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Peace is attainable despite threat, says Osinbajo - Guardian (blog)

Google International ADR News - Sat, 2018-09-22 23:33

Guardian (blog)

Peace is attainable despite threat, says Osinbajo
Guardian (blog)
Osinbajo, speaking at a lecture organised by the Lagos State Citizens Mediation Centre (CMC) to mark the 2018 International Day of Peace, said alternative dispute resolution enhances peace. The Vice President, represented by, the Rule of Law Advisor, ...
Yemi Osinbajo: Peace is attainable in Nigeria despite threatTODAY.NG

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Osinbajo: Peace is attainable in Nigeria despite challenges - New Telegraph Newspaper

Google International ADR News - Sat, 2018-09-22 21:51

New Telegraph Newspaper

Osinbajo: Peace is attainable in Nigeria despite challenges
New Telegraph Newspaper
According to Osinbajo, the CMC was doing great things in Lagos to enhance peace through Alternative Dispute Resolution (ADR), adding that his office so much cherished peaceful resolution of conflict. ... Also speaking, the Lagos Commissioner for ...

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Confidentiality in International Commercial Arbitration: Truth or Fiction?

Kluwer Arbitration Blog - Sat, 2018-09-22 17:05

Marlon Meza-Salas

Confidentiality is usually mentioned among the advantages of international commercial arbitration (ICA). The thought that confidentiality is an innate attribute, seems to be an attractiveness considered to choose ICA to settle disputes. For a long time, it did not seem to be questioned that the private nature of the arbitration process also forced the parties to maintain confidentiality. However, since certain judgments were issued in some countries from the mid-1980s that held: (i) that confidentiality was not an essential attribute of arbitration (Esso and others v. Plowman (1995) 128 A.L.R. 391 —High Court of Australia), (ii) that there was no general principle of confidentiality (U.S. v. Panhandle et al. (1988) 118 F.R.D. 346 (D. Del) —in United States), or (iii) an implied duty of confidentiality in ICA (Bulbank v. A.I. Trade Finance (2000) The Supreme Court of Sweden, case T1881-99), it was evidenced that the belief about confidentiality in ICA was not universal.

When reviewing the comparative law, it is noted that there is no uniform approach on the subject but instead significant differences, since many national legislations do not regulate confidentiality at all, other countries mention it in a very general way, and exceptionally some statutes contain broader regulations. Diversity is so great that even where it is recognized, there are huge differences about its content and scope.

So, it is not surprising that many commentators reject the existence of an implied confidentiality duty in ICA. The truth is that confidentiality in ICA can be misleading, to the point that it has been said it is a “myth” (See J.C. Fernández Rozas, Trayectoria y contornos del mito de la confidencialidad en el arbitraje comercial, 2(2) Arbitraje – Revista de Arbitraje Comercial y de Inversiones 335, 335-378 (2009).

Confidentiality in National Legislations

Confidentiality in ICA is not protected in most countries, which may be due to the fact that the UNCITRAL Model Law on ICA followed in whole or in part by many countries, contains no provision in this regard. In contrast, the laws of New Zealand, Peru, Scotland and Australia have meticulous regulations on confidentiality.

The situation varies among the countries usually chosen as ICA seats. For instance, although there is no statutory regulation on confidentiality for ICA in Great Britain, there is an important development in case law to protect confidentiality. In the United States, the Federal Arbitration Act and the Uniform Arbitration Act adopted as a model by most States, do not impose confidentiality requirements. In France, a legal amendment of 2011 established the duty of confidentiality for domestic arbitration, but not for ICA unless the parties have agreed to it.

Confidentiality in Arbitration Rules

Many arbitration institutions regulate confidentiality, but mainly as a duty of the arbitrators and the staff of each center. Some rules are more detailed or there are Codes of Ethics for arbitrators, but they do not always establish a duty of confidentiality for the parties. This is the case with the ICC Rules, whose article 6 of Appendix I, and article 1 of Appendix II, only impose duties on arbitrators and the staff of the International Court of Arbitration, but not on the parties, although article 22.3 authorizes the Arbitral Tribunal to make orders concerning confidentiality upon the request of any party. Similarly, article 37.1 of the ICDR rules of the AAA only imposes duties of confidentiality on arbitrators and Administrator and article 37.2 establishes that the tribunal may make orders concerning confidentiality; in addition, there is a Code of Ethics with provisions on confidentiality for arbitrators that applies to both domestic AAA arbitrations and international ICDR arbitrations.

In contrast, article 30 of the LCIA Rules regulates the duty of confidentiality in a well-defined manner. The UNCITRAL Arbitration Rules do not mention the subject, although article 34.5 seems to recognize an implicit confidentiality of the award by requiring the consent of both parties so that it may be made public.

Personal and Material Scope of Confidentiality

The discussion is not limited to whether or not there is a duty of confidentiality, because even where the duty is recognized, its content and scope vary. Thus, among the people who could possibly be subject to a confidentiality duty, we find the arbitrators, the staff of the arbitration institutions, secretaries, witnesses, experts, court reporters, translators, interpreters or other people involved in the arbitration, the parties and their representatives and advisors.

The material scope could cover from the fact of the very existence of the arbitration, to the pleadings and memorials of the parties, the documents produced or other evidence such as witness statements or experts reports, the award and other arbitration decisions, as well as information contained in such filings.

The information contained in the arbitration filings can be critical, since it can be, for example, sensitive commercial information such as profit margins, production costs, pricing policies, know-how or trade secrets, the disclosure of which could harm one or both parties involved in an ICA. It could also expose the financial situation of a company or the existence of a defective product, situations that could compromise the image of a company in front of the public and favor competitors.

Absolute Confidentiality Does Not Exist: The Exceptions

A request for annulment, or the request for recognition and enforcement of an award issued in an ICA, are legal actions processed in courts, and in such cases the confidentiality —if any— has to yield, and the award and all information contained therein become public. Something similar happens if judicial assistance is required to request or enforce interim injunctions in an ICA. These situations are called natural exceptions to confidentiality.

Also, one or both parties may be legally bound to disclose information related to the arbitration, for example, at the request of some regulatory authority (in banking, securities, or insurance matters), or by a tax, criminal or judicial authority. In these cases, we are before exceptions to confidentiality due the public interest that are imposed over the private interest of the parties, although they could be interested in keeping the arbitration away from the public sphere.

There are other circumstances that do not fit with the inevitable situations described above, but some legislations, arbitration rules, or case law in some countries, have also admitted as exceptions to the duty of confidentiality. This is the case, for example, when disclosing the existence of arbitration is reasonably necessary to protect the legitimate interests of one of the parties vis-à-vis third parties, or to protect or enforce a right against a third party acting as a plaintiff or defendant, which has been qualified as a matter of procedural public order. It has also been considered that there is no violation of the duty of confidentiality if certain information related to the arbitration is communicated but there is a legitimate reason to do so. Likewise, the right of certain interested third parties to know the existence and outcome of the arbitration has been recognized, such as a parent company, shareholders of a company, corporate auditors, an insurance company, and even an interested party in acquiring a company that requires a due diligence.

Among interested third parties against whom a party may have a legitimate need to disclose the existence of an arbitration, an ICC publication mentions the case of a sub-contractor, who would be entitled to know the terms and circumstances of an arbitral dispute between the main contractor and the owner of the works (See Craig, Park & Paulsson, International Chamber of Commerce Arbitration 312 (Oxford/ICC, 3rd.ed., 2000). A fortiori —we add—, the owner of the works would have the right to know about an arbitral dispute between his contractor and a sub-contractor. In these cases, the exception seems to be justified in the fact that they are linked contracts that, although they are independent contracts themselves, are closely connected by sharing some degree of identity in the object or cause (See J.O.Rodner, Los Contratos Enlazados – El Subcontrato 35 (Academia de Ciencias Políticas y Sociales, 2nd.ed., 2013).

Hence, unless explicitly forbidden by the applicable legislation or arbitration rules, or by agreement among the parties, the parties may disclose details of their own arbitration, including to interested third parties, if there are legitimate reasons to justify that they are acting in good faith.

Conclusions and Recommendations

In matters of confidentiality, the only thing that tends to be recognized almost unanimously in national legislations or in the arbitration rules regarding ICA, is the duty of confidentiality of the arbitrators in the performance of their tasks, but not of the parties or other people involved in the arbitration proceedings. That is why arbitrators in ICA usually promote the inclusion of an express agreement about confidentiality among the parties when establishing the bases of the arbitration procedure, commonly called Terms of Reference.

The diversity is so great that even in cases where the applicable rules recognize the duty of confidentiality, bounded people and the protected contents also vary, which indicates that there is no presumption of confidentiality in ICA or at least there is no general principle on the matter.

That is why those interested in protecting their ICA disputes from public dissemination or in avoiding potentially unfavorable or harmful publicity, should verify the applicable law regarding confidentiality, since depending on the circumstances of each case and the agreement entered into by the parties, it could be the law applicable to the arbitration agreement, the law of the contract, or the law of the seat of arbitration. In any case it is still advisable to include express provisions in the arbitration agreement that deal with confidentiality.

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Arbitration Reform in Ukraine in Action: First Results

Kluwer Arbitration Blog - Sat, 2018-09-22 03:00

Kateryna Shokalo

On 15 December 2017, the renewed Supreme Court was launched in Ukraine, which triggered the entry into force of the new amendments of, inter alia, Civil and Commercial Procedure Codes. Within this broader judicial reform, a number of long-awaited changes in legal framework for international commercial arbitration have been brought forward, including the following:

  • reducing the number of court instances in arbitration-related matters from four to two, by courts of appeal acting now as the first instance courts;
  • stipulating the principle of interpretation in favorem validitatis;
  • empowering the courts to support arbitration through granting the interim measures, preservation and taking of evidence; and
  • introducing simplified procedure of voluntary compliance with arbitral awards.

To analyse the efficiency of application of the new rules, this post is overview of the court practice from the past nine months and it will highlight the most noteworthy cases.

The Enforcement of Arbitration Agreements

Ukrainian courts have been renowned for their strict formalism. For instance, from time to time, the courts refused to enforce arbitration agreements due to the non-essential discrepancies in the name of arbitral institution. This issue had become the central one in Vilnohirske sklo LLC v Expobank CZ a.s. case, which was recently considered by the Supreme Court.

The claimant, Ukrainian entity, filed a claim to a Ukrainian commercial court over the invalidity of the mortgage agreement executed in English and Ukrainian. According to the English version of this mortgage agreement, the disputes shall be decided by the “Arbitration Tribunal of the Chamber of Commerce of the Czech Republic and the Agrarian Chamber of the Czech Republic”. Meanwhile, the official name of the institution reads as “the Arbitration Court attached to the Czech Chamber of Commerce and the Agricultural Chamber of the Czech Republic”. Vilnohirske sklo claimed that the discrepancies between the official name of arbitral institution and the one stated in the arbitration agreement are so significant that make the arbitration agreement not capable of being performed.

The first instance court disagreed, referring the parties to arbitration. The court of appeal, however, upheld the claimant’s position and sent the case back to the first instance court for consideration on merits. Expobank CZ a.s. challenged this ruling to the Supreme Court, which ultimately enforced the arbitration agreement.

The Supreme Court found that notwithstanding the existing discrepancies the parties intention to resolve the disputes under the rules of particular arbitral institution is evident. Article 22 (3) of the amended Commercial Procedure Code stipulates that any defects in the arbitration agreement and/or doubts as to its validity, operability and capability of being performed should be interpreted by the court in favour of its validity, operability and capability of being performed.  Meanwhile, the court primarily derived in favorem presumption from Ukraine’s obligation to recognise arbitration agreements under Article 2 of the New York Convention and stated that it is also provided in the Article 22 (3) of the Commercial Procedure Code.

Interim Measures

Before 15 December 2017 it was practically impossible to obtain interim measures and any other support of arbitral proceedings from Ukrainian courts. The arbitration reform filled the legislative gap for arbitration proceedings seated both in Ukraine and abroad.

On 9 February 2018, SoftCommodities Trading Company SA filed an application to Odesa region Court of Appeal, acting as the first instance court, for interim measures in support of arbitration initiated under the GAFTA Arbitration Rules against Elan Soft LLP. The dispute arose out of the supply contract for supply of 20 000 tons of Ukrainian wheat by several lots. SoftCommodities claimed that the parties agreed for the supply of the lot in the amount of 2500 tons, of which Elan Soft delivered 1000 tons. The other 1500 tons should have been stored in the warehouse of Ukrainian company – Davos Firm LLC. SoftCommodities, however, figured out that only 1290 tons are available in the warehouse and, therefore, initiated the arbitration claiming damages. Arguing that Elan Soft has been trying to move all wheat remaining in the warehouse out to avoid the enforcement of future arbitral award, the SoftCommodities asked the Ukrainian court for (i) freezing 1290 tons of Ukrainian wheat stored by Davos Firm LLC, and (ii) prohibiting Davos Firm LLC and Maritime Trade Port Ust-Dunaisk, the port at the location of the warehouse, to move 1290 tons of Ukrainian wheat out of the warehouse.

Under the general rule, the court seized with the application for an interim measure should consider the case ex parte within two days, while it may order the claimant to appear before the court in certain cases or consider the application inter partes in exceptional circumstances. The court decided to hear this case with the participation of all parties, including Davos Firm LLC and Maritime Trade Port Ust-Dunaisk. The court reasoned that the additional evidence as to the amount of wheat stored in the warehouse in February 2018 and its price should be lodged and analysed as well as certain issues regarding counter-security should be decided.

On 22 February 2018, the court upheld the application in full. Regrettably, the court did not provide sound reasoning to offer a clear guidance for future applications. Furthermore, the court secured the possible damages of Elan Soft by the guarantee of another Ukrainian company in the amount equivalent to the price of 1290 tons of Ukrainian wheat. The court decided that the counter-security is obligatory in this case since SoftCommodities is neither registered, nor has its assets in Ukraine sufficient for compensation of possible damages.

Elan Soft applied to Odesa region Court of Appeal for cancellation of the interim measures, however, unsuccessfully. In the meantime, Elan Soft challenged the ruling on granting the interim measures to the Supreme Сourt. It remains to be seen whether the Supreme Court will uphold this ruling and/or clarify the test for granting the interim measures in support of arbitration.

Voluntary Compliance with an Arbitral Award

Due to foreign currency regulations, debtors encountered practical difficulties in voluntary compliance with arbitral awards. The debtor should furnish the servicing bank with the execution writ, which may be obtained as a result of recognition and enforcement proceedings. The arbitral reform resolved this problem introducing expedited procedure of recognition and voluntary compliance with the arbitral awards. The court shall consider the respective application without the participation of the parties and analyse merely the arbitrability of disputes and public policy issues.

On 4 May 2018, PJSC Centrenergo applied to Kyiv city Court of Appeal, acting as the first instance court, for recognition and voluntary compliance with the LCIA award. In this case, the tribunal dismissed the claims of Centrenergo and in a separate award ordered to repay to Mercuria Energytrading S.A. the arbitration and legal costs. On 21 May 2018, Kyiv city Court of Appeal recognised the LCIA award on costs allowing voluntary compliance therewith.

Conclusions

To streamline Ukrainian court practice in arbitration-related matters with the best international standards all participants should contribute to this process. On the one hand, the above illustrated court practice provides some reasons to hope about the tendency for efficient application of thoroughly drafted new provisions. Meanwhile, we should not undermine the significance of the fresh approach to the interpretation of old (in effect) rules. On the other hand, to build a robust and arbitration-friendly court system, the author calls Ukrainian arbitration practitioners to engage into meaningful arguments, e.g. not the ones that a negligible discrepancy in the name of institution makes the arbitration agreement incapable of being performed.

More from our authors: International Arbitration and the Rule of Law
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ODR as an Effective Method to Ensure Access to Justice: The Worrying, But Promising Brazilian Case - Mediate.com

Google International ADR News - Fri, 2018-09-21 12:24

ODR as an Effective Method to Ensure Access to Justice: The Worrying, But Promising Brazilian Case
Mediate.com
Alternative Dispute Resolution (ADR) is the use of mechanisms to resolve disputes such as conciliation, mediation, arbitration and even negotiation without the involvement of the state and its judiciary. While ADR methods have returned to the spotlight ...

People in the News—Sept. 21, 2018—Marshall Dennehey Warner Coleman & Goggin - Law.com

Google International ADR News - Fri, 2018-09-21 11:00

Law.com

People in the News—Sept. 21, 2018—Marshall Dennehey Warner Coleman & Goggin
Law.com
He is also experienced in alternative dispute resolution, including private arbitration. Forte is the author of ... Huq focuses his practice on securing patents in a wide variety of industries and technologies for domestic and international clients. He ...

Arbitral Award from CIETAC Got Recognized and Enforced by US Court - a Brief Review of Substantial/Procedural ... - Lexology

Google International ADR News - Fri, 2018-09-21 04:45

Arbitral Award from CIETAC Got Recognized and Enforced by US Court - a Brief Review of Substantial/Procedural ...
Lexology
On May 30, 2018, an arbitral award from the China International Economic and Trade Arbitration Commission (CIETAC) got recognized and enforced by the United States District Court for the Eastern District of New York (E.D.N.Y.). The case involved is ...

Recent Developments in India-related International Arbitration - Lexology

Google International ADR News - Fri, 2018-09-21 04:38

Recent Developments in India-related International Arbitration
Lexology
The Supreme Court of India has resolved important questions on the interpretation of amendments to the Arbitration Act and Conciliation Act 1996 (“Arbitration Act“) as regards the enforcement of domestic and international arbitration awards. In Kandla ...

Can Directors Rely on their Companies’ Arbitration Agreements?

Kluwer Arbitration Blog - Fri, 2018-09-21 00:00

Ramandeep Kaur

YSIAC

Joint venture agreements increasingly provide for arbitration, allowing the JV partners to resolve matters privately.  Where a director of a JV company (or JV partners) is sued in his capacity as a director in relation to matters arising out of the joint venture agreement, can he also rely on the arbitration agreement in the joint venture agreement?  Or, must he be left to contend with the public scrutiny of litigation?

Unsurprisingly for a legal problem, the answer is “it depends”.  It depends, according to the Singapore High Court in A co and others v D and another [2018] SGHCR 9, on objective intentions of signatories to the arbitration agreement.  As a general proposition, this is uncontroversial.  Its application however is instructive, indeed cautionary, for directors wishing to avoid litigation, who might otherwise be lulled into an assurance of confidentiality based on arbitration agreements signed by their companies.

The Court clarified that just because a director may be acting in his capacity as a director cannot justify his reliance on his company’s arbitration agreement, even if it is broadly drafted (as most arbitration agreements now are).  Something more is required.  Seemingly, a lot more is required – nothing short of an express statement covering claims against a director might suffice.

Facts

Company A was incorporated pursuant to a joint venture between companies F and G.  The relationship between parties to the joint venture was governed by an investment agreement concluded between, among others, companies A, F and G (“IA”).

The incorporated JV, Company A, was the holding company of Companies B and C, and B in turn was the parent company of Company H.  D was the executive chairman and CEO of Company G, and his son, E, was the managing director of Company C.  D and E were also directors of Company A.

Various persons and entities connected with the IA were embroiled in a string of acrimonious proceedings, which included 4 litigations and 1 arbitration.  The latest salvo in this series was a Court action by Company F against D and E.  In this suit, Company F, acting on behalf of Companies A, H and C (“Companies”), alleged that D and E were in breach of their fiduciary duties to the Companies.

D and E applied to stay the suit in favour of arbitration under section 6 of Singapore’s International Arbitration Act (“IAA”), on the basis that the arbitration agreement in the IA applied to them, even though they had not signed it.  They emphasised the breadth of the arbitration agreement, which applied to “any dispute, controversy or conflict arising out of or in connection with” the IA.  This, they argued, on a “holistic” reading of the IA, included claims brought by “Group Companies” (as defined in the IA, to include the Companies) against “Affiliates” (which included D and E).

Alternatively, relying on the “agency principle” from American jurisprudence, they contended that they could compel the Companies to arbitrate simply because the Companies’ claims concerned D and E’s conduct as directors of companies which were governed by the IA.

The Decision

The High Court declined the stay application.  There appears to have been no serious argument on whether the subject matter of the suit was indeed connected with the IA.  The issue was instead framed as whether D and E were parties to the arbitration agreement, which they had not signed.

Objectively, the arbitration agreement did not apply to D and E

Importantly, the Court held that the mere wording of the arbitration agreement, wide though it was, was insufficient to imply that it covered the Companies’ claims against D and E.  It was significant to the Court that the arbitration agreement had on a separate occasion been expressly incorporated into a deed (which was unrelated to this dispute).  This, the Court held, demonstrated that if parties intended to arbitrate disputes between the Companies and D and E, they could similarly have made an express provision to that end.

The Court concluded that nothing in the IA demonstrated the necessary objective intention to arbitrate the Companies’ claims against D and E, and in the absence of any other supporting circumstances or parties’ conduct, such intention simply was not there.  A clause in the IA, which provided that claims by Company A against D and E (as “Affiliates”) shall be prosecuted on behalf of Company A by directors of company F was found to be irrelevant, as it dealt only with who has the authority to prosecute, not with the mode of the dispute resolution.

Directors cannot rely on “agency principle” to compel arbitration

D and E also argued that they could compel the Companies to arbitrate simply because their allegations concerned D and E’s conduct as directors of companies which were governed by the IA.  This was based on the “agency principle” espoused in a 2011 American decision, Kiskadee Communications v Philip Father 2011 US Dist Lexis 34974 (N. Cal. 2011), which allows an agent to benefit from an arbitration agreement if claims against him (i) concern acts done in his capacity as an agent, and (ii) arise out of or relate to the contract containing the arbitration agreement.

The Court declined to import this “novel” point to Singapore law for a number of reasons, of which the most compelling appears to be the criticism of the “agency principle” (even within American jurisprudence) for its potential to offend parties’ objective intentions, i.e. by allowing an “agent” to invoke an arbitration agreement when objectively, parties may not have intended such an outcome.

Company F’s submissions about the differences between the tests for stay under American and Singapore legislation also found favour with the Court in reaching this conclusion.  The Court accepted that section 3 of the Federal Arbitration Act did not require the party seeking the stay to be a party to the arbitration agreement; all that was required was “an issue referable to arbitration under an agreement in writing for such arbitration”.  On the other hand, section 6 of Singapore’s IAA only allows a party to the arbitration agreement to make an application for stay.

This difference however, appears more apparent than real.  Singapore’s IAA does not define “party”, and where an “agent” seeks to rely on an arbitration agreement, his party status is the very question that needs to be decided.  Further, section 9 of Singapore’s Contract (Rights of Third Parties) Act allows third-party beneficiaries of arbitration agreements to invoke them in prescribed circumstances, thus expressly allowing non-parties to rely on them.  On the other hand, it is highly doubtful whether the American Federal Arbitration Act allows anyone other than a party to (or a third-party beneficiary of) an arbitration agreement to stay court proceedings in favour of arbitration.  It requires an issue referable to arbitration “under an agreement”, and an agreement can only be invoked by those who agree to it or are otherwise intended to be its beneficiaries.

Third party rights under Contract (Rights of Third Parties) Act (“CRTPA”)

Although D and E did not seek to rely on the CRTPA, the Court affirmed the theoretical possibility of a non-signatory invoking an arbitration agreement in his capacity as an intended third-party beneficiary of the arbitration agreement, provided:

  1. the arbitration agreement purports to confer a benefit on him, such that the benefit is intended (not merely incidental); and
  2. parties intended to entitle him to enforce the arbitration agreement.

Comment

The key take-away for directors (or other corporate officers and agents) wishing to rely on arbitration agreements signed by their companies is to say so in writing.  Otherwise, they face the uphill task of convincing the court that the signatory companies also objectively intended to make the directors parties to the companies’ arbitration agreement.

This is not easy, and as A v D demonstrates, arguments based on the interpretation of the underlying contract and the scope of disputes it envisages will likely not pass muster.  The CRTPA will also be of little, if any, assistance to a director in this predicament, as it too requires demonstration of parties’ intention to benefit a third party, and to allow him to enforce the arbitration agreement.  The safest course is to spell out the parties and the disputes that the arbitration agreement is to cover.

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Supreme Court of India ‘Rules Out’ the Rulebook in Favor of Substantive Rights

Kluwer Arbitration Blog - Thu, 2018-09-20 23:00

Siddharth Ratho and Tanisha Khanna

YSIAC

A mandatory legal provision is one that a party has no choice but to obey, whereas a directory provision is one which the party is encouraged to obey. In other words, a mandatory provision must be observed, disobedience of which would lead to a nullification of the legal act, whereas a directory provision is optional.

In the case of State of Bihar & Ors. v Bihar Rajya Bhumi Vijas Bank Samiti1) Civil Appeal No. 7314 of 2018 jQuery("#footnote_plugin_tooltip_6176_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6176_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });, the Supreme Court of India (“SC”) has had occasion to decide whether Section 34(5)2) Section 34 (5) of the Arbitration Act (inserted vide Section 18 of the Arbitration and Conciliation (Amendment) Act, 2015) states as follows: An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. jQuery("#footnote_plugin_tooltip_6176_2").tooltip({ tip: "#footnote_plugin_tooltip_text_6176_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); of the Indian Arbitration and Conciliation Act, 1996 (“Act”), is a mandatory or directory provision of law. In doing so, it had to play referee to two competing considerations – discouraging unscrupulous defendants by upholding strict rules of procedure, versus preventing procedural provisions of law from defeating substantive rights. The SC eventually ruled in favor of the latter.

Consequently, prior notice to an adversary is not mandatory for filing an application to set aside an arbitration award. In reaching its conclusion, the SC elucidated important principles governing the distinction between mandatory and directory provisions of procedural law.

Precedential Back Drop

In this case, the SC was tasked with finally resolving two contrary streams of precedent. One line of rulings, helmed by New India Assurance Co. Ltd. v Hilli Multipurpose Cold Storage Pvt. Ltd. (2015) 16 SCC 20, held that procedural provisions of law (in this case the time limit prescribed for filing a written statement under the Consumer Protection Act, 1986 (“CPA”)) were mandatory in nature. The SC in New India Assurance was guided by observations in Dr. J.J. Merchant & Ors. v Shrinath Chaturvedi (2002) 6 SCC 635 to the effect that the prescribed time limit for filing of a written statement under the Code of Civil Procedure, 1908 (“CPC”) was ‘required to be adhered to.’

Eventually, the SC upheld its previous rulings in Topline Shoes v Corporation Bank, (2002) 6 SCC 33 Salem Advocate Bar Association v Union of India (2005) 6 SCC 344, State v N.S. Gnaneswaran (2013) 3 SCC 594 and Kailash v Nankhu & Ors (2005) 4 SCC 480, where similar procedural provisions prescribing time-lines were considered directory in nature.

Facts and Arguments

The newly introduced Section 34(5) of the Act provides that applications to set aside arbitral awards “shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.” Section 34(6) further provides that such an application is to be disposed of expeditiously and in any event within one year from the date on which such notice is served upon the other party.

The appellants in this case (“Appellants”) had filed an application for setting aside an arbitral award under Section 34 of the Act (“Application”) before the High Court of Patna (“Patna HC”) without issuing prior notice to the respondents (“Respondents”). The Respondents challenged the maintainability of the Application on the ground that no prior notice had been issued to them. The Appellants countered this by stating that the requirement to provide notice under Section 34 (5) of the Act was only directory in nature.

The two arguments came to a head before a single judge of the Patna HC, who relied upon the SC ruling in Kailash to hold that the requirement to issue notice under Section 34(5) of the Act was only directory in nature. However, a division bench of the Patna HC struck down the single judge’s order, opining that the obligatory language in which the provision was couched, and the object of the section, indicated that the provision was mandatory in nature.

Accordingly, the Appellants appealed the decision of the Patna HC division bench before the SC.

Game, Set, Match: SC upholds appeal, ruling that prior notice is not mandatory

On appeal, the SC initially observed that the language of Section 34(5), namely the words ‘shall’, ‘only after’ and ‘prior notice’ supported the Respondents’ argument that the provision was mandatory in nature. The SC also took note of the 246th Indian Law Commission Report (“Law Commission Report”) which documented that the object of Section 34(5) and 34(6) was that an application under Section 34 be disposed of expeditiously within a period of one year from the date of service of the notice.

However, the SC ultimately served three decisive strikes against the Respondents’ arguments.

  • Strike 1: No consequence under the Act for non-service of notice

Relying upon a plethora of judgments, the SC held that the Section 34(5) of the Act was directory in nature because no consequences was provided for its contravention.  The SC also drew a parallel with Section 29A of the Act which prescribes the time limit within which an arbitration award is required to be made and also provides that if the same is not met, the mandate of the arbitrator stands terminated. This stands in stark contrast to Sections 34(5) and 34(6) which did not prescribe a consequence if an application under Section 34 was not decided within the prescribed time limit.

  • Strike 2: Object of Section 34 was to advance justice, not defeat it

The SC held that procedural provisions of law, such as Sections 34(5) and 34(6), ought not be construed in a manner that justice itself was trampled upon. The Law Commission Report indicated that the object behind them was to dispose of applications under Section 34 expeditiously. However, as had been observed in Kailash, the intent behind such provisions was to ‘expedite the hearing and not scuttle the same.’ The SC emphasized the time-honored principle that ‘all rules of procedure were the handmaids of justice’. It noted that ‘if, in advancing the cause of justice, it is made clear that such provisions should be construed as directory, then so be it.

Apart from alluding to the ratio in Kailash to this effect, the SC also noted similar observations in Topline Shoes wherein it was held that a similar provision under the CPA did not create any substantive rights in favor of the complainant that bars a respondent from advancing his defense.

Relying upon the principles propounded in these previous judgments, the SC held that to construe the requirement of ‘prior notice’ in Section 34 as mandatory in nature would defeat the advancement of justice.

  • Strike 3: New India Assurance judgment liable to be set aside

The SC was conscious of the contrary finding of the SC in New India Assurance wherein it was held that the time period for filing a written statement under the CPA was mandatory. In doing so, the SC in New India Assurance relied upon observations in JJ Merchant wherein it was observed that a speedy trial in summary proceedings did not necessarily indicate that justice had not been administered.

In New India Assurance, the SC had reasoned that the remarks in JJ Merchant would prevail, as JJ Merchant was decided prior to Kailash.

The SC in the present case, however, noted that the judgement in New India Assurance had completely overlooked a crucial paragraph in Kailash which underscored both that (i) the observations in JJ Merchant were obiter; and (ii) Topline Shoes had not been cited before the court in JJ Merchant, and that therefore the critical ratio on the consequence of no penalty being provided had not been considered in JJ Merchant.

Additionally, the reasoning in Kailash had been successively upheld by a three–judge bench in Salem Bar Association. In light of this, the SC reasoned that the reliance on the observations in JJ Merchant in New India Assurance was misplaced, and that it was principles propounded in Kailash that held the field.

What this means for procedural provisions of Indian law

This judgment clarifies that before construing a particular provision to be mandatory or merely directory in nature, one has to assess whether there are any penal consequences provided for the same, and whether or not adhering to such a procedural requirement would in any manner take away a vested right of a party and in effect scuttle the administration of justice. This would certainly affect the applicability of the various new provisions introduced across various statutes in India, such as provisions imposing strict time lines for the resolution of disputes, whether through arbitration, litigation, or corporate insolvency.

Some of these statutory time-lines are arguably unreasonable given the judicial backlog, pendency of cases and lack of judges in India. What this judgment re-affirms is that while adhering to procedure is important, administration of justice remains paramount.

References   [ + ]

1. ↑ Civil Appeal No. 7314 of 2018 2. ↑ Section 34 (5) of the Arbitration Act (inserted vide Section 18 of the Arbitration and Conciliation (Amendment) Act, 2015) states as follows: An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the Rule of Law
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Use alternative dispute-solving avenues, reduce burden on BVI courts - BVI News Online

Google International ADR News - Thu, 2018-09-20 07:51

BVI News Online

Use alternative dispute-solving avenues, reduce burden on BVI courts
BVI News Online
Former Attorney General Dancia Penn-Sallah has called on members of the public to make more use of alternative dispute-resolution avenues to reduce the burden on local courts. She said mediation and arbitration are options that are available locally.

Australia’s (In)Capacity in International Commercial Arbitration

Kluwer Arbitration Blog - Thu, 2018-09-20 01:49

Luke Nottage and Nobumichi Teramura

With some fanfare, on the sidelines of the ICCA Congress hosted in Sydney over 15-18 April, the Australian Trade and Investment Commission (Austrade) unveiled a glossy brochure entitled “Australia’s Capability in International Commercial Arbitration”. This blog posting explains its key contents, identifying both convincing and unconvincing aspects. Our later blog posting will compare Japan as another Asia-Pacific jurisdiction that is also still struggling to attract many international commercial arbitration (ICA) cases.

Australia’s ICA Capacity

The Austrade brochure’s Introduction first summarises the general advantages of ICA: flexibility of process, final and binding outcomes, global enforceability under the New York Convention, neutrality of forum, a process “private and confidential by agreement”, and “time and cost efficiency”. The ensuing Industry Overview then argues for Australia as a compelling “neutral forum for ICA between trading partners in the Asia-Pacific region” as “the ICA landscape has evolved considerably” over the last 5-10 years, through:

  • legislative reforms (including the 2006 revisions to the UNCITRAL Model Law, enacted in 2010 for international arbitration);
  • a supportive and independent judiciary (reiterating elsewhere that the World Bank in 2018 ranked “Australia’s judicial processes as the world’s best”: p3);
  • expert arbitrators and more ICA specialisation among law firms (including a growing number of global firm offices) and barristers;
  • new arbitration centres and support facilities; and
  • “increased education and skills training offerings, from university level through to arbitrator training” (p5).

Regarding further reasons as to “why arbitrate in Australia?”, a summary diagram adds “proximity to Asia and time zone advantages” as well as “stable political environment and resilient economy”.

The last point may surprise readers even vaguely familiar with Australia’s convoluted and unstable federal politics over the last decade (and indeed last month, resulting in another change of Prime Minister). Such political uncertainty might even be linked to Australia’s piecemeal approach to amending ICA legislation evident since 2015. Readers may also wonder about the added complexity of State and Territory politics, which makes it harder and slower to implement uniform legislation nation-wide (such as Commercial Arbitration Acts now also based largely on the revised Model Law for domestic arbitrations, enacted over 2010-2017).

Yet it is true Australia’s institutions for passing, implementing and interpreting legislation are basically sound. The Austrade brochure, under the next heading of “An esteemed judicial system and modern legislative framework” (p7), adds that “Australia ranks 13th out of 180 countries on Transparency International’s corruption perception index” and more generally that “Australia is ranked 15th out of 190 economies for ease of doing business” (p10 instead states that it is ranked “14th”).

The brochure also remarks that “7 Australian universities are among the world’s Top 50 for law” (p7) – at least on the QS rankings. Later, under the heading “World-class expertise, lawyers and infrastructure” (p8), it includes (Professor) Jeffrey Waincymer as one of Australia’s “leading international arbitrators” (along with six lawyers and one former judge). Under “Building capacity through quality education and training”, the brochure notes that “many leading Australian universities offer ICA courses as part of their undergraduate or post-graduate legal degrees” (p11).  Many readers may also be aware of the strong involvement and achievements of Australian law students in the Vis Moot and other more recent competitions developing and displaying ICA-related knowledge and skills.

Australia’s ICA Incapacity

Ironically, however, mooting experience may encourage some students later as lawyers to attempt overly ambitious or innovative arguments in ICA-related court proceedings in Australia. This could explain why case disposition times have not changed before and after the 2010 amendments even in the Federal Court, arguably generating the most consistently pro-arbitration judgments over the last decade (spurring on most State and Territory courts). However, a more direct cause is probably the lack of an indemnity cost principle (as in Hong Kong) for failed challenges regarding ICA agreements and awards, despite several calls for reform. Generally, delays and costs remain major disincentives to choosing and especially later pursuing ICA. This may be particularly true for a country like Australia following the adversarial common law tradition, and with a growing population of lawyers.

A related challenge, not well addressed in the Austrade brochure, is Australia’s geographical inconvenience. Why should Asian parties come to Australia’s main cities for ICA when very popular regional venues like Singapore and Hong Kong are so much closer, as well as having all the advantages listed by Austrade? Matters could be resolved instead say in Darwin, but that northerly Australian city lacks ICA-experienced local counsel, facilities and (if matters end up in court) judges. An alternative would be to promote ICA for where the geography of Australia’s larger cities becomes an advantage, for example transactions between South America and Asia (including China’s new Belt and Road Initiative). Further niche marketing should focus on areas like the resources sector, where Australia has special expertise and the amounts in dispute are often large so travel time and expense is not such an issue. (It is therefore unfortunate that the brochure does not mention the Perth Centre for Energy and Resources Arbitration.) Another way to combat ‘the tyranny of distance’ would be to focus more on e-arbitrations and/or expedited proceedings (without hearings), especially for smaller-value disputes.

A further challenge for seating ICA in Australia is the Australian Consumer Law. It sets mandatory rules not only for transactions involving individual “consumers” in the narrower sense used abroad, but also (indeed increasingly) for business-to-business transactions. Yet there is little legislative and even case law guidance as to their scope regarding forum selection, governing law and award enforcement. Statutory reform has fallen between the cracks (namely the Treasury with consumer law regulators, and the federal Attorney General’s Department) and remains unlikely.

A final disincentive for legal advisors considering Australia as a seat for ICA may be the country’s ambivalence about Investor-State Dispute Settlement (ISDS) since 2011. It may be seen as reflecting or potentially reviving ambivalence about arbitration generally, even though the Chief Justice of the Federal Court emphasised for the ICCA Congress audience that ICA and ISDS arbitration have some significant differences.

Conclusion

Where does this leave Australia overall? The proof should be in the pudding. As another positive change over the last 5-10 years, Austrade asserts an “increased case load and use of Australian seats for ICA” (p5). No sources are given and no statistics are published by ACICA (Australia’s main ICA institution). However, a Board member’s publication in 2015 suggested that on average ACICA had attracted 8 cases per annum since the 2010 amendments. This is indeed an increase over 1-4 over 2008-9, but it is still a very small caseload. The same is true for Australia-seated ICC arbitrations: only one filed on average over 2005-9, but almost four annually since 2010. The four ICC arbitrations filed in 2017 compare with 38 in Singapore, 18 in Hong Kong, six in Korea and four in Japan.

It is also interesting to compare this Austrade brochure with another (and related website, archived here) published in 2003 with support from six major Australian law firms, promoting the “Sydney Arbitral Advantage” and replete with gorgeous photos. As well as listing similar advantages such as a supportive legislative framework for ICA, it contrasted Sydney’s mild sunny weather compared to other traditional and regional arbitral venues, and competitive hotel room rates. It also mentioned (tongue-in-cheek!) the exciting restaurant options available after “a hard day of arbitration”, and even the comparatively low price of a dozen oysters (pp12-13 of the PDF here).

The more conventional recent Austrade brochure remains another useful effort to put Australia on the map for ICA, perhaps especially for businesspeople or in-house counsel. But like most marketing initiatives, the brochure (over-)emphasises the positives. Acknowledging negatives such as geographical inconvenience could help suggest (partial) counter-measures or niche markets. A more distinctive and realistic assessment may also be more effective in persuading legal specialists, or those already familiar with Australia, to give it a go.

 

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
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The post Australia’s (In)Capacity in International Commercial Arbitration appeared first on Kluwer Arbitration Blog.

India: Recent Developments In India-Related International Arbitration - Mondaq News Alerts

Google International ADR News - Thu, 2018-09-20 00:09

India: Recent Developments In India-Related International Arbitration
Mondaq News Alerts
Third, there is growing global interest in pre-dispute protocols, and particularly the use of alternative dispute resolution processes such as mediation before the commencement of proceedings. Finally, the theme emerging from the voting data was that ...

Mediation playing vital role in reducing case backlog - thedailynewnation.com

Google International ADR News - Wed, 2018-09-19 13:11

Mediation playing vital role in reducing case backlog
thedailynewnation.com
BIMS founder Advocate Samarendra Nath Goswami chaired the session, while Inbavijan, Course Director of Chartered Instituted of Arbitrators, UK, K S Sharma, International Mediator, Iram Majid, a lawyer of Supreme Court of India, Advocate Haridas Paul ...

Recent Developments in India-Related International Arbitration - Lexology

Google International ADR News - Wed, 2018-09-19 04:28

Recent Developments in India-Related International Arbitration
Lexology
Third, there is growing global interest in pre-dispute protocols, and particularly the use of alternative dispute resolution processes such as mediation before the commencement of proceedings. Finally, the theme emerging from the voting data was that ...

and more »

Why arbitrate at the Astana International Financial Centre?

Kluwer Arbitration Blog - Wed, 2018-09-19 01:23

Philip Kim

Herbert Smith Freehills

A focus on the AIFC Arbitration and Mediation Rules 2018 and improvement to enforcement of arbitral awards in Kazakhstan

Introduction to the AIFC

The Astana International Financial Centre (AIFC) is a financial hub in Kazakhstan that came into operation this year. The purpose of the AIFC is to establish itself as a key centre for financial services in Central Asia, with a view to diversifying the Kazakh economy and provide a platform to achieve Kazakhstan’s aim of becoming one of the top 30 developed countries by 2050.1) “100 Concrete Steps”, News Release, Embassy of Kazakhstan in the UK. See also here. jQuery("#footnote_plugin_tooltip_4450_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  The AIFC also seeks to capitalise on the Belt and Road initiative and support the finance needs of the Kazakh economy, which is undergoing significant change, as a result of the continued privatisation of State assets in Kazakhstan.

In a previous blog post, I reported on the establishment of the AIFC, its legal framework and its dispute resolution bodies. In short, the AIFC is like a “country within a country”, which has an independent judiciary separate from the Kazakh courts, the AIFC Court, which consists of distinguished common law judges and applies English law to disputes that come before it. In addition to the AIFC Court, the AIFC has an international arbitration centre, the procedural rules of which will be considered in this blog post.

AIFC Rules

Leading arbitral institutions, particularly in recent years, have strived to enhance the user experience, by making real efforts to distinguish themselves from each other, through constant innovations in their procedural rules, which have resulted in tangible improvements, such as the strengthening of ethics in the practice of international arbitration, increased awareness of the need for and encouragement of better cost and time efficiency,2) Many leading arbitral institutions publish comparative studies in relation to costs incurred in institutionally administered arbitrations. jQuery("#footnote_plugin_tooltip_4450_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and the establishment of emergency arbitrator procedures.

The International Arbitration Centre of the AIFC is no exception to this trend. Despite being a young arbitral institution, which began operations this year, it has announced state-of-the-art rules for its administered arbitrations (Rules), which came into force on 1 January 2018.

 Key features of the Rules

The Rules are broadly similar in content and structure to those of the leading arbitral institutions such as the rules of the LCIA and the HKIAC, in that they contain the standard elements that would be expected in procedural rules, such as procedures to be followed for the commencement of arbitration and the appointment of arbitrators, as well as procedures for seeking interim or emergency relief and procedures by which proceedings can be consolidated and additional parties joined to arbitral proceedings. However, there are some notable provisions in the Rules, as follows.

  • Overriding Objective – Article 2 states that the purpose of the overriding objective of the Rules is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. It is interesting to see the use of terminology perhaps more familiar to those users of the Civil Procedure Rules in the English Courts. It is also worth noting that the language of Article 2 draws from section 33 of the English Arbitration Act 1996, which differs slightly in that it expressly imposes a general duty to the tribunal. It will be interesting to see whether Article 2 will have any utility, and if it is relied on, how it will be interpreted, as such a statement is capable of varied interpretation by tribunals. Although Article 2 of the Rules appears, on its wording, to be less stringent than the “duty” imposed under section 33 of the English Arbitration Act, it is unlikely to make any difference in practice because the overriding objective in Article 2 is clearly well intended and reflects a standard that should be maintained in arbitral practice.
  • Joinder and Consolidation – Article 6 contains provisions on joinder and consolidation, which makes the Rules suitable for disputes involving multiple contracts. Articles 6.8 and 6.9 are specifically aimed at arbitrations involving multiple contracts. However, Articles 6.8 and 6.9 do not make clear whether arbitrations involving multiple contracts should be commenced in: (i) a single Request for Arbitration or (ii) in separate Requests of Arbitration and later consolidated.3) In comparison, see Rule 6 of the SIAC Rules 2016, which is more detailed. jQuery("#footnote_plugin_tooltip_4450_3").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });
  • Independence of Arbitrators – Article 9 requires arbitrators to be independent and impartial. There is also a requirement for prompt disclosure, throughout the life of an arbitration, of any circumstances giving rise to justifiable doubts as to an arbitrator’s independence or impartiality. The Rules do not prescribe or give guidance on these circumstances. The author has experience of cases where the parties challenged the appointment of an arbitrator on the basis of potential conflicts of their affiliated firms, rather than conflicts individual to the arbitrator. Whilst the IBA Guidelines on Conflicts of Interest in International Arbitration have become accepted good practice in the field of international arbitration, it would be interesting to see if the Centre provides more guidance how this Article may be applied, like the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration,(paragraphs 15 to 26) and the KCAB which provides guidance on this topic in its ethics for arbitrators.
  • Amended and Supplemented Statement of Case – Article 13.8 permits a party to submit an amended or supplemented Statement of Case, so long as the party’s amended case falls within the relevant arbitration agreement and before the closure of proceedings. The Rules give the tribunal the power to refuse to accept an amendment or supplement to a Statement of Case if it would be contrary to the overriding objective. Although the overriding objective is broad in scope, it arguably restricts the tribunal’s case management powers, so far as Statements of Case are concerned. This provision contrasts with equivalent provisions in other institution’s rules; for example, under Article 22 of LCIA International Arbitration Rules (2014), any amendment or supplement to a Statement of Case is subject to an application being made to the tribunal, which is given broad discretion on whether to grant that request, taking into account any duty similar to the overriding objective under the law of the seat.
  • Representatives – Article 17 permits any authorized person, not just legal practitioners, to represent a party. In this regard, there is no harmonization in the rules of the leading arbitral institutions. For example, Rule 23 of the SIAC International Arbitration Rules (2016) is similar and permits non-lawyers to represent parties but the LCIA International Arbitration Rules (2014), by default, in Article 18, requires legal representatives. Practically speaking, it is likely that most parties in international arbitration under the Rules will choose to be represented by lawyers.
  • Tribunal appointed Experts – Article 21 permits the Tribunal to appoint experts to provide an opinion to the tribunal on any expert issue. Similar provisions are found in the rules of leading arbitral institutions, notable Article 26 of the SIAC International Arbitration Rules (2016) and Article 21 of the LCIA International Arbitration Rules (2014). However, Article 21 does not make clear how the fees and expenses of such expert would be paid. In practice, this is likely to be decided by the direction of the tribunal, exercising its broad case management powers, and agreement is likely to be reached during party consultation, but the lack of an express provision addressing that issue may prolong the party consultation and require the tribunal to give more detailed reasons for deciding how costs should be paid in the interim.
  • Sanctions for Default and Waiver – Article 22 grants the tribunal the power to draw appropriate inferences in circumstances where a party fails to comply with the Rules or any procedural order. The Rules could have gone further by giving the tribunal more wide ranging powers to encourage parties’ compliance with the Rules and procedural directions.4) See LCIA International Arbitration Rules (2014), Article 18.6. jQuery("#footnote_plugin_tooltip_4450_4").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });
  • Early Determination – Article 25 provides that a party may apply to the tribunal for the early determination of an issue of fact or law by an abbreviated procedure. This is available where: (i) the claim or defence has no real prospect of success; or (ii) the claim or defence is manifestly outside the jurisdiction of the tribunal. This addresses a common concern of lack of speed in international arbitration. This is similar to Rule 29 of the SIAC International Arbitration Rules (2016). However, there are two notable differences. Firstly, Article 25 of the Rules does not require the tribunal to issue a reasoned order or award within 60 days of the application, which is the position under the SIAC Rules (Article 29.4). Instead, Article 25 confers more flexibility and permits the tribunal to fix the expedited procedure in the form it deems appropriate, with no express time limit for a decision under this procedure. Secondly, the wording of Article 25 arguably suggests that it is a summary judgment procedure, as a claim or defence can be dismissed if there is “no real prospect of success“. On the other hand, Rule 29 of SIAC Arbitration Rules (2016) imposes a higher standard by allowing early dismissal, where a claim or defence is “manifestly without legal merit” or “manifestly outside the jurisdiction of the tribunal“. It will be interesting to see how Article 25 is used and interpreted.
  • Release and Replace of Arbitrators – Article 11 provides that an arbitrator is released from the terms of his or her appointment and ceases to be a member of the tribunal when he or she delivers a notice of resignation to the Registrar. The arbitrator does not have to wait for confirmation by the Centre and the wording suggests that the resignation will be effective immediately,5) In contrast, see Article 10.1 of the LCIA International Arbitration Rules (2014). jQuery("#footnote_plugin_tooltip_4450_5").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and there are no provisions on whether and how much the released arbitrator would be paid.6) In contrast, see Article 10.6 of the LCIA International Arbitration Rules (2014). jQuery("#footnote_plugin_tooltip_4450_6").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); It is worth noting that Article 11.1(4) provides an additional ground for releasing an arbitrator – if the arbitrator is unable or fails to perform his or her functions as an arbitrator. It is not made express who will make this determination – the Centre and/or the other members of the tribunal (if there is more than one arbitrator). A similar provision exists under the SIAC International Rules (2016), Rule 17.3, which makes clear that the procedure for challenge and replacement of an arbitrator applies. In practice, although it remains to be seen whether it will actually be the case, it is likely that the challenge procedure under Article 10 would be followed where the ground for releasing an arbitrator is on the basis of failure to perform his or her functions.

Why would the Parties choose to arbitrate under these AIFC Rules?

There is one noteworthy feature of the Rules, which make them a particularly attractive choice for commercial parties that desire a swift resolution of disputes and parties with interests in Kazakhstan.

Enforceability of orders and arbitral awards made easier in Kazakhstan

Under Article 24.4, a party may, with the permission of the tribunal, request from the AIFC Court of First Instance (an independent court within the AIFC, which consists of distinguished common law judges) an order enforcing the Tribunal’s order for interim relief or an Award. This is particularly useful where the enforcement action needs to be carried out in Kazakhstan. AIFC Court decisions are to be enforced in Kazakhstan like decisions of the national courts of Kazakhstan.  Whilst Kazakhstan is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) and the European Convention on International Commercial Arbitration (1961), neither Conventions have been ratified,7) Kazakhstan has acceded to the New York Convention jQuery("#footnote_plugin_tooltip_4450_7").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); which has resulted in some views that foreign arbitral awards are only enforceable in Kazakhstan on a reciprocal basis. This risk is not present where enforcement is made through the AIFC Court. It is also worth noting that the AIFC shall recognise an award issued in an arbitration under the Rules, even in circumstances where the seat is not the AIFC; in other words, a London seated arbitration under the Rules would still be enforceable through the AFIC Court.8) Regulation 45(1) of the AIFC Arbitration Regulations 2017 which states that: “An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised as binding within the AIFC…“ jQuery("#footnote_plugin_tooltip_4450_8").tooltip({ tip: "#footnote_plugin_tooltip_text_4450_8", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Concluding remarks

As explained above, there are parts of the Rules which could benefit from further innovation and clarity. However, there is no doubt that these Rules, in their current form, reflect many of the more recent developments in other institutional arbitration rules. It is particularly worth noting that these Rules make it easier for awards to be enforced in Kazakhstan, the largest economy in Central Asia, with vast natural resources and growing international trade. For this reason alone, the Rules have already positioned itself to resolve disputes relating to this significant and dynamic economy. Together with the AIFC Court, it will be interesting to see how the Centre develops over time and the role it plays in resolving disputes in the CIS.

 

References   [ + ]

1. ↑ “100 Concrete Steps”, News Release, Embassy of Kazakhstan in the UK. See also here. 2. ↑ Many leading arbitral institutions publish comparative studies in relation to costs incurred in institutionally administered arbitrations. 3. ↑ In comparison, see Rule 6 of the SIAC Rules 2016, which is more detailed. 4. ↑ See LCIA International Arbitration Rules (2014), Article 18.6. 5. ↑ In contrast, see Article 10.1 of the LCIA International Arbitration Rules (2014). 6. ↑ In contrast, see Article 10.6 of the LCIA International Arbitration Rules (2014). 7. ↑ Kazakhstan has acceded to the New York Convention 8. ↑ Regulation 45(1) of the AIFC Arbitration Regulations 2017 which states that: “An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised as binding within the AIFC…“ function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the Rule of Law
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In a dispute? Why going to court isn't always the answer - Arab News

Google International ADR News - Tue, 2018-09-18 14:29

Arab News

In a dispute? Why going to court isn't always the answer
Arab News
Examples of alternative dispute resolution mechanisms that may be used instead of litigation are arbitration, mediation, conciliation and negotiation. Currently, many investors and traders use ... Prominent international arbitration centers include the ...

and more »

This looks like a job for … Super Lawyers! - Innovate Long Island

Google International ADR News - Tue, 2018-09-18 10:35

Innovate Long Island

This looks like a job for … Super Lawyers!
Innovate Long Island
... Deborah Thaxter (Business Litigation/Securities Litigation/Class Action-Mass Torts); Christopher Thomas (Civil Litigation/Business Litigation/Energy & Natural Resources); Harry Trueheart (Business Litigation/International/Alternative Dispute ...

India's Arbitration/Alternate Dispute Redressal Mechanism – Is It A Trap Or A Genuine Redressal Mechanism ? - Live Law

Google International ADR News - Tue, 2018-09-18 09:33

Live Law

India's Arbitration/Alternate Dispute Redressal Mechanism – Is It A Trap Or A Genuine Redressal Mechanism ?
Live Law
The new Act was after all based on the United Nations Commission on International Trade Law. After 22-years of its enactment and application, would it not be apposite to wonder, if Justice Desai's words equally resonate or stand silenced. Arbitration ...

India's Arbitration/Alternate Dispute Redressal Mechanism – Is It A Trap Or A Genuine Redressal Mechanism ? - Live Law

Google International ADR News - Tue, 2018-09-18 09:33

Live Law

India's Arbitration/Alternate Dispute Redressal Mechanism – Is It A Trap Or A Genuine Redressal Mechanism ?
Live Law
The new Act was after all based on the United Nations Commission on International Trade Law. After 22-years of its enactment and application, would it not be apposite to wonder, if Justice Desai's words equally resonate or stand silenced. Arbitration ...

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