Feed aggregator

English Court rejects ‘warm and friendly’ bias claim against arbitrator in costs dispute

International Arbitration Blog - Wed, 2019-02-20 16:17
On January 30, 2019, Sir William Blair of the High Court of England and Wales handed down judgment in the case of Koshigi v Donna Union Foundation.

HBO’s Brexit

ADR Prof Blog - Wed, 2019-02-20 13:15
HBO’s new feature, “Brexit,” stars Benedict Cumberbatch and dramatizes the events leading to the Brexit referendum. Check out the trailer here. Watching the film makes you appreciate how fragile our democracy is, especially (and perhaps ironically) in the information age. When we frame something as a referendum, we have the sense that we are encouraging … Continue reading HBO’s Brexit →

Pharma fraud award upheld but minors spared liability

The Singapore High Court has upheld a US$530 million ICC award that held Indian brothers Malvinder and Shivinder Mohan Singh and their companies liable for fraud over the sale of a pharmaceutical business...

Brazilian airline denied enforcement in Cayman Islands

The Grand Court of the Cayman Islands has refused to enforce a US$55 million ICC award issued a decade ago in favour of a Brazilian airline, finding that two private equity funds that were held liable...

SCC joins Turkmenistan to potash plant dispute

The SCC board has granted a request to join Turkmenistan as an additional party to an arbitration commenced by a state organ over the construction of a billion-dollar potash fertiliser plant. The board...

Websites relating to Communication and Conflict

Communication and Conflict Blog - Wed, 2019-02-20 05:09
This page gives links to websites that promote a similar approach to communication and conflict resolution to that described on this site.

The Future of ISDS: Can’t See the Wood or the Trees

Kluwer Arbitration Blog - Wed, 2019-02-20 01:35

Maarten Draye and Emily Hay

On 22 November 2018, the Belgian Ministry of Foreign Affairs, Foreign Trade and Development Cooperation hosted a High Level Event on the Reform of Investment Protection. Distinguished panellists from arbitral institutions, international organisations, academia, civil society, arbitration users and legal practitioners presented diverse views on the need for reform of the system of investor-State dispute settlement (“ISDS”), the progress of current reform efforts, and the potential multilateral investment court (“MIC”). These insightful contributions surveyed the many and varied perspectives from which to view the current state of ISDS, and its future. At the end of the day, however, the distinct impression was that the various stakeholders in this debate are talking at cross-purposes, making it difficult to see either the wood or the trees.

Status of Current Reform Initiatives

A first wave of reforms is undertaken by ICSID. Meg Kinnear, Secretary-General of ICSID explained that the fourth comprehensive reform of the ICSID arbitration rules is well underway. The proposed amendments were published in August 2018, and are open for comment by States and the public until 28 December 2018. A vote on the amendments to the rules is expected in 2019 or 2020.

In order to keep ICSID’s procedural rules fit-for-purpose, there is a range of proposed reforms, including:

  • a new provision for consolidation or coordination of like cases;
  • an obligation to disclose the existence and source of third party funding;
  • strong provisions in favour of greater transparency of awards, decisions, and orders, including deemed consent and the publication of excerpts; and
  • the availability of expedited procedures, anticipated to be useful in particular for small and medium enterprises.

The reform proposals are based on ICSID’s day-to-day experience in the management of cases, which puts it in a unique position to know what works and what does not. See more details on the proposed reforms here.

In parallel, UNCITRAL has tasked its Working Group III to study ISDS reform. Anna Joubin-Bret, Director of the International Trade Law Division at UNCITRAL, reported that at its thirty-sixth session in November 2018, Working Group III completed the second phase of its mandate, reaching consensus that reform is desirable to address concerns about the current system of ISDS. These concerns fall into three broad categories:

  • lack of consistency, coherence, predictability and correctness of arbitral decisions by ISDS tribunals;
  • concerns about arbitrators and decision makers, including lack of independence and impartiality, limitations in challenge mechanisms, lack of diversity, and qualifications; and
  • concerns regarding the costs and duration of proceedings.

The next and third phase of the work of Working Group III will be to discuss and determine what reforms should be developed to address the specific concerns. Due attention will be given both to concerns based on facts, as well as concerns based on perception. See the draft report of the thirty-sixth session of Working Group III here.

Ms. Joubin-Bret emphasised that this Working Group is a government-led process. This reflects the fact that it was States who initiated the design of the current system, and in her view they should be the ones to reform it.

Which Reforms, Why and How?

According to some stakeholders in civil society who voiced their objections during the event, the question should not be what reforms to undertake, but whether we should rather abolish the system of investor protection altogether. The concerns of these groups are more existential and question why investors should receive favoured treatment. Their assertion that investors are offered protection which is not available in other areas such as human rights, climate, labour rights, etc., may very well be on point. It risks, however, throwing away the baby with the bath water.

While it is difficult to measure the immediate impact of bilateral investment treaties on the levels of foreign investment, Patrick Baeten, Deputy GC at Engie, pointed out that investors want certainty and will always look at the level of investment protection when investigating long-term commitments. He predicted that, failing adequate protection (regardless of its form), investment gaps would not be filled, or at least not at the same cost. Moreover, many speakers, including James Zhan, Senior Director of Investment and Enterprise at UNCTAD, pointed out that the current discussion on reform should not be limited to ISDS or other issues of procedure, but also include substance. Treaties can be revised to include obligations for investors which can be enforced by host States.

For those who accept that investment protection should continue to exist in one form or another, there remains a great variance in opinions on the level of reform to ISDS necessary. For some practitioners, the system is imperfect but with some self-regulating tweaks could be sufficiently improved. Others propose largely maintaining the current system, but adding an appeal mechanism to address issues of consistency, predictability and correctness. Those in favour of a more dramatic rethink may support an MIC, or some form of court with international jurisdiction in combination with recourse to domestic courts. Reference was made to the recent report by the IBA on “Consistency, efficiency and transparency in investment treaty arbitration”, which details some of the challenges facing ISDS and proposes solutions to foster the legitimacy of the system.

In her keynote speech, European Commissioner for Trade Cecilia Malmström expressed the EU’s view that the MIC is the only option on the table that can effectively address these concerns. According to the EU, only a permanent body to resolve investment disputes can create predictability and consistency, bring about the necessary expertise in the system, effectively address costs and duration, and assure equal representation. The EU plans to put forward this idea at the multilateral level during the next phase of UNCITRAL Working Group III’s discussions.

Does an MIC Address the Concerns Raised?

At the time of the conference, no detailed proposals for an MIC had been made public. It was therefore unclear what form the court would take, whether it would be an independent institution in its own right, or whether it would make use of the secretariat and facilities of other institutions which already exist. It was further unknown what kind of judges would sit on the court, how they would be appointed, and what rules would govern their service.1)Meanwhile, on 18 January 2019, the EU submitted two papers containing concrete reform proposals to UNCITRAL. jQuery("#footnote_plugin_tooltip_8922_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8922_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Even speaking in general terms, many speakers doubted whether an MIC could address the concerns with the current ISDS system that have been identified. The speakers therefore advocated that, at this stage, full consideration should be given to all potential reform options, and to measure those options against the objectives sought to be achieved. Professor Loukas Mistelis of Queen Mary University pointed out that, if an MIC is created, one option could be to maintain the current system of ISDS, with the MIC to function as an appellate body.

A further question lingers over the feasibility of bringing an MIC into existence in the current global climate, in which multilateralism already faces serious challenges, and a number of other multilateral efforts in the economic sphere have stalled or are dysfunctional.

Again recalling the importance of substantive standards, several contributions also highlighted that while proposed reforms to ISDS are mainly procedural, the importance of the nature and wording of standards of treaty protection should not be underestimated. Mr. Zhan of UNCTAD pointed out that the overwhelming majority of ISDS cases are brought under old generation treaties. In this connection, Professor Bernard Hanotiau of Hanotiau & van den Berg commented that divergent treaty wording, some of which is unclear or inconsistent with other treaties, is often the very reason why ISDS tribunals reach different interpretations of treaties in different cases.

Conclusion

This event illustrated once more how divided different participants in the debate are on the issue of ISDS, and more generally, on investor protection. At the same time, it demonstrated the need for a continued exchange of views in pursuit of solutions that cater to diverse stakeholders.

Civil society groups question the existence of an entitlement to investor protection itself. This approach does not seem to be shared by most lawmakers. However, the EU, one of the main political forces in the debate at UNCITRAL, has made it clear that it sees an MIC as the only way forward.

Meanwhile, practitioners acknowledge to varying degrees that change is necessary, but point out that an MIC will likely fail to address many of the concerns with ISDS. Indeed, it may create new ones. At this stage, it seems doubtful that such technical remarks will fall on fertile soil, since the idea of an MIC which has been planted by the EU appears cultivated in large part on political ideology.

While States are legitimately in the driver seat of ISDS reform, discussions between experts and lawmakers must continue, in order to benefit from the input of those with daily experience of legal practice and procedure. In this way, every potentially viable variety of tree will be given due consideration before a decision is made whether to replant the forest entirely, or whether to seek better results through forest management.

References   [ + ]

1. ↑ Meanwhile, on 18 January 2019, the EU submitted two papers containing concrete reform proposals to UNCITRAL. 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


Our Need for Truth, Reconciliation, and Justice

ADR Prof Blog - Tue, 2019-02-19 19:28
Donald Trump.  Anthony Weiner.  Ralph Northam.  Kevin McCarthy.  Justin Fairfax.  Steve King.  Antonin Scalia.  Brett Kavanaugh.  Roy Moore.  Al Franken.  James Watt.  Bill Clinton.  Ronald Reagan.  Richard Nixon.  George H.W. Bush.  Bernie Sanders.  Spiro Agnew.  Eric Schneiderman.  Ilhan Omar.  Eliot Spitzer.  Harry Reid.  Mike Huckabee.  Joe Biden.  George Allen.  Ben Carson.  Paul Ryan.  Jesse Jackson.  … Continue reading Our Need for Truth, Reconciliation, and Justice →

Reading List About Our Racial History

ADR Prof Blog - Tue, 2019-02-19 19:28
As noted in this post about our need for truth, reconciliation, and justice about past injustices, Washington Post journalist James Hohmann compiled the following list of readings for Virginia Governor Ralph Northam to learn about our racial history based on suggestions of preeminent historians.  This is a good reading list for all of us to … Continue reading Reading List About Our Racial History →

Resources for Truth and Reconciliation

ADR Prof Blog - Tue, 2019-02-19 19:28
A companion post discusses a great need for truth, reconciliation, and justice about past injustices in our society.  This post identifies some organizations in our field that work to promote these goals and uses language from their websites to describe their activities.  If you know of any resources that should be added to this list, … Continue reading Resources for Truth and Reconciliation →

Challenges to enforcement of foreign awards: recent cases from Indonesia

Andi Kadir and Bernard Sihombing of HHP Law Firm (Baker McKenzie in Jakarta) consider recent trends in challenges to the enforcement of foreign arbitral awards in Indonesia. Since the Indonesian Supreme...

Drrrrum-Roll Please….

Kluwer Arbitration Blog - Mon, 2019-02-18 23:52

Catherine A. Rogers

Arbitrator Intelligence

After years of research, development, data collection, analysis, and refinement, Arbitrator Intelligence (AI) is unveiling a Prototype of its forthcoming Arbitrator Intelligence Reports, or AI Reports.

The formal launch of the Prototype is scheduled March 1 at Vienna Arbitration Days, with a special London Launch of the Prototype on March 4 at 6:00pm at WilmerHale. This post previews the Prototype, and traces where we are going from here.

 

Launch of the Prototype

The Prototype, like the future AI Reports, is an interactive electronic document that presents sophisticated, multi-faceted data analytics regarding an individual arbitrator’s track record. The Prototype focuses on a fictional mid-career arbitrator named Diana Artemis and is based on mock data that we created for the Prototype.

After the formal launch of the Prototype, we will be organizing numerous other presentations both in physical venues around the world and through online webinars. The purpose of these events will be to obtain feedback on the Prototype to revise and refine our work as we begin production of AI Reports on actual arbitrators. If you are interested in organizing such a presentation, please contact [email protected].

 

The Data, Campaigns & Ambassadors

The mock data in the Prototype resembles actual data that we have collected on real arbitrators through our Arbitrator Intelligence Questionnaire or AIQ, which is completed by participants at the end of an arbitration. When we turn to AI Reports, the collected data will be analyzed to generate reports on actual arbitrators, as illustrated:

 

The AIQ collects information on a wide range of topics regarding arbitral proceedings (document production, jurisdictional rulings, interim relief), and the final award (substantive outcomes, timing, legal methodology, cost allocation, interest rates).

To date, Arbitrator Intelligence has collected over 600 AIQ responses that provide data on arbitrations that involved over 800 individual arbitrators.

Most of these AIQs are the product of two efforts:  Regional Campaigns and Cooperation Agreements with arbitral institutions.

 

Regional Campaigns

To raise awareness about Arbitrator Intelligence and to encourage parties, counsel, and third-party funders to complete AIQs, we have been organizing Regional Outreach Campaigns.

The first such campaign in Latin America was wildly successful, thanks to a truly amazing group of AI Ambassadors from the Region.  Throughout the Campaign and beyond, our Ambassadors have presented Arbitrator Intelligence in numerous venues, promoted its goals of transparency, accountability, and diversity, and inspired submission of approximately 150 AIQs.

We currently have another campaign under way in Central and Eastern Europe (CEE), with yet another group of outstanding Ambassadors. Based on preliminary results, this Campaign too promises to be highly successful.

Beyond Latin American and CEE, we receive almost daily new requests to bring campaigns to other regions.  Our next Women Arbitrator’s Campaign will be launched on March 8 on  International Women’s Day and in cooperation with ArbitralWomen. Another Campaign will also soon be launched in conjunction with the al-Tamimi law firm and directed collecting information about arbitrator in the Middle East/North Africa/Turkey.

 

Cooperation Agreements

In addition to Regional Outreach Campaigns, Arbitrator Intelligence also relies on relationships with arbitral institutions to encourage submission of AIQs.

Under Cooperation Agreements, arbitral institutions agree that, at the end of each arbitration, they will send emails requesting parties and counsel to complete an AIQ.  In exchange, Arbitrator Intelligence will provide institutions with free AI Reports, when they are ready.

The AIQ was launched in the summer of 2017 in conjunction with the Singapore International Arbitration Centre (SIAC), which was also the first arbitral institution to sign a Cooperation Agreement with Arbitrator Intelligence

Since that time, Arbitrator Intelligence has signed additional Cooperation Agreements with the Cámara de Commercio de Lima and the Arbitration and Mediation Center of the American Chamber of Commerce of Ecuador. We are currently in discussions with numerous other institutions around the world.

As we all know, one of the most important functions an institution provides is appointment of arbitrators. Free access to AI Reports will enable arbitral institutions, particularly smaller regional institutions, to consider a broader range of arbitrators based on more detailed data-based analysis.

 

*    *    *

We believe introduction of AI Reports will soon bring a multitude of benefits to international arbitration. But we need your help.

First, we hope to see you in Vienna, London, or elsewhere to benefit from your feedback on the Prototype.

Second, we need LOTS, LOTS, LOTS more AIQs! The more AIQs we have, the better and more quickly we will be able to produce AI Reports systematically and on a large number of arbitrators.  So please, contribute AIQs through upcoming Campaigns, in response to emails you may receive from arbitral institutions, or by visiting our website directly.

With your help, AI Reports on individual arbitrators will be available later in 2019 as an important new resource for appointment of international arbitrators.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


The Contents of Journal of International Arbitration, Volume 36, Issue 1, 2019

Kluwer Arbitration Blog - Mon, 2019-02-18 22:23

Maxi Scherer

We are happy to inform you that the latest issue of the journal is now available and includes the following contributions:

Annette Magnusson, ‘Foreword: The Story of the Stockholm Treaty Lab’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 1–6

In 2015, the world community adopted the Paris Agreement and the Sustainable Development Goals, setting an ambitious agenda for curbing global warming and ensuring a sustainable future. It is broadly recognized that attaining these goals will require investments amounting to trillions of dollars across the globe: renewable energy plants must replace carbon-heavy ones; energy-efficient transportation will be needed to carry an increasingly mobile world population; sustainable agriculture and forest restoration must substitute unsustainable land use and deforestation; and climate-resilient infrastructures must be built where global warming and rising sea levels already put communities at risk. Much of the technology necessary to reduce climate change and its effects already exists – affordable solar energy, for example, and energy-efficient vehicles, and carbon capture and storage. Investments are needed to bring these existing technologies to meaningful scale around the world, beyond the borders of the countries that can readily afford them. Investments are also necessary to support innovation in areas where the current state-of-the-art technology is still not sufficient to effect the necessary change. In today’s globalized economic system, many of these investments are likely to be cross-border in nature. In other words, if the global climate-change goals are to be attained, a significant increase in ‘green’ foreign direct investment (FDI) must materialize. For several decades, international investment agreements have been used to increase FDI flows by incentivizing and protecting investments. But no international legal instrument exists that specifically encourages much-needed green investments.

Martin Dietrich Brauch, Yanick Touchette, Aaron Cosbey, Ivetta Gerasimchuk, Lourdes Sanchez, Nathalie Bernasconi-Osterwalder, Maria Bisila Torao Garcia, Temur Potaskaevi, Erica Petrofsky, ‘Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation: Aligning International Investment Law with the Urgent Need for Climate Change Action’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 7–35

The climate change mitigation and adaptation objectives set by the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) and the broader Sustainable Development Goals (SDGs) under the Agenda 2030 create a need for an unprecedented shift from carbon-intensive to low-carbon investment projects. Investment and the legal regimes that govern it—including international investment law—are critical to this shift. To accelerate it, the authors propose the Treaty on Sustainable Investment for Climate Change Mitigation and Adaptation. One of the winners of the Stockholm Treaty Lab competition, the treaty has three building blocks: (1) encouraging Sustainable Investments; (2) discouraging Unsustainable Investments and eliminating new Unsustainable Investments; and (3) ensuring a just transition to sustainable and low-carbon economies and societies. It allows states to indicate, in schedules to the annexes of the treaty, which sectors will be defined as Sustainable or Unsustainable Investments. It protects and signals policy support for Sustainable Investments, while denying treaty-based procedural rights to Unsustainable Investments and committing states to agree on modalities and timelines for phasing out incentives for Unsustainable Investments, such as fossil fuel subsidies. It includes investor obligations and provides access to justice to individuals and communities through an accountability mechanism.

Paula Henin, Jessica Howley, Amelia Keene, Nicola Peart, ‘Innovating International Investment Agreements: A Proposed Green Investment Protocol for Climate Change Mitigation and Adaptation’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 37–70

This article describes a proposal for a new Green Investment Protocol for the Encouragement, Promotion, Facilitation, and Protection of Investments in Climate Change Mitigation and Adaptation (‘Green Investment Protocol’ or ‘Protocol’), which aims to incentivize foreign investment in climate change adaptation and mitigation so as to help achieve the targets set out in the Paris Agreement.

Silke Noa Elrifai, Simon R. Sinsel, Maya Hennerkes, Hans Rusinek, ‘A Model Multilateral Treaty for the Encouragement of Investment in Climate Change Mitigation and Adaptation’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 71–94

The Paris Agreement sets out to limit global warming to below 2°C, yet the pathway to reach that goal is unclear. This specifically applies to the mobilization of investment for climate change mitigation and adaptation. One way to mobilize foreign investments is to create a favourable investment climate with the help of multilateral investment treaties. In this article, a model treaty is proposed to considerably increase climate-friendly investments while maintaining regulatory flexibility for signatory states. Building on Design Thinking principles, key challenges for the success of such a treaty are identified and provisions are crafted incorporating feedback from twenty-five experts from finance, policy, and legal domains. The proposal addresses four key challenges: (1) define climate change mitigation and adaptation investments; (2) decrease the barrier of limited access to capital due to perceived and actual risks; (3) combat insufficient investor trust in long-term contracts; and (4) retain states’ ability to regulate. The treaty proposal addresses these challenges by proposing, inter alia, a definition for mitigation and adaptation investments that establishes a link to the Nationally Determined Contributions under the Paris Agreement, an innovative financing mechanism, a conversion of host country subsidies to investment grants, and a performance verification using latest distributed ledger technology.

Daniel Magraw, Leila Chennoufi, Krycia Cowling, Charles Di Leva, Jonathan Drimmer, Chiara Giorgetti, Young Hee Lee, Jan Low, Kendra Magraw, Steve Mccaffrey, Grace Menck Figueroa, Sergio Puig, Anabella Rosemberg, ‘Model Green Investment Treaty: International Investment and Climate Change’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 95–134

Mitigating and adapting to the extraordinary threats posed by climate change will require dynamic responses across all elements of human society. Governments face urgent, unprecedented challenges in this regard, including with respect to regulating foreign investment. The international investment regime was not designed to take account of this reality, however, either substantively or with respect to the settlement of disputes. This article proposes a new approach to foreign investment regulation designed to rectify this systemic failure, in the form of an innovative bilateral investment treaty drafted by a multidisciplinary team of internationally renowned experts. The approach proposes a balanced, reciprocal set of obligations for both investors and host states consistent with the Paris Agreement. To incentivize transformation, moreover, the article argues for investment treaties that demand good governance by investors, establish sufficient policy space for host states (via a sectoral approach that specifically addresses areas such as climate change, water, agriculture, human rights, indigenous peoples and public health), and adopt a flexible, fair, accountable and transparent approach to dispute settlement, including enhanced standards for arbitrators and a Code of Ethics—among other innovations.

Christopher Campbell , Coimbra Trigo Ana, ‘A Vision for Green Foreign Direct Investment: Proposals for an Investor-State Collaborative Effort’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 135–160

Time is of the essence. With each passing day, the options and alternatives available to the peoples of the world to stem the tide of man-made destruction to the Earth are steadily disappearing. The Stockholm Treaty Lab challenged professionals from various disciplines to imagine and design strategies to mitigate and reduce the detrimental impact of human beings upon the planet. This article reflects the culmination of thought processes and ideas of one the participating teams.

The team drafted a legal instrument within the currently existing U.N. infrastructure, and included a number of aspects advocating for its widespread adoption, seeking to incentivize parties with the power to effect environmentally sound change to be more active. Economists, business consultants, lawyers, and scientist sought to find solutions to three man-made issues, namely (1) food waste, (2) deforestation, and (3) lack of renewable energies. Each of these three categories represent a major exacerbating force upon climate change, yet are areas that could be drastically affected with cooperation among states and investors. Within each category, both general policies and specific solutions/incentives are outlined. Further, dispute resolution mechanisms and the imagined economic impact for investors financing these initiatives are discussed. It is the belief of the team that the problems considered by the article have little chance of being effectively addressed unless there is widespread cooperation, thus it is hoped that articles like this one can be the catalyst for that change.

José Rafael Mata Dona, ‘Stockholm Convention on the Use of Blockchain to Boost Climate Action’ (2019) 36 Journal of International Arbitration, Issue 1, pp. 161–170

This article examines an innovative junction between international investment law and climate change law with the potential to increase foreign investment in climate change mitigation and adaptation. In particular, it explores the use of Blockchain (1) as a climate change investment vehicle, (2) in the collection of evidence of emission reduction compliance and (3) in the implementation of a Carbon Tax. Finally, it analyses the possibility to incorporate those three Blockchain applications to the network of already existing International Investment Agreements (IIAs) and describes a new role arbitration can play in the resolution of new type of claims.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


PCA hears Swiss investor's claim against Kuwait

A Swiss entity’s investment treaty claim against Kuwait is underway before a tribunal at the Permanent Court of Arbitration in The Hague. Conseil Economique Des Pays Musulmans (Economic Council of Muslim...

Using I-statements in effective communication and conflict resolution

Communication and Conflict Blog - Mon, 2019-02-18 08:14
Why and how I-statements support effective communication and conflict resolution. Examples of I-statements to illustrate. Use in relationships, for couples, workplace communication, community issues.

“May” Means “Shall” in Georgia – Supreme Court of Georgia Upholds a Permissive ICC Arbitration Clause

Kluwer Arbitration Blog - Sun, 2019-02-17 21:00

Sophie Tkemaladze

“May” means “Shall” in Georgia! – this was the telephone message I received on January 18, 2018 from a colleague who had just been informed in the courtroom that the ICC arbitration clause he was relying upon was upheld by the Supreme Court of Georgia. I had been following this case [Supreme Court of Georgia Case #as-148-140-2017] since 2016 and kept my fingers crossed for the survival of the arbitration clause. The progress that was made in this case – from the “unfriendly” decision of the Batumi City Court in 2016 on to the “turning point” decision of the Kutaisi Court of Appeals in 2017 and ending gloriously with the final “pro-arbitration” statement of the Supreme Court of Georgia – is telling of the progress arbitration has made in Georgia over the last several years.

Court of First Instance

It all started with the claim lodged with the Batumi City Court in April 2015 on a matter, which under the contract between the parties, was subject to ICC arbitration. The clause read: “If within 30 (thirty) days since the beginning of […] negotiations the Purchaser and the Supplier have not managed to settle the dispute, either of the party is able to apply for the arbitration of law to the International Chamber of Commerce (ICC) to resolve the dispute. The arbitration will take place in Tbilisi, Georgia, the language will be English and will be subject to the ICC regulations.

Respondent, in its first statement of defense, brought up existence of the arbitration clause and requested the Court to terminate the proceedings and refer the parties to arbitration. In its surprising and scarce reasoning, Batumi City Court read the arbitration clause as referring to ICC Rules of arbitration, and found it insufficient to determine parties’ will to refer their disputes to a specific arbitration institution.

This reasoning is similar to the recent decision of the Supreme Court of the Russian Federation [No. A40-176466/17] affirming refusal to enforce an ICC Award on the basis that the arbitration clause only referred to the Rules of Arbitration of the ICC and not a specific arbitration institution. Unlike the Russian case, however, where the issue was raised at the enforcement stage and the reasoning was confirmed by the highest court, the issue in the Georgian case was raised in the context of article 8.1 of the Model Law (Article 9.1 of the Georgian Law on Arbitration) and, fortunately, it was only the Court of First Instance which erred in its finding. Batumi City Court found the arbitration clause invalid, proceeded with full review of the case and on July 15, 2016 rendered its decision on the merits.

Court of Appeals

Kutaisi Court of Appeals turned the approach towards arbitration clauses to a sensible angle. The Court analyzed provisions of the Law of Georgia on Arbitration (which is based on the UNCITRAL Model Law) vis-a-vis the language of the arbitration clause. It noted that the parties’ agreement was clear on their will to refer their disputes to arbitration under the ICC Rules and its administration. It held that choosing the place and language of arbitration was allowed under the legislation. Court of Appeals reversed the decision of the Batumi City Court, upheld the validity of arbitration clause and referred the parties to arbitration under the ICC Rules.

It is noteworthy that by this time Tbilisi Court of Appeals had considered a similar issue with respect to model GIAC (Georgian International Arbitration Center) arbitration clause, which likewise referred to the rules, rather than the institution itself. In its decision dated November 24, 2016 Tbilisi Court of Appeals explained why reference to the Rules of Arbitration was sufficient to find the will of the parties to refer their disputes to the administration of the respective institution. The Court even brought an example of the standard ICC clause in support of its argument and noted: “Model/standard clauses of some arbitration institutions make reference precisely to the Rules and not to the institution. For example, the model clause of the International Chamber of Commerce (ICC) […]”. Thus, both Courts of Appeals of Georgia have now ruled that reference to institutional Rules suffices to hold the respective arbitration clauses valid.

Supreme Court of Georgia

The saga continued as both parties appealed the decision of the Kutaisi Court of Appeals to the Supreme Court of Georgia. Claimant, among others, argued that the clause only granted parties the right to refer their disputes to arbitration. Such right, in Claimant’s view, gave the discretion, but could not oblige the unwilling party to go to arbitration and therefore, could not be the basis for the Court to decline its jurisdiction (this argument was never raised at earlier stages). Respondent appealed the decision on another ground: that the court did not grant them full costs of futile litigation (specifically, attorney’s fees) which Respondent had to incur at Batumi City Court.

In a long-awaited decision of the Supreme Court of Georgia, the Justices confirmed the finding of the Court of Appeals with respect to validity of the arbitration clause. In justifying the binding nature of the arbitration clause, the Supreme Court noted: “the agreement, pursuant to which either party is entitled to refer the dispute to arbitration, means that the arbitration agreement grants a right to either party to commence arbitration; however, if such right is exercised by either one of the parties, then both parties are obliged to submit to arbitration […].” The court further noted: “If the term of the contract gives more than one possibility of interpretation, it is generally reasonable to apply the interpretation which corresponds to the essence of the agreement; therefore, in the present case, the word ‘is able’ should be interpreted in such a way, that if such choice is exercised, the parties are obliged to refer the dispute to arbitration under the Rules of arbitration of the International Chamber of Commerce (ICC).

In addition, the Supreme Court reversed Court of Appeals’ decision with respect to the attorney’s fees. It emphasized that the Respondent from the outset tried to object to the jurisdiction of the Batumi City Court, however was forced to employ lawyers and defend its interests due to Claimant’s insistence on litigation. The Court stated that “[…] such costs should be reimbursed by the party whose actions have triggered these costs” and ordered the Claimant to reimburse full attorney’s fees incurred by Respondent in litigating the case in the court of first instance.

Conclusion

This decision of the Supreme Court reinforces the consensual nature of arbitration and the pro-arbitration spirit of the laws in Georgia. It also clarifies the standards of construction of the arbitration clauses. The reasoning of both Kutaisi Court of Appeals and the Supreme Court are particularly significant in this respect, as they send a clear message to lower courts (which are in charge of enforcing arbitration agreements under the New York Convention) that arbitration clauses must be construed with pro-enforcement spirit and upheld when parties’ intention to refer their disputes to arbitration is clear. Such intention is clear even when arbitration is stipulated as a right to be exercised by one of the parties. This is now the case law in Georgia as well (joining the approach of English, Singapore, Canadian courts).

It is not yet clear, how this decision will affect the practice of the Georgian courts with respect to unilateral option clauses (there is an established case law finding clauses calling for arbitration or litigation invalid). An approach in line with the reasoning of the Supreme Court would be to say that it equally applies to unilateral option clauses (provided it is a B2B context). Whether a clause refers solely to arbitration, as a right or an option, without noting litigation as another option, or whether it explicitly stipulates a choice between arbitration and litigation – in both cases the choice is between arbitration and litigation. In either case, providing for a possibility/an option of arbitration means that at the time of conclusion of the contract both parties acknowledged and agreed that either of them could opt for arbitration; as the Supreme Court stated, “[…] if such right is exercised by either one of the parties, then both parties are obliged to submit to arbitration […]”. The decision of the Supreme Court widens the door for such interpretation.

This decision sends yet another signal to the parties and their representatives: the party who “breaches” the arbitration agreement shall be responsible for the consequential costs of “futile” litigation.

The approach taken by the Supreme Court is particularly timely today when Georgia strives to prove itself as an “arbitration-friendly” jurisdiction and become an attractive seat for international arbitrations. If before we were talking about the progress we had made by adopting the UNCITRAL Model Law based legislation, organizing annual GIAC Arbitration Days in Tbilisi and declaring Government’s desire to promote ADR (the significance of all of which is not to be undermined!), the Supreme Court has acted and demonstrated that arbitration agreements shall be respected and enforced in Georgia.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


Egyptian state entity faces ICSID claim

A UK energy company has threatened to bring an ICSID claim against an Egyptian state-owned entity if it fails to pay its debts under various gas sales agreements. Petroceltic announced in a press release...

The Know How to Enforcing Foreign Arbitration Awards in South Africa

Kluwer Arbitration Blog - Sun, 2019-02-17 02:50

Danika Balusik

Hogan Lovells

Legislative Framework

 

After much anticipation, the South African International Arbitration Act 15 of 2017 (“new Act”) was welcomed by arbitration practitioners in December 2017. The intention of the new Act has been to incorporate the UNCITRAL Model Law as the cornerstone of the international arbitration regime in South Africa. The South African Arbitration Act 42 of 1965 remains applicable to domestic arbitrations.

 

One of the most significant changes in the new Act was the incorporation of the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977 (the “REFAA Act”) which was promulgated to give effect to the New York Convention, that was signed by South Africa in 1976. The REFAA Act recognised that a foreign arbitral award is binding between parties and is capable of being enforced by way of application to the court, to have the award made an order of the court. To avoid duplication of legislation, the REFAA Act has been repealed in its entirety and replaced by the new Act.

 

Procedure

 

The court application to have a foreign arbitral award made an order of a court is a fairly lengthy process. A Notice of Motion and Founding Affidavit is lodged by the Applicant (the party wanting to enforce the award) at a High Court in South Africa that has jurisdiction over the matter. Jurisdiction is usually determined with reference to the principal place of business or the location of the assets of the Respondent (the party against whom the award is being enforced). In terms of section 17 of the new Act, the application is required to be accompanied by the original foreign arbitral award and the original arbitration agreement in terms of which the award was made, both authenticated for use in the High Court, together with certified copies of the award and the agreement.

 

The application is issued by the Registrar of the High Court served on the Respondent by the Sheriff of the court. The Respondent can then elect to oppose the application or not. Should the Respondent elect to oppose the application, it is required to file a Notice of Intention to Oppose within the time period set out in the Notice of Motion (between 5 to 10 days). Thereafter, the Respondent is required to file an answering affidavit on the Applicant within 15 days of serving its Notice of Intention to Oppose. The Applicant will then be afforded an opportunity to file a Replying Affidavit, within 10 days of receipt of the Respondent’s Answering Affidavit.

 

In terms of the High Court Rules, an Applicant is entitled to make an application to the court on an urgent basis, in accordance with Rule 6(12) of the Uniform Rules of Court. In this instance, the time periods are reduced and general procedure applicable to applications is shortened. However, the Applicant would be required to motivate as to why the matter is urgent, for example, that the Respondent is in the process of disposing of all its assets in South Africa. Should the court find that grounds for urgency do not exist; the matter will be enrolled on the ordinary motion court roll.

 

Advantages and Pitfalls

 

When it comes to enforcing arbitration awards, time is of utmost importance. When a matter is placed on the ordinary court roll and the application is opposed, the hearing usually takes places approximately 4-6 months after the matter is enrolled – a pitfall with enforcement in South Africa. It is no secret that a successful party to arbitration wants to have the award enforced as soon as possible so as to receive what it is entitled to, and therefore a 4-6 month delay in enforcement can cause prejudice to the successful party. If the application is not opposed, the application can be heard approximately 1-2 months after the relevant time period has lapsed for the Respondent to serve its notice of intention to oppose.

 

When a party is considering opposing the enforcement of a foreign arbitral award, section 18 of the new Act is important and sets out the various grounds on which the enforcement of a foreign arbitral award will be refused. If a court finds that a reference to arbitration where the subject matter of the dispute is not permissible under the laws of South Africa or where the award is contrary to public policy, the court will refuse to recognise or enforce the foreign arbitral award.

 

Where a party against whom the award is sought to be invoked can prove (1) a party to the arbitration agreement had no capacity to contract, (2) the arbitration agreement is invalid under the law to which the parties are subjected to, (3) that he or she did not receive notice of the appointment of the arbitrator or the arbitration proceedings or was not able to present his or her case, (4) the award deals with disputes not contemplated by or falling within the terms of reference, (5) the arbitration procedure was not in accordance with the arbitration agreement or laws of the country in which the arbitration took place, or (6) the award is not yet binding on the parties or has been set aside or suspended by a competent authority, the court may refuse to recognise or enforce a foreign arbitral award.

 

There is currently no case law dealing with section 18 of the new Act, however, as the wording of section 18 mirrors that of section 4 of the REFAA Act, the below cases remain significant when dealing with refusal of recognition and enforcement of foreign arbitral awards. South African law recognises the principle of judicial precedent. It is very likely that case law decided upon with reference to the REFAA Act will still bear precedential value when deciding case law under the new Act.

 

In the case of Seton Co v Silveroak Industries Ltd (2000 (2) A 215 (T)), the Respondent opposed an application to have an award by a French arbitral tribunal for damages in favour of the Applicant recognised by the High Court, on the grounds that the award was tainted by a fraud committed on the tribunal by the Applicant. The Respondent contended that the South African High Court should refuse the enforcement of the award by virtue of the provisions of section 4(1)(a)(ii) of the REFAA Act in that it was contrary to public policy to recognise an award obtained through fraud. The Respondent conceded that it did not have evidence on the affidavit to substantiate the allegation of fraud, but that there was someone who, if subpoenaed to give viva voce evidence, would give the necessary evidence.

 

The court held that section 4(1)(a)(ii) of the REFAA Act provided that a court would only refuse to recognise a foreign arbitral award if on the face of the award and the arbitration agreement it was clear that the agreement was contrary to public policy. To successfully claim that the award was obtained under fraudulent means (and therefore against public policy), there ought to be no extraneous evidence to persuade the court that the agreement in question was an illegal agreement. The Respondent was required to approach the French court to have the award set aside on the grounds of alleged fraud and parallel to that, make an application for a stay of the Applicant’s application to have the arbitral award enforced, pending the outcome of the Respondent’s application to have the arbitral award set aside in France. The South African High Court found no reason not to recognise the award, and therefore the Applicant’s application for recognition and enforcement succeeded.

 

In Phoenix Shipping Corporation v DHL Global Forwarding SA (Pty) Ltd and Another (2012 (3) SA 381 (WCC)), Phoenix and DHL approached the Western Cape High Court for an order for the recognition and enforcement of a London arbitral award. Bateman Ltd resisted the application on the grounds that it was never a party to the agreement referred to in the request for arbitration, that the arbitrator had accordingly lacked jurisdiction over it, and that the enforcement of the award would, therefore, be contrary to public policy. DHL relied on the booking note, which provided that the parties submitted to London arbitration. DHL contended that the arbitrator had made an award against Bateman Ltd and that Bateman Ltd had failed to satisfy the arbitral award, which the court was then obliged to enforce.

 

The court held that the booking note issued by Phoenix did not, in South African law, constitute a binding contract of carriage for the transportation of Bateman Ltd.’s machinery in terms of which the parties submitted any dispute to arbitration. Arbitration is characterised by its consensual nature and there was nothing to suggest that there ever was a consensus (either between Bateman Ltd and DHL or between Bateman Ltd and Phoenix) to conclude a contract in terms of which the parties had agreed to submit to arbitration. Both the common law and the REFAA Act recognised the importance of an arbitration agreement as a prerequisite to the enforcement of the arbitral award. In this case, as a fact, there had not been a valid agreement concluded between DHL and Bateman Ltd, agreeing to arbitration in terms of either English law or South African law. DHL had accordingly failed to allege and prove a valid arbitration agreement. Absent an arbitration agreement, no arbitrator could claim jurisdiction to determine a dispute and an order for the recognition and enforcement of a foreign arbitral award, which on the face of it was invalid, would be contrary to the principles of public policy.

 

Whilst it may take some time to have a foreign arbitral award made an order of a court in South Africa, parties can be confident that the South African courts will continue to uphold the principles of public policy and remaining practical and impartial when deciding to recognise and enforce a foreign arbitral award.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


Libra v CODESP: Is Arbitration in the Brazilian Ports Sector Salvageable?

Kluwer Arbitration Blog - Fri, 2019-02-15 19:05

Gabriel Ferreira Labatut Simões

A long-term dispute between Libra Terminais S.A., Libra Terminais Santos S.A., two companies belonging to one of the major port operating groups in Brazil (“Libra”), and the Dock Companies for the State of São Paulo (“CODESP”) seems to have been concluded by a recent arbitral award. The dispute concerned a concession agreement of two terminals in the Port of Santos in São Paulo, Brazil. The historic award is the first decision based on controversial statutes regulating arbitration in the ports sector in Brazil. This decision can provide insights on the practical effects of these statutes and their contentious provisions.

Background

In 1995, Libra and CODESP signed a concession agreement for terminal T-37 (“T-37”) and adjacent areas in the Port of Santos (“T-37 Agreement”). In exchange for the concession, Libra would pay CODESP a monthly fee and would be obligated to expand and improve T-37’s infrastructure.

A few years later, in 1998, Libra and CODESP signed another concession agreement for terminal T-35 and adjacent areas (“T-35 Agreement”, together with the T-37 Agreement, “Concession Agreements”). Similar to the first agreement, Libra would have to pay a monthly fee to CODESP and make investments to expand and improve the terminal.

Soon after the conclusion of the T-35 Agreement, still in 1998, Libra requested CODESP to suspend the collection of the fee owed by Libra. According to Libra, CODESP had not fulfilled its obligations to renovate terminal infrastructure and ensure minimum depth of the waterway access to the Santos Port, which supposedly allowed Libra to stay the payments. Meanwhile, CODESP was attempting to collect the amounts owed by Libra for the concessions. These discussions lasted decades in Brazilian courts. From 1998 to 2015, the parties initiated more than 10 lawsuits, resulting in different outcomes. While Libra was successful in some of the claims, CODESP was successful in others. However, the dispute had no prospect of ending soon.

In 2015, new legislation regarding dispute resolution mechanisms in the ports sector enabled Libra and CODESP to opt for arbitration to resolve their dispute.

Ports sector dispute settlement legislation

The port concessions sector in Brazil is regulated by Statute No. 12.815 (“Ports’ Statute”). The Ports’ Statute was envisaged to modernise the port concessions sector in Brazil by amplifying private investment and improving competition and efficiency. In what was seen as a positive development at the time; the Ports’ Statute established that – public and private – parties in concession contracts could resort to arbitration to resolve disputes regarding their financial obligations. The caveat was that the Statute did not specify how the arbitration should be conducted.

Therefore, in 2015, soon after the enactment of the changes to the Brazilian Arbitration Act (previously discussed in this Blog), the Federal Government enacted Decree No. 8.465 (Port Arbitration Decree, or “PAD”). PAD regulated and expanded the provision of the Ports’ Statute that allowed use of arbitration to resolve contractual disputes in the sector.

In contrast with the Ports’ Statute, the PAD was not well received (see here, here and here). It seemed that the PAD was a well-intended project but poorly executed. It was seen as an attempt by the Federal Government to manage and engage in new practices of dispute resolution. For example, among the most criticised provisions, the PAD (i) established that all information regarding the arbitration should be publicised; (ii) added time consuming bureaucracy to the process of initiating an arbitration; and (iii) provided that arbitration could only be used to settle disputes regarding the reestablishment of the financial-economic equilibrium of a contract; only if the arbitration was based on a submission agreement and not on an arbitration clause.

Nonetheless, despite criticisms, in 2015, Libra and CODESP signed a submission to arbitration agreement relying on the mechanism provided for in the PAD.

Arbitration and Partial Award

Pursuant to the submission agreement, the Tribunal had the mandate to decide (i) whether CODESP breached its obligations under the Concession Agreements; (ii) which of the parties (CODESP or Libra)  was liable for the performance of the construction works on the public docks in front of T-37; (iii) whether the financial-economic equilibrium of the T-35 Agreement had been affected by CODESP’s actions; (iv) whether Libra was liable to pay the fee originally agreed between the parties in the Concession Agreements; and (v) parties’ liability regarding these issues.

The Terms of Reference were signed in September 2017 and, a year later, the Tribunal issued an Award. The Award dismissed all of Libra’s claims, accepted CODESP’s claims, and ordered Libra to pay the fee originally agreed by the parties, as well as penalties for breach of contract. The Tribunal decided the case through the strict application of the contractual terms and the relevant statutes. However, the true contribution of the Libra v CODESP arbitration award is that it provides valuable insight as to whether initial criticism regarding application of the PAD was justified.

Time consuming bureaucracy?

One of the main criticisms to the PAD is that, in theory, it increases bureaucracy for execution of submissions to arbitrate. PAD requests a case by case preliminary government assessment regarding the benefits of using arbitration in each particular dispute. The PAD also establishes that arbitrators and arbitral institutions should be contracted by direct negotiation, as opposed to public biddings. Although the former is swifter than the latter, it still entails a number of time-consuming administrative burdens.On the other hand, a positive aspect of the PAD is the time requirement to issue an arbitration award within 24 months, which seems to offset, at least partially, the additional bureaucracy.

In Libra v CODESP, the time requirements for issuance of the award seemed to balance out the additional bureaucracy imposed by the PAD. While CODESP had to go through the preliminary government assessment; submission to arbitration was signed by the parties in less than three months from the day that the PAD entered into force. In fact, the dispute was adjudicated in record time, as the Tribunal decided on the liability issues in no more than 16 months from the signing of the Terms of Reference, which is less than the average period of time for an arbitration to be decided in Brazil, and substantially faster than obtaining a final decision in court.

Publicity issues?

Another point of contention regarding the PAD is the protection of sensitive information (e.g. price formation, production methods, formulas) vis à vis the requirement that all information regarding the arbitration must be publicized.

Again, this did not seem to be an issue in Libra v. CODESP. Even though the Federal Government divulged most of the proceedings through a specific website, no sensitive information was published. This is especially important considering that the Tribunal granted Libra’s request to keep confidential certain documents containing information on its commercial practices. Therefore, it seems that the publicity requirement of the PAD is not incompatible with, and can accommodate, existing judicial protection to sensitive information.

Abuse of privileged condition?

The most glaring issue with the PAD is that it grants to the Public Administration the power to decide whether disputes regarding the financial-economic equilibrium of contracts can be submitted to arbitration. According to the PAD, these disputes can only be submitted to arbitration via submission agreements.  This means that public parties can decide, after the dispute has arisen, whether the dispute should be submitted to arbitration or referred to a national court, which clearly puts the Administration in a privileged position as a disputing party and can hinder the “parity of arms” principle.

Nonetheless, there is some reason for optimism; Libra v CODESP has pinned down better arbitration practices for public authorities as disputing parties. For example, it is all very common for state parties in Brazil to challenge the legitimacy of arbitration. However, in Libra v CODESP, the Administration refrained from these unnecessary (and generally unsuccessful) challenges, demonstrating willingness to submit to arbitration even when there was no contractual obligation to do so.

In fact, the Federal Government Attorney’s Office, for the first time in history, has created a department to deal exclusively with arbitration. The department will represent the Federal Government in arbitration proceedings and will be responsible for gathering and managing expertise in the area, which indicates that the government intends to continue to use arbitration to resolve disputes with private parties in the future.

Conclusion

Prior authors in this blog (see here and here) have correctly described Brazil as an arbitration-friendly jurisdiction. Indeed, it does not appear that the PAD, despite accurate and relevant criticism, can challenge that description.

Libra v CODESP has provided strong indications that the Public Administration in Brazil, despite resistance and poorly drafted legislation. Brazil is walking steadily towards fully embracing arbitration as an efficient (and legitimate) dispute resolution mechanism.

Nonetheless, one should not let excessive optimism be a blindfold, as Libra v CODESP does not answer all the problems with the PAD. One question that remains unanswered is whether the prerogatives granted to the Public Administration by the PAD will be abused, especially in cases where future prospects of prevailing on the merits of the dispute might not be so positive.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185


European Parliament approves EU-Singapore trade deal

The European Parliament has voted to approve free trade and investment protection agreements between the EU and Singapore, including provisions for an “investment court system” that the European Commission...

Syndicate content