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Prague Rules v. IBA Rules and the Taking of Evidence in International Arbitration: Tilting at Windmills – Part II

Kluwer Arbitration Blog - Thu, 2018-07-05 17:22

Guilherme Rizzo Amaral

On my latest post, I addressed the announcement of the upcoming Inquisitorial Rules on the Taking of Evidence in International Arbitration (“The Prague Rules”) as a reaction to the alleged “Creeping Americanisation of international arbitration”, represented by the IBA Rules on the Taking of Evidence in International Arbitration (“IBA Rules”).

In this post, I will assess whether the Prague Rules really differ from the IBA Rules and whether the former are actually capable of delivering a satisfactory result in terms of arbitration efficiency.

Prague Rules and IBA Rules: not that different after all

The Prague Rules provide for the arbitral tribunal’s active role on the taking of evidence in article 2.5, which states that “[t]he Tribunal may also, if it deems appropriate, order the Parties to produce evidence (including making available fact witnesses or expert reports)”. Furthermore, article 3.1 entitlesand encouragesthe arbitral tribunal to take an active role in establishing the facts of the case, albeit not releasing the parties from their burden of proof. The tribunal may on its own motion“request any of the Parties to produce relevant documentary evidence or make fact witnesses identified by the Arbitral Tribunal available for testimony” (article 3.2, i), appoint experts or instruct the parties to do so (article 3.2, ii), order site inspections (article 3.2, iii) and take other appropriate actions for the purposes of fact finding (article 3.2, iv). The Tribunal may also on its own initiativerequest that both Parties and non-parties to the arbitration produce documents (articles 4.4 and 4.5).

From the declaration of purpose of the Prague Rules, we would expect the IBA Rules to take an entirely different stance on these issues. Yet the reality is much different.

The IBA Rules also encourage the arbitral tribunal to identify any issues (whether factual or legal issues) that it considers relevant to the case (article 2.3) and to order the production of documents (article 3) – and here the tribunal has an even more inquisitorial role as the verb orderis used instead of request, favoured by the Prague Rules. The IBA Rules even allow the arbitral tribunal itself to take “any step it considers appropriate to obtain Documents from any person or organisation” (article 3.10). The same goes for witnesses: the tribunal may order any Party to provide for the appearance for testimony of any person, “including one whose testimony has not yet been offered (article 4.10). As for experts, the tribunal also has discretion to appoint their own (article 6), without prejudice to the appointment of experts by the parties (article 5). The arbitral tribunal may also order inspections on its own motion (article 7). Furthermore, the IBA Rules provide that the arbitral tribunal “shall at all times have complete control over the Evidentiary Hearing (article 8.2), varying the order of the proceeding on its own motion(article 8.3, f) and asking witness questions at any time (article 8.3, g).

Both the Prague Rules (articles 5.2 and 5.3) and the IBA Rules (article 9.2) allow the arbitral tribunal to exclude witness testimony on its own motion if said testimony is not relevant to the case. Both the Prague Rules (5.6) and the IBA Rules (article 8.2) bestow upon the arbitral tribunal the power to limit the number of questions to witnesses. Finally, both the Prague Rules (article 6.3) and the IBA Rules (articles 9.5 and 9.6) allow the arbitral tribunal to make adverse inferences, although the IBA Rules are much more detailed on the issue.

With so many similarities between the Prague Rules and the IBA Rules, especially concerning the arbitral tribunal’s proactive role on the taking of evidence, one may question whether the former might be an overreaction to a misconceived view on what the latter really stands for.

Maybe now is a good time to revisit the note from the Prague Rules’ working group. As we have seen so far, the approach towards document production, fact witnesses and party-appointed experts is quite similar in the two sets of rules. Yet the note from the Prague Rules’ working group points out that (i) the IBA Rules take for grantedthe party’s entitlement to cross-examine witnesses, (ii) many arbitrators are reluctant to actively manage arbitration proceedings, fearing the risk of a challenge, (iii) it is very rare that “document production brings a smoking gun to light”, and that (iv) there are doubts “as to the usefulness of fact witnesses and the impartiality of party appointed experts”.

As to the right to cross-examine, it remains unclear how it harms arbitration efficiency, as both the IBA Rules and the Prague Rules allow the tribunal to curtail undue or ineffective questioning of witnesses.

With regard to the arbitrators’ reluctance to manage proceedings for fear of challenges, this would actually stimulate an adversarialapproach rather than an inquisitorialone, and both the IBA Rules and the Prague Rules provide room for arbitrators to follow the latter path unhindered.

Finally, doubts as to the usefulness of document production or party-appointed experts have not caused either the IBA Rules or the Prague Rules to ever dismiss such proceedings. Quite the contrary, both sets of rules confer to the parties the opportunity to appoint their own experts (IBA Rules, article 5; Prague Rules, article 6.6).

And yet the Prague Rules contain a rather questionable provision stating that the arbitral tribunal “shall avoid extensive production of documents, including any form of e-discovery” (article 4.1). It is important to note, however, that it is one thing to control the usefulness of documents in arbitration – a point that both the IBA Rules and the Prague Rules leave at the discretion of the tribunal. Another entirely different thing is to abdicate methods such as e-discovery, which are fundamental not only due to the way businesses are conducted nowadays but also due to the need to address the imbalance between the parties, assuring both a formal and a substantive due process in arbitration. At first glance, the suppression of e-discovery simply looks backward minded.

Anyhow, if the Prague Rules do not represent a clear departure from the IBA Rules – save exceptional and questionable provisions such as the condemnation of e-discovery – one may question whether there is any gain or even utility in issuing them in the first place.

Conclusion

The Prague Rules operate under the shadow of an apparent war between common law and civil law armies for dominance over the international arbitration landscape. Yet, just like Don Quixote, they mistake windmills for giants.

As commentators have pointed out, “[r]igid distinctions that exist between civil law and common law approaches are not imposed upon international commercial arbitration”, as “the emerging practice for taking of evidence in international commercial arbitration comprises elements of both civil and common law type procedures, other legal systems, and practices especially appropriate for an international process” (LEW, Julian D. M., MISTELIS, Loukas A., et al., Comparative International Commercial Arbitration. Kluwer Law International, 2003. p. 556).

This approximation between the common law and the civil law traditions is not circumscribed to international arbitration. It is rather a universal trend intensified by globalisation and the growth of international trade. For example, while civil law countries have been adopting their own case-law systems, common law countries have been relying more and more on statutes rather than on precedents. Good examples can be taken from the Chinese Case Guidance Systemand from the new Brazilian Code of Civil Procedure, which I have dealt with in a recent publication.

The Prague Rules and the IBA Rules are examples of soft law. In order to succeed, soft law needs to bridge gaps, not burn bridges. Its strength rests upon its network effects:the more agents rely upon the soft law, the more power it acquires (DRUZIN, Bryan H. Why does Soft Law have any Power Anyway? Asian Journal of International Law, vol. 7/no. 2, 2017, pp. 362-363). Therefore, it is not by building an illusionary divide between common law and civil law practitioners that the Prague Rules will thrive. Such approach, in fact, practically sentences them to stillbirth.

There is much to gain from a joint effort of arbitration practitioners and academics from different cultural and legal backgrounds, as long as their shared goal is to put all their might at the service of a more reliable, legitimate and cost-effective international arbitration. It would be a terrible mistake to assume that by defending entrenched legal theories or traditions one could achieve such a goal.

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The post Prague Rules v. IBA Rules and the Taking of Evidence in International Arbitration: Tilting at Windmills – Part II appeared first on Kluwer Arbitration Blog.

Supreme Court Grants Cert Addressing Delegation of Arbitrability

Business Conflict Blog - Thu, 2018-07-05 14:46

Upon reconvening in October 2018, the Supreme Court will take up  an interesting question involving the familiar rules of First Options v. Kaplan:  Who is to decide whether a claim is subject to arbitration — a court or the arbitrator?  The peculiar facts giving rise to that concern in Archer and White Sales Inc. v. Henry Schein Inc. broaden, rather than limit, the case’s interest.

Archer, a distributor and seller of dental equipment, brought a suit against Schein, a manufacturer, alleging violations of the Sherman Antitrust Act through a pattern of conduct including price-fixing and anti-competitive agreements that were continuing.  The suit sought both money damages and an injunction prohibiting the continuing conduct.

Schein moved to compel arbitration pursuant to an arbitration agreement that required the application of AAA Rules and that carved out of its scope “actions seeking injunctive relief.”  The Magistrate Judge granted the defendants’ motion to compel arbitration on the grounds that (a) the choice of AAA Rules evince an intention to delegate arbitrability to the arbitrator, and that (b) the arbitration agreement can be reasonably construed as contemplating the inclusion of this dispute.

(AAA Rule 7(a) provides that an “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”)

The district court vacated the Magistrate Judge’s order and held that the dispute was not arbitrable  pursuant to the arbitration agreement, because it expressly carved out any claim for the injunctive relief sought by the plaintiff in the action.

Upon appeal to the Fifth Circuit, the parties agreed to the existence of an arbitration agreement, but not to whether its scope included the filed action.  Following its precedent in Douglas v. Regions Bank, the court entered into a two-step analysis, asking first whether the parties “clearly and unmistakably” intended to delegate the question of arbitrability to an arbitrator, and second whether there is a plausible argument for the claim’s being arbitrable.  This is so because, according to the Douglas analysis, if the argument of arbitrability is “wholly groundless,” it made no sense to send to an arbitrator a dispute as to which there are no grounds whatsoever for arbitration.

As to the first step — whether the parties unmistakably agreed to delegate arbitrability — the court skirted the question of whether AAA Rule 7(a) delegated the question of arbitrability to claims that are subject to the carve-out in the arbitration agreement.  Instead, it held that the second Douglas step was dispositive irrespective of the resolution of that first inquiry.  That second-step analysis was straightforward, according to the Fifth Circuit.  The arbitration agreement “expressly excludes certain types of disputes,” and among them are claims for injunctive relief.  Here we have a dispute where the claimant seeks injunctive relief.  Any conclusion  that the claim is subject to arbitration is therefore “wholly groundless,” and the court could see “no plausible argument that the arbitration clause applies” to it.  The district court therefore properly determined that the action was not subject to arbitration, and its order denying defendants’ motion to compel was affirmed.  “The mere fact that the arbitration clause allows [plaintiff] to avoid arbitration by adding a claim for injunctive relief does not change the clause’s plain meaning.”

[Note to Self:  Revise slide 19 of the “Drafting Arbitration Clauses” Power Point!]

So we have several interesting questions.  Does a clause carving out “actions seeking injunctive relief” carve out that portion of an action that seeks an injunction, but preserve that portion that seeks monetary damages?  Is the idea of booting “wholly groundless” claims of arbitrability properly applicable only to claims having nothing whatsoever to do with the contract at issue (say, a claim for an unrelated, non-contractual injury)? In determining the “wholly groundless” nature of the assertion of arbitrability, is the court improperly construing the arbitration agreement, in derogation of the parties’ determination that the arbitrator should do so pursuant to AAA Rule 7(a)?  Is there an at-least-colorable construction of the carve-out language that would hold that the parties may come to court to seek injunctive relief, but must arbitrate claims for money damages?

At least we will have no doubt about “who decides” these questions — the Supreme Court will.

Exciting ADR Developments in China and Hong Kong - JD Supra (press release)

Google International ADR News - Thu, 2018-07-05 14:16

JD Supra (press release)

Exciting ADR Developments in China and Hong Kong
JD Supra (press release)
Meanwhile, JAMS also is preparing to co-sponsor major events this fall in both Hong Kong and China with leading Chinese alternative dispute resolution institutions, including the Shenzhen Court of International Arbitration, Beijing's China ...

and more »

Exciting ADR Developments in China and Hong Kong | JAMS ... - JD Supra (press release)

Google International ADR News - Thu, 2018-07-05 14:16

JD Supra (press release)

Exciting ADR Developments in China and Hong Kong | JAMS ...
JD Supra (press release)
A JAMS delegation traveled to Hong Kong in May to participate in the fourth Shanghai-Hong Kong Commercial Mediation Forum, a seminal event that provides ...

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Law Helps Divorcing Couples Avoid Combat - Daily North Shore

Google International ADR News - Thu, 2018-07-05 13:09

Daily North Shore

Law Helps Divorcing Couples Avoid Combat
Daily North Shore
As an alternative-dispute resolution method, it utilizes the specialized skills of various trained professionals to reach resolutions acceptable to both parties. Both parties must retain attorneys from ... Together with the International Association ...

Product liability in Canada - Lexology

Google International ADR News - Thu, 2018-07-05 08:15

Product liability in Canada
Lexology
These acts legislate into consumer contracts (which encompasses most retail sales of products) implied conditions as to description, fitness, merchantability and durability. Further, the United Nations Convention on Contracts for the International Sale ...

Nigeria: Buhari to Reorganise Judiciary for Anti-Corruption War - AllAfrica.com

Google International ADR News - Thu, 2018-07-05 00:38

Nigeria: Buhari to Reorganise Judiciary for Anti-Corruption War
AllAfrica.com
He stressed the crucial role of the maritime sector in the nation's economy, and called for efficient use of the Alternative Dispute Resolution (ADR) mechanisms which, he noted, has a proven record of expeditious resolution of maritime cases. The CJN ...

and more »

Nigeria: Buhari to Reorganise Judiciary for Anti-Corruption War - AllAfrica.com

Google International ADR News - Thu, 2018-07-05 00:38

Nigeria: Buhari to Reorganise Judiciary for Anti-Corruption War
AllAfrica.com
He stressed the crucial role of the maritime sector in the nation's economy, and called for efficient use of the Alternative Dispute Resolution (ADR) mechanisms which, he noted, has a proven record of expeditious resolution of maritime cases. The CJN ...

and more »

Buhari to reorganise judiciary for anti-corruption war - Guardian (blog)

Google International ADR News - Wed, 2018-07-04 23:25

Guardian (blog)

Buhari to reorganise judiciary for anti-corruption war
Guardian (blog)
He stressed the crucial role of the maritime sector in the nation's economy, and called for efficient use of the Alternative Dispute Resolution (ADR) mechanisms which, he noted, has a proven record of expeditious resolution of maritime cases. The CJN ...

and more »

Prague Rules v. IBA Rules and the Taking of Evidence in International Arbitration: Tilting at Windmills – Part I

Kluwer Arbitration Blog - Wed, 2018-07-04 17:14

Guilherme Rizzo Amaral

On May 29, 2010, the International Bar Association (“IBA”) adopted the IBA Rules on the Taking of Evidence in International Arbitration (“IBA Rules”), a revised version of the original 1999 version which, in turn, had replaced the IBA Supplementary Rules Governing the Presentation and Reception of Evidence in International Commercial Arbitrationof 1983.

Even though the IBA Rules were drafted as a “resource to parties and to arbitrators to provide an efficient, economical and fair process for the taking of evidence in international arbitration”, their main goal was to bridge the gap between different legal systems and their respective procedures on the taking of evidence, which is “particularly useful when the parties come from different legal cultures” (IBA Rules, Foreword).

The IBA Rules have successfully influenced the practice of international arbitration, as arbitral tribunals formed by members from different legal traditions have been applying them, be it on their own motion or at the request of the parties,regardless of an express choice for the IBA Rules in the terms of reference.

However, such success has not prevented a reaction from members of the arbitral community concerned by what they see as a dominance of the common law tradition over the IBA Rules. For instance, the denunciation of a “Creeping Americanisation of international arbitration” set the tone at the IV Russian Arbitration Association Annual Conferencethat took place in in Moscow on April 20, 2017. The outcry gave rise to the proposal of a different set of rules, the so-called Inquisitorial Rules on the Taking of Evidence in International Arbitration, or The Prague Rules, as their drafters intend to launch them in Prague in December 2018.

In a preliminary draft of the Prague Rules, dated March 2018, it is easy to see that while they share one of the goals of the IBA Rules, which is to improve the efficiency of international arbitration, their focus is entirely different when it comes to bridging the gap between different legal traditions.

The Prague Rules are a manifestoin favour of the civil law tradition and of an inquisitorial approach in international arbitration, as well as an attack on the inefficiencies of the adversarial approach. If their official name was not enough evidence of that – InquisitorialRules on the Taking of Evidence in International Arbitration –, the note from the Prague Rules’ working group leaves no room for doubt. It criticises the IBA Rules “from a civil law perspective” for following “a more adversarial approach”. It goes on to say that many of the procedural features of the IBA Rules “are not known or used to the same extent in non-common law jurisdictions, such as continental Europe, Latin America, [the] Middle East and Asia”. It then states that the adoption of an “inquisitorial model of procedure” would contribute to the efficiency in international arbitration, “reducing time and costs of arbitrations”.

Regardless of any assessment on the efficiency of the Prague Rules’ procedural mechanisms to reduce the time and costs of arbitrations, some questions can immediately be raised: Is it true that the IBA Rules are dominated by the common law tradition – that is to say by an adversarial approach? How much do the IBA Rules differ from the Prague Rules? Furthermore, if the problem with the IBA Rules is really the fact that many of their features are uncommon to civil law practitioners, would the Prague Rules not suffer from the same problem in reverse? Considering the existence of domestic arbitration statutes and institutional rules that already reflect different traditions, what would be the purpose of a soft lawon the taking of evidence in international arbitration if not to bridge the gap between different legal traditions?

The Prague Rules and the proactive role of the arbitral tribunal

The classic distinction between the inquisitorial approach and the adversarial approach rests on the distribution of burdens and powers between parties and adjudicators (whether judges or arbitrators). An inquisitorial proceeding relies on an active role of the adjudicator, who may take initiative both in fact-finding (production of evidence) and in the ascertainment of the law. The adversarial approach, on the other hand, burdens the parties with those activities and confers upon the adjudicator the duty to preside over the proceeding and to rule on the dispute as an umpire; definitely a more passive stance for the adjudicator.

That said, the Prague Rules contain many provisions bestowing a proactive role upon the arbitral tribunal. And yet many of such provisions have no direct connection – and sometimes not even an indirect connection – with the taking of evidence, as can be seen in the provisions of article 2 (e.g., holding a case management conference through electronic communication, clarifying the legal grounds on which parties base their position, fixing a procedural timetable, limiting the number of submissions or their length, the tribunal being allowed to share with the parties – during the proceeding – its views regarding the relief sought), article 9 (assistance in amicable settlement), or article 11 (allocation of costs).

These provisions in particular may be useful in ad hocarbitrations, yet their usefulness in institutional arbitrations is questionable as most institutional rules or terms of reference usually address those issues. The Prague Rules themselves concede that due regard should be given not only to the mandatory provisions of the lex arbitribut also to the applicable arbitration rules (article 1.3).

Yet, what about the rules strictly concerning the taking of evidence? How do the Prague Rules differ from the IBA Rules? Are the Prague Rules capable of delivering a better result than the IBA Rules in terms of arbitration efficiency?

These questions will be addressed in the second and final part of this post.

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The post Prague Rules v. IBA Rules and the Taking of Evidence in International Arbitration: Tilting at Windmills – Part I appeared first on Kluwer Arbitration Blog.

Product liability in Switzerland - Lexology

Google International ADR News - Wed, 2018-07-04 09:02

Lexology

Product liability in Switzerland
Lexology
In terms of product regulation and liability law, Switzerland has kept up with international developments. On 12 June 2009, the Swiss Parliament enacted the Product Safety Act (SR 930.111) which governs the safety of products that are placed on the ...

CJN harps on training of judges for efficient operation in maritime - NIGERIAN TRIBUNE (press release) (blog)

Google International ADR News - Wed, 2018-07-04 05:52

NIGERIAN TRIBUNE (press release) (blog)

CJN harps on training of judges for efficient operation in maritime
NIGERIAN TRIBUNE (press release) (blog)
The CJN stressed the need for the expeditious resolution of maritime cases through Alternative Dispute Resolution mechanisms such as Conciliation and Mediation. According to him, the adoption of technology is helping to transform the maritime industry ...

International Commercial Court in China: Innovations, Misunderstandings and Clarifications

Kluwer Arbitration Blog - Tue, 2018-07-03 22:03

Wei Sun

On 29 June 2018, the Supreme People’s Court of China (the “SPC”) launched its First International Commercial Court in Shenzhen, Guangdong, and Second International Commercial Court in Xi’an, Shaanxi (the “Courts”). Correspondingly, the Regulations of the Supreme People’s Court on Certain Issues Concerning the Establishment of International Commercial Courts (the “Regulation”) has just taken effect on 1 July, 2018. This is considered an effort by the SPC to provide effective judicial protection for the “Belt and Road” initiative, and to reform China’s international dispute resolution system. In this article, I will introduce the basic mechanisms of the Courts, and then clarify certain misunderstandings which I believe are already circulating within the international community of law practitioners.

 

  1. Courts

 

The Courts are permanent branches of the SPC. The judges of the Courts are appointed by the SPC from experienced judges familiar with practices in international commerce and investment and having language capacity to work with both Chinese and English. Currently, the SPC has appointed eight judges, including Wang Chuang, Zhu Li, Sun Xiangzhuang, Du Jun, Shen Hongyu, Zhang Yongjian, Xi Xiangyang, and Gao Xiaoli. A tribunal hearing a specific case will consist of three or more judges.

 

The Courts will only hear international civil and commercial disputes between equal parties. In other words, they will NOT hear state-state trade or investment disputes or investor-state disputes. According to Article 3 of the Regulation, disputes are “international” where one or both of the parties are foreign, where one or both parties regularly reside outside the territory of the PRC, where the subject matter is located outside the territory of the PRC, and where legal facts that create, change or eliminate commercial relations occur outside the territory of the PRC.

 

Specifically, the Courts will focus on four types of international commercial disputes: first, a dispute where the parties agree to litigate in the SPC according to Article 34 of the Chinese Civil Procedural Law and the amount in dispute exceeds RMB 300 million; second, a dispute which originally should be litigated in a high court but was submitted to the SPC because the high court believes it should be heard by the SPC and the SPC approves; third, disputes that have an impact nationwide; fourth, disputes where one parties applies for interim measures in assistance for arbitration, setting aside and enforcement of arbitral awards according to Article 14 of the Regulation.

 

  1. Clarifying Misunderstandings

 

  1. Determining the Jurisdiction of the Courts

 

The jurisdiction part of the Regulation is mainly drafted with a focus of the jurisdictional relationship between the Courts as part of the SPC and the lower courts. Under the Civil Procedure Law, the SPC already has the right to hear any litigation case, as long as it believes to be necessary, which is within the jurisdiction of a lower court. However, the relationship between arbitration and litigation and between domestic and foreign courts and arbitral institutions are much more complicated. The Regulation does not cover this issue.

 

For instance, let’s say an international sales contract between a Chinese company and a Russian one with the total value of RMB 1 billion designates one of the Courts as the forum, but when a dispute arises the amount in dispute is only RMB 200 million, would the Courts still have jurisdiction? If not, will the lower Chinese courts have jurisdiction? Or will the clause be deemed not applicable at all for this dispute? What if the plaintiff adds a new claim or the defendant makes a counter-claim, thus making the amount in dispute exceed RMB 300 million? Further, let’s say the same contract provides that when the amount in dispute is under RMB 300 million, arbitration under SIAC Rules; when the amount in dispute exceeds RMB 30 million, litigation in one of the Courts. Will this clause be valid? How does it work in practice?

 

  1. Involvement of Foreign Institutions

 

Misunderstanding: Article 11 of the Regulation provides that the Courts will work with international mediation and arbitration institutions to form a one-stop dispute resolution mechanism. Some believe foreign institutions will get involved and will be able to operate within China.

 

Clarification: The wording of “international” in this article refers to both Chinese institutions with experiences and reputation in international dispute resolution and foreign institutions. One good example for Chinese international arbitral institution is the CIETAC.

 

Major obstacles have to be cleared before foreign institutions could actually get involved. Opening up the market for these foreign institutions may happen in the future but it will unlikely be decided by the SPC. Hence, in the near future, institutions that actively work with the Courts will likely be Chinese institutions with an international focus.

 

  1. Interim Measures in Assistance of Foreign Arbitration

 

Misunderstanding: Parties to foreign arbitration proceedings may apply to the Courts for interim measures.

 

Clarification: This misunderstanding stems from Article 14 of the Regulation, which appear to mean that the parties, when choosing an international arbitration institution to resolve their disputes, may apply to the Courts for interim measures, whether before or during the arbitration proceeding.

 

However, Article 14 does not have that effect. The arbitration proceedings in this Article only refer to those conducted under Article 11 of the Regulation, i.e. arbitration proceedings as part of the Platform. The parties to foreign arbitration proceedings involving a Chinese party still cannot apply to Chinese courts for interim measures and cannot have the tribunal’s interim measure orders enforced in China.

 

  1. International Commercial Law Expert Committee (“Expert Committee”)

 

Experts will be mainly foreign nationals, especially those from “Belt and Road” countries with an international reputation and recognition. They may act as mediators if the parties choose so and will also help to ascertain and interpret foreign substantive laws as well as customary international rules.

 

According to Article 9 of the PRC Law on Judges, judges of Chinese courts must be Chinese nationals, so it is impossible for foreign nationals to be judges of the Courts. The Expert Committee is established so that foreign experts can play an active role, despite the restriction on becoming judges. The number of experts sitting in the Expert Committee might be around 30 so as to balance efficiency and diversity. The appointment, tenure, management and remuneration of experts will be provided in more detailed rules to follow. But it’s safe to say that when an expert is requested to work on a specific case, such as ascertaining foreign law, issuing expert opinions, or conducting as mediators, then very likely there will be payments.

 

  1. Procedural Language of the Courts

 

Misunderstanding: The procedural languages for case before the Courts can be English or other foreign languages.

 

Clarification: This common misunderstanding stem from Article 4, which require judges of the Courts to be able to use English as working language, and Article 9, which provides that, if agreed by the other party, a party may submit evidence materials in English without the need of translating into Chinese.

 

However, the Regulation never mentions that procedures before the Courts can be in English or parties can argue their cases in English. In fact, these are not possible under the current legal framework. Article 262 of the Civil Procedure Law in China provides that trials of cases involving foreign elements must be in “language commonly used in the PRC”, meaning Chinese, including languages native to the 55 recognized ethnic minorities in China. Article 6 of the Law on the Organization of Courts also includes a similar requirement. These laws are superior to the Regulation and cannot be modified by the SPC through judicial interpretations. Within the existing legal framework, the SPC is exploring ways to make it more convenient and cost-efficient for parties, hence the flexibility on submitting evidence materials in English.

 

  1. 6. Publication of Dissenting Opinions

 

Article 5 of the Regulation provides that a judgment of the Courts is reached by majority decision, and the dissenting opinion, if any, may be incorporated into the judgment. This is also an innovative measure of the SPC.

 

There have already been attempts (for instance, the Guangzhou Maritime Court) to promote the publication of dissenting opinions in judgments in China. However, this practice has never been widely adopted by other courts or made into a mandatory rule. Article 5 of the Regulation should NOT be viewed as an attempt to promote this practice nationally.

 

Internationally, in common law countries such as the United States, publication of dissenting opinion is a customary practice, but in civil law countries such as France, it is different, where each judgment is seen as the collective decision of the tribunal. In theory, China tends to recognize the practice of civil law countries. One possible major concern of the SPC is that, if the reasoning of each individual judge is known by the parties, then judges may face pressures, threats or reprisals from parties or even from higher-ups.

 

To make sure you do not miss out on regular updates on the Kluwer Arbitration Blog, please subscribe here.

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The post International Commercial Court in China: Innovations, Misunderstandings and Clarifications appeared first on Kluwer Arbitration Blog.

McGeorge Wins ABA International Negotiation Competition

ADR Prof Blog - Tue, 2018-07-03 14:41
This dispatch comes from our good friend (OGF?) Michael Colatrella (McGeorge). McGeorge School of Law, University of the Pacific students Doug Leach and Leah Parrish, representing the United States, won the American Bar Association’s (ABA) International Negotiation Competition held from June 26-30, 2018 in Wales, UK. The McGeorge negotiation team qualified to compete in the … Continue reading McGeorge Wins ABA International Negotiation Competition →

Former Justice Holland gets UK designation; Directors named at Richards, Layton & Finger: Law notes: July 3, 2018 - delawarebusinessnow.com

Google International ADR News - Tue, 2018-07-03 08:38

delawarebusinessnow.com

Former Justice Holland gets UK designation; Directors named at Richards, Layton & Finger: Law notes: July 3, 2018
delawarebusinessnow.com
... of the Delaware Supreme Court, Randy Holland became a door tenant, a rarity in the United Kingdom. To have international lawyers and former judges as door tenants is not unusual: Australian, Singaporean, South African and Indian nationals are ...

Arbitrating WTO Disputes

Kluwer Arbitration Blog - Tue, 2018-07-03 08:20

Matthew Weiniger and Akshay Sewlikar

Linklaters

In light of the tariffs on steel imposed by the United States of America (“USA”), the Europe Union (“EU”) has threatened to impose tariffs of its own on American goods. Additionally, the EU has also filed a claim against USA at the World Trade Organisation (“WTO”). However, as discussed below, it may be that this procedure may be ineffective due to a lack of members at the Appellate Body. Arbitration can serve to resolve disputes effectively until the larger issue at the Appellate Body is addressed by the States at the WTO.

Dispute resolution in the WTO

Under the Understanding on rules and procedures governing the settlement of disputes, Annex 2 of the WTO Agreement (“DSU”), a Dispute Settlement Body (“DSB”) is established for the settlement of disputes. When a dispute arises between the members of the WTO, it is first sought to be resolved through a consultation process (Article 4.2 DSU). Failing such consultation, a panel is appointed to assist the DSB in making rulings or recommendations (Article 4.3 DSU). The panel’s report can only be rejected by consensus within the DSB (Article 16.4 DSU). Each party to the dispute has 60 days from the date of the report to notify the DSB of its intention to file an appeal against the panel report to the “Appellate Body” (Article 16.4 DSU). Once such intention is notified, the DSB cannot consider the panel report for implementation until the appeal is heard (Article 16.4 DSU). Each appeal has to be heard by three members of the Appellate Body (Article 17.1 DSU). On the conclusion of the appeal, the Appellate Body report has to be adopted by the DSB and unconditionally accepted by the parties unless the DSB decides by consensus to not adopt the Appellate Body report within 30 days (Article 17.14 DSU).

Constitution of the Appellate Body and the current crisis

The Appellate Body consists of seven members, who are experts in the field of law and international trade. The DSU requires them to be unaffiliated to any government. Each Appellate Body member is appointed for a four-year term, which may be renewed for a second term. However, in practice, each member’s term is automatically renewed by the DSB for a second time. The appointment and re-appointment of members of the Appellate Body has to be by consensus within the DSB. Therefore, a country can oppose any appointment, or even re-appointment.

Currently, however, there are only four members on the Appellate Body. No new Appellate Body members have been appointed to replace these members who resigned or whose terms ended in 2018. This is due to the opposition of the USA to any new appointments. The USA claims that the Appellate Body members are guilty of judicial overreach, interpreting WTO agreements in a manner which they were never intended to apply and therefore, refused to consent to the appointment of new members. In the past, it has blocked the appointment of certain members who it alleges have indulged in judicial activism. USA argues that the Appellate Body creates new rights and provides decisions on issues not raised by the parties. However, due to the nature of the consensus requirement, there is no check on the adoption of its decisions. It has therefore refused to appoint members to positions vacated recently.

The status of the Appellate Body as a functioning arm of the WTO is under threat due to USA’s stance. By the end of 2019, only one member, Ms Zhao of China would remain on the panel. A panel report cannot be adopted by the DSB if an appeal is filed until it is decided by the Appellate Body. Given that three members are required to hear an appeal (Article 17.1 DSU), it is imperative to consider solutions to this impasse. Otherwise, the WTO dispute resolution procedure will grind to a halt as the DSB will not be able to adopt any panel report under appeal.

Commentators have offered a number of solutions such as agreements between states not to appeal the panel report and appointments to the Appellate Body by majority and not consensus in the DSB. One solution which should be widely considered is arbitrating WTO disputes.

Arbitrating WTO disputes

WTO disputes can be resolved through the arbitration process under Article 25 DSU. An Article 25 DSU arbitration can be initiated at any stage of a dispute, including on appeal from a panel decision. It produces decisions that are binding on the parties and are enforceable in the same way as panel and Appellate Body decisions adopted by the DSB. In the past, USA and EU have used the Article 25 DSU arbitration provision in United States – s 110(5) of the US Copyright Act (the “US Copyright case”). This case concerned an exemption in USA which permitted the playing of radio and television music in public without licenses in certain conditions which the EU argued was in contravention of the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”). USA agreed to implement the panel report, within a reasonable period of time to be determined by arbitration under Article 21.3 DSU. However, the parties could not agree on the level of nullification or impairment of benefits to the EU as a result of section 110(5) of the US Copyright Act. Therefore, they resorted to arbitration under Article 25 DSU. The arbitrator determined that the level of benefits nullified or impaired were EUR1,219,900 per year. Therefore, arbitration was used to resolve a specific aspect of the dispute in that case.

Article 25 arbitration could function as an alternative to a panel procedure or the Appellate Body procedure. Additionally, the procedure for the arbitration is subject to the agreement of the parties (Article 25(2) DSU). However, in practice and as mentioned in the US Copyright case, it is likely the procedures would be similar to those used in Appellate Body hearings. Thus, arbitration could be the most appropriate solution to the current crisis facing the WTO in respect of Appellate Body decisions.

Conclusion

Thus, until a more permanent solution is evolved, arbitration can be a practical solution to ensure that WTO disputes are not stuck in limbo and can be resolved successfully. There are however, practical barriers to such an approach. The success of this solution depends on States agreeing to it as a solution. Particularly, States who have lost in panel report might be reluctant to agree to arbitration instead of an Appellate Body hearing. Therefore, an agreement should be reached at the earliest possible stage of the dispute to arbitrate the appeal, or the entire dispute. This approach should be promoted by States in order to ensure that the WTO mechanism for the settlement of disputes remains effective and is not rendered defunct.

The views expressed in this article are those of the authors. The authors would like to thank Reyna Ge for her assistance with the article.

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