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UK Government is Seeking Arbitrators for Free Trade Agreement Rosters

Kluwer Arbitration Blog - Sat, 2020-11-21 21:48

Many of the free trade agreements that the UK has signed or that are currently under negotiation include a requirement for the parties to create rosters of individuals who could act as arbitrators for disputes launched under the state-to-state dispute settlement mechanisms within those agreements. The Department for International Trade (DIT) is seeking to appoint suitably qualified people to be included in these rosters.

 

The Role

We’re seeking to nominate people to serve on general dispute settlement rosters and also specialised rosters for disputes related to financial services, sustainability or labour rights. If a dispute were to occur under an agreement, individuals from the roster may be called upon to serve on an ad hoc arbitration panel to adjudicate on the dispute. The duration of disputes can vary considerably, however, the responsibilities associated with chosen arbitrators may extend beyond 18 months.

Candidates must demonstrate:

  1. Specialised knowledge of law and international trade with eight years proven experience in these fields;

They must also demonstrate at least one of the following requirements:

  1. Experience as an adjudicator (judge, tribunal member, panellist, arbitrator, mediator) in disputes arising under international agreements;
  2. Experience as lead counsel in a state-to-state trade dispute under the WTO Dispute Settlement Understanding or a free trade agreement;
  3. Experience as an academic teaching and/or researching in the field of international trade law for at least ten years;
  4. (For specialised rosters): specific expertise in financial services law or regulation, international environmental law or international labour law (including resolution of disputes arising under relevant international agreements).

Panellists would be remunerated in line with the specific terms set out in the relevant FTA, which is likely to be equivalent to the rates for WTO panellists. Please note that successful candidates will only be remunerated if their services are required and provided.

More information on the role, requirements and recruitment process can be found on the Department for International Trade .GOV webpages here.

Applications should be submitted by 11:59pm on 6 December 2020.

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“Don’t Walk Behind Me, I May Not Lead; Don’t Walk in Front of Me, I May Not Follow “ – Article 29(7) of the ICC Rules and Concurrent Judicial Jurisdiction

Kluwer Arbitration Blog - Fri, 2020-11-20 23:27

It is a generally accepted rule that while state courts have concurrent jurisdiction to hear and decide motions for interim relief prior to the constitution of an arbitral tribunal, they will only maintain such concurrent jurisdiction in appropriate or exceptional cases following such constitution.

The ICC Rules are unique in the sense that they apply the same rule when dealing with an Emergency Arbitrator (“EA”) and impose restrictions on the jurisdiction of state courts following the making of an application for EA, which are the same as those applicable following the constitution of a tribunal.

In this blog post, we analyze how the courts in Israel perceived their own jurisdiction following the making of an EA application and suggest that the ambiguous and inconsistent interpretation and application of this rule should be taken under careful consideration in any future revisions of the ICC Rules. At the outset, it bears noting that the ICC has recently publicized a revision of the Rules which are due to enter into force in 1 January 2021. This revision does not revise Article 29(7) and the wording of the Article under the 2017 Rules shall remain following the coming into force of the new Rules in 1 January 2021.

 

The Concurrent Jurisdiction of State Courts under Article 29(7) of the ICC Rules

One of the key features in EA proceedings under the 2017 ICC Rules of Arbitration (“ICC Rules“) is that found in Article 29(7), which states:

“The Emergency Arbitrator Provisions are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time prior to making an application for such measures, and in appropriate circumstances even thereafter, pursuant to the Rules. Any application for such measures from a competent judicial authority shall not be deemed to be an infringement or a waiver of the arbitration agreement. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat.” [Emphasis added]

Similar language is used in Article 28(2) of the ICC Rules which provides “Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures”. [Emphasis added] Article 28(2) has been interpreted to suggest that after the tribunal is constituted, judicial relief is permitted only in the event that ‘appropriate’ circumstances exist and not automatically.

Implementing this feature to EA procedures by the ICC is unique, considering other arbitral institutions and the UNCITRAL Arbitration Rules (“UNCITRAL Rules”) only provide similar guidelines to that of Article 28(2), i.e., only to interim applications submitted to national courts following the constitution of an arbitral tribunal (see e.g., Article 9.13 of the2020  LCIA Arbitration Rules, Article 30.3 of the SIAC Arbitration Rules, Article 23.9 of the HKIAC Administered Arbitration Rules and Article 26.9 of the UNCITRAL Rules).

 

The Interpretation of Section 29(7) of the ICC Rules

It is common interpretation and practice that Article 29(7) of the ICC Rules sets out the concurrent jurisdiction of national courts and EA and the non-exclusive nature of the EA (See, Emergency Arbitrator Proceedings – Commission Report, 2019, p. 15 (“ICC EA Report)), an exception to the general principal of exclusivity and judicial non-interference in the arbitral procedure.1)Gary B. Born, International Commercial Arbitration (Second Edition, 2014), Volume II: International Arbitral Procedures p.2522- 2523; 2544-2545, §17.04. jQuery("#footnote_plugin_tooltip_5367_1").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Article 29(7) was introduced to the ICC Rules due to concerns of members of the ICC Commission on Arbitration and ADR (“Commission”) that the existence of EA Provisions on its own “could lead to the adverse consequence of some state courts deciding to deny their own jurisdiction to issue interim or conservative measures”.2)Nathalie Voser, “Overview of the Most Important Changes in the Revised ICC Arbitration Rules”, ASA Bulletin, Vol. 29, No. 4, 2011, p. 814. jQuery("#footnote_plugin_tooltip_5367_2").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Following the amendment of the ICC Rules in 2012, and the introduction of Article 29, the interpretation of the Rules in the Secretariat’s Guide to ICC Arbitration3)J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration, ICC Publication 729 (Paris, 2012), p. 310. jQuery("#footnote_plugin_tooltip_5367_3").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); followed the same interpretation suggesting that the “Emergency Arbitrator Provisions are not intended to be the only means of seeking urgent relief”, but simultaneously noting that “Article 29(7) slightly qualifies” this concurrent jurisdiction when the application to the court is made following the EA application, and highlighting that in such circumstances the “Rules require circumstances that make it ‘appropriate’ for the party to resort to a state court”.4)Ibid, § 3-1106. jQuery("#footnote_plugin_tooltip_5367_4").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Although these were the initial concerns and intentions of the drafters of the Rules and the members of the Commission, following the introduction of the EA provisions to the ICC Rules, the Commission and scholars gave little attention to the way in which state courts apply this “concurrent jurisdiction”.

In practice, on the occasions where a respondent asserts that by applying to a state court for interim relief the applicant waived the EA jurisdiction and its right to commence arbitration, such “waiver” arguments were rejected by the EA themselves, based, inter alia, on the language of Article 29(7) (ICC EA Report, p. 15).

In fact, most arbitration rules also explicitly confirm that applying to national courts for interim relief shall not constitute a waiver or infringement of the arbitration agreement (See e.g., Article 28(2) of the ICC Rules, Article 26(9) of the UNCITRAL Rules, Article 24(3) of the ICDR Rules) and judicial precedent generally arrives at the same conclusion.5)Gary B. Born, International Commercial Arbitration (Second Edition, 2014), Volume II: International Arbitral Procedures pp.2549-2551, §17.04. jQuery("#footnote_plugin_tooltip_5367_5").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, the mirror image, of the national courts’ position towards their “concurrent jurisdiction” alongside EA was rarely examined (ICC EA Report, p. 15).

And thus, although the drafters of Article 29(7) were concerned with courts denying their own jurisdiction, the language of the article did, at least to a certain extent, exactly that, and while the “concurrent jurisdiction” exists before making the application for EA, it only partially exists after the EA application was filed, and only in “appropriate circumstances”. The language of Article 29(7) overturned the presumption of jurisdiction – meaning that by default the court should deny jurisdiction unless “appropriate circumstances” persuade it to determine otherwise.

This position is in line with Webster & Buhler’s interpretation, namely that the actual effect of Article 29(7) will depend on the applicable law of the state court where a party applies for relief.6)T. Webster & M. Buhler, Handbook of ICC Arbitration (Fourth Edition, 2018), p. 501, §29-137. jQuery("#footnote_plugin_tooltip_5367_6").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); An illustration to this approach, deferring the application of the concurrent jurisdiction to the state courts and the applicable law, is that of Gerald Metals SA v. Timis, [2016] EWHC 2327 (Ch), where the English court denied jurisdiction, inter alia, based on the fact that Gerald Metals previously applied for an EA and was denied by the LCIA.

However, bearing in mind the drafters’ concerns, it is interesting to note that the language of Article 29(7) does not address these concerns in a conclusive manner, leaving the concurrent jurisdiction aspect of the EA Provisions to the discretion of different courts in different jurisdictions, rather than to that of the parties and the institutions.

 

The Position Taken by The Courts in Israel

Earlier this year, a decision by the Tel-Aviv District Court in O.M. (Tel-Aviv) 56844-10-19 Mer Telecom Ltd. v. Sint Maarten Telephone Company N.V. (Nevo, 17.3.2020) (“Mer Telecom Decision”) provided insight on how courts in Israel may view EA applications, and their effect on the jurisdictional level and specifically the concurrent jurisdiction aspect.

In the past, the Supreme Court of Israel determined that when parties authorized an arbitral tribunal to issue interim measures and orders, such tribunal shall have the jurisdiction to decide motions for interim measures instead of a local court (see RCA 9389/06 Advanced Highway Systems Ltd. v. FTS Formula Telecom Solutions (Nevo, 14.10.2009)). The court, in turn, will be authorized to give only ex-parte or temporary emergency orders, and only prior to the constitution of the Tribunal.7)When an ex-parte motion is filed or if the petitioner cannot wait until the constitution of the Tribunal or the EA. See also: T. Webster & M. Buhler, Handbook of ICC Arbitration (Fourth Edition, 2018), pp. 501-502. jQuery("#footnote_plugin_tooltip_5367_7").tooltip({ tip: "#footnote_plugin_tooltip_text_5367_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, until of late, the Israeli courts did not directly address the EA Provisions and their interplay with past case-law and precedents.

Earlier this year, the Tel-Aviv District Court had to address these matters in the Mer Telecom Decision, where the court was requested to issue an interim injunction against the payment of a bank guarantee.

In that case, Mer Telecom petitioned the Court to issue an interim injunction against the payment of a bank guarantee until the final disposition of its main claim. Mer Telecom informed the Court that it intends to file for EA under the ICC Rules and that the interim petition and the main claim it filed with the Court were filed as a temporary relief, until such time that the EA or the Tribunal can decide on the merits of the interim measure (The Mer Telecom Decision, ¶¶ 24-25).

Although the Court initially granted Mer Telecom’s petition for emergency temporary injunction, it eventually denied the motion for interim injunction, stating that once the arbitration has commenced there was no place for the proceedings in the Israeli Court to continue, thus, denying the motion on jurisdictional grounds. The District Court also reasoned that its conclusion is in line with the Israeli case-law and with the parties’ pleadings.

Surprisingly, the Court did not analyze Article 29(7) and did not inquire if the circumstances of the application before it are appropriate circumstances which justify applying jurisdiction regardless of the EA application, and satisfied itself by noting that the EA application was dismissed. A motion for leave to appeal to the Supreme Court was denied on other grounds on April 4, 2020 in the framework of RCA 2388/20 (Justice Solberg).

 

Concluding Remarks

It is possible that the Court in the Mer Telecom Decision did not analyze the question of its concurrent jurisdiction as the application itself highlighted that it is only a temporary application pending the Tribunal’s decision, but nevertheless, the decision  highlights the risks of too wide of a discretion given to national courts. Such wide discretion and the variances between courts in different jurisdictions and legal traditions may lead applicants to “forum shopping”, favoring the jurisdictions which will hold a looser approach to the concurrent jurisdiction principle.

Although a “tight” approach to the interpretation of the concurrent jurisdiction principle or the “silent” approach taken by other arbitral institutions and the UNCITRAL Rules may lead to abuse of the EA Provisions, it would be advisable for the arbitral institutions and in particular the ICC, to define in greater detail the appropriate circumstances which will lead to the exclusion of the concurrent jurisdiction of the EA and state courts.

 

Shai Sharvit is an of counsel at Gornitzky & Co. and a member of the LCIA Court, the ICC Commission on Arbitration and ADR and the task force on Emergency Arbitrator; Nuna Lerner is a partner at Gornitzky & Co. The authors’ practice focuses mainly on international arbitration and complex multi-jurisdictional commercial disputes.

References   [ + ]

1. ↑ Gary B. Born, International Commercial Arbitration (Second Edition, 2014), Volume II: International Arbitral Procedures p.2522- 2523; 2544-2545, §17.04. 2. ↑ Nathalie Voser, “Overview of the Most Important Changes in the Revised ICC Arbitration Rules”, ASA Bulletin, Vol. 29, No. 4, 2011, p. 814. 3. ↑ J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration, ICC Publication 729 (Paris, 2012), p. 310. 4. ↑ Ibid, § 3-1106. 5. ↑ Gary B. Born, International Commercial Arbitration (Second Edition, 2014), Volume II: International Arbitral Procedures pp.2549-2551, §17.04. 6. ↑ T. Webster & M. Buhler, Handbook of ICC Arbitration (Fourth Edition, 2018), p. 501, §29-137. 7. ↑ When an ex-parte motion is filed or if the petitioner cannot wait until the constitution of the Tribunal or the EA. See also: T. Webster & M. Buhler, Handbook of ICC Arbitration (Fourth Edition, 2018), pp. 501-502. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Challenging the Validity of An International Arbitration Agreement at the Pre-Arbitration Stage: Is There a Remedy Available under the Pakistani Arbitration Laws?

Kluwer Arbitration Blog - Thu, 2020-11-19 23:00

In Pakistan, the law governing international arbitrations resulting in a foreign award is the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (“2011 Act”). To those who are unfamiliar with the 2011 Act, it may come as a surprise that it does not provide any remedy to an applicant challenging the arbitration agreement at the pre-arbitration stage. But there is a way out!

When promulgating the 2011 Act, the legislature intended to design a law which limits judicial intervention in order to create a pro-foreign investment climate in Pakistan. A brief overview of the 2011 Act reveals that it significantly restricts the discretion of the courts to declare the arbitration agreement invalid prior to the commencement of arbitration.

The dilemma of which provision to apply for a challenge to the validity of an international arbitration agreement first arose in Pakistan before the High Court of Sindh in Karachi Development Company Limited v. IM Technologies Pakistan (Private) Limited, 2017 CLCN 157, in which Justice Shafi Siddiqui held that a possible remedy available for the applicant to challenge an international arbitration agreement is under Section 9 of the Civil Procedure Code, 1908 (“C.P.C.”), which relates to residuary proceedings of the court.

In the author’s opinion, there is a lacuna in the 2011 Act which fails to provide opportunity to the applicant to challenge the validity of the international agreement and the answer to it does not lie by invoking Section 9 of the C.P.C. This is for two reasons:

  • Firstly, under the Arbitration Act, 1940 (“1940 Act”) which is applicable to domestic arbitration agreements, Section 33 allows the applicant to challenge the arbitration agreement at the pre-arbitration stage. Such a provision is completely missing under the 2011 Act leaving an applicant without a remedy at the pre-arbitration stage.
  • Secondly, C.P.C. is general law and Section 9 is a procedural provision as opposed to a substantive one. It confers jurisdiction upon courts and does not grant a substantive right of action. The right of action is to be established by reference to substantive law which in this case is the 2011 Act.

Interestingly, under the 2011 Act, an applicant can challenge the validity of the arbitration agreement both post commencement of arbitration and again once an arbitral award has been rendered under Section 4 and Section 6 respectively. One of the reasons to explain the scheme of the 2011 Act to allow challenge to the validity of the arbitration agreement during and post arbitration may be to allow the arbitrator to decide the question of jurisdiction as opposed to the courts deciding it. This is because in Pakistan, court cases tend to proceed at a slow pace due to overcrowded dockets and inherent delays in the system. Another reason would be to give effect to the purpose of the New York Convention incorporated under the 2011 Act which is summarised by the Lahore High Court in Louis Dreyfus Commodities Suisse S.A. v. Acro Textile Mills Ltd., PLD 2018 Lahore 597 as follows:

The general pro-enforcement bias which permeates the 2011 Act is the policy of the law and must be the underlying thrust to liberalise procedures for enforcing foreign arbitral awards. The courts, on a proper objective analysis must give effect to the intention of the legislature and the purpose of the New York Convention, in the enforcement of foreign arbitral awards. The centrality of the statutory enterprise consists in shunning a tendency to view the application with scepticism and to consider the arbitral award as having a sound legal and foundational element.”

The legal position in Pakistan can be juxtaposed with that in India, which shares common history with Pakistan in relation to the 1940 Act up until 1996 when India enacted its Arbitration and Conciliation Act, 1996 (“1996 Act”). Unlike the 2011 Act, the 1996 Act codifies the principle of competence-competence in the statute itself under sub-section (1) of section 16 which provides that the “the arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement.”

In principle, pursuant to an application under sub-section 3 of section 16 of the 1996 Act,1)A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. jQuery("#footnote_plugin_tooltip_1783_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1783_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); an Indian court cannot refuse the arbitral tribunal to determine its own jurisdiction if a party wishes to challenge the validity of the arbitration agreement. In case an arbitral tribunal upholds a challenge to its jurisdiction, the aggrieved party can immediately file an appeal against the said order under section 37(2)(a) of the 1996 Act.2)37. Appealable orders – … (2) An appeal shall also lie to a court from an order of the arbitral tribunal – Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16. jQuery("#footnote_plugin_tooltip_1783_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1783_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This is a marked distinction from the 2011 Act which does not contain any provision authorising the arbitral tribunal to rule on its own jurisdiction.

In this author’s opinion, the approach adopted under the 1996 Act is much more preferable given that it acts as a deterrence for frivolous claims raised by the party before the courts of its home jurisdiction. In Pakistan, it is a standard practice for a party which fears an unfavourable award may be passed against it, to adopt obstructionist and dilatory tactics. If Pakistan were to codify the principle of competence-competence under the 2011 Act, the legislature could indirectly ensure that only genuine claims challenging the validity of the arbitration agreement are raised before the arbitrators.

So, what is the solution under the 2011 Act to challenge an international arbitration agreement prior to the commencement of arbitration? The answer is that one may institute a suit for declaration and injunction in a Pakistani court pursuant to the provisions of the Specific Relief Act, 1877 without challenging the arbitration agreement at all. The opposing counsel would then file an application under Sections 3 and 4 of the 2011 Act to stay the legal proceedings. Such an application would then have to be contested under the limited grounds provided under Section 4 of the 2011 Act which are confined to an arbitration agreement being null and void, in operative or incapable of being performed.

Recently, in Ovex Technologies (Private) Limited v. PCM PK (Private) Limited and others, PLD 2020 Islamabad 52 = 2020 CLD 15, the Lahore High Court discouraged the practice of filing cases in court by roping in other parties who are not signatories to the arbitration agreement  alongside those who are party the arbitration agreement as co-defendants in a suit to avoid the proceedings in the court from being stayed. The reasoning given by the court was that this results in abuse of process as the matter which is supposed to be resolved through arbitration is unnecessarily dragged to the court.

On the contrary, in Aroma Travel Services (Pvt.) Ltd. v. Faisal Al Abdullah Al Faisal Al-Saud and 20 others, PLD 2018 Sindh 414 = 2017 YLR 1579, the High Court of Sindh dismissed an application under Sections 3 and 4 of the 2011 Act to stay the legal proceedings on the grounds that an unwritten and unsigned arbitration agreement would result in a futile exercise of referring the matter to the arbitrator. Thus, the discretion of the courts to stay the legal proceedings depends on the facts and circumstances of each case and whether or not the grounds provided under Section 4 are met with certainty.

Overall, it appears that the real issue lies with poor drafting of the 2011 Act. Ultimately, it is the Parliament which through an amendment to the 2011 Act should legislate on whether or not challenge to the arbitration is permissible at the pre-arbitration stage.

References   [ + ]

1. ↑ A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. 2. ↑ 37. Appealable orders – … (2) An appeal shall also lie to a court from an order of the arbitral tribunal – Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Problems with Teaching “Integrative” Negotiation

ADR Prof Blog - Thu, 2020-11-19 06:44
Debra Berman wrote Is Our Over-Emphasis on Integrative Negotiation Pedagogy Falling Short of Reality?, which prompted responses by Art Hinshaw and Carrie Menkel-Meadow as well as others on the DRLE listserv. My answer to Debra’s question is that our over-emphasis on integrative negotiation pedagogy does fall short of reality.  We know that much – probably … Continue reading Problems with Teaching “Integrative” Negotiation →

Arbitrating Insolvency Disputes? The English High Court Showcases Its Pro-Arbitration Stance Once Again

Kluwer Arbitration Blog - Wed, 2020-11-18 23:00

On 23 September 2020, the England and Wales High Court (“High Court”) rendered its judgment in Riverrock Securities Limited v International Bank of St Petersburg (Joint Stock Company) granting Riverrock Securities Limited (“RSL”) an interim anti-suit injunction in respect of bankruptcy proceedings in Russia brought against RSL by the receiver of the International Bank of St Petersburg (“IBSP”).

The court held that the avoidance claims brought in the foreign bankruptcy proceedings fell within the scope of the LCIA arbitration agreements concluded between RSL and IBSP and were arbitrable as a matter of English law, even though such claims were non-arbitrable under Russian law.

 

Facts Are Facts: What Happened?

IBSP was a major retail bank incorporated in Russia until it was declared insolvent. In contrast, RSL is a company whose place of incorporation is England and Wales. The two parties concluded nine almost identical contracts (“the Contracts”) whereby IBSP purchased securities from RSL in the form of credit link notes. Looking at the bigger picture, other parties had a role to play in the transactions as well, including UBS AG (“UBS”) (through its London branch), a major Swiss multinational investment bank and financial services company. Essentially, by purchasing the aforementioned credit link notes, IBSP undertook the credit risk stemming from certain loans given by UBS in exchange for a coupon.

The Contracts provided for English law as the governing law of the main contract. Furthermore, they all contained an arbitration clause which stated that “[a]ny dispute under the Agreement or in connections with it shall be referred to and finally resolved by arbitration under the LCIA Rules […]”. As for the seat, the arbitration clause pointed to London, England.

The Russian authorities conducted an investigation into the activities of IBSP, finding numerous irregularities and non-compliance with Russian banking law. IBSP’s banking license was revoked, and eventually, on 24 September 2019, the bank was declared insolvent. The Russian State Corporation Deposit Insurance Agency (‘the DIA’) was appointed as IBSP’s official receiver in bankruptcy.

It was against the background of the bankruptcy proceedings that IBSP sought that the Russian court invalidates the Contracts with RSL on the basis that these had been nothing but the tools to siphon off the Russian bank’s assets. The laws on which IBSP relied in this context were the Russian Bankruptcy Law and the Civil Code of Russia.

In turn, RSL turned to English courts for the purposes of securing an interim anti-suit injunction. RSL opined that, as a result of the arbitration clauses that were included in the Contracts, the matters arising out of or in relation to them must be resolved through the LCIA London-seated arbitration, and not be entertained by the Russian court. Unsurprisingly, IBSP challenged RSL’s application for an interim anti-suit injunction on several grounds, as discussed below.

 

Issues in the Case and Positions Taken by the High Court

The High Court was asked to shed light on the following issues:

  1. Is the Russian Federation, as opposed to England and Wales, a natural and appropriate forum for RSL’s application for an interim anti-suit injunction?
  2. Is the action before the Russian court pursued by DIA, and not by IBSP?
  3. Are the claims brought before the Russian court, as a matter of construction, to be deemed as falling outside of the coverage of the LCIA arbitration agreements?
  4. Are the claims brought before the Russian court actually arbitrable?

In discussing the first issue listed above, the High Court referred to Enka Insaat Ve Sanayi A.S. v. Chubb case (discussed in a previous post on the blog) and characterised the position of IBSP as hopeless. Given the fact that the parties had chosen London, England as the legal seat of their arbitration, this in and of itself meant that the parties had also submitted themselves to the jurisdiction of English courts in certain respects, including the power of English courts to grant anti-suit injunctions when such a need arises. Thus, England and Wales indeed is an appropriate forum for seeking anti-suit injunctions in the case at hand.

In terms of the second issue, the underlying argument brought against the application was that, since DIA was behind the steering wheel when it came to the proceedings before the Russian court, the substantive matters of those proceedings were thus outside of the purview of the LCIA arbitration agreements. The High Court disagreed, concluding that the claims before the Russian court were indeed brought by DIA, but on behalf of IBSP. To support its stance, the English High Court, among other things, relied on the document with which the proceedings before the Russian court had been commenced (the said document contained the following wording: ““Applicant: [IBSP] represented by the Official Receiver State Corporation Deposit Insurance Agency””) as well as the judgment of the Singapore Court of Appeal in Larsen Oil and Gas Pte Ltd v Petroprod Ltd. In this case, the Singaporean judges opined that the claims of the liquidator seeking to set aside a transaction in accordance with the (Singapore) Bankruptcy Act would be deemed as claims by the actual party to the arbitration agreement.

As for the third issue, the High Court recapitulated the “generous approach” to the construction of arbitration agreements as espoused in the case law since Fiona Trust & Holding Corporation & Others v Yuri Privalov & Others and basically noted that there is no place in English law for the “presumption that an arbitration agreement should not extend to claims which only arise on a company’s insolvency”. Moreover, the expansive wording of the parties’ arbitration agreements “(“under or …. in connection with”)”, as per the High Court, leads to the conclusion that the claims brought before the Russian court are within the reach of the LCIA arbitration agreements.

As for the last issue listed above, the High Court noted that both under Russian and English laws the claims under the Russian Bankruptcy Law indeed belonged in the realm of insolvency. This finding, however, did not render these claims non-arbitrable as a matter of English Law. Only in rather specific circumstances would insolvency claims under English law not be arbitrable, including when the order sought would be of the type that only a court could make, something that here certainly was not the case. Furthermore, there was nothing in the facts of this case that would bring the High Court to trample “the clear policy of English law of upholding arbitration agreements”.

In reaching the relevant conclusions, the High Court relied heavily on Nori Holding Ltd v PJSC Bank Otkritie Financial Corp, a case with comparable facts to the case at hand.

 

Key Takeaways

The judgment of the High Court is important as it confirms that avoidance claims brought under foreign insolvency law are arbitrable in England and Wales, maintaining England’s position as an attractive jurisdiction for international arbitration.

The High Court did not accept IBSP’s argument of non-arbitrability of insolvency claims under Russian law as a strong reason not to grant an anti-suit injunction. Instead, it reaffirmed the robust pro-arbitration approach of the English courts in holding parties to their agreement to arbitrate when the latter is broad enough to cover the claims under dispute.

The judgment demonstrates the importance of the wording of the arbitration agreement, the choice of the governing law and the seat of arbitration, reminding once again that parties should be mindful when drafting their agreement to arbitrate.

If the parties use the wording “any dispute under the agreement or in connections with it”, they should be prepared to face a broad range of claims that touch upon their contractual obligations.

Concerning the governing law, the High Court did not discuss at length which law should apply to the LCIA arbitration agreements. It merely relied on Enka Insaat Ve Sanayi A.S. v. Chubb to conclude that English law governs the arbitration agreements, whichever of the two approaches for identifying that law discussed in Enka is adopted.

Further, if the parties choose England as the seat of their arbitration, they should consider English courts’ expansive interpretation of the scope of the arbitration agreement, even where the dispute that arises under the agreement invokes the application of foreign law. A party can be sure that their will to arbitrate will not be overridden by the existence of foreign bankruptcy proceedings against their counter-party.

The present judgment also delves into the question of the interaction between insolvency and arbitration.

In light of the inevitable economic consequences of the COVID-19 pandemic and the expected increase of insolvencies, arbitration may facilitate the resolution of insolvency disputes.

The case at hand is indeed a good illustration of an ongoing trend that is here to stay, namely that arbitration seems to be a growing nest in which an ever-expanding number of various claims find their place under the sun, including those on and related to insolvency.

While the judgment obstructs IBSP’s receiver from pursuing bankruptcy claims against RSL in Russia for the time being, it remains to be seen whether the Russian court will give effect to it.

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ADR Diversity Panel for Students TOMORROW, November 19

ADR Prof Blog - Wed, 2020-11-18 16:38
From PFOI Robyn Weinstein: The Brooklyn Law School Student Organizations OUTLaws and APALSA are hosting a free ADR Diversity Panel tomorrow, November 19, 2020 from 12:40 pm – 1:50 pm. The purpose of this panel is to provide insight for future practicing attorneys on how to begin, develop, and thrive in the ADR field. Specifically, … Continue reading ADR Diversity Panel for Students TOMORROW, November 19 →

ODR through the Lens of A2J: Who Benefits?

ADR Prof Blog - Wed, 2020-11-18 14:38
My indefatigable colleague, Amy Schmitz, recently gave an important presentation, “ODR through the Lens of A2J: Who Benefits?” which examined ODR’s successes and failures in advancing justice. Yale Law Professor Judith Resnik provided a commentary. This presentation was sponsored by the Quinnipiac-Yale Dispute Resolution Workshop.  Click here to watch the video.  [But first click on … Continue reading ODR through the Lens of A2J: Who Benefits? →

Alpha BIT: Awaiting The First Arab-Israeli Bilateral Investment Treaty

Kluwer Arbitration Blog - Wed, 2020-11-18 00:42

The announcement on 13 August 2020 of a rapprochement between Israel and the United Arab Emirates (‘UAE’) took the world by surprise. Seasoned regional observers noted quiet cooperation and cross-border transactions over the past few years, but few expected these covert relationships to burst into public view so fully and wholeheartedly. The joint declaration, soon replicated by Bahrain and Sudan, was meant to lead to the full normalization of relations between the countries, including a subsequent series of binding bilateral agreements. Most interesting to the readers of this Blog is the promise of agreements on finance and investment, including the first ever Arab-Israel bilateral investment treaty (‘BIT’). A series of Arab-Israeli BITs would be noteworthy not only in their own right, but also in light of the current period of widespread ISDS reform. The purpose of this post, therefore, is to examine the ISDS practices of the primary parties to the Abraham Accords (at the moment, Israel, Bahrain, Sudan, and the UAE) and to anticipate whether and how the forthcoming BITs may appear.

 

Setting the Stage: From the Abraham Accords to the First BIT

The Abraham Accords, signed 15 September 2020, are a framework agreement to establish “peace, diplomatic relations and full normalization of bilateral ties” between these States, and envision further binding international agreements on a broad range of subjects, including security cooperation, civil aviation, exchange of science and technology, telecommunications, and energy.. Under the Accords, Israel and the UAE have agreed to “deepen and broaden bilateral investment relations,” including by giving “high priority to concluding agreements in the sphere of finance and investment.” They also “reaffirm their commitment to protecting investors, consumers, market integrity and financial stability, as well as maintaining all applicable regulatory standards.” (See here, Annex, p. 1.) Since the UAE agreed to establish normal relations with Israel, Bahrain and Sudan have followed suit, with several other Arab States expected to follow this template as well.

Press reports suggest that the UAE and Israel have agreed to sign the first Arab-Israeli BIT, though the text of the agreement is not yet publicly available. Might a series of Arab-Israeli BITs follow? Egypt and Jordan have had diplomatic relations with Israel for decades, but neither has concluded a BIT despite having many of their own. Yet Middle Eastern States are sophisticated actors in investor-State dispute settlement (‘ISDS’). According to ICSID’s most recent caseload statistics report, State Parties from the Middle East and North Africa (‘MENA’) region are involved in 11% of ICSID’s proceedings historically, and 10% of new proceedings in the 2020 (US) financial year. Despite a high number of regional BITs, they form an incomplete patchwork quilt across the MENA region, leading litigants to turn to the underutilized OIC Investment Agreement and the Arab Investment Agreement in increasing numbers. The OIC’s reform efforts have anticipated and reflected much of the ISDS reform discussion elsewhere in the world. Recent scholarship has revealed the “Euro-Arab Investment Treaty that nearly was”, including to consider its influence on the subsequent development of ISDS. Middle Eastern States also challenge the strict dichotomy of developed/capital-exporting versus developing/capital-importing States.

 

Previous Practice of Abraham Accords States towards Investor-State Dispute Settlement

Of the four States, the UAE is perhaps the most active vis-à-vis investment treaty protection and arbitration. Over the past decade, like other Gulf Cooperation Council (‘GCC’) States, it has gradually liberalized its domestic investment laws in a bid to diversify and stimulate its national economy in a post-oil world. This activity was not only matched, but surpassed, by its enthusiasm for negotiating, signing and ratifying BITs. Remarkably, the UAE has signed 52 BITs in the past decade (of which 21 were subsequently brought into force), for a total of 52 in force with a further 36 signed, but not yet in force. 1)The figures in this section are derived from UNCTAD record-keeping. jQuery("#footnote_plugin_tooltip_6010_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6010_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In the past two years alone, the UAE has signed BITs with Panama, Mali, Kazakhstan, Argentina, Japan, Zimbabwe, Uruguay, Brazil, Gambia, and Hong Kong SAR, though only the last one has been brought into force as yet.

Sudan and Bahrain are less active treaty participants in comparison: Sudan has 14 BITs in force and a further 19 that have been signed, but not yet in force; whereas those figures for Bahrain are 25 and six. In the past decade Sudan and Bahrain have signed three and four BITs respectively. With 34 BITs in force and two signed but not yet in force, Israel falls in the center of BIT activity between the UAE on the one hand and Bahrain and Sudan on the other. That Israel and its bilateral partners appear much more committed to ratifying BITs after they have been signed—Japan in 2017, Myanmar in 2014, and Ukraine in 2010—suggests that Israel takes investment promotion and protection seriously as a matter of policy. That Bahrain and Sudan are less likely to bring recent signed treaties into force suggests that they are less of a priority.

For its middling number of BITs, investors claiming Israeli nationality have not been shy to use Israeli BITs, having  acted as claimants in at least five known cases. Three of these are canonical, having made meaningful contributions to ISDS jurisprudence: Phoenix Action v. Czech Republic, Fuchs v. Georgia, and Metal-Tech v. Uzbekistan. While Israel does not appear to have been haled as a respondent, however, Bahrain has acted as a respondent in investor-State proceedings at least twice and Sudan at least once. The UAE, again, is much more seasoned in investment arbitration proceedings. At least thirteen known cases involve investors invoking their Emirati nationality, while the State has been named respondent in at least five.

The other countries rumored to establish normal relations—Saudi Arabia, Oman, Kuwait, Qatar, Morocco, Niger—show a similar diversity of ISDS experience. Morocco and Kuwait each have sixty or more BITs in force (and several proceedings apiece as respondent), while plucky Niger has only five—including two of the earliest BITs with Germany and Switzerland from the 1960s.

Each State’s familiarity or novelty with concluding and enacting BITs, as well as their relative success in ISDS proceedings, might influence their desire to conclude BITs with Israel in the wake of the Abraham Accords. There is also a degree of path dependency: the ease with which the UAE concludes its BIT with Israel might induce other Abraham Accords States to follow suit. It might even induce the Arab Abraham Accords States to conclude BITs as among themselves. For instance, Sudan has signed, but not yet enacted, BITs with each of the UAE and Bahrain; and there is no BIT signed between the UAE and Bahrain. As noted above, the OIC Investment Agreement and Arab Investment Agreement may fill some gaps in the region such, but these three States and others might wish to strengthen their bilateral ties with each other to the same extent they do so with Israel.

 

A Conservative or Progressive Approach towards Investor-State Dispute Settlement?

As the text of the draft Israel-UAE BIT is not yet publicly available, it is not yet clear whether the parties will choose a cautious or more ambitious approach. For instance, Israel’s recent BITs with Ukraine (2010) and Myanmar (2014) closely resemble its Model BIT (2003), while its most recent BIT with Japan (2019) does not.

According to press reports, the Israel-UAE BIT will include protections against “nationalisation, confiscation, judicial seizures, freezing assets, [as well as provisions on] establishing licenced investments, and transferring profits and revenues in convertible currencies.” Further, “the agreement also provides national and MFN treatment, no interference on all investment related topics, fair and immediate compensation for the investor in case of seizures according to the law, without any form of discrimination and according to the market value of the investment.” These fairly standard provisions will need to be analyzed in greater detail when the final text is released.

It is no guarantee, however, that the Israel-UAE BIT, or any others that follow, will stick to the same old script. It bears noting that the UAE and Sudan are both parties to the OIC Investment Agreement (though not Bahrain: Member States of the OIC are not automatically parties to the OIC Investment Agreement). Recently, that agreement has been the subject of a reform effort aimed at dramatically scaling back both the scope of investment protection as well as the procedural mechanisms afforded to aggrieved investors. That the Israel-UAE BIT seems unlikely to follow suit might speak to the durability of conventional BITs, as well as the likelihood or not that the OIC succeeds in its reform efforts. Perhaps, on the other hand, the Israel-UAE BIT will instead contain procedural innovations, such as the mandatory conciliation provision included in the 2019 Hong Kong-UAE BIT. Morocco—another possible Abraham Accords State—attracted attention for the public interest provisions and Joint Committee established by its 2016 BIT with Nigeria. Further, in a region where dual nationality is common and offshore business operations are familiar and routine, the treaty drafters might pay special attention to the definition of investor, as well as the desirability of denial of benefits clauses.

Finally, a brief word on the matter of Palestine. The effect of the Abraham Accords with respect to Israeli-Palestinian relations is far beyond the scope of this post. Yet, several Arab States make significant investments in Palestine, particularly its infrastructure. One might expect more detail than usual to be paid to the definition of “territory” under the Israel-UAE BIT to clearly define an investment “in Israel.” On the other hand, the issue might draw more attention to Palestine’s five BITs, including ones with Egypt (1998) and Jordan (2012).

The Middle East has been an important but under-heralded player in ISDS. Come what may, the forthcoming Israel-UAE BIT and other Abraham Accords-inspired agreements should bring the region to the fore.

References   [ + ]

1. ↑ The figures in this section are derived from UNCTAD record-keeping. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Menkel-Meadow on the Overemphasis on Integrative Negotiation Pedagogy

ADR Prof Blog - Mon, 2020-11-16 23:33
Yesterday DR field titan Carrie Menkel-Meadow (UC-Irvine) contributed to this conversation on the listserv.  Cross posting it here for posterity.  Enjoy. If I may be so bold as to say, as one of the “mothers” of integrative bargaining (actually problem solving in my lexicon), anyone who reads my texts (with Andrea Schneider, Lela Love, Jean … Continue reading Menkel-Meadow on the Overemphasis on Integrative Negotiation Pedagogy →

Due Process Concerns in Virtual Witness Testimonies: An Indian Perspective

Kluwer Arbitration Blog - Mon, 2020-11-16 23:00

Before the Covid-19 pandemic, virtual witness testimonies were prevalent in specific instances, such as when witnesses could not reach the venue because of illness. Article 8.1 of IBA Rules on Taking of Evidence in International Arbitration permits virtual testimony only at the discretion of the tribunal. The Commentary on the Rules establishes that the tribunal’s decision to allow video-conference should depend upon the “sufficiency” of the reasons given.

The uncertainty of the return of normalcy has forced the parties to adapt to a new normal, by relying entirely on virtual hearings, including virtual witness testimonies. Arbitral institutions are organizing virtual hearings using various video-conferencing platforms. As parties get more comfortable with technology and realise the associated time/cost benefits, virtual witness testimonies are likely to become more prevalent.

Accordingly, there is a need to analyse the manner in which procedural safeguards such as, “due process”, would play out in virtual witness testimonies, in order to enable a fair and proper hearings.

The exact contours of “due process” vary amongst national laws, but certain broad principles, including, the right to be heard and equal treatment of parties are universally accepted. While the principle of the right to be heard entails that each party should have an opportunity to present its case and defend against opposition’s case, the concept of equal opportunity entails that a party should not be less favourably treated than its counterparty.

 

Understanding the prevalent due-process concerns

One prevalent due process concern is that witnesses may be coached using concealed means of communications during virtual witness testimony. Moreover, the credibility of virtual testimony, particularly in cross-examinations, has been questioned as the practice involves analysing body language and non-verbal cues of the witness, such as eye gestures, gesticulation, and expressions, which becomes difficult during virtual hearings.

However, modern technology combined with logistical best practices has alleviated these concerns. Using HD video quality ensures that facial expressions and body gestures are clearly visible. As opposed to an in-person hearing, video-conferencing provides a closer-up view of the witness and allows for video replays (if recording permitted) for analysing body language. Through the installation of rotating or 360-degree view cameras, parties/tribunals may monitor the witness and ensure that he or she is not accessing other devices or persons for being coached. Separately, software applications/extensions may be used for blocking other web-pages for communication while the hearing is in progress.

These tech-solutions coupled with logistical best practices provided by the Seoul Protocol on Video Conferencing in International Arbitration, (“Protocol”) address a majority of these concerns. The Protocol’s requirements include: a reasonable part of the interior of the (witness’s) room to be visible and giving testimony on an empty desk, which would further eliminate risks of witness coaching. The safeguard to opt-out of the videoconference, if the tribunal deems it unfair to either party, ensures a safe back-up.

However, certain shortcomings of the virtual testimonies still need to be addressed. Virtual hearings may be more time-consuming in cases requiring bulky documents to conduct cross-examination. Moreover, there are issues of unreliability of technology. For instance, the right to be heard may be impacted when the connection is lost during a cross-examination leading to the loss of momentum and enabling the witness to re-evaluate their answers in the extra time. Virtual cross-examination may also not be helpful if there are audio/video distortions/ freezing of images/ time-lags. Further, concerns regarding equal treatment may arise where one party presents evidence and cross-examines in person, while the counterparty is expected to take evidence by virtual hearing.1)See, for instance, Sino Dragon Trading Ltd (“Sino Dragon”) v. Noble Resources International Pte Ltd (“Noble Resources”) [2016] FCA 1131. Sino Dragon argued that the technical glitches arising in witness testimony given via video-conference violated principles of equal treatment of parties, opportunity to be heard and public policy. The Federal Court of Australia held that there was no lack of equality because, (i) the mode of taking evidence was chosen by Sino Dragon; (ii) the technical difficulties were due to act/omission of Sino Dragon; (iii) the evidence of Sino Dragon was not excluded because of technical difficulties; (iv) the technical difficulties more acutely disadvantaged Noble Resources as they arose while cross-examination of Sino Dragon’s witness. Overall, no “real unfairness” was caused to Sino Dragon, and hence the challenge was unsuccessful. jQuery("#footnote_plugin_tooltip_7652_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7652_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

A close-up view of the parties may also lead to over-interpretation of the visible gestures or actions. For instance, a miniscule-time lag in answering a question or visibility of sweat on the face may be over-interpreted.2)Stuke v. ROST Capital Group Pty Ltd [2012] FCA 1097, where, in context of giving evidence by video-link, the Federal Court of Australia discusses as follows: “And what if there is a delay in giving a response to a critical question? It may be impossible to tell whether the delay is due to evasiveness or uncertainty on the part of the witness or merely to difficulties with the transmission.” jQuery("#footnote_plugin_tooltip_7652_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7652_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

In my opinion, amidst these challenges, safeguarding the right of due process should be a dual responsibility of both the participants of the arbitral process (parties, arbitrators, institutions) and the courts enforcing the award. To minimize issues of unreliability/misuse of technology, parties (to the extent it can be afforded) should implement the logistical/technological best-practices, including installation of rotating cameras, communication blocking software, etc. Counsel should make a judgement call on whether to remotely take a clinching testimony, i.e., one which would affect the award. Tribunals may order to opt-out of videoconference where connectivity issues persist.

If, however, participants fail to remedy due process breaches internally, courts must ensure that grounds to challenge or resist enforcement dynamically interpreted in order to address due process violations owing to unreliability/misuse of technology.

 

Witness Examination by Video in India

While the legislation is silent on video-conferencing, the recording of witness testimony through video-conferencing has been permitted by the Indian Supreme Court, where the presence of witness is required, but the witness cannot appear without an unreasonable amount of delay, expense or inconvenience. (State of Maharashtra v. Dr. Praful Desai, (2003) 4 SCC 601.)

Accordingly, in cases where witnesses have had poor health conditions, financial burden, were aged or resided abroad, testimonies have been taken through videoconferences. (See The State of Maharashtra v. Chandrabhan Sudam Sanap, 2018 SCC OnLine Bom 6576; Zaishu Xie & Another v. The Oriental Insurance Company Ltd. & Others, 2014 (207) DLT 289; Amitabh Bagchi v. Ena Bagchi, 2004 SCC OnLine Cal 93.)  At the same time, the courts have given directions for conducting a videoconferencing examination including, (i) proper identification of witnesses; (ii) the appointment of a technical coordinator; (iii) ensuring access of documents to witnesses; and (iv) presence of an officer to ensure witness is not coached. The Court has further caveated that the cross-examinations should be finished in one-go, without granting adjournments. Although, High Courts have also noted the unsuitability of virtual cross-examination where there are voluminous documents. (R Shridharan v. R Sukanya, 2011 (2) MWN (Civil) 324.)

Likewise, the courts have been largely positive towards video testimonies in arbitrations. The Calcutta High Court directed a witness present in Russia to present himself for a cross-examination through videoconference. (Saraf Agencies Private Limited v. Federal Agencies for State Property Management, 2018 SCC OnLine Cal 5958.) The Madras High Court went one-step further and encouraged parties from different parts of the country to conduct entire arbitration via videoconference. (Axis Bank v. M/s Nicco UCO Alliance Credit Limited, 2017 SCC OnLine Mad 33928.) More recently, the Delhi High Court, in the case of Rategain Travel Technologies Private Limited v. Ujjwal Suri, recognizing the possibility of conducting virtual arbitral proceedings, stated, “the arbitral tribunal may consider conducting the hearings and recording of evidence by video-conferencing, if considered feasible”. (Rategain Travel Technologies Private Limited v. Ujjwal Suri, High Court Of Delhi, O.M.P (MISC) 14/2020, May 11, 2020.)

In light of these judicial precedents, it may be reasonable to conclude that the Indian courts may continue taking a positive view towards video testimonies in arbitration. Taking inspiration from above-cited decisions, in order to further eliminate risks of witness coaching, either the representative of an institution or the counterparty may be present in the same room as witness. Moreover, parties should be encouraged to keep the virtual cross-examinations brief and conduct them in one session.

 

Enforcement of awards in India

For due process purposes, a party may challenge or resist the enforcement of an award on grounds of, inability to present one’s case or the tribunal’s lack of compliance with the procedure contemplated in the agreement.

A common instance where an award may be successfully challenged or resisted on the ground of inability to present one’s case, is where no opportunity was given to a party to deal with an argument which goes to the root of the case. (Vijay Karia and Others v. Parysmian Cavi E Sistemi SRL and Others (“Vijay Karia”), 2020, SCC OnLine SC 177;  Ssangyong Engineering and Construction Company Limited v. NHAI (“Ssangyong”), 2019 SCC OnLine SC 677.) In Vijay Karia case, the Supreme Court propounded that the test to determine if a party has been unable to present its case is – “whether factors outside the party’s control have combined to deny the party a fair hearing.

Further, the ground of violation of “public policy” may also be invoked by courts sua sponte to set aside or resist enforcement. However, the Indian Judiciary has been taking a pro-enforcement approach by narrowly interpreting the ground of public policy.

Given the pro-enforcement approach of the Indian judiciary, the courts are unlikely to set-aside/resist enforcement of domestic/foreign awards, unless there has been an “apparent” due process violation during virtual testimony. Accordingly, enforcement challenge to an award based on virtual witness testimonies would be successful when fairness has been visibly impacted, and not when grounds made out are hyper-technical. In my opinion, such a standard, although high, aims to strike a balance between fairness and ensuring that parties do not indulge in speculative litigation. The standard would also assist in reducing due process paranoia, i.e., “a perceived reluctance by arbitral tribunals to act decisively in certain situations for fear of the arbitral award being challenged on the basis of a party not having had the chance to present its case fully”.

 

Conclusion

The due process concerns in virtual testimonies are yet to be fully resolved. In my opinion, until such resolution, the decision to take virtual testimonies should be taken carefully – technological capabilities of participants, importance of witness, are relevant considerations in such decision-making. Furthermore, in my opinion, where virtual testimonies are taken, implementation of technological/logistical solutions coupled with vigilance of courts is necessary to avoid due process concerns.

 

Disclaimer: The material/opinion expressed is exclusively my own and does represent the views of my employer or any other firm.

References   [ + ]

1. ↑ See, for instance, Sino Dragon Trading Ltd (“Sino Dragon”) v. Noble Resources International Pte Ltd (“Noble Resources”) [2016] FCA 1131. Sino Dragon argued that the technical glitches arising in witness testimony given via video-conference violated principles of equal treatment of parties, opportunity to be heard and public policy. The Federal Court of Australia held that there was no lack of equality because, (i) the mode of taking evidence was chosen by Sino Dragon; (ii) the technical difficulties were due to act/omission of Sino Dragon; (iii) the evidence of Sino Dragon was not excluded because of technical difficulties; (iv) the technical difficulties more acutely disadvantaged Noble Resources as they arose while cross-examination of Sino Dragon’s witness. Overall, no “real unfairness” was caused to Sino Dragon, and hence the challenge was unsuccessful. 2. ↑ Stuke v. ROST Capital Group Pty Ltd [2012] FCA 1097, where, in context of giving evidence by video-link, the Federal Court of Australia discusses as follows: “And what if there is a delay in giving a response to a critical question? It may be impossible to tell whether the delay is due to evasiveness or uncertainty on the part of the witness or merely to difficulties with the transmission.” function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the COVID-19 Revolution
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The Over-Emphasis on Integrative Negotiation Pedagogy

ADR Prof Blog - Mon, 2020-11-16 15:55
The indefatigable Debra Berman (South Texas) raised an interesting issue on the listserv, which has been posted here, asking if we are doing our students a disservice by over-emphasizing integrative bargaining in our negotiation courses.  Her question is reminiscent of questions raised by James J. While, Gerald Wetlaufer, and Russell Korobkin among other over the … Continue reading The Over-Emphasis on Integrative Negotiation Pedagogy →

The More Things Change, The More They Stay The Same: The Court of Appeal Upholds the Huras Decision for Appeals Under s. 7 of the Arbitration Act, 1991

International Arbitration Blog - Mon, 2020-11-16 11:47

In Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, Soho Grand Condominiums Inc. and Soinco Limited, 2020 ONCA 612 (“TSCC No. 1628”), the Court of Appeal for Ontario confirmed that s. 7(6) of the Arbitration Act, 1991 does not bar an appeal where a judge refuses to grant a stay of a court proceeding under s. 7(5) where there is an arbitration agreement between the parties.

Moneyball for Equity

ADR Prof Blog - Mon, 2020-11-16 10:40
New Zealand, not surprisingly, is moving the needle faster than the U.S. on gender equity by changing the criteria that is actually used to measure pay equity.  The New York Times had a great piece yesterday that explains this further.  It’s all about the standards that we use.  Think Moneyball for equity.    Our traditional argument … Continue reading Moneyball for Equity →

Tools for Difficult Post-Election Conversations

ADR Prof Blog - Mon, 2020-11-16 10:09
Bill Froehlich (deputy director of Ohio State’s Divided Community Project) asked me to share this post… Ohio State’s Divided Community Project was privileged to develop Ohio State’s Education for Citizenship Post-Election Dialogue Series in partnership with Ohio State President Kristina M. Johnson. We just completed the first two events in this series: 1. “Unpacking the … Continue reading Tools for Difficult Post-Election Conversations →

International Law Talk Podcast and Arbitration: In Conversation with Professor Bernard Hanotiau

Kluwer Arbitration Blog - Mon, 2020-11-16 00:00

Welcome to the first post in the series of International Law Talk. During a series of podcasts, Wolters Kluwer will bring you the latest news and industry insights from thought leaders and experts in the field of International Arbitration, IP Law, International Tax Law and Competition Law. Here at Kluwer Arbitration Blog, we will highlight the podcasts focused on international arbitration.

 

In the first podcast of the series, Dr Crina Baltag, Editor of Kluwer Arbitration Blog, interviews Professor Bernard Hanotiau, partner with Hanotiau & van den Berg in Brussels, Professor of Law and Arbitrator. Professor Hanotiau is the author of Complex Arbitrations: Multiparty, Multicontract, Multi-issue (Wolters Kluwer, 2nd edition, 2020) and of numerous articles on international commercial law and arbitration.

With a successful career in law of over 50 years, as arbitrator and lawyer, Professor Hanotiau shares his thoughts on various relevant topics pertaining to international arbitration:

 

http://arbitrationblog.kluwerarbitration.com/wp-content/uploads/sites/48/2020/11/KLI-Trailer1.wav

 

  • judicialization of international arbitration, after the release of IBA’s Rules on the Taking of Evidence in International Commercial Arbitration, with numerous and long submissions to the arbitral tribunal;
  • arbitration as a complex process, with increasing situations of multi-party, multi-contract, and multi-issue, as projects are becoming more and more complex and arbitration a preferred dispute resolution mechanism;
  • theories considered by arbitral tribunals with regard to non-signatories, including agency, estoppel, third-party beneficiary, implied consent etc.;
  • the appropriateness of group of companies doctrine;
  • support found by arbitral tribunals on “practical reasons and considerations of equity”;
  • ISDS reform and legitimacy of investment arbitration;
  • consolidation and coordination of arbitrations under the proposed ICSID Arbitration Rules. On this particular point, Professor Hanotiau emphasizes that ICSID has always encouraged consolidation of arbitrations and the use of different tools such as single award, same composition of arbitral tribunals etc. On the latter example, Professor Hanotiau refers to the Alcoa, Kaiser Bauxite and Reynolds cases against Jamaica. Professor Hanotiau also explains that, in the past years, in particular from his position as member of the Court of Arbitration of the Singapore International Arbitration Centre (SIAC), he has seen an enormous number of request for consolidation in international arbitration.

As a final thought, Professor Hanotiau highlights that international commercial arbitration, while it might not see radical changes in the next 5-10 years, will begin to address issues of diversity of arbitrators more vigorously.

 

Listen to the podcast ‘Complex arbitrations’ with Professor Hanotiau.

 

Follow the coverage of the International Law Talk arbitration podcasts on Kluwer Arbitration Blog here.

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The Contents of the Yearbook Commercial Arbitration, Volume XLV (2020), Upload 5

Kluwer Arbitration Blog - Sat, 2020-11-14 23:33

Subscribers of KluwerArbitration.com enjoy access to the ICCA Yearbook Commercial Arbitration. The most recent upload of ICCA Yearbook materials in 2020 is now available online. It features 17 court decisions applying the 1958 New York Convention from Argentina, Sweden, Switzerland, the United Kingdom, and the United States, as well as six decisions of US courts applying the 1975 Panama (Inter-American) Convention. Four decisions are particularly interesting.

The Supreme Court of Justice of Argentina, in Deutsche Rückversicherung AG, held that the appellate court was correct in modifying an award rendered in the United States against an Argentinean public entity before enforcing it, in order to bring it in line with Argentina’s public policy on debt consolidation – the system established in 1991 under which public debts under court decisions or arbitral awards could be paid in government securities instead of actual money.

The Swiss Federal Supreme Court affirmed enforcement of two awards rendered in the United States in the Abengoa case despite claims that there was appearance of bias on the part of the chairman of the arbitral tribunal, whose law firm had certain links with the group of the claimant. The Court, invoking the IBA Guidelines on Conflicts of Interest as guidance, stressed the restrictive reading to be given to the public policy exception under the New York Convention and found the links not sufficiently significant. The Brazilian Superior Court of Justice, by contrast, had reached the exact opposite result.

In Sladjana Cvoro the United States Court of Appeals for the Eleventh Circuit heard a case of first impression on whether enforcing an award that is based on a choice of law or choice of forum clause depriving a seaman of the right to pursue a Jones Act statutory claim is contrary to US public policy in the sense of Art. V(2)(b) of the New York Convention. The Court answered this question in the negative and distinguished the standard to determine compliance with public policy that applied at the stage of enforcing arbitral awards from the standard to be applied when determining whether to compel arbitration in the first place.

The Eleventh Circuit also decided a case under the Panama Convention concerning the enforcement of an award dealing with an agreement for the distribution of CBD oil, a cannabidiol product. In Earth Science Tech Inc., the Court disagreed with defendant, the producer of CBD oil, that confirmation of the award would be illegal under federal law proscribing all products containing THC. Not only had defendant advertised its products as deriving from the “federally legal industrial hemp plant”, and did not require a prescription or permit to buy; any illegality would also become moot when the 2018 Farm Bill was enacted, which removed hemp-derived CBD with low levels of THC from the group of prohibited substances.

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Six Lessons from the Sixth Sarajevo Arbitration Day

Kluwer Arbitration Blog - Fri, 2020-11-13 23:10

The Sixth Sarajevo Arbitration Day conference took place on 23 October 2020 and it was dedicated to the opportunities to adopt positive arbitration practices amidst the challenges created by the Covid-19 pandemic. This annual conference organized by the Association ARBITRI took place online for the first time and gathered legal practitioners from all over the world to hear from six of the leading international arbitration experts. Under the umbrella of the overarching theme of seeking opportunities for better arbitration, each speaker informed and inspired the participants with their insights and experiences in the field. The main lessons drawn from the conference are outlined below.

 

Less talk, more action – The Three E’s in International Arbitration

The keynote speaker Lucy Greenwood cautioned that international arbitration as an industry has lagged behind in three E’s: efficiency, equality and environmental care for decades. However, the recent developments caused by the Covid-19 pandemic are a good starting point in providing more attention and action to these important matters. This pandemic gave us the opportunity to pause and reflect on our wasteful ways of life and business which directly decrease the efficiency of arbitration. Efficiency could be increased, and costs reduced if we tackled the issues of other two E’s and if International arbitration would no longer waste talents and natural resources, aside from time and costs. Ms Greenwood highlighted that the increased reliance on virtual hearings and speaking engagements can enhance the equality and diversity in international arbitration, by providing exposure for junior lawyers from diverse backgrounds. Additionally, Ms. Greenwood stressed that international arbitration practitioners from ”flight pride” and that instead we should suffer from ”flight shame” because 93% of carbon emission related to international arbitration comes from air travel. We must embrace behavioural changes caused by this pandemic and embrace video conferencing, paperless arbitration and sustainability because the Environmental E is already a dangerous emergency.

 

The window of opportunity is wide open

The second speaker, Professor Mohammed Abdel Wahab, described the Covid-19 pandemic as a door of opportunity for international arbitration, which should be approached with a positive outlook and sincere optimism. Even though 2020 was the most stressful year in lives of many people, Professor Abdel Wahab holds that the silver lining of the pandemic is getting broader rather than thinner for arbitration industry. He noted three effects of the pandemic on international arbitration: the pandemic will be a catalyst for the transformation of arbitral proceedings as we know them, it will lead to the development of new digital legal support tools and services and different generations of arbitration practitioners will find a way to adapt to the new and flexible working arrangements.

Abdel Wahab also pointed out that the new approach to arbitration practice will make tech savvy arbitration practitioners indispensable, and the removal of physical barriers in the virtual setting will allow the breakthrough of persons who previously had limited visibility and mobility– a phenomenon described as the ”New blood transfusion”. Professor Abdel Wahab concluded by touching upon the likely regionalization of international arbitration where the arbitrators and counsels might be selected not because of their skills but because of their national or regional proximity which will simplify the technical organization of arbitral hearings.

 

Virtual arbitration is here to stay

The third speaker, Steven Finizio (WilmerHale London) focused on the idea of the increased efficiency of virtual hearings in international arbitration. The key idea was that international arbitration needs to be flexible and tailored for the needs of the parties in order to remain more attractive than national court litigation. To achieve this, arbitration professionals need to reconsider their habits and make sure that they abandon practices which are reflexive and not thoughtful. This pandemic has certainly forced us to revisit the use of technology and embrace it in international arbitration where cases are going forward – unlike the national courts where the backlog are only getting worse. Mr Finizio pointed out that we need to make sure that arbitration remains a better option than court litigation through technology and flexibility. Finally, Mr. Finizio addressed the criticism of virtual hearings, such as the opinion that use of technology makes arbitration less serious and emphasized that arbitral awards have been rendered in virtual arbitral proceedings and that there is no reason to believe they are any less legitimate than the awards issued under normal circumstances.

 

Hearings etiquette and technical support in virtual hearings

The fourth speaker, Florian Haugeneder (Knoetzl Vienna) shared reflected on the practice of remote hearings in international arbitration, from first-hand experience. He noted that the Covid-19 pandemic transformed the perception of remote hearings among international arbitration practitioners, which were not a common practice just one year ago. Addressing the admissibility of remote hearings, Mr. Haugeneder explained that remote hearings are a procedurally permissible modus operandi which is also used in court proceedings and cannot be seen as a violation of Article 6 of the ECHR, i.e. the right of each individual to have a fair and public hearing before a neutral tribunal established by law. Mr. Haugeneder highlighted some of the practical steps we can take to improve the quality of remote hearings by emphasizing the importance of hearing etiquette: muting the microphone while others speak, preventing audio and video interruptions and refraining from private statements in remote hearings He also suggested that capacity building and technical assistance for arbitration practitioners in remote hearings can improve the quality of the proceedings and the level of trust and reliance in the process. Finally, Mr. Haugeneder concluded that remote hearings are here to stay but that they probably will not entirely replace physical hearings because people will always prefer in-person interactions over online meetings.

 

The doors of the Vis East are open to anyone with a computer, internet and the CISG

When Coronavirus struck Hong Kong in January 2020, Louise Barrington (ArbitralWomen) knew that cancelling a Vis East competition in international arbitration scheduled for March was not an option. Months of legal analysis, drafting and teamwork could not simply be ignored. As discussed in a previous blog post, for the first time ever, the competition was held online and, as Ms Barrington notes, it was a huge success that highlighted the flexibility of international arbitration and its ability to overcome difficulties. 72 out of the original 138 signed up for the online competition and have overcame the reluctance to embrace this technological step. Ms Barrington noted that the introduction of technology in arbitration moot competitions also enabled more arbitrators to participate because they no longer had to travel from across the world. Organizers soon realized that online moot competitions actually opened the doors for more “mooties” and more diversity into the world of Vis East since financial constraints, visa requirements and geography were no longer constraints. The Vis East, as a powerful generator of future international arbitration experts and practitioners, became open to anyone who has a computer, internet and the CISG.

 

Arbitration is no longer a playground for the select few

Catherine Rogers (Arbitrator Intelligence), as the final speaker of the conference described the Covid-19-motivated, transparency-driven innovations in international arbitration as an opportunity for “The Rise of the Rest“. Smaller arbitration institutions, less known arbitrators and smaller disputes are finally getting the opportunity to „go out there“ and venture into the world of international arbitration. The old traits success in international arbitration, such as the number of flights taken to participate in proceedings or number of appointments, are no longer an eligibility factor for those seeking first appointments. Nowadays, the proficiency in technology is its own marker of success in international arbitration, for both counsel and arbitrators. Ms Rogers pointed out that we should welcome the breakdown of these stale myths and markers and accept the fact that international arbitration needs to expand to Africa, Latin America and Asia instead of sticking with North America and Europe – which are all long established arbitration hubs. Finally, Ms Rogers emphasized the importance of the availability and equal access to information about diverse arbitrators to all stakeholders. She highlighted the need for data-driven resources, such as Arbitrator Intelligence reports, which will level the playing field and provide visibility to arbitrators from diverse backgrounds, as discussed on previous blog posts.

Although all the speakers touched upon the „new-normal“ in international arbitration from different perspectives, there is a common thread of opportunity and the recognition that these uncertain and challenging times can result in sustained positive change. The Seventh Sarajevo Arbitration Days will be an opportunity to look back and see if the predictions and insights from this conference still hold true. We hope to see you there.

 

The full recording of the Sixth Sarajevo Arbitration Day conference is available on the Association ARBITRI YouTube Channel

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Does Issuing a Dissenting Opinion to an Arbitral Award Constitute a Violation of the German Ordre Public?

Kluwer Arbitration Blog - Fri, 2020-11-13 00:59

A one paragraph obiter dictum in an annulment decision rendered by the Frankfurt Higher Regional Court (the “Court”) on 16 January 2020 (26 Sch 14/18) reignited an old debate: are dissenting opinions in German arbitration proceedings permissible?

From an international perspective, dissenting opinions in arbitral awards are by no means unusual.  That is why it came as a surprise to many that the Court took a strong stance against written dissenting opinions in arbitral awards in German-seated arbitrations.  According to the Court, issuing a written dissenting opinion undermines the secrecy of the arbitral tribunal’s deliberations.  The principle of secrecy of deliberations is regarded as an important principle of German law because it serves the impartiality and independence of the arbitrators. Thus, the Court indicated that a dissenting opinion may violate the procedural ordre public and expose a majority arbitral award to a risk of annulment.

This obiter dictum is the first time that a German court has taken an express position on the long-debated issue of the admissibility of dissenting opinions in German arbitration proceedings.  Unfortunately, the Court was not definitive in its view and neither annulled or confirmed the award in question based on the issue of the dissenting opinion.   This decision will add to pre-existing uncertainty surrounding this issue.  Unless the Federal Court of Justice (Bundesgerichtshof) clarifies – and ideally rectifies – the position advanced by the Court, the Frankfurt decision has potential to harm Germany’s position as an internationally recognized place of arbitration.

 

The Decision and Facts of the Dispute

The Court ruled on an annulment application against an award issued by a three-member arbitral tribunal under the 1998 ICC Rules of Arbitration.  The place of arbitration was Frankfurt am Main, Germany.  In its final award, the arbitral tribunal had dismissed all claims by way of a majority decision.  The dismissal was based, in part, on the majority’s confirmation of the company’s valuation prepared by a tribunal-appointed valuation expert.  One arbitrator submitted a dissenting opinion in which he objected to the valuation expert’s opinion and to the arbitral tribunal’s evaluation of that opinion.

The Court annulled the award, finding that one party was denied the right to be heard.    Then, in a single paragraph (almost as an afterthought), the Court discussed, but ultimately left open, the question of whether the award also had to be annulled because one arbitrator filed a dissent:

However, in the court’s opinion, there is much to be said for the fact that the publication of a dissenting opinion is inadmissible in domestic arbitration proceedings, even taking into account the considerations of the legislature that has refrained from regulating this matter, and violates the secrecy of deliberation which also applies to domestic arbitral tribunals.  The particular importance of the secrecy of deliberation for the protection of the independence and impartiality of the arbitrators may also suggest that the secrecy of deliberation – even after the final deliberation and the issuing of the award – should not be put at the disposal of the parties and/or the arbitrators and should be regarded as part of the procedural ordre public.” (internal citations omitted; emphasis added)

The annulment decision is subject to an appeal before the Federal Court of Justice.

 

The German Debate

In many jurisdictions, dissenting opinions in judgments are permitted.  By contrast, in Germany, judges are prohibited from rendering dissenting opinions because they are bound to uphold the secrecy of deliberations.  There is an exception in constitutional courts at the federal and state level.

Whether arbitrators in German-seated arbitration proceedings are also prohibited from rendering dissenting opinions is subject to an ongoing controversial debate among scholars and practitioners.  While most agree that an arbitral tribunal’s deliberations are secret, (German Federal Court of Justice, 11 December 2014, I ZB 23/14; German Federal Court of Justice, 23 January 1957, V ZR 132/55, NJW 1957, 592) there are diverging views as to whether, and to what extent, this renders dissenting opinions unlawful.  Even among those who oppose dissenting opinions in arbitration proceedings, there is some disagreement as to the consequences of a member of an arbitral tribunal impermissibly filing a dissent. One school of thought is that this is a procedurally inconsequential violation of contractual duties; but another (older) is that it violates the German procedural ordre public, which may be fatal for the arbitral award as a whole. (For a discussion see, e.g.,H.P. Westermann, “Das dissenting vote im Schiedsverfahren” (2009) SchiedsVZ, 102; M. Escher, “Die Dissenting Opinion im deutschen Handelsschiedsverfahren – Fear of the unknown” (2018) SchiedsVZ, 219)

The Court seems to agree with those who believe that the existence of a dissenting opinion can violate the German ordre public.  The Court’s position thus deviates from the position of the German legislature which considered this debate settled when reforming the German arbitration law in 1997:

The (…) question whether a dissenting opinion can be rendered with the arbitral award did not require any express regulation; under the current regime this is predominantly considered permissible.” (BT-Drs. 13/5274, p. 56)

The traditional view among German scholars and practitioners – in line with the legislature’s position – has been that parties can waive the secrecy of deliberations and thereby allow dissenting opinions.  Some additionally consider the arbitrators’ consent to be necessary for such waiver to be effective. (See R. Schütze, “Das Zustandekommen des Schiedsspruchs” (2008) SchiedsVZ, 10 (14); I. Sänger, Zivilprozessordnung, 8th ed., Münster, Nomos, 2019, § 1052 para. 3; H.P. Westermann, “Das dissenting vote im Schiedsverfahren” (2009) SchiedsVZ, 102 (105)) The Federal Court of Justice, in a 1957 decision, appears to have agreed with the possibility that the parties can waive the secrecy of the deliberations with the consent of the arbitrators, but ultimately left this question open. (German Federal Court of Justice, 23 January 1957, V ZR 132/55, NJW 1957, 592)

In its recent ruling, the Court acknowledged the legislature’s view, but nonetheless disagreed and even considered a dissenting opinion a violation of the procedural ordre public, although it provided no explanation for this determination.  And it did this despite the obvious consequence that every German arbitral award with a dissenting opinion would thus be subject to annulment, irrespective of whether the dissent was relevant to the outcome of the proceeding.

The decision implies that any waiver of secrecy by the parties is insignificant.  The Court, by stating that the secrecy of deliberations is part of German procedural ordre public, deprives the parties and arbitrators of the power to waive the secrecy of deliberations and thus allow for dissenting opinions.  It is inherent in the concept of ordre public that those things which fall within it cannot be waived by the parties since they embody the core values of the rule of law which are enforced ex officio. (S. Wilske, L. Markert, Beck Online Kommentar ZPO, 36. Ed., 1.3.2020, § 1059 para. 56)

 

The practical implications of the Court’s obiter dictum

Arbitrators conducting German-seated arbitrations are now faced with the difficult question of how to navigate the uncertainties created by the Court.

Any party that is dissatisfied with the outcome of a German-seated arbitration will now seriously consider having the award annulled if a dissenting opinion exists.  To a losing party, the Court’s ruling is appealing – it considers the mere existence of the dissenting opinion a violation of the German ordre public, and this is a fact that a party can easily establish.  Whether an annulment action based on a dissenting opinion will succeed will ultimately be decided by the German Federal Court of Justice.  The Frankfurt decision is currently subject to an appeal, so the Federal Court of Justice may clarify the issue soon.

For now, and until the German Federal Court of Justice has definitively ruled on this issue, arbitrators should refrain from issuing dissenting opinions in German arbitrations.  Parties should agree at the outset that the arbitrators are not permitted to issue dissenting opinions, even if an arbitrator disagrees with a majority view.  With respect to arbitrations already in progress, the parties or the chairperson should proactively raise the issue in order to make all participants aware of this German particularity that international arbitrators may not be familiar with.

Not only the parties, but also the arbitrators, have an interest in avoiding dissenting opinions in German-seated arbitration.  Arbitrators have a fiduciary duty to render an enforceable award that withstands scrutiny in set-aside proceedings.  Issuing a dissenting opinion despite being on notice of the Frankfurt decision could subject the dissenting arbitrator to damages claims for the costs of the arbitration if the award is annulled.

Any party to a German-based arbitration must discuss the Frankfurt decision with their (prospective) arbitrator(s) in order to ensure that the eventual award will not be subject to challenge on this ground.  Having heard the presiding judge during the oral hearing leading up to the Frankfurt decision, we have little doubt that the Court will enforce its obiter dictum and annul an arbitral award accompanied by a dissenting opinion, if and when it is called upon to do so.

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The Contents of the Asian International Arbitration Journal, Volume 16, Issue 2 (November 2020)

Kluwer Arbitration Blog - Thu, 2020-11-12 22:09

The contents of this issue of the journal is now available and includes the following contributions:

 

Georgia Dawson & Kate Apostolova, Banks as Claimants in Investment Arbitration

Historically, banks have tended to prefer litigation over arbitration for their disputes. However, in recent years, banks have increasingly been using international arbitration instead, particularly when doing transactions in Asia and in emerging markets. The 2018 Queen Mary International Arbitration Survey also concluded that financial institutions, including banks, and their counsel are ‘contemplating arbitration with much greater interest than ever before’. In addition to using international commercial arbitration more often, banks have increasing sought to benefit from treaty-based international investment arbitration. The protections afforded in investment treaties mitigate some of the key risks banks face when investing abroad, such as having their investment nationalized or being subjected to unfair investigations. This article focuses on banks as claimants in treaty-based investment arbitrations, a subject not addressed in commentaries. It examines the publicly available investment arbitration awards in cases brought by banks against States and sets out to identify some key trends and themes.

 

Eunice Chua, The Singapore Convention on Mediation and the New York Convention on Arbitration: Comparing Enforcement Mechanisms and Drawing Lessons for Asia

This article considers the enforcement mechanism for international mediated settlement agreements proposed by the Singapore Convention on Mediation and critically examines this mode of enforcement as against enforcement as an arbitral award in Asia, including through a hybrid process like Arb-Med-Arb. Similarities and differences between the New York Convention and the Singapore Convention on Mediation will be discussed and used to consider how Asian jurisdictions may respond to the Singapore Convention on Mediation and what lessons may be learnt from the arbitration context.

 

Faadhil Adams, The Semi-Autonomy of the Arbitral Legal Order

The term arbitral legal order refers to the tapestry of conventions, model laws and guidelines that applies in the field of international arbitration and renders it a selfstanding community among the international legal order of States. This article discusses the allegiance owed by the arbitral community to States generally and the State in which it is seated more specifically. It takes as its point of departure that the growth in international arbitration merits a reconsideration of the international standing of the arbitral legal order. The article considers earlier viewpoints that argued for the total detachment of arbitration from State legal systems in terms of what is referred to as delocalization. It delves into the impact that such views have on the choice of law process and considers the possibility of this detachment against pluralistic and State sovereign perspectives. It comes to the conclusion that modern day arbitration is neither dependent on States nor independent from them but exists among them as a semi-autonomous community. The semi-autonomy derives from the idea that the international arbitral community is by and large afforded the freedom to regulate itself. It has the ability to create norms and to create international jurisprudence that is largely followed, regardless of the State in which the tribunal is seated. In this way the field is autonomous. This freedom is, however, restricted by the interests of States where certain countries can and sometimes do impose their will on the community in the form of legislation that restricts the freedom of the arbitral process. On the other hand the arbitral order is still in need of States, as it is only State machinery that can compel parties to comply with the arbitral process where a party chooses to attempt to escape the obligation imposed by the arbitral clause or choose to delay or subvert the arbitral process. The arbitral community is also dependent on State machinery for enforcement of its awards. In these cases, State assistance is not only welcomed but imperative. States have, however, gradually reduced impediments to arbitration through a pro-arbitral sentiment that is globally expressed. The article thus concludes that a symbiosis exists between the international arbitral community and States more generally.

 

Anirudh Hariani, Indian Arbitration and the Shifting Sands of Public Policy

The ‘public policy’ test is a statutory exception to the enforcement of arbitration awards. The doctrine has its roots in common law. At times, the test has been construed narrowly, and at other times, expansively. What actually constitutes and what is contrary to public policy, however, is never clear. This article seeks to trace the tumultuous development of the public policy doctrine in India, from its beginnings as a common law concept, to arrive at the current understanding of the doctrine and its parameters, in the context of Indian arbitration law. In the process, this article discusses the approach of Indian courts in limiting interference with foreign arbitration awards on the public policy ground. The author argues that it is necessary to further check the public policy exception in India, particularly in the context of enforcement of foreign awards and awards from international commercial arbitration, in view of the Indian government’s aim of making India a ‘hub of arbitration’.

 

Ritunjay Gupta, Res Judicata in International Arbitration: Choice of Law, Competence & Jurisdictional Court Decisions

Given the twin goals of finality and efficiency, the doctrine of res judicata has come to be applied, although less frequently, in the international arbitration context as well. However, being largely perceived as a proverbial ‘twilight issue’ in international arbitration, its application is fraught with uncertainties and inconsistencies. Amongst the more compelling concerns regarding the subject matter, this Article tackles the ambiguities around the choice of law analysis for preclusion standards; the doubts regarding the arbitral tribunal’s kompetenz-kompetenz to address the issue; and the peculiar nature of jurisdictional court decisions and its res judicata effect in subsequent arbitral proceedings.

Rarely, if ever, does the lex arbitri shed light on the precise standards of preclusion to be applied in a particular case. Instead, the choice of law analysis by arbitral tribunals are guided by a fluid balancing act between varying degrees of private rights and public interests. While the The International Law Association (ILA) Recommendations (Resolution No. 1/2006) do come close to a purported international standard, its limited acceptability within the community and lean adoptability across jurisdictions, brings to the fore the uncertainties attached to the doctrine itself.

Confusion further ensues when the authority of the tribunal to decide on its own jurisdiction is brought into question on confronting the defense of res judicata. While the New York Convention’s mandate of recognition of awards empowers the Courts to afford res judicata effect to a prior adjudication, the same conflicts with the arbitral tribunal’s own competence to address arguably procedural arbitrability issues such as this. These concerns amplify manifold when an arbitral tribunal encounters a prior Court’s decision regarding the tribunal’s jurisdiction, including the question of non-arbitrability of the disputed claim.

In the absence of exacting standards and principles to deal with any of these issues, different tribunals have been discharging their own brand of the doctrine’s broad interpretation. This Article expounds the existing literature on the subject, and thereafter, attempts to analyse each of these complex and controversial issues to better equip practitioners and arbitrators when faced with such concerns; at least until universal conformity is achieved through promulgations bordering a truly international standard.

 

Book Review: Edward Poulton (ed), Arbitration of M&A Transactions: A Practical Global Guide (Second Edition) (Globe Law and Business, 2020) by Angela Yap

Ashwin Shanbhag & Amoga Krishnan, NAFED v. Alimenta: Has India Missed the Wood for the Trees?

Crests and troughs mark the development of the jurisprudence of Indian arbitration law. The enforcement of arbitral awards has regularly been hobbled by an anachronistic judicial approach that allowed for the merits to be examined despite it not being within the court’s remit – the proverbial Achilles heel to an otherwise robust legal framework that mirrors the UNCITRAL Model Law, 1985. Judgments that applied the brakes on the advancement of India as an arbitral hub took shelter behind the esoteric ‘public policy’ principle. A recent decision by the Supreme Court of India in National Agricultural Cooperative Marketing Federation of India (NAFED) v. Alimenta serves as a worthy example. This case note considers the implications of the Court’s approach in setting aside an arbitral award that was held to violate the public policy of India. It argues that though the Court may have erred in examining the terms of the parties’ contract, its ultimate decision to set the award aside is capable of justification.

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Is Our Over-Emphasis on Integrative Negotiation Pedagogy Falling Short of Reality?

ADR Prof Blog - Thu, 2020-11-12 17:33
From EFOI Debra Berman: In our zeal to teach integrative bargaining, many of us tend to use negotiation role-plays that have multiple items to creatively bargain about. But is that actually doing a disservice to our students?  While I certainly believe it is beneficial to teach our students to think outside of the box and encourage … Continue reading Is Our Over-Emphasis on Integrative Negotiation Pedagogy Falling Short of Reality? →
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