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Conversation with Nancy Rogers about the Past and Future of the ADR Field

ADR Prof Blog - Wed, 2019-03-20 20:19
Nancy Rogers, a great leader in our field, has made tremendous contributions to our community and she is one of the people I thanked for her contribution to my career.  I was fortunate to participate in a three-week summer institute that she and others organized at Ohio State in 1993.  With Nancy’s permission, I am … Continue reading Conversation with Nancy Rogers about the Past and Future of the ADR Field →

Kenya faces bid to annul “black swan” award

Subsidiaries of a Canadian mining company that lost an ICSID claim against Kenya last year have applied to annul the award, which they call a “black swan” for its finding that an investment treaty implicitly...

Samsung liable over Australian mining project

A SIAC-administered tribunal has ordered the construction arm of South Korea’s Samsung to pay US$94 million in a dispute over work on a multibillion-dollar mining project in Australia, but it remains unclear...

ICSID claimant seeks to annul “black swan” award

Subsidiaries of a Canadian mining company that lost an ICSID claim against Kenya last year have applied to annul the award, which they call a “black swan” for its finding that an investment treaty implicitly...

Mining company fails to revive billion-dollar ICSID claim

London-listed Churchill Mining has failed to revive a US$1.3 billion ICSID claim against Indonesia that was dismissed because of findings of forgery, after an annulment committee concluded the tribunal...

New 2019 BAC Rules for International Investment Arbitration: A Chinese Approach to the Concerns over Investment Arbitration Regime

Kluwer Arbitration Blog - Tue, 2019-03-19 17:19

Yihua Chen

Overview

On 11 February 2019, Beijing Arbitration Commission/Beijing International Arbitration Center (‘BAC/BIAC’) launched its draft of ‘Beijing Arbitration Commission/Beijing International Arbitration Center International Investment Arbitration Rules’ (the ‘BAC Rules’) for public comments, comprised of its main text and six appendixes. The BAC Rules are the second investment arbitration rules promulgated by a Chinese international arbitration institution after the 2017 CIETAC Investment Arbitration Rules (the ‘CIETAC Rules’). The BAC Rules have made a series of innovations and proposed a ‘Chinese approach’ to the issues and drawbacks of the current investment arbitration regime. In this post, the author will first discuss the major innovations of the BAC Rules and then provide some recommendations.

 

Main innovations

1. Strengthening the correction system of arbitral awards

The BAC Rules introduce multi-layered mechanisms to ensure the enforceability and credibility of the arbitral award. Apart from provisions for the correction and interpretation of award and power to issue the supplementary award, the arbitral tribunal is required to send the draft of an award to the Parties before finalizing an award, and the Parties may provide their comments on it. The tribunal may take into consideration those comments where it considers this necessary (Article 42.5). This mechanism allows the Parties to highlight serious errors in the award and to do so early, which decreases the likelihood of other correction mechanisms being required.

In addition, the BAC is the first arbitral institution to introduce an appellate procedure in investment arbitration rules. In the Asia-Pacific region, neither the SIAC nor the CIETAC incorporates the appellate procedure in their investment arbitration rules. The ICSID Convention Arbitration Rules also do not permit ICSID to re-examine any substantive issues of an arbitral award. Hence, this new appellate mechanism may encourage parties to choose to bring their claim before the BAC or choose the BAC Rules. Under the BAC Rules, the Party may submit the Notice of Appeal within 60 days from the date on which the award is made (Article 46.3). Since the appellate procedure is not a compulsory mechanism, the Rules require the Party wishing to appeal the award to submit the Parties’ written agreement to this procedure before the deadline to file comments on the draft award (Article 46.2). This requirement sufficiently protects party autonomy and ensures the efficiency of the proceedings. Moreover, the grounds of appeal are limited to 1) errors in the application or interpretation of the applicable rules of law, 2) manifest and material errors in the appreciation of the facts, or 3) the lack of jurisdiction (Rule 3 of Appendix E), which balances the desire for finality in the award.

2. Balancing confidentiality with the transparency of investment arbitration

The BAC Rules provide that any recordings, transcripts or documents associated with the arbitral proceedings shall remain confidential unless the Parties have agreed that the hearing shall be conducted in public (Article 24). Considering the public interest involved in investment disputes, the BAC Rules set a baseline with regard to the compulsory publication of certain arbitration documents, including the Notice of Arbitration, the Notice of Appeal, other orders, decisions and awards (Article 50.2). Moreover, to maintain a flexible scope of transparency and permit parties’ adoption of the latest thinking in international arbitration, the BAC Rules also allow the Parties to apply the 2014 UNCITRAL Transparency Rules to the arbitration (Article 50.1), in which the party autonomy concerning transparency gets full respect.

3. Improving the efficiency of arbitral proceedings

The BAC Rules adopt several innovations to improve the arbitral efficiency, for example, the 24-month time limit for the render of arbitral awards since the constitution of the arbitral tribunal (Article 19), the digitalization of the written submissions (Article 23), an indicative timetable for the stages of arbitration (Appendix B), and a set of rules of expedited procedure (Appendix C).

Under the expedited procedure rules, the time for the written submission and the length of the document are restricted. After consulting the Parties, the arbitral tribunal may not allow the requests for document production, and the decision may be made solely on the basis of the written documents with no hearing or examination of witnesses or experts.

4. Expanding the scope of applicability

The BAC Rules are applicable to both institutional arbitration and ad hoc arbitration under the UNCITRAL Arbitration Rules administered by the BAC (Article 2). Appendix F provides detailed procedural guidelines for arbitration under the UNCITRAL Arbitration Rules in terms of the functions and duties of the BAC. Both investment treaty-based and contract-based investment arbitration can be referred to the BAC.

 

Recommendations

In my view, the draft BAC Rules would benefit from a few changes to the following Articles:

1. Article 5 and Article 6: the commencement of arbitration and response to the Notice of Arbitration

Article 5 provides that ‘the date the Claimant validly submits the Notice of Arbitration (the ‘NOA’) shall be deemed to be the date of the commencement of the arbitration.’ A valid submission of the NOA shall include providing a complete NOA, sending a copy of NOA to the Respondent and successfully paying the registration fee in accordance with Article 5.5. Consequently, the date of commencement of arbitration shall be the latest of the dates on which the previous conditions are met. However, Article 6 provides that ‘the Respondent shall file a Response to the BAC within 30 days of receipt of the NOA’. Assuming that a complete NOA is sent to the BAC and the Respondent on 1 January, but the registration fee is paid 15 days later, it would be inconsistent that, in the interim, the Respondent has been preparing a Response to the NOA but the arbitration has not been commenced.

Since the BAC is required to issue a Notice of the Commencement of Arbitration to the Parties, I have the following recommendation for Article 6: ‘The Respondent shall file a Response to the BAC within 30 days of the Receipt of the Notice of the Commencement of Arbitration…’, or for Article 5(6): ‘The Arbitration shall be deemed to commence on the date on which the NOA is received by the BAC’.

2. Article 11: Sole arbitrator

Article 11 lacks detailed rules as to how the sole arbitrator is appointed by the Chairman when the Parties fail in their attempts to jointly nominate one. Thus, I recommend adding ‘unless the Parties otherwise agree, the Chairman shall appoint the sole arbitrator in accordance with Article 10 (2)’ to Article 11, so as to ensure the consistency in the rules.

3. Article 33: Objections to jurisdiction

It is a common practice that the arbitral tribunal shall have the power to rule on its own jurisdiction as required by the competence-competence doctrine. However, should arbitrators ruling on the merits of a dispute decide jurisdictional issues? The existing arbitration rules, either commercial or investment rules, acknowledge that the same arbitrators may rule on both issues, but the doubts can still be raised that arbitrators are inclined to make a positive jurisdictional judgement so as to maintain their positions to gain financial interests or reputational benefits, particularly in investment arbitration cases. It is undeniable that there have been some decisions where investment arbitral tribunals declined their jurisdiction, for example, the ICSID case Supervisión y Control S.A. v. Republic of Costa Rica. However, the conflict-of-interest standards should not be only based on the actual arbitrator bias, which is almost impossible to measure and even prove, but the risk of bias.1)Morelite Construction Corp. v. New York City District Counsel Carpenters Benefits Fund, 748 F.2d 79 (2d Cir. 1984), para. 18. jQuery("#footnote_plugin_tooltip_9809_1").tooltip({ tip: "#footnote_plugin_tooltip_text_9809_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The expectation of the transparency of arbitral proceedings and the significant public interests involved have raised the bar higher for arbitrator impartiality in investment arbitration. As Gerard Meijer mentioned in his suggestion to the amendments to the ICSID Arbitration Rulesthe system of international arbitration … should be made as transparent and ethical as possible, particularly in investment arbitration’. Considering the increased criticism investment arbitration has encountered, a mechanism should be set up to prevent the conflicts of interest between the arbitrator and the party who raises the objection. Therefore, I recommend the following addition to Article 33 (3) based on the structure of the BAC Rules:

The Arbitral Tribunal shall have the power to rule on its own jurisdiction. Unless otherwise agreed by the Parties, the objection to jurisdiction shall be ruled by a new sole arbitrator or new arbitrators nominated by the Parties or appointed by the Chairman pursuant to the Appendix D [Expedited Procedure], if an objection to jurisdiction is raised after the arbitral tribunal is constituted. While such an objection is pending, the arbitral tribunal may continue the arbitral proceedings and make an award’.

4. Article 17: Assistant to Arbitral Tribunal

It is a common practice to use an assistant or a secretary by the arbitral tribunal within the community of arbitrators in both international commercial and investment arbitration. Although the BAC Rules have tried to differentiate the assistant from the arbitrator and the secretary, it is still unclear what duties that the assistant shall or may exercise. Therefore, it is recommended to illustrate these duties directly in the Rules, for example, ‘administrative, logistical assistance or liaison duties.’

5. Article 39: Third-Party funding (‘TPF’)

It is a good initiative of the BAC Rules to explicitly obligate the Party to disclose ‘the relationship between the third-party funder and the arbitrator’ since the arbitrator’s independence and impartiality are guaranteed. However, the first issue is that Article 39(2) seems to impose too broad a mandatory disclosure requirement on the Party. Apart from the basic information of TPF, the details of the interest of the funder in the outcome of the proceedings and whether or not the funder covers the adverse fee award, subject to the confidentiality of the TPF agreement, are also required to be disclosed. Considering the scope of mandatory disclosure should not exceed the extent required for the legitimacy of proceedings, the alternative measure is to grant the tribunal the power to order the disclosure where it considers necessary.

The second issue is about the lack of clarity as to whom the disclosure shall be made. Article 39(3) requires the disclosure to be made only to the BAC, which does not make sense since the arbitral tribunal and particularly, the opposing party ought to have the right to know the disclosed information. It remains uncertain in the draft BAC Rules whether and how the BAC distributes the disclosed information to the other parties. Therefore, I recommend that the BAC Rules state clearly that ‘the notice [disclosing third-party funding] … shall be sent to the other party or parties, the arbitral tribunal, and the BAC by the Claimant or the Respondent’.

References   [ + ]

1. ↑ Morelite Construction Corp. v. New York City District Counsel Carpenters Benefits Fund, 748 F.2d 79 (2d Cir. 1984), para. 18. 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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€ 185


Commonwealth Arbitration Study

ADR Prof Blog - Tue, 2019-03-19 12:42
The Commonwealth Secretariat is conducting a Study on challenges to accessing international commercial arbitration across the Commonwealth, and potential solutions. The aim of the study is to understand the use of international commercial arbitration in addressing commercial disputes across the Commonwealth, as well as ways in which member countries may strengthen the accessibility and effectiveness … Continue reading Commonwealth Arbitration Study →

Giving Appreciation

ADR Prof Blog - Mon, 2019-03-18 21:05
When was the last time you told someone that you appreciated something that they did for you? This is a quintessential way to create value.  Other than investing a little time, we incur no cost to express appreciation, which not only is likely to make others feel good but also makes us feel good to … Continue reading Giving Appreciation →

LCIA decides dispute over £100 billion asset management deal

UK fund manager Standard Life Aberdeen says it has prevailed in an LCIA arbitration against Lloyds Banking Group arising from the early termination of a deal to manage £100 billion in assets. Standard...

Enel brings ICSID claim against Panama

A subsidiary of Italian renewable energy company Enel has lodged an ICSID claim against Panama over the state’s failure to compensate it for commercial damage caused by a delay in the construction of an...

From the Archives: Follow the Yellow Brick Road to Danubia, Procedural Guidance for this Year’s Vis Moot

Kluwer Arbitration Blog - Mon, 2019-03-18 17:25

Kiran Nasir Gore (Associate Editor)

Introduction

Each spring, the global international arbitration community arrives in Vienna for the Willem C. Vis International Commercial Arbitration Moot and in Hong Kong for its younger counterpart, the Vis Moot East.  Students, after many months of research, drafting, and practice, are eager to present the fruits of their hard work through oral advocacy.  Practitioners, for their part, seek to regroup with colleagues and friends over coffee, tea, sachertorte, and dim sum, while supporting students in their advocacy development.  The common thread is an interest in emerging topics in commercial arbitration and sales law, as presented by the current Vis Moot problem.  This year is no exception.

No matter if you will soon travel to Hong Kong or Vienna, the editors of the Kluwer Arbitration Blog seek to saddle you (pun intended) with guidance from our archives.

This year’s backdrop is the Hong Kong International Arbitration Centre (HKIAC)’s newly revised Administered Arbitration Rules.  Shortly after their release in October 2018, Joe Liu, Deputy Secretary-General of the HKIAC, wrote on the Blog to introduce the Rules and explain key highlights and revisions.  No doubt, these changes should be the starting point for any procedural analysis of the Vis problem.

 

The Issue

Contracts are rarely perfectly suited for the events that later unfold.  This is precisely what we see in this year’s Vis problem.  The Frozen Semen Sales Agreement identifies the choice of Mediterranean law for the main contract and selects Vindobona, Danubia as the place of arbitration.  But the drafting history suggests that perhaps the intended choice of law for the arbitration procedure was different.

In our past discussion of the 2014 HKIAC Model Clauses, our authors noted the “growing body of discordant judicial decisions on this issue demonstrates that it is important for parties to expressly agree upon the law that will govern an agreement to arbitrate.”  If only the parties to the contract had followed this advice…

 

Wisdom From Our Archives

So what should parties do under these circumstances?  Follow the yellow brick road, as paved by our Blog contributors, of course!

In 2012, we introduced our readers to Sulamérica Cia Nacional De Seguros S.A. and others v Enesa Engenharia S.A (Sulamérica)1) [2012] EWCA Civ 638. jQuery("#footnote_plugin_tooltip_2177_1").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and Abuja International Hotels Limited v Meridien SAS (Abuja),2) [2012] EWHC 87 (Comm). jQuery("#footnote_plugin_tooltip_2177_2").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); two English cases which confirmed the test to determine the proper law of an arbitration agreement in the absence of the parties’ express choice.  The three stages of this inquiry are:

  1. whether the parties expressly chose the law of the arbitration agreement;
  2. whether the parties made an implied choice of the arbitration agreement; and
  3. in the absence of express or implied choice, identification of the law with the “closest and most real connection” to the arbitration agreement.

In Sulamérica, the Court recognized the distinct identity afforded to arbitration agreements under the doctrine of separability.   In both cases, the Court emphasized that the analysis is fact-specific, but where the parties have agreed to England as the seat, the Court will not hesitate to find that English law has the closest connection to the agreement.

In 2014, we revisited the Sulamérica test through the lens of Habas Sinai Ve Tibbi Gazlar Istihsal Andustrisi AS and VSC Steel Company Ltd. (Habas),3) [2013] EWHC 4071 (Comm). jQuery("#footnote_plugin_tooltip_2177_3").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); an English Commercial Court decision.  In Habas, the Court found that the law of the arbitration agreement was the law of the country of the seat, i.e. English law.  In dicta, the Court added nuance to the three stage Sulamérica test:  It observed that Stage (2) often merges into Stage (3), though as a matter of principle the stages should be embarked upon separately and in order.  As our author noted, “The Court’s observation in Habas thus has the potential to muddy the waters surrounding the determination of the law of the arbitration agreement, not helped by the fact that the Court did not apply it to the case at hand.”

Sulamérica and Habas were soon incisively considered by the Supreme Court of India in Enercon India v. Enercon GMBH.4) [Civ. App. 2086/7 of 2014]. jQuery("#footnote_plugin_tooltip_2177_4").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  In 2014, we discussed the fact-specific complexities of this case.  The arbitration agreement (1) designated Indian law as the substantive law, (2) stated that the Indian Arbitration and Conciliation Act, 1996 (Indian Arbitration Act) was applicable, and (3) identified London as the “venue” for arbitration proceedings.  The Court considered whether the word “venue” was intended to be used interchangeably with “seat” or “place” of arbitration – a legally loaded designation – or whether London was designated as only the venue of the hearings.  Applying the Sulamérica test and Indian precedent, the Court determined that the parties actually intended New Delhi be the seat of arbitration, vesting the courts in India with exclusive supervisory jurisdiction.  The Court assumed that, by expressly making the Indian Arbitration Act applicable, Indian law was designated as both the procedural and substantive law.

A post in 2016 considered a similar problem – how to proceed when the parties have failed to clearly designate a seat?  Although our author’s discussion is tangential to this year’s Vis problem, it very helpfully presents the Swedish perspective and discusses international views regarding the “default” approach of applying the law of the seat as the law of the arbitration.

Not to be left out of the debate, the Singapore High Court has also grappled with the tension between the procedural law of an arbitration agreement and the substantive of a contract.

In the 2012 decision, FirstLink Investments Corp Ltd v GT Payment Pte Ltd and others (FirstLink),5) [2014] SGHCR 12 jQuery("#footnote_plugin_tooltip_2177_5").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); the Singapore High Court ruled that in the absence of contrary indications, parties impliedly choose the law of the seat of the arbitration to govern the agreement to arbitrate. Our authors observed that case signaled an international (horse) race to the bottom – ongoing difficult and expensive litigation could result each time a court is presented with this question.  They further identified the HKIAC’s Model Clauses, which include an option to designate the law of the arbitration, as reflecting industry best practices.  This observation was repeated by another author who considered its impact on Chinese arbitration practice through the lens of a case before the China Supreme People’s Court.

In 2017, our authors considered another case from Singapore, BCY v BCZ.6) [2016] SGHC 249. jQuery("#footnote_plugin_tooltip_2177_6").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  Echoing the priorities of the Sulamérica test and applying FirstLink, the Court followed the three-step inquiry and focused on Step (2) – the implied choice of the parties.  The Court also added a nuance:  if the arbitration clause is part of a main contract the “governing law of the main contract is a strong indicator of the governing law of the arbitration agreement unless there are indications to the contrary.”  The choice of a seat different from the law of the governing contract could justify moving away from the starting point of applying the governing law of the main contract.  However, it could not in itself suffice to displace the starting position.  In contrast, if the arbitration clause is a freestanding arbitration agreement and there is no express choice of law of the arbitration agreement, the law of the seat would most likely govern the arbitration agreement.

In this last case, the parties agreed that there was no material difference between the two choices of governing arbitration law (New York law or Singapore law, respectively).  The Court proceeded to determine the governing law of the arbitration agreement in an effort to settle the debate on this issue.

Where the applicable law is determinative, as it is in this year’s Vis problem, the stakes are much higher.  For analysis in this respect, have a look at our contributor’s recent views regarding conflict of laws analysis in arbitration generally.

 

Concluding Thoughts

The Vis problem offers many fact-specific cues that allow for a persuasive argument in either direction.  If following the Sulamérica test, it seems impossible to move past Step (2) of the analysis – the record includes enough negotiating history to suggest that Mediterranean law was intended to govern the arbitration agreement.  Yet the importance of the arbitral seat cannot be minimized.7) See also Gary Born, International Commercial Arbitration (2d ed.), Vol. 2 (Selection of Arbitral Seat in International Arbitration) (Kluwer Law International, 2014). jQuery("#footnote_plugin_tooltip_2177_7").tooltip({ tip: "#footnote_plugin_tooltip_text_2177_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  It is not merely a convenient place for the hearings, but rather a designation of legal framework for the arbitral proceedings.

No matter whether you are more persuaded by the arguments of Claimant or Respondent, we hope you found this foray into our archives illuminating and wish you all happy mooting!

References   [ + ]

1. ↑ [2012] EWCA Civ 638. 2. ↑ [2012] EWHC 87 (Comm). 3. ↑ [2013] EWHC 4071 (Comm). 4. ↑ [Civ. App. 2086/7 of 2014]. 5. ↑ [2014] SGHCR 12 6. ↑ [2016] SGHC 249. 7. ↑ See also Gary Born, International Commercial Arbitration (2d ed.), Vol. 2 (Selection of Arbitral Seat in International Arbitration) (Kluwer Law International, 2014). 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
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


Political risk insurers back claim against Thailand

An Australian mining company has reached a settlement with its political risk insurers that will allow it to continue financing a treaty claim against Thailand over the alleged expropriation of a gold...

Interviews with Our Editors: 360 Degrees of Perspective with Noah J. Hanft, President and CEO of CPR

Kluwer Arbitration Blog - Sun, 2019-03-17 21:05

Kiran Nasir Gore (Associate Editor)

Mr. Hanft, welcome to the Kluwer Arbitration Blog!  I appreciate the opportunity to share your perspective with our readers at an exciting moment, where conversations about politics, diversity, and technology are intersecting and transforming the way globalized corporations and their lawyers conceive of and approach dispute resolution.  

  1. Before we delve in, can you briefly introduce yourself and the path that brought you to CPR?

Of course, and thank you for the invitation. Before coming to CPR, I was the General Counsel and Chief Franchise Officer at Mastercard and it was there that I truly gained an appreciation for the power and potential of alternative dispute resolution (ADR). After years of handling disputes, which resulted in both wins and losses, I found myself growing frustrated by the traditional litigation process. At the same time, I was increasingly turning to mediation to resolve some major cases. I became more and more intrigued by the process, and soon also introduced early dispute resolution to the company, including a sophisticated early case assessment protocol. As a forward-thinking and customer-centric business, Mastercard was extremely receptive, embracing alternatives to litigation and a thoughtful approach to addressing inevitable business disagreements.

 

  1. CPR is more than just a provider of arbitration rules and ADR services. Can you tell us how CPR draws on its membership to establish itself as a thought leader in ADR?

We are indeed much more. We are also the world’s leading ADR think tank, utilizing our powerful and member-driven committee structure—comprising top corporations and law firms, academic and public institutions and leading mediators and arbitrators around the world—to foster and inspire thought leadership. This, in turn, leads to the development of cutting edge tools, trainings and resources and drives CPR’s efforts to promote and develop an ADR culture globally. This unique and multi-level structure is part of CPR’s heritage, going back to 1977 when the organization was founded by a group of corporate counsel that knew there had to be a better way, and who wanted to help themselves, and each other, prevent and resolve commercial disputes more effectively and efficiently.

 

  1. In your prior role, at Mastercard, your responsibilities and focus were much broader than only dispute resolution. What about ADR generally, and arbitration specifically, attract you and how does this support a corporation’s day-to-day business and prosperity?

You are correct, at Mastercard, I had responsibility for the traditional law and law-related functions (policy, compliance and regulatory), but also business responsibilities (that included licensing, franchise development, information security and diversity).  I think the expanded business role helped me in thinking more broadly about dispute prevention and resolution and the importance of maintaining ongoing relationships with customers, suppliers and even competitors.  Once you see your role as extending beyond just dispute resolution and combine it with the early identification of disputes and dispute prevention it becomes an extremely broad and important component of the job. It then puts you in a position to create a business imperative in terms of structuring relationships, focusing on early resolution as a way to preserve those relationships and increase commerce. Once executive management gets behind these efforts, recognizing the benefits of such a thoughtful approach, it becomes part of the day-to-day business. And, if you’re doing it right, the management and even the board actually start to adopt ADR thinking in reviewing and weighing in on matters that come up, instead of going straight to an adversarial or litigation mindset.

 

  1. For which parties, and in what types of disputes, is arbitration likely to be of most benefit?

I think it is generally accepted that, if parties know each other and want to maintain a relationship, arbitration is often the preferred approach to dispute resolution as it offers the potential to be somewhat less adversarial, speedier and more efficient—a good partner with mediation, as part of a multi-step process, if the mediation fails to resolve the matter. Of course, there are cases where one wants to establish a published precedent, where litigation is a better option. But with respect to the overwhelming number of disputes, mediation is an attractive method for resolving disputes early on in the process. And, if that fails, arbitration is often the best option for commercial disputes. It is a particularly good choice where two consenting entities want a private proceeding and want to have a say on who the decider or deciders are? In fact, I believe that if arbitration is approached and practiced in the right fashion, its inherent flexibility makes it the right choice for many different types of disputes. One such example is in the intellectual property sphere, where the expertise of an arbitrator may serve to the advantage of the parties. At the end of the day, if parties understand what arbitration can achieve and how best to utilize it depending on the nature of a dispute, it is an excellent tool for reducing expense and obtaining a reasoned opinion from an expert.

 

  1. What is a common misconception about arbitration percolating within corporate legal departments and what can we do to address it?

One common misconception is that arbitrators tend to “split the baby.” There is this notion that, in arbitration, there is often no clear victor, that the parties often receive a compromise decision, where both parties win or lose a little. Studies on the subject bear out that this is simply not the case. This misconception gives rise to a misplaced view that if one has a strong case, they are better off litigating than arbitrating. Other misconceptions stem from a lack of understanding of arbitration including that there is no appellate right (there can be if the parties choose) and arbitration costs as much as litigation (not if the parties take control of the process). CPR was the first to add an appellate option and now most ADR organizations have followed suit. As to cost, at CPR we’ve addressed the concern by building into our Rules an efficient process that provides for reasonable, but strict timeframes and allows arbitrators to limit disclosure and control the process. One final misconception, that we very clearly addressed in our new Rules for Administered Arbitration, is that one can’t obtain an early disposition of a claim or defense. In fact, arbitrators have the authority to dispose of claims and defenses before a hearing, if a proper showing can be made.  All of the misconceptions can be addressed through education. There is a surprising lack of understanding amongst some very sophisticated people as to how arbitration works, its benefits and potential. I believe it is incumbent upon all of us to take every opportunity we have to make it clear to users and potential users what arbitration can offer if used thoughtfully.

 

  1. What are some “best practices” for outside counsel as they collaborate with corporate clients to resolve disputes?

That’s a really good and important question. One of the things CPR has made available to our corporate members is a supplement to their requests for proposal (RFPs) for outside law firms which seeks information about their approaches to and expertise in dispute resolution. Our view is that it is not only important for law firms to know how to litigate and/or arbitrate, but also how to approach settlement and mediation. For outside counsel, it is important to understand, not only the nature of the dispute, but the specific corporate or commercial culture of an organization, which dictates how a resolution might practically work within the company. It really helps to understand a company’s business practices, and the personalities involved in the dispute.

Also in terms of best practices, law firms need to be really upfront about both the strengths and weaknesses of their clients’ cases. They also need to be prepared to move beyond mere litigation or arbitration strategy, and to think about the best way to resolve disputes from very early on, which will often involve mediation and negotiated settlements.

 

  1. How do emerging views on diversity support effective dispute resolution?

Just as diversity strengthens a legal team, it strengthens the reasoning process and the resulting nuance of the outcome. In fact, a highly-regarded study has suggested that diversity can lead to better decisions. Thus one can expect a tribunal that has arbitrators from different backgrounds and/or perspectives to achieve better results than a less diverse group. Supporting effective dispute resolution, stimulating new types of creative and strategic thinking, and nudging people out of old ruts and habits, is important to the continuous development and improvement of ADR. At CPR addressing the diversity challenge has been a long-standing objective of the organization. To that end, we have been very focused on not only adding diverse neutrals to our panel, but encouraging consideration of them. Our selection rate for diverse neutrals has reached 31% and we are very proud of the progress we have made. We believe there is more to be done and, in an effort to address gender diversity, we recently published, Look Who’s Joined ADR’s Most Exclusive Club, which highlights many of our leading female neutrals.

 

  1. Why should corporations and dispute resolution practitioners pay attention to emerging technology trends, and how can they employ new technology to support the dispute resolution process?

Whether we are talking about diversity or new technologies, corporations and practitioners need to pay attention to any and all learnings and new developments that could possibly improve the process. The ADR world needs to take into account the increasing importance of issues like cyber and data privacy as well as the opportunities presented by AI and ODR. And there will undoubtedly be many more new technologies just around the corner, which will bring both new complexities and potential new benefits. It is an ongoing process, and certainly never boring!

 

  1. I understand that you recently announced that, in a few months, you will step down as President & CEO of CPR and transition to launching your own ADR practice in collaboration with CPR Board member Richard Ziegler. Congratulations!  Can you tell us more about your forward-looking plans, and how the lessons you’ve learned in-house and at CPR will inform your vision and approach?

Well, thank you. I’m very excited about this new phase in my career. I plan to be a mediator, arbitrator and  settlement counsel and to consult with law departments on various dispute prevention and resolution issues and, in all of these areas, I will be applying and benefitting from the best practices I’ve gained from CPR. That includes participating and learning from the outstanding work done by CPR Committees as well as the many fabulous CPR training opportunities.  Richard and I have both taken the intensive and exceptional CPR/CEDR mediation training and are CEDR accredited mediators. Additionally, we both benefitted from the outstanding CIARB training and are both fellows of the Chartered Institute.

In terms of the lessons I’ve learned, and how they will inform my future vision and approach, from an in-house perspective I’ve learned how important it is to think about early resolution and mediation during the life cycle of a dispute.  When I was in-house, I came to realize how important it is that a mediator both be able to effectively listen and create an environment where parties are able to actively listen to each other.   But now, after 5 years at CPR and having mediated many cases, I have an even richer understanding of what it takes to be a good mediator. As important as it is to create the right environment for parties to work towards a collaborative result, there is no substitute for understanding the facts underlying a dispute and the relevant law. Also, given my in-house background, I understand some of corporate counsel’s concerns about arbitration, and as an arbitrator I believe I will be well positioned to address those concerns, again in large part as a result of learnings from CPR. I also believe that the learnings I’ve gained from other arbitrators and the best practices that I’ve been privy to for the last 5 years will enable me to effectively manage an arbitration and handle the many issues that arise. I am excited about this upcoming new phase and am deeply appreciative of CPR and my friends in the ADR community that have been so welcoming to me from the day I joined CPR 5 years ago.

 

Mr. Hanft, thank you for sharing your time and unique perspective.  We wish you and CPR continued success!

 

This is the first of two interviews that cover CPR’s innovative approach to aiding corporate legal departments with global dispute resolution.  Keep an eye out for a follow up interview with Olivier P. André, Senior Vice President, International at CPR.

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ICSID releases updated rule proposals

Following a public consultation, ICSID has published a second draft of its proposed amendments to the centre’s rules, including new provisions on third-party funding, arbitrator disqualifications and expedited...

Marquette Hiring a Visitor in ADR

ADR Prof Blog - Sun, 2019-03-17 13:10
I am really delighted to announce that we are looking for a visiting faculty member in ADR–yay!  Come hang out with me–the weather is awesome.  Okay, don’t come for the weather, do come for the great students and super fun colleagues 😊   Here is the official announcement: Marquette University Law School invites applications for a visiting … Continue reading Marquette Hiring a Visitor in ADR →

Taking a Second Bite of the Cherry: When is it Appropriate to Remit an Award Instead of Setting it Aside in Singapore?

Kluwer Arbitration Blog - Sat, 2019-03-16 23:51

Raghav Kohli

Young ICCA

Much ink has been spilt on the legal consequences of remitting an award back to an arbitral tribunal vis-à-vis setting it aside. The Singapore Court of Appeal in the seminal decision of AKN v. ALC [2015] SGCA 63 has settled that remission is not possible after an award has been set aside. Rather, remission is a curative alternative available in circumstances where setting aside of an award is preventable. These two remedies available under Article 34(4) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) are thus mutually exclusive.

 

Background of the Case

In its earlier decision in AKN v ALC [2015] 3 SLR 488, the Singapore Court of Appeal allowed appeals in part against a High Court decision to set aside an arbitral award. The crux of the dispute at the arbitration was whether or not the liquidator and secured creditors of an insolvent corporation had breached their obligation under an Asset Purchase Agreement to deliver certain assets free from encumbrances to the purchasers. The Tribunal found for the purchasers. However, the High Court set aside the award in its entirety on the grounds of breaches of natural justice and excess of jurisdiction. On appeal by the purchasers, the Singapore Court of Appeal held that only some parts of the award should be set aside. The Court also directed parties to file written submissions on costs and consequential orders. The decision being analysed arose from these subsequent proceedings.

The Court framed the following issues, inter alia, for adjudication: (1) Does the court have the power to remit matters to a new tribunal? (2) Can the court remit any matter, which is the subject of an award that has been set aside, to the same tribunal that made the award? (3) What are the various consequences of setting aside an arbitral award? While the issues were worded broadly, the Court confined its analysis to cases governed by the Singapore International Arbitration Act and the Model Law.

 

Decision of the Singapore Court of Appeal

On the first issue, the parties agreed that courts have no power to remit an award to a newly constituted tribunal. The Court cited its decision in BLC v BLB [2014] 4 SLR 79, where it was observed that the clear language of Art 34(4) of the Model Law only envisions the possibility of remitting an award to the same tribunal which delivered it.

On the second issue, the Court held that remission operated as an alternative to setting aside. Thus, the question of remitting an award after it had been set aside could not arise in any case. Since a tribunal becomes functus officio after issuing a final award, a court may only direct it to review its award in accordance with Article 34(4), which requires a court to ‘suspend setting aside proceedings for this purpose. Based on ‘good sense’ and an ordinary reading of Article 34(4), the Court held that it was not competent to remit an award after it had been set aside. Support for the proposition that remission was meant to be an alternative curative provision to prevent the setting aside of an award was also found in the travaux préparatories of the Model Law.

On the third issue, the Court considered the consequences of setting aside an award. It found that while an award ceases to have legal effect, it does not affect the continued validity and force of the arbitration agreement between the parties. A tribunal’s mandate also ends with the making of an award, unless it is restored pursuant to an order remitting it back for further consideration of the tribunal.

 

Commentary

Previously, Singapore courts have employed remission both after setting aside an award (see Kempinski Hotels SA v. PT Prima International Development [2012] SGCA 35), and to refer matters to newly constituted tribunals (see Front Row Investment Holdings v. Daimler South East Asia [2010] SGHC 80). The decision in AKN v ALC is welcome, as it has resolved that the power to remit under Article 34(4) of the Model Law may only be invoked for reconsideration by the same tribunal before an award has been set aside.

However, the significant question of when it is appropriate to remit an award to the same tribunal instead of setting it aside has not been adequately addressed by both courts and the academic community in Singapore. For example, in BLC v. BLB [2014] SGCA 40, the Court of Appeal reversed the High Court decision remitting the matter to a new tribunal. Although the issue was not strictly before the Court, it went on to summarily hypothesize about an appropriate case for remission. Without laying down any definitive threshold, the Court weighed in two relevant factors to determine whether or not to remit an award: the pure oversight of the arbitrator in overlooking an issue, and his ability to determine it again. Thus, in an application for remission vis-à-vis setting aside in the future, courts will have little assistance from national precedents on the scope and substance of this remedy. While the AKN decision has provided clarity on some aspects, it remains to be seen how Singapore courts will carve out meaningful contours for determining the appropriateness of remission under Article 34(4) of the Model Law.

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The Applicability of the Ukraine-Russia BIT to Investment Claims in Crimea: A Swiss Perspective

Kluwer Arbitration Blog - Sat, 2019-03-16 00:00

Simon Bianchi

Young ICCA

Since the annexation of Crimea by the Russian Federation in 2014, a substantial number of investment claims, in particular expropriation claims, have been raised by Ukrainian nationals against the Russian Federation in relation to investments made in Crimea prior to the annexation. In this regard, a fundamental legal issue concerns the applicability of the Agreement on the Encouragement and Mutual Protection of Investments entered into in 1998 between Ukraine and the Russian Federation (the “Ukraine-Russia BIT”) to such investments. In a landmark decision 4A_396/2017 dated 16 October 2018, the Swiss Supreme Court upheld an award on jurisdiction (the “Award on Jurisdiction”), rendered by an arbitral tribunal in the case PCA No. 2015-34 (the “Arbitral Tribunal”), recognizing that (i) investments made by a Ukrainian company in Crimea prior to its annexation were protected under the Ukraine-Russia BIT and thus (ii) the Arbitral Tribunal had jurisdiction to hear the corresponding investment claims.

 

Background

On 21 March 2014, following the annexation of Crimea, the Russian Federation adopted the treaty of accession of Crimea and, in this context, took various economic measures relating to Crimea, in particular to the energy sector. Within this framework, PJSC Ukrnafta, a Ukrainian company active in the fuel market (“PJSC”), alleged that the measures implemented by the Russian Federation interfered with and ultimately expropriated its investments in petrol stations located in Crimea and violated the Ukraine-Russia BIT.

On 3 June 2015, PJSC initiated arbitration proceedings under the UNCITRAL Arbitration Rules against the Russian Federation based on Article 9(c) of the Ukraine-Russia BIT and sought payment of USD 50,314,336 as compensation for the alleged expropriation (the “Dispute”). The Russian Federation contested the jurisdiction of the Arbitral Tribunal, refused to take part in the arbitral proceedings and did not appoint an arbitrator nor submit an answer to PJSC’s statement of claims.

On 26 June 2017, the Arbitral Tribunal rendered the Award on Jurisdiction acknowledging its own jurisdiction to hear the Dispute and made the following findings:

  • The territorial scope of application of the Ukraine-Russia BIT was fulfilled as the concept of “territory” defined in Article 1(4) encompassed regions over which a contracting State exercised de facto In casu, the Russian Federation exercised de facto control over Crimea and it was unnecessary, for the purpose of the application of the Ukraine-Russia BIT, to determine whether the annexation of Crimea was lawful under public international law.
  • The Dispute fell within the scope ratione materiae of the Ukraine-Russia BIT since the notion of “investments” (Article 1(1) of the Ukraine-Russia BIT) did not require that the relevant investments be initially made in the territory of the Russian Federation. Investments located in the territory of the Russian Federation only as a result of subsequent border changes were also protected under the Ukraine-Russia BIT.
  • PJSC, being a company duly incorporated under the laws of Ukraine and legally capable of carrying out investments in the territory of the Russian Federation, qualified as an “investor” according to Article 1(2)(b) of the Ukraine-Russia BIT (scope ratione personae).

In light of the above, the Arbitral Tribunal concluded that it had jurisdiction to hear the Dispute under Article 9(c) of the Ukraine-Russia BIT.

 

The Swiss Federal Supreme Court Decision

On 14 August 2017, the Russian Federation lodged an appeal to the Swiss Supreme Court against the Award on Jurisdiction and contested the jurisdiction of the Arbitral Tribunal based on three main arguments.

First, the Russian Federation submitted that the concept of “territory” in the Ukraine-Russia BIT only encompassed territories belonging to a contracting State at the time of contracting and any subsequent extension to further territories had to be agreed between the contracting States. Second, PJSC facilities, subject of the alleged expropriation, did not constitute “investments” under the Ukraine-Russia BIT as the latter required an act of a cross-border investment at a certain point in time. Third, PJSC did not qualify as an “investor”.

The Supreme Court rejected the Russian Federation’s appeal and confirmed the jurisdiction of the Arbitral Tribunal to hear the Dispute on the following grounds.

Concerning the notion of “territory”, the Supreme Court noted that the Russian Federation did not contest that (i) the legality of the annexation of Crimea was irrelevant for the purpose of the application of the Ukraine-Russia BIT and (ii) the notion of “territory” encompassed regions over which a contracting State exercised de facto control. This said, the Supreme Court recalled that, under Article 29 of the Vienna Convention on the Law of Treaties (“VCLT”), an international treaty is binding upon each contracting State in respect of its entire territory. Therefore, even in case of subsequent territorial changes, a treaty remains applicable to the entire territory of each contracting State, without the need for a supplementary agreement. In the present case, Crimea became a territory of the Russian Federation as the latter has exercised de facto control since 21 March 2014 at least. Therefore, the Supreme Court confirmed that Crimea was a territory of the Russian Federation under Article 1(4) of the Ukraine-Russia BIT.

With regard to the notion of “investments”, the Supreme Court recalled that such notion had to be interpreted pursuant to the principles set out in Article 31 of the VCLT and resorted to various methods of interpretation to determine whether the Ukraine-Russia BIT covered only investments made ab initio in the territory of the Russian Federation or also investments being located in its territory as a result of subsequent border changes.

First, the Supreme Court found that the wording of Article 1(1) of the Ukraine-Russia BIT in itself did not support the restrictive position defended by the Russian Federation.

Second, the limitation of the notion of “investments” to investments initially made in a foreign State (cross-border investments) results from the “transaction-based” model, which reflects earlier bilateral investment treaties focused on liberalisation of capital movements. On the contrary, the “asset-based” model includes the protection of investments in the form of assets and rights which are not directly related to a cross-border transaction. As Article 1(1) of the Ukraine-Russia BIT contained a non-exhaustive list of assets qualifying as investments, the Supreme Court found that the definition of “investments” was broad and followed an “asset-based” model. Thus, it did not refer to specific cross-border transactions, which could be attributed to a specific point in time, and did not contain a limitation with regard to the moment of border crossing.

Further, a teleological interpretation supported the fact that the Ukraine-Russia BIT served two purposes, i.e., the promotion and protection of investments. For this reason, the Supreme Court did not follow the argument of the Russian Federation according to which the purpose of protection was only secondary. Furthermore, a broad protection of investments, including investments located in the territory of the Russian Federation only as a result of subsequent border changes, did not contradict the meaning and purpose of the Ukraine-Russia BIT. Indeed, the general principle underlying bilateral investment treaties is that the host State should not interfere with or expropriate investments made by nationals of the other contracting State without compensation. In casu, the protection offered by the Ukraine-Russia BIT only took effect at the time of the alleged expropriation. Therefore, the necessary conditions to benefit from the protection granted by the Ukraine-Russia BIT should be fulfilled at the time of such infringement (and not at the time of contracting). This also corresponds to the well-established principle that the conditions for jurisdiction ratione personae (i.e., nationality or seat) must be fulfilled at the time of the infringement.

In the view of the Supreme Court, neither a systematic interpretation of the Ukraine-Russia BIT, in particular Articles 1(2)(a), 2(1) and 12, nor the principle of good faith could support a limitation of the protection solely to investments made ab initio in the territory of the Russian Federation. On the contrary, such limitation would exclude from protection investments made within the ratione temporis scope of application of the Ukraine-Russia BIT (i.e., after 1 January 1992 according to Article 12) and would be incompatible with the principle of good faith and the purpose of the Ukraine-Russia BIT.

As to the concept of “investor”, the arguments raised by the Russian Federation were similar to those related to the notion of “investments”; thus, there was no reason to dismiss the Arbitral Tribunal’s conclusion that PJSC qualified as an “investor”.

In conclusion, the Swiss Federal Supreme Court confirmed that the Ukraine-Russia BIT was applicable and that the Arbitral Tribunal had jurisdiction to hear the Dispute. In my opinion, the takeaways of this decision are twofold:

  • The Swiss Supreme Court does not hesitate to use its broad power of review when assessing an arbitral tribunal’s legal reasoning on jurisdiction.
  • A majority of the judges of the Supreme Court tend to adopt a broad definition of the notion of investments relying on the purpose and meaning of bilateral investment treaties and to reject a more restrictive definition based on a historical and/or literal interpretation.
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Conoco takes record ICSID award to US court

After obtaining the largest win in ICSID’s history last week, US oil company ConocoPhillips has applied to enforce its US$8.7 billion award against Venezuela in the US courts. The US oil company filed...

Women Saying Sorry

ADR Prof Blog - Fri, 2019-03-15 13:47
Interesting addition to our ongoing discussion about apologies: Check out this TedTalk about how women overapologize, and how too many “I’m sorrys” can relate to or exacerbate problems with confidence, participation, and voice. Canadian sociologist Maja Jovanovic starts with a fascinating story about women academics at a conference downplaying their own expertise. From this writeup: … Continue reading Women Saying Sorry →

Guaidó seeks to intervene in appeal over Citgo

Venezuela’s self-declared acting president Juan Guaidó has asked a US court for leave to intervene in an appeal concerning the fate of the country’s most valuable US asset, oil refining business Citgo...

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