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Vienna Arbitration Days: How to Deal with Biases and Cultural Differences and Other Practical Issues

Kluwer Arbitration Blog - Thu, 2019-04-18 00:11

Floriane Lavaud and Edna Sussman

In the beautiful surroundings of the Palais Niederosterreicher, the 200+ delegates at Vienna Arbitration Days (VAD) 2019 were warmly welcomed by members of the Organising Committee, representing ArbAut, VIAC, AYIA (the Austrian Yearbook of International Arbitration), ICC Austria, YAAP (Young Austrian Arbitration Practitioners), and UNCITRAL.  Anna Joubin-Bret, UNCITRAL’s Secretary, provided an overview of UNCITRAL’s work streams, including its work on ISDS procedural reforms and expedited proceedings under the UNCITRAL rules.

The keynote speech from Professor Catherine Rogers of Penn State University and Queen Mary, University of London discussed the development of Arbitrator Intelligence, which is due to launch later in 2019.  Adopting an engaging presentation, Catherine considered the points of relationship between the storylines of James Bond films and the sorts of scenarios which arise in international arbitration, contrasting Bond’s gadgets with the most-used gadget in arbitrator selection, i.e., the old-fashioned word-of-mouth recommendations.

Arbitrator Intelligence seeks to unlock a wider range of options for parties and appointing counsel by using an in-depth data-driven analysis of an arbitrator’s track record to assist parties in making more informed selections of arbitrators.  Delegates were encouraged to explore the AIQ (the Arbitrator Intelligence Questionnaire) to see the depth of information which it seeks to extract. Such information being objective and factual, there is a limit to how much a disgruntled party, for example, can affect the feedback on a particular arbitrator.  The more data submitted via the AIQ, the more likely it is that the reports generated by Arbitrator Intelligence will be of high value to users.

The first panel session of the VAD featured four ArbitralWomen: Edna Sussman (independent arbitrator and mediator), chair, Philippa Charles (Stewarts, London), Giuditta Cordero-Moss (University of Oslo) and Claudia Winkler (Negotiation Academy), as well as Dr Philip Anthony from DecisionQuest (a leading mock trial/arbitration provider based in the U.S.).  Within the umbrella topic of psychology and its impacts in arbitration, the four speakers each gave a short presentation on a particular psychological dynamic in arbitration, which may affect the outcome if not anticipated and managed by participants.

Edna Sussman opened the discussion on cultural differences by reference to the Hofstede Dimensions and the studies that have demonstrated that people from countries with a higher “power distance” and who accept that some people have more power than others are more likely to be persuaded by expert testimony.  Philippa Charles noted that far from being cultural chameleons, arbitration practitioners are—at least, to some extent—influenced by their nationality and the approaches to society which that nationality imports.  She explained Professor Hofstede’s six cultural hard-wiring characteristics, where a high or low score tends to illustrate a particular national characteristic which is distinctive.  She drew out the overwhelming influence, for example, in US nationals, of a preference for individualism, and how that feeds into, for example, a drive for success.  Philippa also referred to high-context and low-context cultures, which can greatly impact a tribunal’s understanding of evidence.

Giuditta Cordero-Moss focused her presentation on the imprinting of a decision-maker’s home legal culture on their approach to legal issues.  Using as an example a contractual pricing mechanism dispute, she contrasted the instinctive, textual approaches of a Norwegian-trained lawyer and a British-trained lawyer.  The differing approaches led to different results in Giuditta’s example: the challenge for practitioners -and especially for arbitrators- is to apply the relevant applicable law without being influenced by one’s personal legal culture.

Claudia Winkler drew on her experiences training negotiators and mediators to look at framing and its effect on one’s receptiveness to a proposition.  In the negotiation context, the way in which an offer or proposal is framed may affect the recipient’s response, engaging either the recipient’s risk adversity or risk acceptance.  The effect of the choice of presentation has far wider implications, including in cross-examination questioning and a tribunal’s appreciation of the gulf between the parties’ positions. Being aware of the other party’s alternative framing and addressing it proactively, rather than being defeated in a “battle of the frames,” is also key.

Closing the session with practical guidance on how counsel can counter these biases, Edna quoted Lucy Reed comment that “what mock arbitration therefore does is to change the lawyers’ biases about their own cases. It allows them to see whether what they think are the most important points to make are (or are not) as good as they think, and therefore whether their clients are likely to win (or not).”  Dr. Philip Anthony highlighted two particular advantages of mock arbitration: First, having the mock judge’s private feedback assists the party in addressing any quasi-emotional or experientially-driven responses.  Second, the effect and influence of a dominant arbitrator or judge on the rest of the panel can be explored.  By matching the mock arbitrators as closely as possible to the selected panel, parties have an opportunity to assess how much a dominant arbitrator may affect the proceedings and potentially the outcome.

The second panel, consisting of Wendy MacLaughlin (GBsqd LLP), Howard Rosen (Secretariat International), and Manuel Conthe (Independent Arbitrator), was chaired by Dr. Günther Horvath (Dr. Günther J. Horvath Rechtsanwalt GmbH) and focused on the importance of mathematics and economics in arbitration. Wendy MacLaughlin explained the complexity in establishing reasons for the late completion of a project by means of forensic analysis.  She emphasised that delay analysis in construction projects should not be perceived as a “black box.” One of the challenges faced by arbitrators is that the use of the different methodologies can lead to different results, despite being based on the same facts (for example, relying on the actual progress records vs. using software with hypothetical calculations). Wendy explained that one methodology is not necessarily better than the other. The arbitral tribunal has to make its choice based on the available data and contractual requirements.

Howard Rosen explained the importance of the ability of counsel and arbitrators to manage economic and industry skills. Experts, in turn, should use plain language and provide practical examples that would complement an academic approach with practical market knowledge.  Bringing the message across in a clear and understandable manner requires time and cannot be underestimated by counsel. Arbitrators should also approach the presentation of the quantification of damages in an efficient manner and not leave it for the end of a long hearing.  Howard noted, although AI tools are very useful in the quantification of damages, they raise various ethical, practical and legal issues, such as who should be designing and maintaining the system, what should be the basis used by the system to “learn,” and whether the result should be considered valid evidence.

Manuel Conthe focused on the role and impact of time warps in the assessment of risks.  Manuel referred to the “curse of knowledge,” a cognitive bias under which an individual assumes that others have the technical and legal expertise to understand what he/she is explaining.  In arbitral proceedings, the time-lag between the events that led to a dispute and the actual time of arbitration unavoidably imposes a “curse of knowledge” upon arbitrators and causes discrepancies between the assessments of facts at the different stages of the dispute.  It is important for tribunals and parties to be aware of this phenomenon as both influence the decision-making process.

Building on the preceding panels, the third panel considered—from the perspective of counsel—the myriad of ways in which unconscious bias affects arbitral proceedings.  The panel featured two ArbitralWomen: Floriane Lavaud (Debevoise & Plimpton) and Cecilia Carrara (Legance), as well as Paul Oberhammer (WilmerHale), Carsten van de Sande (Hengeler Mueller), and moderator Klaus Peter Berger (Center for Transnational Law).  After discussing the different types of bias that affect arbitration proceedings, the panel suggested possible solutions and mitigating measures, including through the use of technical tools.

Floriane and Cecilia discussed the effect of the arbitrators’ legal background and training on their decision-making, particularly with respect to evidentiary rulings, and how to mitigate such bias.  For instance, practitioners from civil law jurisdictions may undertake a more inquisitorial approach to evidence, thereby limiting party-initiated disclosures, while arbitrators from common law jurisdictions may more broadly permit such disclosures.

Next, the panel considered a range of other biases, including self-serving bias, where decision-makers resolve ambiguities in a manner favourable to themselves, and hindsight bias, where decision-makers perceive certain facts as being more predictable than they actually were at the time.  The panel focused especially on the cultural biases of arbitrators vis-à-vis gender and race, in connection with how arbitrators assess the reliability of witnesses.  The panellists cited numerous efforts to tackle such biases in the selection of arbitrators, including the Pledge on Equal Representation in Arbitration and the ArbitralWomen arbitrator database.

Among the technical tools for mitigating bias, Floriane mentioned the hidden bias tests and training modules, such as the Implicit Association Test and Project Implicit (Harvard University- University of Virginia). Carsten discussed the increasing use of artificial intelligence (AI) in arbitration, but also the risk of AI tools leading to dysfunctional results, because not all relevant elements to disputes are taken into consideration when developing the original algorithms.  Cecilia discussed the Council of Europe’s first European Ethical Charter on the Use of Artificial Intelligence in Judicial Systems. They all stressed the importance of ensuring equal access, warning that any existing procedural unfairness may be further entrenched otherwise.

To conclude, Paul raised the importance of not losing sight of the fundamental goal to ascertain the underlying truth and distinguished between “scientific” and “legal” truths and the influence of such modalities on advocacy techniques. The panel emphasized that arbitrators are often self-aware of their biases and will indeed try to look beyond the manner and style of presentation of counsel to ascertain the underlying facts.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Pace’s securities arbitration clinic students go to the SEC

ADR Prof Blog - Wed, 2019-04-17 12:22
Because most disputes between individual investors and their brokerage firms are arbitrated through FINRA’s Dispute Resolution forum, many legal issues impacting retail investors do not make their way through the courts but instead end up being resolved in a private forum with little transparency (i.e., awards are published but usually contain no reasons or explanations). … Continue reading Pace’s securities arbitration clinic students go to the SEC →

The Problem of Assistance in Investment Arbitration?

Kluwer Arbitration Blog - Wed, 2019-04-17 01:00

Abhisar Vidyarthi

Most investment treaties do not expressly provide for the appointment of assistants or secretaries to the arbitral tribunal. It is an institutional practice that has been subsequently codified by several arbitral institutions, while some institutions are still silent on the subject. Despite the significant attempts being made, the apprehension that arbitral secretaries may overstep their limits continues to haunt the parties and the arbitral process. The same apprehension was shared by Popplewell J in P v Q, wherein he illustrated the considerable and understandable anxiety in the international arbitration community that the use of arbitral secretaries risks them becoming the fourth arbitrators. It is an established institutional practice that the arbitral tribunal may appoint assistants or secretaries after consulting the parties. The tribunal is further required to present the curriculum vitae of the assistants to the parties. Moreover, the same standards of independence and impartiality extend to such assistants and they are required to comply by the disclosure requirements. However, it cannot be assumed that entrusting the assistant with substantive arbitral functions was contemplated by the parties while giving the consent to their appointment.

 

Prevailing Rules Regarding the Role of Arbitral Secretaries

The ICCA Guide on Arbitral Secretaries attempts to enlist the best practice principles for the appointment and exercise of assistance by secretaries. It also provides that the delegation of work to secretaries may legitimately go beyond the administrative roles. The ICCA Guide elaborates that the role played by arbitral secretaries may include, researching questions of law and questions relating to factual evidence and witness testimony. Moreover, the task of secretaries may extend to drafting and reviewing procedural orders, parties’ submissions and evidence. They may also attend the arbitral tribunal’s deliberations and draft appropriate parts of the award’. Other institutions such as the SCC and LCIA limit the extent of tasks of assistants to purely organisational and administrative work of the arbitral tribunal. The UNCITRAL Notes on Organizing Arbitral Proceedings limits the task of secretaries to listing and briefing in light of fostering a timely decision by the tribunal. The SCC’s 2017 Arbitrator’s Guidelines further provide that, subject to any agreement of the parties to the contrary, ‘the administrative secretary’s duties shall be limited to organisational, clerical and administrative functions’. While there is no conclusive determination as to what the administrative functions might entail, the guidelines explicitly state that the tribunal shall not delegate any decision-making authority to the administrative secretary’. The Singapore International Arbitration Centre (SIAC) is not elaborate on the subject and provides that a secretary may only be appointed with the consent of all the Parties. However, it does not entail the ambit of the secretary’s duties and the same is subject to the   agreement between the parties. Moreover, the same standards of independence and impartiality are extended to the assistants. This is evident from the comparison given in the IBA Guidelines on Conflict of Interest in International Arbitration 2014 (“IBA Guidelines”) that both “secretaries and assistants to the Arbitral Tribunal are bound by the same duty of independence and impartiality (including the duty of disclosure) as arbitrators”.

 

Impact of delegation of Substantive functions to the Assistants or Secretaries

Over the years, the arbitral practice in Investment Arbitration, shows that arbitral assistants are sometimes appointed to assist the arbitrators. The complexity of the cases and the abundance of the submissions made by the parties triggers the appointment of assistants. The arbitral tribunal in Caratube v. Republic of Kazakhstan justified the appointment of the tribunal’s assistant by the need for logistical assistance on the file in this case. Furthermore, the appointment of assistants is in line with the objective of arbitration i.e. to ensure expedient and efficient resolution. The tribunal secretaries increase the efficiency of the arbitration proceeding by supplementing the arbitrators during the arbitral process. Moreover, they allow the arbitrators to focus on deliberating on the merits, and enable them to decide the cases expediently. Therefore, the appointment arbitral secretaries provide a cost effective mechanism to ensure the efficiency and expediency of the proceedings.

 

However, it is important to draw the line between the essential functions of the arbitrators and the functions that can be delegated to the assistants. The excessive involvement of arbitral assistants raise the following concerns.

 

  1. It shall be a ground for the disqualification of the Arbitrator

The delegation of substantive functions breaches the President’s duties to perform his function personally. Article 14 of the UNCITRAL Model Law provides that if an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay, then either party may request the court for the termination of his mandate. Article 14 of the ICSID Convention requires the arbitrators to be of high moral character and recognized competence.1) ICSID Convention, 1986, Art. 14(1). jQuery("#footnote_plugin_tooltip_2812_1").tooltip({ tip: "#footnote_plugin_tooltip_text_2812_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Moreover, the arbitrator must fulfill his role by exercising independent judgement to the best of his skill. The involvement of arbitral assistants and secretaries is contrary to the exercise of independent judgement. Furthermore, the position of arbitrators is voluntary and the same can be declined if they want to delegate essential functions to the secretary. Thus, the delegation of substantive functions by the arbitrator shall be a ground for a disqualification as it would render him unable to perform his duties.

 

  1. The delegation of substantive functions would raise doubts over the credibility of the award

The duties of the arbitral assistant must be limited to organisational and administrative work not extend to substantive functions such as collecting evidence and drafting the award. It was highlighted by Professor Jan Hendrik Dalhuisen, in his Additional Opinion in Compañía de Aguas v Argentina, that the appropriate role of a tribunal secretary is one of ‘administration and support’ and that the secretary is not the ‘fourth member of ICSID tribunals or ad-hoc committees. The assistants’ role must be limited to organisation and maintenance of the tribunal’s files and other administrative work such as organising hearings and meetings, attending deliberations, performing legal research, and proofreading procedural orders and awards. The ICCA note on arbitral secretaries expressly states that under no circumstances may the Arbitral Tribunal delegate decision-making functions to an Administrative Secretary. The delegation raises concern of quality, impartiality and objectivity. Arbitral Institutions prescribe for certain qualifications for arbitrators in investment arbitration that ensure the integrity of the tribunal. Therefore, as the arbitrators in investment arbitration possess considerable expertise in the subject, the involvement of secretaries and assistants in decision making would raise claims against the authenticity and credibility of the award.

 

  1. It shall be a ground for subsequent Annulment of the Award

The use of assistants in carrying out the substantive tasks of an arbitrator can directly impact the validity of an arbitral award. It must be noted that almost all domestic jurisdictions as well as international institutions recognise a serious procedural irregularity as a ground for annulling an arbitral award. The question was dealt by the Italian Supreme Court in Sacheri vs Robotto, wherein it was held that delegation of the decision-making function to a third party amounted to a violation of due process and annulled the impugned award. Therefore, the delegation of substantive functions is a fundamental departure from rule of law and would be a ground for annulment of award. The issue was brought to the forefront in the Yukos cases wherein the Russian Federation challenged the delegated substantive responsibilities to the Tribunal’s assistant and argued that the award must be set aside  on the basis of Article 1065(1)(c) of the Dutch Code of Civil Procedure as the arbitrator failed to fulfill its mandate. Though the District Court did not address the issue as it set aside the awards on the grounds that the ECT had not been ratified by the Russian Parliament, the appeal against the assistant playing role in decision making did raise questions of legitimacy over the involvement of secretaries in International Arbitration.

 

Conclusion

The limited role for tribunal secretaries stems from the intuitu personae nature of appointment of the arbitrators. Therefore, while the appointment of assistants makes the arbitral process smooth and expedient, there should be a line differentiating the role played by party appointment arbitrators possessing the requisite standards set by the arbitral institutions and the assistants appointed by the tribunals to assist in organisational and administrative tasks. In order to ensure greater transparency and evade the possible consequences mentioned in the last section, the work of the secretary must be clearly agreed by the parties, and known to them throughout the process. Moreover, there is a need for uniformity of regulation as the uncertainty regarding the proper role of the secretaries adds a negative connotation to the perceived legitimacy of the arbitral process and the award. Thus, risking the annulment of the award after a lengthy arbitral process.

 

References   [ + ]

1. ↑ ICSID Convention, 1986, Art. 14(1). function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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DSD and the Catholic Church

ADR Prof Blog - Tue, 2019-04-16 14:14
This week’s New Yorker has a great article on Ken Feinberg’s work helping the Catholic Church manage its sexual abuse crisis. Feinberg and Camille Biros created and run the Independent Reconciliation and Compensation Program (IRCP), which processes claims of sexual abuse by priests. The IRCP started in New York in 2016 and other dioceses from … Continue reading DSD and the Catholic Church →

Israel Reflections 2019–Justice Aharon Barak

ADR Prof Blog - Tue, 2019-04-16 09:36
It is always such a highlight of our trip to hear from Justice Barak and this was no exception–student Lucas Baker reflected on the meeting: It was an incredible opportunity to meet with retired Chief Justice of the Israeli Supreme Court, Justice Aharon Barak. Rarely do law students have the chance to learn from a … Continue reading Israel Reflections 2019–Justice Aharon Barak →

Mark Your Calendars: ABA Conference Next Year April 22-25 in New Orleans

ADR Prof Blog - Tue, 2019-04-16 08:27
I just came back from the ABA conference, which I thought was great.  Unfortunately, the weather prevented some people from getting there on time or at all. Next year, it will be April 22-25 at the Sheraton in New Orleans. I predict that there will not be more than five inches of snow nor a … Continue reading Mark Your Calendars: ABA Conference Next Year April 22-25 in New Orleans →

Data Protection in India and Arbitration: Key Questions Ahead

Kluwer Arbitration Blog - Tue, 2019-04-16 01:00

Tarun Krishnakumar

 

For a country with a significant corpus of the world’s personal data, India’s data protection framework is notoriously deficient. Improperly scoped, imprecisely drafted, and with no real enforcement culture, the extant framework1)as contained within the Information Technology Act, 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. jQuery("#footnote_plugin_tooltip_2999_1").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); often tends to create more problems than it solves.

With a view towards overhauling this framework, the Government of India, in July 2017, constituted a Committee of Experts (‘CoE’) under the Chairmanship of Justice (Retd.) BN Srikrishna to recommend a new data protection framework for India. After a year of deliberations, the CoE released the Personal Data Protection Bill (‘Draft Bill’), along with a detailed report, in July 2018. After further consultations, the Draft Bill was to be introduced in Parliament for enactment. However, ongoing General Elections have put these plans on hold.

Partially modeled along the lines of the GDPR, the Draft Bill proposes an omnibus framework which includes detailed obligations relating to the manner of processing personal data2)‘Personal data’ is defined at Clause 3(29) of the Draft Bill. jQuery("#footnote_plugin_tooltip_2999_2").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, grounds on which such data may be processed3) ‘Processing’ is defined at Clause 3(32) of the Draft Bill. jQuery("#footnote_plugin_tooltip_2999_3").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, data principal4) ‘Data principal’ is defined at Clause 3(14) of the Draft Bill. jQuery("#footnote_plugin_tooltip_2999_4").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); rights, accountability measures, and the constitution of a Data Protection Authority. While this progress is welcome, there are concerns that several provisions of the Draft Bill are unclear, excessively burdensome, or impractical in their current form.

Alongside other gaps, there is no clarity on the applicability of the proposed framework to alternative dispute resolution mechanisms such as arbitration. While data protection frameworks typically exempt judicial proceedings from compliance, it is critical to examine if these exemptions equally apply to arbitration. This is as a significant amount of personal data is likely to be processed in the course of a typical commercial dispute. If arbitration is not exempt, compliance concerns arise not only for parties processing personal data (as part of pleadings, evidence, or arguments) but also for the tribunal in collecting and storing it. Despite the significant overhead that data protection compliance could bring to arbitration, no discussions have begun on this interplay.

Arbitration in context of the Draft Bill

A key issue in the Indian context is whether the proposed framework applies to arbitral proceedings at all. The Draft Bill, in Chapter IX, contains a suite of processing activities which are exempted from compliance with all or parts of the proposed framework. In this regard, the question is whether the exemption granted to ‘Processing for the purpose of legal proceedings’ would extend to cover arbitration-related processing. The relevant provision (Clause 44(1)) provides that:

Where disclosure of personal data is necessary for enforcing any legal right or claim, seeking any relief, defending any charge, opposing any claim, or obtaining any legal advice from an advocate in any impending legal proceeding such processing shall be exempted from the following provisions of this Act— (a) Chapter II, except section 4;  (b) Chapter III; (c) Chapter IV; (d) Chapter V; (e) Chapter VI; and (f) Chapter VII, except section 31.

The import of this provision depends on whether arbitration would be considered as being a proceeding to ‘enforce [a] legal right or claim’, ‘defend any charge’, or ‘oppose any claim’. While arbitration is, no doubt, a mechanism to resolve disputes between parties by adjudicating upon their rights, its core nature is controversial.

Specifically, it is unclear if arbitration may be described as being for the purpose of enforcing a legal right or claim. While courts ultimately enforce arbitral awards, it would be wrong to suggest that all responsibilities for enforcing legal rights lie solely with the judiciary. In many cases, arbitral tribunals are empowered to determine disputes and the legal rights implicated by them.

In contrast, it is relatively easier to conclude that arbitration is a type of proceeding where parties ‘seek any relief’ or ‘oppose any claim’ – terms which are sufficiently broad to include stages of almost any dispute resolution mechanism. While a detailed examination of the nature of arbitration is beyond the scope of this post, it would seem prima facie that arbitration would be covered under Clause 44(1) of the Draft Bill.

What are ‘Legal Proceedings’?

Further the Supreme Court has interpreted ‘legal proceedings’, the term used in the section heading to Clause 44, to include arbitral proceedings. Albeit in a different context, the generality of the Court’s observation provides useful guidance. In General Officer Commanding v. CBI5)(2012) 6 SCC 228 (at Para 29). jQuery("#footnote_plugin_tooltip_2999_5").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, the Court observed that:

The phrase ‘legal proceeding’…is not synonymous with the ‘judicial proceedings’. Every judicial proceeding is a legal proceeding but not vice-versa, for the reason that there may be a ‘legal proceeding’ which may not be judicial at all, e.g. statutory remedies like assessment under Income Tax Act, Sales Tax Act, arbitration proceedings etc. So, the ambit of expression ‘legal proceedings’ is much wider than ‘judicial proceedings’.

Even if this were not conclusive, it may be noted that Clause 44(2) of the Draft Bill exempts processing related to judicial functions. By necessary implication, this indicates that Clause 44(1) was intended to cover non-judicial and quasi-judicial legal proceedings such as arbitration.

Implications of exempting arbitration under the Draft Bill

If arbitration is indeed exempt under Clause 44, most obligations under the proposed framework would not apply to its conduct. This would include the standards for processing in Chapter II, the requirement for legal grounds to process personal data in Chapter III, data principal rights in Chapter VI, and all but one of the transparency/accountability measures in Chapter VII. However, two significant caveats exist:

  • The exemption under Clause 44(1) only applies where disclosure of data is necessary for “enforcing any legal right or claim, seeking any relief…”. Therefore, where personal data that is not strictly necessary for such purpose is disclosed in an arbitration, it will likely not be covered by this exemption.
  • The following obligations continue to apply regardless of the exemption:
    • Fair and Reasonable Processing: Personal data must be processed in a fair and reasonable manner that respects the privacy of the data principal.
    • Security Safeguards: Data fiduciaries and processors6)‘Data fiduciary’ and ‘Data processor’ are defined by Clauses 3(13) and 3(15) of the Draft Bill. jQuery("#footnote_plugin_tooltip_2999_6").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); must implement (and periodically review) security safeguards including: (a) methods such as de-identification and encryption; (b) steps to protect the integrity of personal data; and (c) steps to prevent misuse, unauthorised access to, modification/destruction, disclosure of personal data. These safeguards must be risk-based considering the nature, scope and purpose of processing, and the likelihood and severity of harm that may result from such processing.
    • Data Transfers: Restrictions on cross-border transfers of data (contained in Clauses 40 and 41) would also continue to apply.

Concluding Remarks

Based on the above, it would appear prima facie that arbitration-related data processing would be exempt from most compliance under the Draft Bill. However, several niggling uncertainties remain. For instance, neither the preliminary White Paper nor the final Report of the CoE makes any reference to arbitration in discussions of Clause 44.

In fact, in commenting on Clause 44(1), the Report (p.136) notes that disclosure of personal data “in pursuance of a legal claim” would occur where data is required to be produced “in connection with any legal proceeding”. However, in apparent disconnect, the Draft Bill adopts a different, narrower standard: exempting disclosure where necessary for “enforcing any legal right or claim, seeking any relief, defending any charge, opposing any claim, or obtaining any legal advice”. It is this unexplained narrowing of scope that raises questions concerning Clause 44(1) and its applicability to arbitration.

Further, the Report lists the ‘Arbitration and Conciliation Act, 1996’ as a legislation that would be impacted by the passage of the Draft Bill7)Annexure C, Point E(1) at Page ‘i’ of the Report of the CoE. jQuery("#footnote_plugin_tooltip_2999_7").tooltip({ tip: "#footnote_plugin_tooltip_text_2999_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, no elaboration is provided on this point.

Lastly, like much of the Draft Bill, Clause 44(1) itself proves difficult reading. As extracted above, this exemption applies where “disclosure of personal data is necessary”. However, the second part of this provision exempts “such processing”. This inconsistency creates avoidable doubt if only disclosure (and not other types of processing) is covered by this exemption.

Despite these inconsistencies and lack of clarity, on balance, it is likely that arbitral proceedings will be covered under the present framing of Clause 44(1) and, therefore, be exempt from compliance with significant portions of India’s proposed data protection framework. However, whether such a broad exemption is in the interests of privacy, cybersecurity, and transparency remains to be seen. While there is nothing to suggest that significant changes are likely to be made to the current text of the Draft Bill, a Government looking to establish India as a ‘global arbitration hub’ should take this opportunity to clarify and definitively settle this issue from the get-go.

References   [ + ]

1. ↑ as contained within the Information Technology Act, 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. 2. ↑ ‘Personal data’ is defined at Clause 3(29) of the Draft Bill. 3. ↑ ‘Processing’ is defined at Clause 3(32) of the Draft Bill. 4. ↑ ‘Data principal’ is defined at Clause 3(14) of the Draft Bill. 5. ↑ (2012) 6 SCC 228 (at Para 29). 6. ↑ ‘Data fiduciary’ and ‘Data processor’ are defined by Clauses 3(13) and 3(15) of the Draft Bill. 7. ↑ Annexure C, Point E(1) at Page ‘i’ of the Report of the CoE. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Israel Reflections 2019–Immigration, Racism & Refugees

ADR Prof Blog - Mon, 2019-04-15 16:22
On our first full morning in Tel Aviv, we turned to some (other) hard issues facing different parts of the population in Israel.  Our first speaker was Mazal Bisawer, a PhD candidate and student leader at Tel Aviv University.  Mazal spoke to us about the Ethiopian population in Israel—a minority within a minority—most of whom … Continue reading Israel Reflections 2019–Immigration, Racism & Refugees →

The PCA’s Assistance in the Constitution of an Arbitral Tribunal: Last Breath for Investor-State OIC Arbitrations?

Kluwer Arbitration Blog - Mon, 2019-04-15 02:51

Katia Bennadji

On 27 March 2017, the Secretary-General of the Permanent Court of Arbitration (“PCA“) designated an appointing authority in an OIC arbitration by applying the UNCITRAL Arbitration Rules, despite the absence of any reference to these Rules in the OIC Agreement.

This decision, which concerns a pending case, DS. Construction v. Libya , could mark the beginning of future changes to OIC investor-State arbitration regime, especially concerning the interpretation of the OIC Agreement’s provisions regarding recourse to arbitration.

The current interpretation of the OIC Agreement following the Al Warraq v. Indonesia case

With a membership of 57 States, the Organisation of Islamic Cooperation (“OIC“), which was established in 1969 to “safeguard and protect the interests of the Muslim world in the spirit of promoting international peace and harmony”, is the second largest intergovernmental organization after the United Nations. Member States of the OIC signed the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the OIC (the “OIC Agreement“), a copy of which may be accessed here.

The OIC Agreement was signed in 1981, entered into force in 1988 and was ratified by 28 countries.1)The following countries have ratified the OIC Agreement: Burkina Faso, Cameroon, Egypt, Gabon, Gambia, Guinea, Indonesia, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mali, Morocco, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Senegal, Somalia, Sudan, Syria, Tajikistan, Tunisia, Turkey, Uganda, and the United Arab Emirates. jQuery("#footnote_plugin_tooltip_4289_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4289_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); For over 25 years after its entry into force, the OIC Agreement remained unused in investor-State arbitrations until it was invoked for the first time in 2012, by a Saudi national in the famous Al-Warraq v. Indonesia case.

In this case, the claimant, a Saudi national, initiated an arbitration against Indonesia, the respondent, on the basis of Article 17 of the OIC Agreement, of which both Saudi Arabia and Indonesia are member-States. The claims concerned the alleged expropriation of an indirect ownership of capital in a bank.

At the jurisdictional stage, Indonesia argued that Article 17 of the OIC Agreement does not provide a forum for investor-State arbitrations, but only refers to a forum for resolution of inter-State disputes.

The Tribunal finally resolved the dispute between the parties, concluding that Article 17 contained a binding consent to participate in investor-State arbitration.

First, Article 1 of the OIC Agreement defines the “contracting parties” as “[t]he Member States of the OIC signatories to the Agreement“. However, contrary to many other provisions of the OIC Agreement that refer to “contracting parties“, Article 17 refers to “parties to the dispute“, thus leading the Tribunal to conclude that Article 17 should be construed as encompassing not only inter-State disputes, but also investor-State disputes.

Moreover, under the OIC Agreement, the investor is also bound by some obligations regarding the respect of public order, morals and public interest.2)See Article 9 of the OIC Agreement. jQuery("#footnote_plugin_tooltip_4289_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4289_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); For this reason, the Tribunal considered that excluding the investor from recourse to arbitration would result in an asymmetry, such that the investor would be bound by obligations without having recourse to sanctions in the event of the State’s non-compliance with these obligations.

The Tribunal also took into consideration in its reasoning the fact that the OIC Agreement contains a “fork in the road” clause which gives the investor the right to choose between national courts and an arbitral tribunal, immediately followed by Article 17, referring to arbitration. Accordingly, the Tribunal considered that Article 17 combined with Article 16 leads to the conclusion that Article 17 refers to investor-State arbitration as well.

Since this decision was rendered, requests for arbitration invoking the OIC Agreement have significantly increased. However, a problem has arisen in recent years because the OIC Agreement provides that if a party to the dispute does not appoint an arbitrator, the OIC Secretary-General will step in and make the appointment on the party’s behalf. However, in previous cases (notably, in three cases against Egypt in 2014) the Secretary-General has refused to make such appointments, and as reported by some practitioners, this refusal is essentially due to political pressure from some OIC member-States.

The potential interpretation of the OIC Agreement in the aftermath of DS Construction v. Libya

In DS Construction v. Libya, a still pending case which is mentioned in the introduction above, an Emirati investor has brought a claim against Libya under the OIC Agreement concerning contracts for 19 construction projects in Libya affected by the Arab Spring in 2011. The investor alleges that the State’s acts and omissions before, during and after the outbreak of the conflict led to the indirect expropriation of its investment.

In this case, the claimant appointed Stanimir Alexandrov as arbitrator, but Libya refused to appoint an arbitrator. In view of this refusal, the claimant requested the Secretary-General of the OIC to appoint an arbitrator on behalf of Libya. The Secretary-General, however, did not respond favorably to this request and did not explain the reasons for his refusal to appoint an arbitrator.

The claimant then decided to use the most favored nation clause contained in the OIC Agreement to import Libya’s consent to the application of the UNCITRAL Arbitration Rules in the Austria-Libya BIT to apply Article 7(2) (b) of the 1976 UNCITRAL Rules which provides that the Secretary-General of the PCA shall designate the appointing authority if the previous designated appointing authority refuses to act or fails to appoint the arbitrator. The PCA agreed with the claimant and designated the French academic Pierre-Marie Dupuy as the appointing authority, who in turn appointed Nassib Ziadé as arbitrator. Thereafter, the two arbitrators appointed Bruno Simma as chairman.

This intervention by the PCA is significant for several reasons. In the short term, this decision would probably have positive consequences for investors, because the PCA has provided a legal precedent for investors seeking to constitute a tribunal to hear their claims under the OIC Agreement. However, in the long term, this decision may also push OIC member-States to decide on how they wish such disputes to be handled. If both the member-States and the OIC Secretary-General continue to refuse to appoint arbitrators, they will likely be placing the constitution of the tribunals in the hands of the PCA rather than the OIC, which is completely contrary to the spirit and the objectives of the OIC.

Potential establishment of the International Islamic Court of Justice

It is important to take into consideration the fact that one of the most important reasons behind the constitution of the OIC is to solve problems and difficulties by finding local solutions without foreign interventions. This is why the OIC has planned to establish a dispute settlement “organ”, the International Islamic Court of Justice (“IICJ“).

To date, no such organ has been established by the OIC, but its statute has already been drafted and adopted by the member-States.3)The statute of the International Islamic Court of Justice was adopted on the 29 January 1987. jQuery("#footnote_plugin_tooltip_4289_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4289_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This organ is the same one envisaged by Article 17 of the OIC Agreement:

Until an Organ for the settlement of disputes arising under the Agreement is established, disputes that may arise shall be entitled through conciliation or arbitration in accordance with the following rules and procedures.

It follows that recourse to arbitration is only a temporary solution, until this “organ” is established. In other words, if the OIC finally decides to establish the IICJ, resorting to arbitration will no longer be possible, as only the IICJ would be competent to resolve the disputes. However, if we look at the statute of the IICJ, it is mentioned in the Section “Competence of the Court” in Article 21 that: “Member States of the Organization of the Islamic Conference alone have the right to appear before the Court“, which means that this possibility is clearly not offered to a private investor.

Conclusions

It is for the reasons highlighted above that the decisions discussed in this blog post could represent the end of investor-State arbitration under the OIC Agreement. Firstly, recourse to arbitration on the basis of Article 17 will no longer be possible if the OIC member-States decide to establish the IICJ, and secondly, according to the statute of the IICJ, investors will not have a right to appear before the IICJ.

It will be interesting to see if the OIC Member-States take the initiative to establish the IICJ in order to avoid PCA interventions and, at the same time, to finally evade investor-State arbitrations under the OIC Agreement. Further indications will become apparent in the near future, particularly after the issuance of the much awaited decision of the French court concerning the set-aside proceedings introduced by Libya to contest the PCA’s assistance.

In any event, the PCA’s decision will undoubtedly mark the start of future changes in investor-State OIC arbitration: the question to be determined is whether these changes will be in favor of private investors, or Member-States.

References   [ + ]

1. ↑ The following countries have ratified the OIC Agreement: Burkina Faso, Cameroon, Egypt, Gabon, Gambia, Guinea, Indonesia, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mali, Morocco, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Senegal, Somalia, Sudan, Syria, Tajikistan, Tunisia, Turkey, Uganda, and the United Arab Emirates. 2. ↑ See Article 9 of the OIC Agreement. 3. ↑ The statute of the International Islamic Court of Justice was adopted on the 29 January 1987. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Israel Reflections 2019–Shared Society Continued!

ADR Prof Blog - Sun, 2019-04-14 14:10
Great to see so many of us at the ABA conference this past week!  We will have blogs soon about conference sessions and lessons…And, in the meantime, here’s another from Israel: Our work out for the week was held at Budo for Peace (BFP). BFP is an innovative non-profit educational organization based in Israel that … Continue reading Israel Reflections 2019–Shared Society Continued! →

Legal Shrapnel: Brexit, Micula and Europe’s Banker

Kluwer Arbitration Blog - Sun, 2019-04-14 04:00

Adrian Iordache

Introduction

It has by now become amply clear that nothing truly prepares the jurist for an analytical maze run of predicting the effects of Brexit. In some way, it reminds one of “Nebel des Krieges”, the “fog of war” faced by military decision makers once on the battlefield. The best you can hope for is sound judgment when facing the unexpected (which, ironically, is inevitable).

Enforcing Micula

Here is one example of the unexpected scenarios: The state of the enforcement of the Micula ICSID Award in the High Court in England and its impact on the money market. The outline of the legal conundrum is notorious, but it bears recapping briefly to bring the issue into relief. Micula et al1)More precisely: Viorel Micula, Ioan Micula, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. jQuery("#footnote_plugin_tooltip_5404_1").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, relying on the bilateral investment treaty between Romania and Sweden 2)The Sweden-Romania Bilateral Investment Treaty had been ratified in 2002 by Law no 651/2002 and has now been denounced unilaterally by Romania alongside other intra-EU BITs by Law no 18/2017 jQuery("#footnote_plugin_tooltip_5404_2").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, have brought an ICSID claim in 2005, which they won in 2013. The dispute concerned the withdrawal by Romania of tax incentives in furtherance of EU State Aid rules and became a test case for the EU Commission assault on Intra-EU BITs as incompatible with EU law.3) Some of the legal and practical issues arising out of this conflict between EU Law and BITs have been usefully reviewed here. jQuery("#footnote_plugin_tooltip_5404_3").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In any event, ever since the Award, the claimants have tried to enforce it both in Romania and elsewhere with only limited success, despite the tenacity of the ICSID enforcement mechanism.4)Article 54(1) of the ICSID Convention provides for enforcement of money awards to be enforced by each Contracting State “within its territories as if it were a final judgment of a court in that State”. jQuery("#footnote_plugin_tooltip_5404_4").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

One reason for the difficulty, at least in the enforcement attempts within the EU, has been the role played by EU law within the legal orders of Member States. For itself, Romania has been enjoined by the Commission pursuant to its powers under art 108 of the Treaty on the Functioning of the European Union (TFEU) from voluntarily complying with the ICSID Award and was even ordered to seek the recovery of whatever it had already granted to the claimants pursuant to the Award.5)Commission Decision (EU) 2015/1470 of 30 March 2015 on State aid SA.38517) (known as the “Final Decision” by reason of a provisional order having also been issued earlier in 2014. jQuery("#footnote_plugin_tooltip_5404_5").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Other Member States face a separate hurdle in dealing with enforcement actions, namely to choose between complying with the ICSID framework for enforcement as instituted by their respective national law, and their obligations of sincere cooperation under the Treaty of the European Union (TEU).

The United Kingdom (UK) is the case in point. In the UK, under the 1996 Arbitration Act, ICSID Awards gain, essentially, the status of a High Court decision by registration and follow thereafter a regular enforcement route.6)Registration is by right (section 1(2) of the 1966 Act) and there is no public policy exception to be raised to the registration of an ICSID Award; Section 2 of the 1996 Act lays out the effects of “registration” of an Award and its status. jQuery("#footnote_plugin_tooltip_5404_6").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This is what happened with the Micula Award, which was registered in 2014. Following registration, on application by Romania, the High Court decided to stay enforcement, pending a decision by the General Court of the European Union (GCEU) on the challenge lodged by the claimants against the Final Decision of the Commission. That decision by the High Court was affirmed by the Court of Appeal.

In sum, the High Court stayed the enforcement on account of the corroborated effects of:

(1) the Final Decision of the Commission issued under the authority of the TFEU;

(2) the “sincere cooperation” principle in the TEU; and

(3) the real prospect of a decision by the GCEU which would be incompatible with a High Court decision.

Brexit

Since no one really knows what the terms of Brexit will be, it is not for us to say with any certainty whether specific TEU provisions will be clearly regulated by a withdrawal agreement or by national legislation. The political signs, however, are not particularly edifying. The current draft Withdrawal Agreement does not expressly regulate the fate of the sincere cooperation principle, apart from disclaiming any limitation on it that the provisions of the Withdrawal Agreement itself may be construed to have.7) See Art. 5 of the November 2018 Withdrawal Agreement containing the disclaimer, which, remains, however, silent on what happens after the Union law ceases to have effect. jQuery("#footnote_plugin_tooltip_5404_7").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

A fortiori, a withdrawal on the basis of Article 50(3) of the TEU (in the absence of any specific withdrawal terms) means essentially what it appears to mean on its face, namely that the TEU ceases to apply from the relevant exit date, taking with it (presumably) Article 4(3) and the sincerity out of the cooperation. In such a case, it is safe to expect that the High Court would no longer consider itself bound by the principle.

Nevertheless, irrespective of any withdrawal agreement, the UK Government has indeed begun a legislative and administrative process of preparing the country for an effective regulatory transition by adopting national legislation which perpetuates substantial EU rules, in particular related to standards, trade and myriad of other areas.

This spirit applies to State Aid and the UK authorities rightfully reassure businesses that the thinking about State Aid is not likely to change dramatically on “day 1” after Brexit. In fact, the European Union (Withdrawal) Act 2018 effects a far-reaching transposition of primary EU legislation into UK domestic law to ensure “day 1” continuity in substantive rules.

Notwithstanding that spirit, however, it remains the case that the stay of enforcement decided by the High Court in the Micula case is not issued in application of substantial state aid rules (however considerate they may remain to EU soon-to-be-neighbors), but in deference to the sincere cooperation obligations of Member States under the TEU.

We are yet to receive any sign of willingness on the part of an exiting UK to uphold that principle after ceasing to be a Member State. If one may venture a negotiation prediction, it would be surprising if the UK took any steps in that direction. The sincere cooperation principle is reminiscent of a “further assurances” boilerplate and one would be rightfully surprised if the parties continued to volunteer such overarching cooperation after parting ways without further agreement. In other words, unless further grounds are mustered, it is difficult to see how the current High Court stay of enforcement of the Micula Award can survive an unregulated Brexit.

Europe’s Banker

What does that mean, apart from the proper enforcement? The UK is not merely another country where diligent lawyers can look for assets (aircraft, buildings, etc.) following ICSID Awards, but one of the most active actors on the money market.

A great majority (perhaps as much as 70%) of EU government bond issuance (estimated to a total of 150 billion euro a year) is facilitated by London banks. Italy, Spain and France reportedly use Barclays Bank plc, JP Morgan Securities plc and Nomura plc (all UK incorporated) for bond issues. According to industry report, and the industry became rightfully concerned with the effects of Brexit on the London investment banking offering to the EU sovereign debt in 2017, when fears of the loss of ‘passporting’ privileges prompted contingency planning.8) See here. Also, solutions sought by banks vary widely, see Reuters 20 December 2018 report on the topic here. jQuery("#footnote_plugin_tooltip_5404_8").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_8", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

In addition to acting as ‘primary dealers’, countries hold accounts with London banks, for secondary market trading (e.g., interest rate and currency swaps) as well as to service coupons.

This is what emerged in fact in the case of the enforcement of the Awdi et al v Romania ICSID Award (ICSID Case no Arb 10/13). Romania used Citibank N.A. London Branch for debt service, when the claimants succeeded in temporarily attaching the accounts of Romania held with the bank and delaying the service of sovereign debt coupons by one day.

Will Brexit and the death of “sincere cooperation” inside London courts render London banks less safe for sovereign money? Should EU States even become concerned with legal recourse to the funds raised for them by London banks?9) An anonymous eurozone official quoted by Reuters intimated as much. jQuery("#footnote_plugin_tooltip_5404_9").tooltip({ tip: "#footnote_plugin_tooltip_text_5404_9", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });In a sense, this may be too bleak a vision. No doubt, the legal complexities of the Micula Award are somewhat peculiar to its circumstances. However, as a core proposition, it remains the case that enforcement of the Award in the UK has been stayed in order to avoid court conduct potentially conflicting with a CJEU decision. So framed, the circumstances are not that unusual. In the seminal Achmea decision on the conflict between EU law and intra-EU Bilateral Investment Treaties, the CJEU asserted the priority of EU over public international law obligations between Member States, materially on the basis of the “sincere cooperation” obligation. This raises the specter (or, as has previously been mentioned, the “unexpected ray of light”) of the UK’s becoming a preferred basis for investment structures into the EU away from the Achmea reach.

But while this may indeed be a “ray of light” for the UK from that angle, it is bound to compound the question of enforcement of investment arbitration decisions under UK-EU Member States after Brexit discussed here. Releasing the High Court from its “strong bond of comity” towards EU institutions under Article 4(3) of the TEU, may be seen as an opportunity for third party enforcement actions where the EU law otherwise provides a shield against investment arbitration decisions, and consequently as a vulnerability for the banks acting as conduits for the service of global sovereign debt.

References   [ + ]

1. ↑ More precisely: Viorel Micula, Ioan Micula, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. 2. ↑ The Sweden-Romania Bilateral Investment Treaty had been ratified in 2002 by Law no 651/2002 and has now been denounced unilaterally by Romania alongside other intra-EU BITs by Law no 18/2017 3. ↑ Some of the legal and practical issues arising out of this conflict between EU Law and BITs have been usefully reviewed here. 4. ↑ Article 54(1) of the ICSID Convention provides for enforcement of money awards to be enforced by each Contracting State “within its territories as if it were a final judgment of a court in that State”. 5. ↑ Commission Decision (EU) 2015/1470 of 30 March 2015 on State aid SA.38517) (known as the “Final Decision” by reason of a provisional order having also been issued earlier in 2014. 6. ↑ Registration is by right (section 1(2) of the 1966 Act) and there is no public policy exception to be raised to the registration of an ICSID Award; Section 2 of the 1996 Act lays out the effects of “registration” of an Award and its status. 7. ↑ See Art. 5 of the November 2018 Withdrawal Agreement containing the disclaimer, which, remains, however, silent on what happens after the Union law ceases to have effect. 8. ↑ See here. Also, solutions sought by banks vary widely, see Reuters 20 December 2018 report on the topic here. 9. ↑ An anonymous eurozone official quoted by Reuters intimated as much. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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I-statements - Wonderful reinforcement material for students of all ages

Communication and Conflict Blog - Sat, 2019-04-13 02:54
This was awesome! A great supplement to what I already teach. I can't wait to post it on my website! You are doing a great service. Thank you! Thank You!

Is It Possible to Halt A Constitutional Claim by Means of An Anti-Suit Injunction?

Kluwer Arbitration Blog - Sat, 2019-04-13 01:16

Julio-César Betancourt

In international commercial arbitration, issues relating to the unconstitutionality of national law (or national legislation) are very rarely raised before the arbitral tribunal. Within a purely academic setting, Jan Paulsson once commented that “[t]here [was] nothing at all unorthodox about the proposition that international tribunals empowered to apply national law [are also entitled to] make plenary determinations about [its] constitutionality.”1)J PAULSSON, International Arbitration Is Not Arbitration, (2008) 2 Stockholm International Arbitration Review 18. jQuery("#footnote_plugin_tooltip_6871_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Five years after Jan Paulsson’s lecture, I wrote an article arguing, among other things, that the task of determining whether an act of Parliament is contrary to the constitution is entrusted to national courts and not to arbitral tribunals. I further argued that, unless otherwise declared by the judiciary, acts of Parliament are generally presumed to be valid, as a result of which the tribunal’s role is to apply the law, even if this produces a hypothetically “unconstitutional” outcome.2)See JC BETANCOURT, Understanding the ‘Authority’ of International Tribunals: A Reply to Professor Jan Paulsson, (2013) 4(2), Journal of International Dispute Settlement 227-244. jQuery("#footnote_plugin_tooltip_6871_2").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

To illustrate, if the tribunal is asked to render an award with respect to the validity of a commercial contract governed by a piece of legislation that has been claimed — but not proved or declared — to be unconstitutional, it is clear that the tribunal would be certainly empowered to decide the question of whether or not such a contract is valid. However, it would definitely not be empowered to consider the question of whether the relevant legislation is or is not unconstitutional, hereinafter referred to as a “constitutional claim.”

At that time, there were no English cases on this point and, therefore, most of my arguments were supported by constitutional theory rather than case law. My proposition was, and continues to be, that an arbitral tribunal cannot legitimately make a decision as to the constitutionality of national law. Consequently, the only way to effectively challenge the validity of the alleged unconstitutional legislation is by way of an application to the court that has been constitutionally vested with the power to decide this type of claim.

In Aqaba Container Terminal (Pvt) Co. v Soletanche Bachy France SAS, [2019] EWHC 362 (Comm), the Commercial Court made clear that an arbitral tribunal sitting in London is not empowered to arbitrate a constitutional claim to invalidate national legislation. The Court’s stance on this issue may no doubt encourage parallel proceedings. However, the Court also held that a constitutional claim may be brought to a halt by means of a permanent anti-suit injunction. This blog post provides an analysis of the Court’s judgment.

 

The Case: Aqaba Container Terminal (Pvt) Co. v Soletanche Bachy France SAS

Aqaba Container Terminal (ACT) entered into a construction contract with Soletanche Bachy France (SBF). The contract contained an ICC arbitration clause. The seat of the arbitration was London. A dispute arose as to whether such a contract had been lawfully terminated. The dispute was referred to arbitration. The arbitral tribunal decided, inter alia, that ACT had validly terminated the contract.

SBF sought to challenge the award under Sections 67 and 68 of the Arbitration Act 1996. The challenge was dismissed.

A few years later, SBF initiated court proceedings in Jordan to obtain a declaration of unconstitutionality of Article 17 of the Aqaba Special Economic Zone Law No. 32 of 2000. SBF alleged that the contract was “signed pursuant to [Article 17] which [was contrary to Article 117] of the Jordanian Constitution.”3)See Id. at 20. jQuery("#footnote_plugin_tooltip_6871_3").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

SBF’s submission was that if the court were to find that Article 17 was contrary to Article 117 of the Jordanian Constitution, it would have also concluded that the above-mentioned contract was null and void. SBF made no reference whatsoever to the arbitration agreement, the award, or the challenge to the latter in the Jordanian proceedings.

 

The Anti-Suit Injunction

To counteract the Jordanian proceedings, ACT applied to the Commercial Court for a permanent anti-suit injunction to impede the continuation of those proceedings. SBF contended that a constitutional claim was the only way to invalidate the contract and that the granting of that injunction would adversely affect its constitutional rights.

The Commercial Court relied on expert evidence that even if the court had determined that Article 17 was contrary to Article 117 of the Jordanian Constitution, it would not have declared the contract void. The Court also found that “a claim to invalidate the [contract fell within the scope of] the Arbitration Agreement,” and that it should have been decided by the tribunal.4)See Id. at 35. jQuery("#footnote_plugin_tooltip_6871_4").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

The Court also explained that “[i]f the result of agreeing not to bring a civil claim to invalidate the contract [was] that it [was] not possible to reach the benches of a constitutional court then that [was] the result of the agreement that [SBF] made, not of the injunction.”5)Id. at 42. jQuery("#footnote_plugin_tooltip_6871_5").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Consequently, the injunction was granted.

 

Is the Court’s Reasoning Legally Sound?

The Court’s judgment may raise a few eyebrows among constitutional romanticists, but no doubt, its reasoning is legally sound. By agreeing to arbitrate, the parties were bound not to initiate court proceedings in breach of the arbitration agreement. In the case in hand, it was for the arbitral tribunal to determine whether or not the main contract was valid.

Nonetheless, SBF chose to question its validity before the Jordanian courts, which constitutes a breach of the arbitration agreement, and the purpose of an anti-suit injunction is to remedy that type of breach. Thus, the Court was right in granting such an injunction. This is also fully consistent with the New York Convention.

 

What Would Have Been the Arbitral Tribunal’s Role?

Although the Court expressly stated that an arbitral tribunal does not have the power to invalidate national legislation, it also acknowledged that “[i]f Article 17 of Law No 32 of 2000 [was] invalid the question whether the Construction Contract [was] as a result invalid would be (or have been) for the arbitration tribunal.”6)Id. at 36. jQuery("#footnote_plugin_tooltip_6871_6").tooltip({ tip: "#footnote_plugin_tooltip_text_6871_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

The above reasoning should not be interpreted to mean that arbitral tribunals are authorised to carry out a non-binding judicial review in order to decide whether a contract is valid. Rather, it means that if, at some point, Article 17 had been declared unconstitutional by the Jordanian courts, the tribunal would have been entitled to make an award as to its validity.

 

Conclusions

As far as English Law is concerned, it is possible to halt a constitutional claim by means of a permanent anti-suit injunction. It can be said that the right to set aside a contract on any of the available grounds (including constitutional grounds) is not a constitutional — and let alone a fundamental — right, but a contractual right.

Once the parties have entered into an arbitration agreement, it can also be said that they have somewhat waved their right to challenge the validity of the respective contract before the national courts, and this appears to be the case even if the validity of the contract arises in the context of a constitutional claim.

References   [ + ]

1. ↑ J PAULSSON, International Arbitration Is Not Arbitration, (2008) 2 Stockholm International Arbitration Review 18. 2. ↑ See JC BETANCOURT, Understanding the ‘Authority’ of International Tribunals: A Reply to Professor Jan Paulsson, (2013) 4(2), Journal of International Dispute Settlement 227-244. 3. ↑ See Id. at 20. 4. ↑ See Id. at 35. 5. ↑ Id. at 42. 6. ↑ Id. at 36. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Arbitration in Guatemala: The Admissibility of the Amparo Action Regarding Judicial Assistance on Jurisdictional Matters

Kluwer Arbitration Blog - Fri, 2019-04-12 01:15

Iosif Alexander Sosa

The amparo is a constitutional action available in several Latin American countries by means of which a person can request the protection of her fundamental rights when an authority has violated or threatened to violate them.  Because of the amparo’s broad scope, it can be used as a guerrilla tactic in many of those jurisdictions, including Guatemala.  This article addresses the Guatemalan Constitutional Court’s analysis on the admissibility of the amparo action on jurisdictional matters.

The Guatemalan Arbitration Law (GAL) is based on the 1985 UNCITRAL Model Law.  In its Chapter IV, the GAL addresses the subject of the jurisdiction of the arbitral tribunal and, in its article 21(3), it states that either party may request the civil or commercial judge of first instance (trial judge)—as indicated in the GAL’s article 9—to determine whether the arbitral tribunal has jurisdiction to resolve the dispute.  The judge’s decision, according to article 21(3), is not subject to appeal.  The wording employed by the GAL, however, is different.  If translated literally, article 21(3) states that the decision is definite and cannot be revised by any recourse or remedy.

After that brief explanation, it is imperative to describe concisely how the amparo works in Guatemala.  Under the Guatemalan constitutional procedural law, four requirements must be met in order to exercise the action: 1) temporality; 2) passive standing; 3) active standing; and 4) finality.  The latter is the relevant requirement in this analysis.  The finality requirement is met when all ordinary recourses have been exhausted before bringing the amparo action.  Put differently, an individual cannot bring forward the amparo action if there is an ordinary legal remedy or recourse still available.

Further, pursuant to the Guatemalan constitutional procedural law, the court with jurisdiction over the amparo proceeding will depend on the public or private entity or person who violated or threatened the individual’s constitutional rights.  The decision granting or not granting the amparo is subject to appeal and the Constitutional Court is the court with jurisdiction to see of the appeal.  A final aspect that should be considered is that the amparo action is all encompassing.  That is, its scope of protection is broad.

To illustrate the issue it is important to first discuss a case decided by the Guatemalan Constitutional Court regarding the admissibility of the amparo action (Case no. 1617-2012, decided on 5 July 2012).  According to the facts of the case, the parties concluded a fuel transportation agreement, which contained a multi-tiered arbitration clause that provided for conciliation and then arbitration before the Arbitration Center of the Guatemalan Chamber of Commerce.  Pursuant to the agreement, Transportes Reyes (‘Transportes’), using its own vehicles, would transport fuel supplied by Chevron Inc. (‘Chevron’), from Chevron’s facilities to a third party’s service station.  However, while fuel was unloaded at the service station a fire ensued.  This fire destroyed Transportes’ vehicle and caused damage to the third party’s property.  Chevron paid damages to the third party and in return Chevron urged Transportes to pay back the damages Chevron had paid.  Because Transportes refused to pay, Chevron terminated the agreement and commenced arbitration.  In its counterclaim, Transportes sought damages caused by the fire and damages arising out of unfair competition conducted by Chevron.  Chevron argued that, pursuant to article 364 of the Guatemalan Commercial Code, the arbitral tribunal lacked jurisdiction to decide unfair competition matters and pursued judicial assistance before a trial judge.  The judge ruled that the arbitral tribunal lacked jurisdiction to resolve unfair competition matters.  Consequently, Transportes brought an amparo action against the judge’s decision before the Supreme Court of Justice.  The Supreme Court denied the action holding that, in order to satisfy the amparo’s finality requirement, Transportes had to exhaust all the ordinary recourses or remedies before bringing the action before the Court.  Transportes appealed the Court’s decision before the Constitutional Court.  It argued that the decision resolving the arbitral tribunal’s jurisdiction over unfair competition matters was not subject to appeal and therefore the amparo action was admissible. The Constitutional Court ruled that no other recourse or remedy was available under article 21(3) of the GAL and granted the constitutional protection.  This case, however, is just one of the many that the Constitutional Court has decided in the same way.1)See E.g., case no. 5571-2016, decided on 2 May 2016, in which the Constitutional Court held that the amparo action was admissible until all the legal remedies or recourses were exhausted. jQuery("#footnote_plugin_tooltip_4709_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4709_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

From the author’s perspective, although article 21(3) of the GAL clearly states that the trial judge’s decision on jurisdiction is final and not subject to appeal, it should not be construed as an authorization that an amparo action could be brought applying the same interpretation granted by the Constitutional Court.  On the contrary, the intention of the rule is precisely to prevent the aforementioned situation.

As mentioned above, the GAL is based on the 1985 UNCITRAL Model Law, which states in its article 16(3) that the court’s decision regarding the jurisdiction of an arbitral tribunal “shall be subject to no appeal” (which is akin to the expression “cannot be revised by any recourse or remedy,” used in the GAL).  The Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration states that when an arbitral tribunal decides “as a preliminary question that is has jurisdiction, article 16(3) allows for immediate court control in order to avoid waste of time and money.”  However, three procedural safeguards are added to reduce the risk and effect of dilatory tactics:  short time-period for resort to court (30 days), court decision not subject to appeal, and discretion of the arbitral tribunal to continue the proceedings and make an award while the matter is pending before the court.”2)Explanatory Note by the UNCITRAL secretariat on the 1985 Model Law on International Commercial Arbitration, paragraph 26. jQuery("#footnote_plugin_tooltip_4709_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4709_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  It is clear, therefore, that the intention was precisely to prevent parties from delaying the arbitral proceedings applying recourses or other remedies, either ordinary or extraordinary.  To allow the use of the amparo action against the trial judge’s decision on whether the arbitral tribunal has jurisdiction does the opposite.  Thus, the interpretation of the Constitutional Court with respect to article 21(3) of the GAL is incorrect and detrimental for the purposes of arbitration.

As stated above, the scope of the amparo action is broad.  Based on this, it has been argued that the amparo action is admissible because the Guatemala’s constitutional procedural law states that nothing is beyond the scope of the amparo action.  However, from the author’s perspective, that argument only allows litigants to initiate indiscriminately amparo proceedings arguing serious violations of constitutional rights where there are none.  Regardless, it should be noted that the same Constitutional Court has narrowed the scope of the amparo action through case law.3)Case no. 5557-2014, decided on 3 July 2015; Case no. 2972-2015, decided on 20 November 2015 and Case no. 5195-2017, decided on 7 March 2018 jQuery("#footnote_plugin_tooltip_4709_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4709_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

In those cases, the Constitutional Court held that, although the Guatemalan Constitution and the law state that nothing is beyond the scope of the amparo action, there are certain aspects and circumstances that, for logical reasons and according to the principles of legal security and certainty, narrow the scope of the amparo action.

In that sense, it can also be argued that if an arbitral tribunal without jurisdiction renders an award, judicial review is still available via setting aside proceedings or at the recognition and enforcement stage.  That is, parties do have procedural mechanisms to demonstrate that the arbitral tribunal lacked jurisdiction, thus protecting the rights of the parties.  Because the purpose of the amparo action is to protect or restore a person’s constitutional rights, applying it where there is a procedural mechanism achieving the same result, would only create the possibility of parallel proceedings—this is contrary to the principles of legal security and certainty.

For arbitration to be effective, it is fundamental that the Constitutional Court in Guatemala take a different approach.  The Court’s erroneous application of the amparo action is clear evidence of the lack of knowledge and understanding about the institutions and principles that inspire arbitration; a situation that hopefully will change, in order for Guatemala to become a competitive regional arbitral seat.

References   [ + ]

1. ↑ See E.g., case no. 5571-2016, decided on 2 May 2016, in which the Constitutional Court held that the amparo action was admissible until all the legal remedies or recourses were exhausted. 2. ↑ Explanatory Note by the UNCITRAL secretariat on the 1985 Model Law on International Commercial Arbitration, paragraph 26. 3. ↑ Case no. 5557-2014, decided on 3 July 2015; Case no. 2972-2015, decided on 20 November 2015 and Case no. 5195-2017, decided on 7 March 2018 function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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Online Arbitration in Theory and in Practice: A Comparative Study in Common Law and Civil Law Countries

Kluwer Arbitration Blog - Thu, 2019-04-11 00:04

Ihab Amro

This post presents an overview of online arbitration (e-arbitration’) as part of online dispute resolution (‘ODR’) techniques from both theoretical and practical perspectives.1)For a more detailed analysis of these issues see: Ihab Amro, Online Arbitration in Theory and in Practice: A Comparative Study of Cross-Border Commercial Transactions in Common Law and Civil Law Countries, Cambridge Scholars Publishing, UK, First Published 2019. jQuery("#footnote_plugin_tooltip_4635_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4635_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

E-arbitration is a major component of online dispute resolution (‘ODR’) in which parties can solve any dispute arising out of their contractual relationship online. E-arbitration is mainly used for the resolution of Business to Business (‘B2B’) cross-border e-commerce disputes, and partially used for the resolution of traditional cross-border commercial disputes.

 

The form requirement may not be as important in e-arbitration

In e-arbitration, the arbitration agreement is concluded, and the arbitral process is conducted, online. In this regard, some commentators observe that the form requirement in e-commerce contracts, including an arbitration agreement, is not as important if the electronic document is sufficiently definite, setting up clear signs which can be read in the future.2) See Van Cutsem, Jean-Pierre, Viggria, Arnaud, and Güth, Oliver, E-Commerce in the World –Aspects of Comparative Law–, Bruxelles, Bruylant, 2003, at p. 95. jQuery("#footnote_plugin_tooltip_4635_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4635_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

National laws regulating arbitration in many civil law countries have broadened the form requirement of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (‘The New York Convention’), including Germany, France, Austria, Slovenia, Greece, The Netherlands, Ukraine, and Switzerland. Under the laws of these countries, the form requirement includes electronic communications such as e-mail communications.

In practice, for example, in Compagnie de Navigation et Transports SA v. MSC Mediterranean Shipping Company SA, the Swiss Supreme Court interpreted Article II (2) of the New York Convention broadly, considering that “exchange of letters or telegrams” includes any other means of communications. The Court further observed that the form requirement of the New York Convention was met since it was equivalent to the form provided by Article 178(1) of the Swiss Code on Private International Law.3)This decision is cited as BGE 121 III 38, 44, E.2c. jQuery("#footnote_plugin_tooltip_4635_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4635_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

 

 

The e-arbitration hearing can be different than traditional arbitration

In online arbitration, the e-arbitral process, including the hearing, is entirely conducted online. For the purposes of such process, an e-file for each e-commerce dispute is created and administered by the online service provider. This e-file includes all notifications and communications between the parties and the arbitrator(s), as well as the documents submitted by the parties. In traditional arbitration, parties may likewise agree to hold hearings online insofar that is permitted, either by national laws or by the rules of the arbitral institution. For instance, the 2017 Rules of the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation (“ICAC”) provide under Article 30(6) that either party has the right to request to participate in the hearing by means of videoconferencing, i.e. e-hearing. The arbitral tribunal will bear in mind the circumstances of the case, the parties’ position, and its technical feasibility when ruling such request.

 

The e-arbitration award is recognized under some national arbitration laws

In online arbitration, an award is rendered online. An e-arbitral award should be binding unless otherwise agreed by the parties before the commencement of the arbitration. in case of non-binding arbitration, the parties retain the right to submit the dispute to a court or to a binding arbitration. The arbitrator(s) shall notify the parties of an arbitral award via digitally signed e-mail to the parties’ e-mail addresses. The arbitrator(s) shall also notify the online arbitral institution of an e-award. Once an e-award is notified, the institution will close the e-file and will ask the parties to comply with the e-award. The institution may also publish an e-award on its website. Once an e-award has been rendered and notified, the losing party must comply with the award voluntarily or seek to set it aside while the winning party may seek to have the award recognised and enforced, like any other traditional arbitral award.

Some national laws regulating arbitration in both common law and civil law countries may not require an award to be in a specific form, and consequently an electronic form of an arbitral award will be recognised. In the UK, a common law jurisdiction, for example, Section 52 of the Arbitration Act of 1996 provides, inter alia, that the parties are free to agree on the form of an award. Similarly, in Switzerland, a civil law jurisdiction, Article 189(1) of the Swiss Code on Private International Law, entitled Arbitral Award, provides that the arbitral award shall be rendered according to the procedure and in the form agreed upon by the parties. Apart from that, in The Netherlands, the Arbitration Act contained in the Code of Civil Procedure provides in Article 1072(b)(3) that an arbitral award may be made and signed electronically.

Practical thoughts on issuing an e-arbitration award when the award must be in writing

Other national laws may require that an arbitral award must be in writing. For avoiding this practical difficulty, it is desirable that arbitrators issue a signed and printed copy of an e-award. If online institutional arbitration is applicable, the ODR provider “institution” must issue a printed copy signed by the arbitrator(s), sealed by the institution and send it to the parties through regular mail.

Making of online arbitral awards may face some challenges soon, including the use of a machine arbitrator, noting that most national arbitration laws of both common law and civil law countries provide that only natural persons can act as arbitrators. However, one may observe that “such cooperation between artificial intelligence and arbitration will be beneficial for all participants involved in arbitration because it will provide both parties and arbitrators with additional tools that help to make dispute resolution more effective”.4) Pavlovskaya Veronika raised this issue in her presentation during the 10th ICC YAF-YAAP Joint Conference, entitled: “Young Approaches to Arbitration”, Vienna, March 24, 2018, unpublished yet. jQuery("#footnote_plugin_tooltip_4635_4").tooltip({ tip: "#footnote_plugin_tooltip_text_4635_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

References   [ + ]

1. ↑ For a more detailed analysis of these issues see: Ihab Amro, Online Arbitration in Theory and in Practice: A Comparative Study of Cross-Border Commercial Transactions in Common Law and Civil Law Countries, Cambridge Scholars Publishing, UK, First Published 2019. 2. ↑ See Van Cutsem, Jean-Pierre, Viggria, Arnaud, and Güth, Oliver, E-Commerce in the World –Aspects of Comparative Law–, Bruxelles, Bruylant, 2003, at p. 95. 3. ↑ This decision is cited as BGE 121 III 38, 44, E.2c. 4. ↑ Pavlovskaya Veronika raised this issue in her presentation during the 10th ICC YAF-YAAP Joint Conference, entitled: “Young Approaches to Arbitration”, Vienna, March 24, 2018, unpublished yet. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
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The Chartered Institute of Arbitrators v B and others: The “Interests of justice” exception to the general obligation of confidentiality in arbitral proceedings

International Arbitration Blog - Wed, 2019-04-10 12:21
On March 7, Justice Moulder of the England and Wales High Court (Commercial Court) handed down the decision in The Chartered Institute of Arbitrators v B and others.

College Admissions Cases and Hard Bargaining

ADR Prof Blog - Wed, 2019-04-10 10:54
Prosecutors regularly threaten to add charges if defendants do not accept plea deals. This threat can be serious and can result in substantially more prison time. It seems the rich and privileged defendants in the College Admissions Scandal cases are experiencing this first hand. On Monday, a number of defendants, including Felicity Huffman, agreed to … Continue reading College Admissions Cases and Hard Bargaining →

Israel Reflections 2019–Shared Society

ADR Prof Blog - Wed, 2019-04-10 08:45
One key focus of our trip was all of the organizations working on shared society across groups in Israel.  Our day of shared society started at Sindyanna of Galilee with a Za’atar workshop. Sindyanna of Galilee is a non-profit organization that employs Arab and Jewish women who aim to create a peaceful coexistence between the … Continue reading Israel Reflections 2019–Shared Society →

The Contents of the ASA Bulletin, Volume 37, Issue 1 (March 2019)

Kluwer Arbitration Blog - Wed, 2019-04-10 01:11

Matthias Scherer and Catherine Anne Kunz

We are happy to inform you that the latest issue of the ASA Bulletin is now available and includes the following articles and cases:

ARTICLES

Elliott GEISINGER, From Licence to Licence to Licence Points? (Yet Another Revolutionary Idea)

In his message, ASA President Elliott GEISINGER, inspired by the gilets jaunes and the French driving licence system, proposes an innovative system to deal with parties’ excessive behaviour in international arbitration. What if there were a “procedural points capital” for each party to use for its procedural requests? Points could then be deducted for unreasonable procedural conduct and parties required to pay an additional advance on costs once their procedural points capital is exhausted.

Matthias SCHERER, Lea MURPHY, Inventory of Arbitration Proceedings Based on Swiss Bilateral Investment Treaties (BIT) (Update 2018)

Switzerland’s Bilateral Investment Treaties (BIT) have given rise to over twenty investment arbitrations. This inventory provides basic information about these cases.

Robert L. ROM, Practical Aspects of the Cooperation between Arbitration Counsel and In-House Counsel through Different Stages of International Arbitration Procedures

A close cooperation between outside lawyers and in-house counsel is essential throughout the arbitration proceedings. Robert L. ROM looks at the interaction and cooperation between in-house and external counsel in international arbitration and possible areas for improvement in the light of the experience he gained as senior Group Legal Counsel to Swiss multinationals.

Gordon BLANKE, Trends in International Energy Arbitration: Can ECT Claims be Arbitrated?

The ruling of the Court of Justice of the European Union (CJEU) in the case C-284/16 – Slovak Republic v. Achmea BV raises major concerns about the compatibility of obligations to arbitrate entered by Member States within the framework of bilateral investment treaties for infra-EU investment with EU law. Gordon BLANKE discusses whether the Achmea ruling extends to the operation of the arbitration mechanism contained in the Energy Charter Treaty (ECT) or whether – given the EU’s membership of the ECT – it remains unaffected by the CJEU’s findings for now.

Michel NARDIN, Is there a Future for Tribunal-Appointed Experts?

The settlement of complex disputes arising in industry or in construction requires an exceptional understanding of the various issues addressed in such procedures. One main challenge for the arbitrators is to be capable of seeking specialized knowledge and then to integrate it into their decision-making process. Michel NARDIN takes stock of the options available to arbitral tribunals.

Luis BRAVO ABOLAFIA, Implied Choice of the Law Applicable to the Arbitration Agreement: The Effect on Non-Signatories in International Arbitration

The law applicable to the arbitration agreement has a decisive impact on the validity, scope and extension of the arbitration clause to non-signatory third parties. Luis BRAVO ABOLAFIA examines the long-debated issue of the law applicable to the arbitration agreement and its effect on non-signatories from a common law and civil law perspective.

Sorin DOLEA, Arbitrability of Disputes Arising out of Procurement Contracts Concluded by Municipally Owned Companies in the Russian Federation

The arbitrability of disputes arising out of procurement contracts concluded by municipally-owned enterprises in the Russian Federation is hotly debated among arbitration practitioners in the region. The author analyses the approach taken by the Supreme Court of the Russian Federation in a number of cases concerning the arbitrability of procurement disputes.

Subhiksh VASUDEV, Damages for Non-Material Harm in Investment Treaty Arbitration

Investment treaty arbitration has witnessed a significant rise in claims for moral damages. Subhiksh VASUDEV provides an overview of how various arbitral tribunals have dealt with this issue. The author also provides a critical analysis of key issues faced by arbitral tribunals in practice.

Catherine Anne KUNZ, Fact or Fiction? How to Deal with Allegations of Simulation. Case Note on Swiss Supreme Court Decision of 1 October 2018, 4A_550/2017

Contract simulation is one of the tools used to perpetrate or conceal a criminal activity, such as fraud or money laundering. Catherine Anne KUNZ comments on a decision of the Swiss Supreme Court of 1 October 2018 (4A_550/2017) in which Switzerland’s highest court had to decide whether an arbitral tribunal had violated a party’s right to be heard in relation to allegations of contract simulation.

Caroline DOS SANTOS, European Court of Human Rights Rules upon Sports-Related Decision: Switzerland Condemned

Caroline DOS SANTOS reports on the decision of the European Court of Human Rights of 2 October 2018 in the case opposing two athletes, Mutu and Pechstein, and Switzerland. The athletes argued without success that their right to a fair trial pursuant to Article 6 § 1 of the ECHR Convention had been violated on the basis that the Court of Arbitration for Sport (CAS) lacked independence and impartiality as a consequence of its appointment mechanism. The ECHR however condemned Switzerland for not setting aside the CAS award on the ground that the CAS’ refusal to grant Ms Pechstein’s request for a public hearing violated Article 6 § 1.

DECISIONS OF THE SWISS FEDERAL SUPREME COURT

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Israel Reflections–Golan Heights, the Galilee and the Druze

ADR Prof Blog - Tue, 2019-04-09 08:47
The group had a memorable night at the kibbutz and were very sad to leave the cozy cottages we were able to stay in. Our busy day (Tuesday) of sight-seeing started with a visit to Mount Bental.  At the peak of Mt. Bental we had views of Golan and Syria. Taylor Brisco and her friends … Continue reading Israel Reflections–Golan Heights, the Galilee and the Druze →
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