eventually decided against it, because – at the time – there were discussions in the German legislature to include such provisions in statutory arbitration law, which the commission did not want to anticipate.1)Ramona Schardt, Neue Regelungen der DIS-Schiedsgerichtsordnung zur Steigerung der Verfahrenseffizienz, SchiedsVZ 2019, 28, 34. jQuery('#footnote_plugin_tooltip_35994_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_35994_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); In cases where the rules of these institutions are applicable, an emergency application exclusively can be filed in national courts.

Another aspect shareholder A should consider before choosing between emergency arbitration and national court proceedings is the question of enforceability. An emergency order of an emergency arbitrator will be of limited use if the courts at the opposing party’s place of jurisdiction (usually where the opposing party’s assets can be located) do not enforce emergency orders of an arbitrator. For instance, courts in Russia, Sweden, Finland, or France will not recognize an emergency order as an arbitral “award” and therefore would deny enforceability.2)For further references: Philippe Cavalieros, Janet Kim, Emergency Arbitrators Versus the Courts: From Concurrent Jurisdiction to Practical Considerations, Journal of International Arbitration (June 2018), 275, 291 et seq. (pointing out, however, that jurisprudence is scarce and that in France provisional measures could be enforceable, if they were “finally ordered”). jQuery('#footnote_plugin_tooltip_35994_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_35994_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

In Germany, on 18 August 2020, the Bavarian Higher Regional Court (Bayrisches Oberlandesgericht, docket no. 1 Sch 93/20) decided on the enforceability of an arbitral interim order in an arbitration between shareholders of a German limited liability company (GmbH). The Bavarian Higher Regional Court emphasized that it was not the national court’s task to perform a full review of the arbitral tribunal’s decision on preliminary measures, and confirmed the emergency order as enforceable, because it complied with the following prerequisites:3)see also Matthias Goumas, SchiedsVZ 2020, 315, 318 commenting on the Bavarian Higher Regional Court’s order. jQuery('#footnote_plugin_tooltip_35994_27_3').tooltip({ tip: '#footnote_plugin_tooltip_text_35994_27_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

  • The emergency order was “plausible” and provided comprehensible reasoning regarding the ordered measure and its prerequisites;
  • The arbitral tribunal confirmed the order as appropriate and necessary without abusing its discretionary power;
  • The purpose of the emergency order and the ordered measure were proportional, in particular, the ordered measure did not prejudge the main arbitration on the merits;
  • The arbitral tribunal ordered an emergency measure that stayed within the limits of what a German national court could have ordered as emergency relief in a corporate dispute.

In any case, even if courts categorically refused to enforce emergency arbitration orders, the opposing party usually will comply with an emergency order in order to prevent a negative effect on the tribunal deciding in the subsequent main arbitration. The main tribunal may revise, vacate or reconfirm the emergency arbitrator’s order and grant its own interim order. The main tribunal may also render a final interim award, which would be enforceable in most jurisdictions in application of the New York Convention.4)In recent decisions the German Federal Court (Bundesgerichtshof, BGH) dismissed applications to set aside partial awards, BGH, 25 June 2020, I ZB 108/19, and BGH, 11 October 2018, I ZB 9/18, with comments of Maximilian Pika SchiedsVZ 2019, 150. jQuery('#footnote_plugin_tooltip_35994_27_4').tooltip({ tip: '#footnote_plugin_tooltip_text_35994_27_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Finally, before making a choice between emergency arbitration and court proceedings, the relevant contracts should be checked in detail. Some contracts provide specific language on emergency arbitration that can narrow or widen the available options. Even if an arbitration agreement specifically provides the option to apply for emergency measures, this does not mean, however, that the applicant cannot apply for emergency measures in national courts. In Germany, the Higher Regional Court Frankfurt am Main (Oberlandesgericht) confirmed on various occasions that an application for emergency measures in German courts is always available even if the parties agreed on an arbitration clause. In one decision of 13 June 2013, (docket no. 26 SchH 6/13), the Court decided on a football club’s application for a court order to be re-admitted to the DFB-Pokal, a football tournament, after the club had been excluded due to heavy crowd disturbances. The Court held that even if an arbitration agreement explicitly provided for the possibility to receive emergency relief from the arbitral tribunal, the club could apply for interim relief in national courts, “because such a provision hardly can be interpreted as an agreement to block access to national courts for emergency measures.” The football club’s application still was dismissed, as an arbitral tribunal had already decided that the ban from the tournament was valid (prohibition of a révision au fond). On 20 May 2020, the Higher Regional Court Frankfurt am Main reconfirmed this decision (docket no. 19 W 22/20). After the rest of the season was cancelled due to the outbreak of the Covid-19 pandemic, a table tennis club was relegated to a lower league. The Court confirmed that the club may apply for emergency measures against the relegation in national courts notwithstanding an arbitral agreement, but ultimately denied the club’s application on the merits due to lack of urgency.

 

Step 2: Where Do You Go?

Once shareholder A knows that she has at least two options in her emergency situation, she will be asked the question that pop band No Mercy contemplated in their 1996 song: Where do you go, my lovely? Should she apply for emergency arbitration or apply for relief in a national court? Pursuing both options unnecessarily will consume additional resources.

Unfortunately, the answer is not simple. The following table gives an overview of elements to be balanced. Every line shows a factor that could be considered, such as neutrality of the decision-maker, venue, costs, etc. The left column describes how each individual factor plays out in arbitration, the right column in national courts.

 

  Emergency Arbitration Preliminary Relief in National Court Decision maker · one emergency arbitrator

· usually with neutral nationality · one judge

· national of his jurisdiction Venue · place of arbitration at neutral venue (depending on arbitration agreement) · usually at defendant’s venue (home advantage) Language · language chosen by parties · in official language of the court’s jurisdiction (translation of documents, perhaps interpretation necessary) Institutional experience · administered by institution staff specialized in international commercial disputes

· arbitrator usually experienced in the subject-matter · administered by local court staff Procedural costs · usually flat rate (no consideration for amount in dispute)

· e.g. US$ 40,000 for ICC proceedings

· e.g. S$ 35,000 for SIAC proceedings · depend on law applicable for court fees

· usually depend on amount in dispute

· often lower than in arbitration Costs for legal representation · reimbursable at the discretion of the arbitrator

· usually lawyers’ fees calculated on an hourly basis · rules applying to domestic litigation usually more restrictive than rules applying to arbitration

· in many jurisdictions courts apply tariffs to costs

· in many jurisdictions capped depending on amount in dispute Enforceability · emergency order enforceable in various jurisdictions

· some jurisdictions deny enforceability

· non-compliance may have negative effect on the opinion of the tribunal hearing the case · enforcement through the ordering court

· generally enforceable only in the deciding court’s jurisdiction

· perhaps enforceable in other jurisdictions (e.g. Brussels I regulation for EU member states) Correlation with main proceeding · only possible before the full tribunal or sole arbitrator have been appointed and received the arbitration file (addressee for interim relief application would be tribunal in main arbitration)

· main arbitration has to commence shortly after (or concurrent with) the application for emergency proceeding (e.g. request for arbitration to filed 10 days after application in ICC proceedings; tribunal to be constituted 90 days after order in SIAC proceedings)

· emergency arbitrator excluded from acting as arbitrator in main proceeding

· tribunal in main proceeding may review, modify or vacate emergency order · possible before or after the main proceeding has commenced

· court may order applicant to commence main proceeding (e.g. s. 926 of the German Code of Civil Procedure, which allows a court to order the applicant to commence a main proceeding upon request of the opposing party)

· risk that court does not find urgency if main proceeding has not commenced yet

· tribunal in main proceeding cannot formally modify or vacate emergency order; still, tribunal in main proceeding formally is not bound by court order when deciding on merits of the case

 

Conclusion

In Germany, the decision of an emergency arbitrator would probably be enforceable and access to German courts is also available for emergency measures if the parties concluded an arbitration agreement. In order to choose between emergency arbitration and preliminary court relief, the emergency-afflicted party should carefully weigh the pros and cons of both options and they will surely find the desired relief.

References[+]

↑1 Ramona Schardt, Neue Regelungen der DIS-Schiedsgerichtsordnung zur Steigerung der Verfahrenseffizienz, SchiedsVZ 2019, 28, 34. ↑2 For further references: Philippe Cavalieros, Janet Kim, Emergency Arbitrators Versus the Courts: From Concurrent Jurisdiction to Practical Considerations, Journal of International Arbitration (June 2018), 275, 291 et seq. (pointing out, however, that jurisprudence is scarce and that in France provisional measures could be enforceable, if they were “finally ordered”). ↑3 see also Matthias Goumas, SchiedsVZ 2020, 315, 318 commenting on the Bavarian Higher Regional Court’s order. ↑4 In recent decisions the German Federal Court (Bundesgerichtshof, BGH) dismissed applications to set aside partial awards, BGH, 25 June 2020, I ZB 108/19, and BGH, 11 October 2018, I ZB 9/18, with comments of Maximilian Pika SchiedsVZ 2019, 150. function footnote_expand_reference_container_35994_27() { jQuery('#footnote_references_container_35994_27').show(); jQuery('#footnote_reference_container_collapse_button_35994_27').text('−'); } function footnote_collapse_reference_container_35994_27() { jQuery('#footnote_references_container_35994_27').hide(); jQuery('#footnote_reference_container_collapse_button_35994_27').text('+'); } function footnote_expand_collapse_reference_container_35994_27() { if (jQuery('#footnote_references_container_35994_27').is(':hidden')) { footnote_expand_reference_container_35994_27(); } else { footnote_collapse_reference_container_35994_27(); } } function footnote_moveToAnchor_35994_27(p_str_TargetID) { footnote_expand_reference_container_35994_27(); 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 * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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AfCFTA, the Future Investment Protocol, and the Phasing-Out of Intra-African BITs

Kluwer Arbitration Blog - Sat, 2021-02-06 23:46

As Phase II negotiations of the African Continental Free Trade Area (“AfCFTA”) have been delayed due to the COVID-19 pandemic, a draft legal text of the AfCFTA Investment Protocol (“Protocol”) has not been submitted to the January 2021 Session of the Assembly, as originally expected.  There are reasons to believe that with the recent start of trading under AfCFTA rules on January 1, 2021, Phase II negotiations will be positively sped up at best. According to insiders, the Protocol that will result from these negotiations is likely to be modelled on the Pan African Investment Code (“PAIC”), or at least embody some of the Code’s key features. The Protocol will be an additional ingredient to the African spaghetti bowl of domestic investment laws/codes, regional investment-related instruments, and bilateral investment treaties (extra and intra-Africa). The co-existence of the Protocol and intra-African BITs might undermine the overall objective of harmonisation that is the focus for many African policymakers. The lessons learned from the European Union (EU) and intra-EU BITs has shown that increased integration creates a need for more harmonisation. This round of negotiation gives African States the opportunity to provide more predictability in the continental investment regime. This post proposes that African states should start with a clear phasing-out programme of existing intra-African BITs and the reasons for this approach are outlined below.

 

Oded Besserglik v Mozambique: A Reminder of the Status of Intra-Africa BITs

The Besserglik case can be described as a cas d’école, reminding investment arbitration actors  of the importance of looking carefully to the conditions of entry into force of the BIT that they wish to rely on. In this case, the arbitral tribunal unanimously declared itself incompetent to hear the claims because the underlying instrument of consent – the Mozambique-South Africa BIT – was not in force, both States having failed to comply with their respective notification obligations as required by Article 12(1) of the BIT. Accordingly, the Besserglik case shed a light on the status of intra-African BITs. Some of these BITs were concluded back in the 1980s, 1990s, and are still awaiting ratification. Examples include the Tunisia-Mauritania BIT (1986), Tunisia-Mali BIT (1986), Egypt-Uganda BIT (1995) and Angola-São Tomé and Príncipe BIT (1995). Although Article 18 of the Vienna Convention on the Law of Treaties (VCLT) requires States not “to defeat the object and purpose of a treaty” prior to its entry into force, the importance of a valid consent to arbitration – as well as the limited claims that might be brought concerning inconsistency with Article 18 – makes difficult the invocation of this provision. To the best of this author’s knowledge, no ISDS case to date has been brought on the basis of Article 18 of VCLT. According to UNCTAD IIA Navigator, out of 190 existing intra-African BITs, 130 are still not in force. Three main reasons, beyond the often-heard technical bureaucracy, may explain why African states have not set in motion the ratification process, or why these processes take so long.

 

Political agenda prioritised over economic diplomacy

A significant body of literature, particularly in the field of political science, links the conclusion of BITs to the existence of diplomatic relations between States, and describes investment treaties as a mean to consolidate those relations. Explaining why Ukraine was so eager to enter into a BIT with the United Kingdom in 1979, Lauge N. Poulsen declared “[…] BITs are often signed partly to promote foreign policy agendas […] or to tie in, diplomatic links between States”. This explanation could be transposed to the African context, where one could question the real intent of the State parties when signing intra-African BITs. Some of these countries probably did so with no motives of economic diplomacy at the time. In practice, BITs are often embedded in the large list of agreements government officials signed when on state visits.

 

The weak FDI flows between African States disincentivizes the ratification process

According to a recent study by the African Development Bank (AfDB), intra-Africa FDI from 2003 to 2017 was about USD 92.8 billion and allocated between four capital-exporting countries namely, Kenya (8%), Morocco (11%), Nigeria (9%), and South Africa (39%). Although encouraging, the study reminds us that intra-Africa FDI remains small, and confirmed the traditional axis of FDI which flows from North to South. When questioning the different treatment African States accord to intra-African BITs and those concluded with non-African parties, Gracious Avayiwoe, taking Ghana as a case study, suggests that the expected volume of FDI seems to be a determinant factor in the decision to ratify or not:

One may find it quite puzzling why Ghana would eagerly conclude BITs and be unwilling to ratify them. As the majority of the unratified BITs are south-south – mostly intra-African – with the other contracting parties having same or weaker economic and political strength than Ghana, it could follow that the country attaches much importance to its north-south BITs – perhaps as a result of the envisioned investment volume that may arise therefrom – by ratifying them to the neglect of the south-south BITs.

 

The impact of regional integration initiatives

The logic underlying the establishment of Regional Economic Communities (RECs), i.e., creation of a single market without discrimination, made redundant the need to maintain BITs between members of a same regional group, or even to ratify them because most RECs already provide instruments for investment protection with similar substantive rules.

 

Intra-African BITs: Rarely Invoked in ISDS

As a result of this lack of ratification, only 3 investment arbitration cases so far have been filed under intra-African BITs before ICSID, the world leading investment disputes resolution centre. These ICSID cases are now at different stages of the proceedings, with no significant prejudice should African States decide to implement a phasing-out plan:

The ICSID case figures should not overshadow that African States and investors also seek recourse before other fora, such as PCA or ad hoc arbitration under UNCITRAL Rules (for examples of cases filed under multilateral and regional agreements; see, e.g., Kontinental Conseil Ingénierie v The Gabonese Republic, filed under the OIC Investment Agreement; Burmilla Trust and others v Lesotho, filed under the SADC Investment Protocol).

 

A Roadmap for the Termination of Intra-African BITs

The question of intra-African BITs termination is not new as such; it has been discussed among African States at least since 2015 at the time of the negotiation of the PAIC. In contrast with the EU, where the termination of intra-EU BITs was motivated by their alleged breach of EU law, in the African context termination would be in support of harmonisation. There is currently no formal transfer of competence to the African Union or the RECs to conclude investment agreements on behalf of their member States.

The minutes of the Meeting of Experts on the consideration of the Pan African Investment Code held in Kampala (30 November – 2 December 2015) raised this issue for the first time: “it was observed that Member States may agree to replace intra-Africa BITs or investment chapters in intra-Africa trade agreements after a period determined by the Member States”.

In the same vein, Article 3(2) of PAIC reads as follows:

Notwithstanding paragraph 1, Member States may agree that this Code [PAIC] could be reviewed to become a binding instrument and to replace the intra-African bilateral investments treaties (BITs) or investment chapters in the intra-Africa trade agreements after a period of time determined by the Member States (1) or after the termination period as set in the existing BITs and investment chapters in the trade agreements (2)” (emphasis added)

Option 1, that is “after a period of time determined by the Member States”, requires political will. It could be implemented by either (i) an African Union Declaration inviting States to proceed with the termination of intra-African BITs (whether in force or just signed) following the entry into force of the AfCFTA Investment Protocol; or (ii) an article contained in the Protocol itself urging States within a  precise timeframe (e.g. 5 years) to dismantle existing intra-African BITs.

Recent news from the African Union suggests that African States may consider this option. During the 13th Extraordinary Session on the AfCFTA held on December 5, 2020, the African Union Ministers of Trade (AMOT) adopted a Draft Declaration on the Risk of Investor-State Dispute Settlement. According to insiders, the Draft Declaration provides for a mutual temporary suspension of ISDS provisions in BITs (although not yet public, discussions around the Declaration suggest that the suspension might apply to both intra and extra-African BITs), among other measures of mitigation to protect themselves against any claims for measures they could have taken in dealing with the pandemic. The Declaration is a significant impetus toward a broader complete phasing-out of intra-African BITs.

When considering Option 2, “after the termination period as set in the existing BITs and investment chapters in the trade agreements”, States might want to add in an “Intra-African BITs Termination Agreement” particular wording so as to exclude the effects of the “sunset clauses” contained particularly in BITs, which may extend the substantive provisions of the BITs for additional 5 or 10 years, just as the EU Member States did.

 

Concluding Remarks

What should be the role of the AfCFTA Investment Protocol in the pyramidal structure (domestic, regional, and continental) of investment regulation on the continent? The question will be at the centre of the negotiation of the Protocol. For the sake of harmonisation and predictability, States should consider a phasing-out of intra-African BITs. A majority of them being unratified, and quite a few of them having been invoked in ISDS cases, African States are in much better position than their EU counterparts, should they want to proceed with this option. The last hurdle to face is a matter of realpolitik, whether major African capital-exporting countries would agree on terminating their intra-African BITs. As an example in the midst of the Ethiopian Tigray crisis, Egyptian investors which suffered from the conflict are reportedly considering suing Ethiopia under the Egypt-Ethiopia BIT, if an amicable solution is not found. The challenge is surmountable provided that the Protocol, once adopted, is ratified in a very short period of time by all signatory parties.

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Get Yer ODR News Here

ADR Prof Blog - Sat, 2021-02-06 11:57
ODR and Mediation Chapter Noam Ebner and Daniel Rainey published a chapter entitled ODR and Mediation in the second edition of Online Dispute Resolution: Theory and Practice.  Here’s the abstract: Online mediation had been spreading rapidly as a mode of practice, even before the entire profession shifted online during the COVID-19 era. In this chapter, … Continue reading Get Yer ODR News Here →

The Evolution of International Arbitration’s Scholarship and the International Arbitration Law Library Series

Kluwer Arbitration Blog - Fri, 2021-02-05 21:00

The publication of the 60th volume of the International Arbitration Law Library Series (“IALL” or “Series”) is a remarkable anniversary. The purpose of this blog post is to offer a brief assessment of the Series’ contribution to the field in the light of the evolution of international arbitration’s scholarship in the last 40-50 years.

It was in 1993 that Kluwer Law International (“Wolters Kluwer”) published the first title in the Series, by Moshe Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes. It is suitable to remember that, having registered only a single case in that year, ICSID  was hardly prominent outside a very small circle of practitioners. Hirsch’s monograph on ICSID was one of the very first titles on a subject that would come to dominate international arbitration’s scholarship in the next 25 years.

It is also appropriate to remember that, at the time the Series was introduced, arbitration was not considered a distinct legal field. It was treated as an integral part of other areas of law. For example, in Germany and in a number of other German influenced jurisdictions, such as Austria, the Netherlands, Greece, and Italy, arbitration was mainly treated as procedural law. This explains why arbitration laws in these countries were included in the national codes of civil procedure. Moreover, in France1)See the seminal Hague Lectures of Berthold Goldman, Les Conflits de Lois dans l’Arbitrage International de Droit Privé, 109 Collected Courses 347 (1963). jQuery("#footnote_plugin_tooltip_2833_1").tooltip({ tip: "#footnote_plugin_tooltip_text_2833_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and Switzerland, arbitration had been viewed as private international law or a conflict of laws subject, while in some parts of the common law world, arbitration had traditionally been treated as a version of ordinary contract law. This explains why at this time scholarly work in arbitration largely drew on theories, concepts, and doctrines of private international law, civil procedure, contract, and company law.

Equally importantly, arbitration was not considered a subject of academic importance, not least because of its close relevance to legal practice. Arbitration courses were not included in generalist law degrees (such as J.D. or LL.B. programs) or in LL.M. curricula (the only exception being the arbitration course developed and first taught in 1985 by Professor Julian Lew at the School of International Arbitration at Queen Mary University of London). As was then generally accepted, if one wanted to learn about arbitration, one should do so by practicing arbitration in a law firm.

The fact that arbitration law was mainly developed by practitioners had important ramifications on the scope of arbitration scholarship and the methods of research that were employed for research in arbitration. Practicing arbitration lawyers were not concerned with the concept or legal theory of arbitration or how socio-legal jurisprudence may relate to the subject of arbitration. Their focus was on scholarship that would directly respond to the problems they were facing in their arbitration practice. Their methods of inquiry were not empirical, scientific, contextual or interdisciplinary; their primary method of analysis was the traditional approach taken for legal research, namely doctrinal analysis that focuses exclusively on legal statutes and case law. Arbitration scholarship did not originally engage with the crucial movements and theories of international legal scholarship that advanced the concept of international law. Interdisciplinary research did not originally appear in arbitration scholarship, and arbitration law was never critically examined through the lens of political theory, international affairs or economics.

Equally, at that time, arbitration scholarship did not critically engage with legal theory and socio-legal jurisprudence. With the exception of a small number of French theorists,2)See generally, Daniel Cohen, Arbitrage et Société [Arbitration and Society] (1993); Bruno Oppetit, Theorie de l’arbitrage (1998); E. Loquin, L’application des règles nationales dans l’arbitrage commercial international, in L’apport de la jurisprudence arbitrale, 87 (1986). jQuery("#footnote_plugin_tooltip_2833_2").tooltip({ tip: "#footnote_plugin_tooltip_text_2833_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); the majority of arbitration scholars paid little to no attention to such subjects. Legal theory was often regarded as an academic “tempest in a teapot” or a discussion that “does not fully accord with what happens in the real world of international commercial arbitration”.

As a result, the main focus of arbitration scholarship was originally narrow. The agenda of arbitration scholarship and conferences until as recently as twenty years ago was dominated by practically oriented topics, such as the validity of arbitration agreements, the power of tribunals to provide interim relief, the role of non-signatories in arbitration, and procedural matters including the taking of evidence, enforcement of arbitral awards, the appropriate standards of impartiality of arbitrators, and cost-control and effective case management of arbitration proceedings.

The inception of the Series, thus, came at a time when the field of international arbitration was seeking to grow out of its subordinate and practical origins, and develop theoretical foundations as an autonomous legal field. It is thus fair to observe that Wolters Kluwer took a considerable risk in establishing the first academic series dedicated to a field which at the time was at a nascent stage.

Today, international arbitration is a thriving academic field. In contrast to when Professor Lew established his first course, there are now dozens of Law Schools offering dispute resolution LL.M. and Diploma courses worldwide. In parallel, there are several academic journals specialising in international arbitration, numerous conferences held every year, and a large number of arbitration articles and books published annually.

Looking back with the reassuring luxury of hindsight, the inception of the Series was a visionary decision. Of course, it was fitting to entrust the editorial supervision of the Series to Professor Lew, who has, arguably, contributed to the development of international arbitration as a distinct academic field more than anyone. He was among those who wrote the first monographs on international arbitration. In addition to founding the School of International Arbitration, Queen Mary University of London which was the first academic institution dedicated to the teaching and research of international arbitration, Professor Lew wrote the first doctoral thesis in English on the subject of international arbitration. His monograph on the Law Applicable in International Commercial Arbitration was published in 1978 and – together with Philippe Fouchard’s L’arbitrage Commercial International (1965), Pierre Lalive’s Hague Course on Problèmes Relatifs a l’Arbitrage International Commercial (1967), Albert Jan Van Den Berg’s The New York Convention of 1958: Towards a Uniform Judicial Interpretation (1981) and W. Laurence Craig, William W. Park and Jan Paulsson’s International Chamber of Commerce Arbitration (1984) – is widely considered one of the theoretical foundations of arbitration as an autonomous international field.

Reflecting Professor Lew’s vision for introducing the first English series of volumes on quality theses and monographs, the Series’ approach to commission and publication of volumes has been comparative, international, and inclusive. The Series has published a wide range of dispute resolution works, from mediation and commercial arbitration to energy, maritime, and investment arbitration; from private law to public international law; from conflict of laws to contract and procedural law.

The inclusive approach and cosmopolitan outlook of the Series reflects a dynamic idea of arbitration law that transcends the often narrow boundaries of legal fields and legal traditions. Indeed, arbitration scholarship in the last twenty years has become more diverse and interdisciplinary. This is not only because non-arbitration scholars have developed an interest in arbitration, but also because arbitration scholars have started to examine arbitration against a wider context.

Investment arbitration was the catalyst here, which prompted scholars to examine how arbitration interacts with public international law and human rights, for example. Other scholars, mainly French theorists, critically engaged with legal theory and socio-legal jurisprudence, arguing that the increase of institutional actors in arbitration, including arbitral institutions, specialised law firms, professional arbitrators, and experts, has changed the social structure of international arbitration. Arbitration has equally attracted interest from international relations scholars to critical legal theorists, constitutional and administrative law scholars. Very interestingly too, research on arbitration is now conducted with the use of non-traditional methods of research, at least for arbitration. While traditional methods of doctrinal analysis are still the most popular method of research in international arbitration, a wave of studies has been produced in the last twenty years using social science methods of research. Poignantly, such scholarship has made us realise that international arbitration is more than a body of black letter laws, that it affects society, the wider public, and the rule of law.

In this regard, the Series was influenced by, and contributed to, the growth, diversity, and interdisciplinarity of international arbitration’s scholarship as an academic subject, publishing arbitration related titles on human rights, the environment, but also works on empirical research, economic analysis, and psychology.

Perhaps the single achievement that I, as co-editor of the Series, am most proud of is that all these years the Series displayed a distinct sense of academic purpose, publishing the works not only of established practitioners (see, for example, Gabrielle Kaufmann-Kohler (with co-author Thomas Schultz, Bernard Hanotiau, Mark Kantor, Franco Ferrari (with co-editor Friedrich Rosenfeld), Luke Nottage (with co-editors Shahla Ali, Bruno Jetin, and Nobumichi Teramura) and Hamid Gharavi) but also – and importantly – the prototype works of young and talented academics and practitioners (see, for example, Monique Sasson, Rémy Gerbay, Mary Mitsi, Ileana Smeureanu, Alfonso Gómez-Acebo, Zena Prodromou and Ali Yesilirmak).

Since the inception of the Series, international arbitration has been one of the most diverse, dynamic, and indeed exciting fields of international law. The Series has inevitably benefited from the extraordinary growth of arbitration. But we also want to believe that the Series’ contribution to the scholarship of international arbitration has been real and important.

 

Stavros Brekoulakis is Professor of International Arbitration, Director of the School of International Arbitration, Queen Mary University of London, and Co-Editor (with Professor Julian Lew) of the International Arbitration Law Library Series, published by Kluwer Law International.

References   [ + ]

1. ↑ See the seminal Hague Lectures of Berthold Goldman, Les Conflits de Lois dans l’Arbitrage International de Droit Privé, 109 Collected Courses 347 (1963). 2. ↑ See generally, Daniel Cohen, Arbitrage et Société [Arbitration and Society] (1993); Bruno Oppetit, Theorie de l’arbitrage (1998); E. Loquin, L’application des règles nationales dans l’arbitrage commercial international, in L’apport de la jurisprudence arbitrale, 87 (1986). 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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The Development of International Arbitration as a Mechanism For Determining International Business Disputes

Kluwer Arbitration Blog - Fri, 2021-02-05 20:55

Professor Stavros Brekoulakis has written a blog post commemorating the 60th volume of Kluwer Law International’s International Arbitration Law Library Series (“Series”), of which he and I are co-editors. His blog post considered the Series’ contribution to the field in light of the evolution of international arbitration’s scholarship in the last 40-50 years. In particular, he reflected on the founding of the School of International Arbitration, Queen Mary University of London in 1985, which was the first academic institution dedicated to the teaching and research of international arbitration. In the intervening years, international arbitration has continued to grow and mature as a field, and so too has related research and scholarship. Reaching the 60th volume of the Series is only one such example; however, it is a significant one. To mark this moment, I wish to offer some perspectives on the background to the development of international arbitration in the 1960s-1980s, and the founding of the School of Arbitration in 1985.

When we established the School of International Arbitration we had a clear vision: to establish a centre of excellence to research, teach and participate in the development of international arbitration as a stand-alone subject. We aimed to provide our students with an understanding of the aims, structure and workings of international arbitration as an independent, flexible and appropriate mechanism to determine disputes arising from international transactions of all kinds in an efficient and effective manner.

There were three prevailing geo-political factors at that time which heralded the beginning of a new era for international arbitration.

First, following the end of WWII, was the emergence of many new and independent states, particularly in Africa and Asia, in the 1950s and 1960s. This was the end of the colonial period. The opportunities from trading internationally were apparent and the circumstances to support these opportunities became the focus of international institutions and national governments.

Second, following on the first point, was the beginning of globalisation and increasing international commercial reliance and business transactions. This was spurred on with the development of telecommunications and the need of the business world for new markets and places of business. National focuses were replaced by global visions.

Third, and perhaps the most significant for the School of International Arbitration, was the emergence and acceptance of an international and neutral infrastructure for international arbitration. This was started in 1958, when the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards was concluded. Today this is the cornerstone of international arbitration, to which over 168 countries are party.

The 1960s saw a flurry of developments:

  • The 1961 European Convention on International Commercial Arbitration (mainly between western and eastern countries). To date, the Convention has 16 Signatories and 31 parties.
  • In 1965 regionally focused arbitration rules for international commercial arbitration were developed by United Nations Economic Commissions for Europe and for Asia and the Far East.
  • These were the forerunners to the UNCITRAL Arbitration Rules 1976.
  • In 1966 through the influence of the World Bank, the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and the establishment of ICSID, provided a system for determining disputes between investors and the States in which they had invested. To date, 163 States have signed the Convention, of which 155 have ratified it.
  • In the early 1980s UNCITRAL also proposed the Model Law on International Arbitration which States could incorporate into their national laws. To date 84 States (for 117 jurisdictions) have adopted the Model Law, in whole or in part.

As we know now, these factors all have contributed to the development of international arbitration practices, with accepted basic legal principles and practices followed in arbitrations conducted under different systems and different laws.

Whilst there were many institutions offering arbitration facilities around the world, the only active international arbitration institution at that time, with a significant caseload, was the International Chamber of Commerce. The other institutions were focused on domestic arbitrations or were offering arbitrations for special circumstances, e.g., the Stockholm Chamber of Commerce, which the American Arbitration Association and the Soviet Foreign Trade Arbitration Commission had agreed should be the forum for disputes between US and USSR entities.

In many countries and legal systems there was no real concept of international arbitration.  There were few truly international arbitration specialist lawyers. Many of those were professors of private international law, public international law, international commercial and comparative law. Even if law firms had lawyers with some experience of international arbitration, few such firms boasted great expertise in international arbitration.  In most national jurisdictions, arbitration was seen either as a subject of procedural law, or a contractual arrangement between parties.

Even where parties were of different nationalities, and the underlying business arrangement out of which their dispute arose was in other countries, most national systems considered the arbitration to have the nationality of the country in which it had its seat. This often also indicated the law and procedure to govern the arbitration and the substantive issues in dispute and enabled national courts to claim the right and obligation to review the process followed and decision reached by arbitrators. That is why in many countries arbitral practice mirrored how proceedings were conducted in the national courts. Today, subject to mandatory laws, there is greater flexibility in the right of parties to choose the applicable substantive law or rules to govern their relations, and the procedure to be followed in the conduct of the proceedings.

At that time, there was nowhere to study international commercial arbitration as a stand-alone subject.  Arbitration was considered in some jurisdictions as a subset of procedural law; in other places, it was a contractual arrangement between the parties as to how disputes should be resolved, and was considered similar to all other contractual terms. In these jurisdictions, it was subject to control and supervision, more or less, by the national courts.  International arbitration was not considered a subject in its own right.

Our vision at the School of International Arbitration was to present international arbitration, commercial and investment, as a distinct and independent subject, with its own specific character, requirements, practices and infrastructure. We wanted to provide a venue where students could learn about international arbitration, its essential characteristics, infrastructures, international regulations, soft law and other instruments, as well as the fundamentals, concepts and issues which arise in practice.

An essential criterion for international arbitration was its non-nationality. Hence the requirement that arbitrators should be independent and impartial, and that all parties should be equally viewed in the context of the arbitral process. It was increasingly accepted that national procedural and substantive laws were not necessarily appropriate for an international arbitration with parties from different and often disparate jurisdictions.  Whilst recognised in principle these concepts were to be developed into fundamentals of international arbitration in light of decreasing confidence of parties receiving a fair hearing in national courts. These principles are still followed and considered fundamental to international arbitration today and, through the decisions of national courts, they have become clearer and even more entrenched.

In this light there were three key elements in the arbitration courses and other programs which were developed by the School of International Arbitration: private international law, public international law and comparative law.  This was pertinently summarised by Professor Pierre Lalive at the inaugural conference of the School of International Arbitration when he expressed the view that an international arbitrator “should have a good command of contract law, commercial law, procedure, private international law and preferably also public international law” but should also have some experience “of comparative law and the comparative method”.1)P Lalive, “International arbitration – teaching and research”, in Contemporary Problems in International Commercial Arbitration, ed Julian D M Lew, 1986, Centre for Commercial Law Studies, at p 16. jQuery("#footnote_plugin_tooltip_6996_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6996_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

These subjects were considered the essential tools for practitioners and arbitrators where parties are from different legal and cultural backgrounds. They remain fundamental to the work of the School of International Arbitration today and to the specialist international arbitration lawyer.

Private international law and conflict of law rules are important as they direct the determination of the applicable national or non-national governing law and the applicable relevant rules to apply. This relates not only to the law to govern the substantive issues and the arbitration agreement, but also relevant procedural issues within a non-national and independent system arbitral context. It also is frequently relevant to other incidental but important issues, such as rights and duties of legal entities, the form of documents and evidence, and the obligations and behaviour of legal counsel.

National legal systems have their conflict of law rules applicable in a domestic context.  There are no default rules for choice of law in international arbitration. Most arbitral institutions now have choice of law rules to be applied by tribunals. This includes the right of arbitrators to make a direct choice of the applicable substantive law to apply based on the facts and circumstances of the case, or to choose and apply a conflict of law rule which the tribunal considers appropriate to direct it to the applicable law. Arbitrators are also able to apply non-national rules such as the lex mercatoria and soft laws to the substantive dispute, or decide issues ex aqua et bono where appropriate.

Public international law was important because States have always been involved, directly or indirectly, in international business, and influence transactions through their laws and policies. This has expanded enormously with the now mainstream of investment arbitrations under the ICSID Convention and other treaties, e.g., NAFTA, USMCA, ECT, CAFCA, and bilateral investment treaties.

Comparative law brings clearly the need to understand that at all levels of legal direction, there are different national ways of dealing with legal and practical situations. This includes, e.g., burden of proof and weight of evidence, discovery/document production, presentation of evidence, examination of witnesses, reports of experts, legal privilege, awarding costs. It is important to understand these concepts which apply with differences in all international arbitrations, often determined specifically for each arbitration depending on its facts, the applicable rules, the origin of the parties, the seat of the arbitration and the background of the arbitrators.

A major change since the establishment of the School of International Arbitration is that now, after 35 years, many law firms and many individual lawyers have expertise in international commercial arbitration, including international investment arbitration, with dedicated teams working in these areas. International arbitration has become almost a core subject in many university programmes. Many of our former students have joined major law firms, big corporations, arbitration institutions, and government service where they are involved with international arbitration; there are also former students now professors and lecturers on international arbitration in many countries.

This level of maturity and growth has been enabled by continued study, research and scholarship. It is therefore fitting that the Series covers a wide range of works related to international arbitration, spanning from mediation and commercial arbitration to energy, maritime and investment arbitration; from private law to public international law; from conflict of laws to contract and procedural law. Professor Brekoulakis and I view it as a venue to explore and better understand current debates and important issues in the field.

Having now reached the milestone of 60 volumes, we look forward to the scholarship that will take us to 100 volumes and beyond.

 

Professor Julian Lew QC is Professor of International Arbitration and Head of the School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London. He has held these positions since the School’s creation in 1985. He is Co-Editor (with Professor Stavros Brekoulakis) of the International Arbitration Law Library Series, published by Kluwer Law International.

 

 

 

References   [ + ]

1. ↑ P Lalive, “International arbitration – teaching and research”, in Contemporary Problems in International Commercial Arbitration, ed Julian D M Lew, 1986, Centre for Commercial Law Studies, at p 16. 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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