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Can a robojudge be fair?

Kluwer Arbitration Blog - Mon, 2019-12-16 03:00

Zbyněk Loebl

Introduction

At the latest ODR Forum which was held on 29-31 October 2019 in Williamsburg, Virginia, Dr Anyu Lee presented on China’s vision of online dispute resolution (“ODR”). He discussed how far China has progressed in developing artificial intelligence (“AI”) tools for online courts, arbitration and mediation. He also described the potential of AI in resolving disputes and in particular mentioned that, cross-border small value dissatisfactions which are difficult to resolve at present could be resolved smoothly and efficiently in the near future through AI.

Dr Lee concluded his presentation by arguing that the only way forward is to have these small value cross-border cases decided by robojudges/roboarbitrators/robomediators, and have their resolutions enforced by a social credit system. According to Dr Lee, in the near future, the first advanced robots will be able to speak multiple languages, know laws of different jurisdictions and analyze a large volume of court decisions, which will enable them to render correct and consistent decisions. Further, it was raised that judges, arbitrators and mediators should start training their own robots in order to compete with other robots in the near future.

 

A robojudge cannot be fair

While I agree with most of what Dr Lee presented, I disagree with his conclusions. Why? It is because our concept of fair justice is inseparable from human ethics.

At present and in the foreseeable future, machines will not be able to act ethically. Ethical questions are key for the success of any arbitration institution designing and implementing online processes. No matter how (cost) efficient online arbitration can be, designers of such online processes need to focus on general principles of fair trial and also on ethical principles of ODR (such as accessibility, informed participation etc.), and increasingly on evolving ethics of the AI (e.g. transparency, non-discrimination, under user control etc.), as well as IT development (e.g. accountability and data agency).

Further, the quality of AI is determined by the quality of the algorithms behind, and by the quality and amount of data available for mathematical analysis. Algorithms must be “trained” by data, and in this process, algorithms and models adapt substantially. It is the amount and the quality of data that determine the performance quality of AI modules. Individual arbitrators or arbitration courts are unlikely to have at their disposal enough data to train their robots adequately.

 

Centralized approach to online justice

In China as well as other countries, most of the small value dispute resolution data are currently controlled by the largest corporations (e.g. Alibaba, Amazon, eBay and similar) and governments. If we follow today’s trends in China, the current and future robojudges are not and will most probably not be in the hands of judges, but will be controlled by the largest corporations and states. In China, robojudges have already started to be implemented to supervise human judges. It is, however, not the future.

I call this approach the centralized approach to online justice. Yes, robojudges are efficient and can make decisions in a consistent manner. Yet, the independence of human judges, arbitrators and mediators has always been key to our human justice systems. Will a human arbitrator remain independent if he or she is directly supervised by a roboarbitrator in a similar way as with judges being supervised by robojudges in China? I doubt so.

This is why I read with great interest a previous post related to online arbitration in China by author Chen Zhi, which discussed the plans of Guangzhou Arbitration Commission (“GZAC“) to implement AI in its already developed online procedures corresponding with the current best ODR practices.

I understand from the blog post that GZAC has yet to implement roboarbitrators. Perhaps an alternative way of development for arbitration institutions is as follows: AI can be remarkably helpful in assisting with settlement and this may be the future for resolution of small value cases – resolution through AI-assisted negotiation rather than by an arbitral award rendered by a roboarbitrator.

Further, arbitration institutions will probably be viewed positively, if users are offered an option in the future to exchange anonymized judicial data with online arbitration courts all over the world, in order to maintain the quality of their future AI-enhanced services to the parties on top level. Such option is, in my view, connected with the decentralized approach to online justice.

 

Decentralized approach to online justice

The decentralized approach to online justice is based on wide global sharing of anonymized judicial data between all stakeholders. In the decentralized approach, judicial data will be controlled initially by their originators, i.e. the parties – people and the judiciary, under state regulatory supervision. The data will be shared widely with developers of AI modules and other stakeholders who will compete among themselves in their services for the parties and courts, arbitration institutions and mediation centers.

The decentralized approach to online justice however does not exist today. For it to happen, we need to develop globally acceptable open ODR schemes, specifications and standards. Such open standards will serve not only to share anonymized data, but also to enable global access by people to different types of dispute resolution methods and to share widely ODR know-hows. Such public and private ODR platforms will be able to cooperate on commercially agreed terms and complement their services to people.

 

Existing use of AI in dispute resolution

Outside of Mainland China, AI has already been efficiently implemented in the first online courts and arbitration forums. For example, the State Courts in Singapore have developed data repositories for both civil and criminal cases, a step which is prerequisite for successful AI application. Further, in the Netherlands, AI research has, inter alia, been focusing on automated processing of judicial texts. In addition, at the end of this year, a newly developed Electronic Business Related Arbitration and Mediation (eBRAM) Centre in Hong Kong was put into operation, reportedly using AI for automatic translations and text processing etc.

In general, it is observed that AI has been used as a smart research assistant in organizing support material regarding past cases or relevant literature. Further, AI can organize case files smoothly or even write first drafts of decisions or awards based on judge’s or arbitrators’ notes. Moreover, AI can assist parties in navigating the online justice system of a particular country and can readily respond to majority of user requests, and accordingly recommend course of action to be taken, or the type documents relevant to the parties’ dispute.

 

Future of AI in dispute resolution

I predict that in most countries, the centralized and decentralized approaches will co-exist.

Even at present, certain aspects of the centralized and decentralized features interact. For example  according to Professor Ethan Katsh’s opening address at the ODR Forum 2019, eBay has been deciding over 60 million disputes per year and mostly without human intervention. Further, it would appear that eBay-like centralized approach may be complemented in the US in the near future by decentralized open ODR environments.

In our own interest, we must always be watchful and thoughtful in dealing with AI, and particularly in the justice sector. I predict that there will be new governance necessary and indeed emerging very soon, particularly in countries where the decentralized approach is implemented. Such development will likely take the form of self-certification, compliance controls by operators of the first private open ODR environments, voluntary and/or mandatory certification by third parties for compliance with open ODR standards, and also new regulations addressing AI ethical issues when we get to recognize them. On the other hand, in countries implementing the centralized approach, the need for new governance will be less pressing.

Apart from AI-related aspects of online arbitration, there are other important issues to resolve when designing an online arbitration platform, including the “evergreens” like form requirements or enforceability of e-arbitration awards as mentioned in a previous post.

Other interesting features of online arbitration in the future include blockchains and smart contracts (see previous post on such features).

 

Conclusion

A robojudge cannot be fair because a robojudge is not a human being, and people are not machines. At present and in the foreseeable future, a robojudge will be an advanced statistical machine operating based on past data. AI will make a significant positive impact on achieving justice, but it may also have a dark side.

If we allow robojudges to preside over human decision-making, I am afraid that step-by-step, people may risk acting like machines which is a big risk that we need to prevent. One may ask: how so? And why is such develpment negative? Some may hope that robojudges will be less biased than human judges, others including myself would feel vulnerable with centrally-controlled robojudges in place.

I see a positive future for online arbitration. Technology as a tool to assist human decision-making may enable individuals to have an increased say in how their disputes are resolved and possibly minimize issues with bias. In such case, users will have more options to settle their disputes and to exercise better control over one’s data rather than relying solely on robojudges.

 

For further information, see Designing Online Courts: The Future of Justice Is Open to All

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2019 in Review: Sub-Saharan Africa

Kluwer Arbitration Blog - Sun, 2019-12-15 03:00

Ana Carolina Dall'Agnol (Assistant Editor for Africa)

2019 has been a busy year for international arbitration in Sub-Saharan Africa. Indeed, the year has brought an interesting wave of precedents, new domestic statutes, modern international investment agreements, and arbitration events.

This post highlights and summarises some of the African developments covered in the Blog in 2019, with many thanks to the authors who have contributed to our coverage.

 

Conclusion of Multilateral Agreements

Perhaps the most significant African multilateral initiative of 2019 was the signing of the Agreement Establishing the African Continental Free Trade Area (“AfCFTA Agreement”) on 30 May 2019 and the launch of its operational phase on 7 July 2019. The conclusion of the AfCFTA Agreement is one of the six steps in the process of creating an African Economic Community (“AEC”), which is set out in the Treaty Establishing the African Economic Community (“Abuja Treaty”).

The Abuja Treaty, which was concluded in 1991, sets forth milestones for the thirty-four transitional period for the establishment of the AEC, including the establishment of:

  • a Continental Customs Union, initially planned to be concluded by 2019;
  • an African Common Market by 2023; and
  • the Africa Economic Community by 2028.

As a means for settling disputes between its parties, the AfCFTA provides for state-state arbitration, which is set out in AfCFTA’s Protocol on Rules and Procedures on the Settlement of Disputes. However, it is still unclear what will be the substantive protections and procedural remedies available to investors, as one author commented. These aspects will likely be governed by the Investment Protocol, whose terms remain to be determined. In the meantime, there are aspects that investors might be interested in considering in the near future.

In addition, Djibouti signed the ICSID Convention in April 2019, although it has not yet ratified the Convention. Djibouti, therefore, became the 163rd signatory state of the ICSID Convention.

 

Arbitration Disputes Involving African Parties

In regard to arbitration disputes involving African parties, the year started in the wake of a development that has shaken up the African arbitration community in 2019 – that of the $8.9 billion arbitral award against Nigeria in favour of Process and Industrial Development (“P&ID”). The case involves a gas supply and production agreement and has resulted in a $6.6 billion arbitral award, with $2.6 billion of interest at seven percent per annum effective from the outset of the arbitration proceedings. The development received great public attention, as some have noted that  $9 billion represents one-fifth of the country’s declared foreign reserves.

In another dispute involving Nigeria, the English High Court adjourned the decision to enforce the arbitral award in a dispute between AIC Limited (“AIC”) and The Federal Airports Authority of Nigeria (“FAAN”). In AIC Limited v The Federal Airports Authority of Nigeria [2019] EWHC 2212, the English High Court exercised its discretion pursuant to section 103(5) of the Arbitration Act 1996 and decided to adjourn the decision to enforce the arbitral award as a claim for annulment of the arbitral awards was still pending before Nigerian courts. The arbitral award in question was rendered in 2010 and favoured AIC, awarding it the sum of $48,124,000 plus interest at 18% per annum from the date of the award until payment. The English High Court took a similar position in other two past cases (see here and here). A contributor understands that this decision highlights the balance to be struck between enforcing a New York Convention arbitral award on one hand, and avoiding conflicting judgments when set aside proceedings are pending before other jurisdictions on the other.

Moreover, recent disputes involving Tanzania and Zambia have also been covered on the Blog.

On 16 April 2019, Ayoub-Farid Michel Saab, a Dutch national, has filed an ICSID claim against Tanzania under the Agreement on Encouragement and Reciprocal Protection of Investments with the Netherlands (“Tanzania-The Netherlands BIT”), which was terminated in September 2018. The claim is probably related to FBME Bank, whose operations in Tanzania were shut down and liquidated by Tanzania’s central bank.

The dispute between Vedanta Resources (“Vedanta”) and the Zambian State Mining Company ZCCM-IH (“ZCCM”) has come to public notice and has received much publicity (see here, here, and here). The dispute relates to an ex parte order sought by the Zambian government to initiate liquidation proceedings in respect of Konkola Copper Mines (“KCM”) before the Zambian courts. Vedanta is a majority shareholder of KCM, whereas ZCCM holds a 20% shareholding in KCM.

While opposing to the filing of liquidation proceedings by ZCCM, Vendanta alleged that initiating liquidation proceedings before Zambian courts would be procedurally incorrect, as the KCM shareholders’ agreement contained an arbitration clause. Accordingly, Vedanta initiated UNCITRAL arbitration proceedings seated in South Africa against ZCCM, while also filing for, and later successfully obtaining, an ex parte order of the South African High Court in Johannesburg against ZCCM. In July 2019, the South African High Court granted an anti-suit injunction in support of the arbitration agreement contained in the KCM shareholders’ agreement, as well as ordering the blocking of KCM’s wind up.

As the arbitration proceedings have proceeded, the outcome of the dispute remains to be seen. Likewise, Zambia’s approach to welcoming and protecting foreign investments is still an open issue.

 

Enactment of Domestic Laws Relating to Arbitration

Our authors have brought to our attention interesting developments that took place in Nigeria in 2019. These developments could be construed as indications that Nigeria may establish itself as the favorite arbitral seat in West Africa.

While Nigeria’s Arbitration and Conciliation Act (Repeal and Re-Enactment) Bill 2017 (“Bill”) was still pending before the House of Representatives earlier this year, it was received with optimism by the international community – indeed, the Bill could provide grounds for securing Nigeria as a preferred seat for arbitrations in Africa. In particular, the fact that the Bill tacitly recognises third party funding (“TPF”) in arbitration could be a commendable move, as it may be interpreted as enabling parties who would otherwise not have had the resources to participate in arbitration proceedings to access justice. On the other hand, contributors have discussed whether the Bill clearly authorizes TPF. While some commentators understand that it is sufficiently clear that TPF is allowed under the Bill, others believe that the matter demands further clarity. One author suggests that Nigeria should consider including substantive provisions expressly allowing TPF in its new Bill, following the examples of Singapore and Hong Kong. On the other hand, another author understands that although the Bill authorises TPF, Nigeria would benefit from establishing a comprehensive regulatory framework for this type of funding, he suggests.

In addition, the decision in Case No. SC/851/2014 between Dr. Charles Mekwunye v. Christian Imoukhuede before the Nigerian Supreme Court was also brought to our attention. In this case, the Nigerian Supreme Court upheld an arbitral award, confirming that any irregularity that one of the parties became aware of and failed to object to would not be grounds for setting aside the arbitral award. In this sense, the Nigerian Supreme Court relied on the concept of waiver, and affirmed that the will of the parties must be given effect to. In so doing, one author understands that the Nigerian Supreme Court set aside its much criticized past judgment in Imoukhuede v Mekwunye & 2 ORS. (2015) 1CLRN 30.

In a less commendable note for liberal arbitration enthusiasts, one author raised the concern that the Nigerian Arbitration Rules could be interpreted as preventing parties from relying on legal counsels who are not qualified to practice law in Nigeria. From the author’s perspective, such restriction on the parties’ selection of their preferred representatives could inhibit the selection of Nigeria as an attractive seat of arbitration – and therefore encourage Africa-related disputes to keep seeping through to Europe for resolution.

***

All in all, these discussions will probably continue in 2020. The coming year is likely to prompt African states to further implement the next stages of the AfCFTA, and certainly, new interesting developments are on the way.

We encourage our readers to contribute to the discussions by submitting posts to [email protected].

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The Contents of b-Arbitra, Issue 2019-2

Kluwer Arbitration Blog - Sun, 2019-12-15 00:00

Annet van Hooft and Jean-François Tossens

To mark the 50th anniversary of the CEPANI, we are pleased to present you with this special issue of b-Arbitra, devoted to Supreme Courts and Arbitration.

We are grateful to the eminent specialists who have agreed to deliver, for their respective jurisdictions, comprehensive reports of the Supreme Courts’ rulings in arbitration matters. Their overviews cover 15 selected jurisdictions from four continents: for Europe, the review covers the Court of Human Rights (by Jean-Paul Costa), the European Court of Justice of the European Union (by Jacob Grierson) and 7 national jurisdictions, i.e. Austria (by Christian Aschauer and Matthias Neumayr), Belgium (by Herman Verbist and Luc Demeyere), France (by Dominique Hascher), Germany (by Jan K Schaefer), Sweden (by Joel Dahlquist Cullborg), Switzerland (by Laurent Hirsch) and the United Kingdom (by Jan Kleinheisterkamp & Shaurya Upadhyay); from the Americas, we have contributions for the United States (by Erica Stein and David L Attanasio) and for Brazil (by Marcelo Roberto Ferro); for Africa, we have a contribution from Veronique Goncalves on OHADA Arbitration; Asia is represented by contributions on mainland China (by Kun Fan) and Hong Kong (by Chiann Bao) and on Singapore (by Michael Hwang and Yin Wai Chan).

This overview offers, through the highest courts’ eyes, a unique and up to date comparative account of many essential concepts of the law and practice of international arbitration. As several authors have pointed out, if Supreme Courts’ decisions in arbitration matters are generally scarce (in Belgium 62 decisions have been identified over more than a century), they also deal with issues of critical importance. Even the most experienced international arbitration practitioner will acquire, through this rich study, a new insight into presumably well-known issues and will discover less classic debates. You may, for instance, have never come across the question of whether arbitrators should be treated as employees. You will be pleased to know the answer that was given to such a question by the UK Supreme Court in its Jivraj v Hashwani decision. You will also acquire a better grasp of the relativity and of the subtleties of more traditional concepts. The US Supreme Court approach to the recognition of the validity, and to the enforcement, of the arbitration agreement is an interesting example. The views as to who should decide whether an arbitral tribunal has jurisdiction to hear the case are not always as straightforward as we might imagine from our continental European perspective.

This review is also a powerful reminder of the fact that international arbitration would not have flourished to the extent that we have been enjoying in recent decades without the support of these Supreme Courts Such support is equally as important as the support to be expected from national legislation. We are for instance helpfully reminded by Dr Hascher that until the Gosset decision of 1963, arbitration had been virtually extinct in France for the past 120 years due to the very strict conditions imposed on it by the Prunier decision of 1843. In 50 years the jurisprudence of the French Supreme Court has evolved from one where arbitration was almost non-existent to one that recognises an international arbitral order as producing decisions of international justice, not belonging to any particular jurisdiction and potentially enforceable even when annulled by a court at the place of arbitration, such as the French Supreme Court decided in the Putrabali case in 2007.

Needless to say, the success of arbitration has been and remains heavily dependent on the court system’s support. And such support does not consist and shall never consist in the mere application of the law, even when such law is a modern arbitration law inspired by the UNCITRAL Model Law. As Erica Stein and David L Attanasio rightly put it, “the problem in its (the Court) decision-making is that not every future problem looks just like the past. But the solution to these problems will depend crucially on the relative emphasis placed on the different policies,…” This is the word: policy. We must be aware that in arbitration matters as in most matters, legal solutions are the product of a policy, as much as of a statutory rule.

The following reports confirm that arbitration has been the beneficiary over recent decades, throughout the world, of a widely pro-arbitration policy of the Supreme Courts Such policy still prevails today. Yet, as we are aware, the arbitration-friendly environment that has become familiar to us is facing today new challenges. Flashing alerts have not been ignored by our contributors. It is sometimes fashionable nowadays to convey a negative image of arbitration, perceived as a justice for the privileged. An extensive application of statutory provisions restricting the right to resort to arbitration (such as Article 2061 of the French civil code), even in commercial matters, occasionally receives political support. In France, the administrative jurisdiction has made an adverse intrusion into arbitration law, on behalf of the interest of the State, of which the French Supreme Court would allegedly be insufficiently protective. There are persistent suspicions that arbitration may not always incorporate all the guarantees of an equitable and fair trial. These suspicions have in particular been echoed in sport arbitration cases. In the Mutu and Pechstein v Switzerland decision of October 2018, the European Court of Human Rights has sanctioned a TAS (Tribunal Arbitral du Sport de Lausanne) decision for a violation of Article 6, § 1 of the European Convention. If, as J P Costa puts it, the European Court has granted the TAS a “certificate of compatibility” with the Convention, the Court has also affirmed its right to cast a critical look on the functioning of the arbitral tribunal, and its composition. Depending on the underlying policy, such reinforced control can either be a reasonable safeguard of essential principles or turn into an intrusion into the functioning of arbitral tribunals that would constitute a handicap to the attractiveness and reliability of arbitration. But the most frontal attack against arbitration in recent years has probably come from the Achmea decision of the European Court of Justice that literally prohibits the Member States from resorting to investment arbitration in matters ruled by the European treaty.

As a conclusion, this overview of the Supreme Courts and Arbitration is not just a remarkable compilation of helpful information. It also casts light on the challenges with which the arbitration world of today is confronted and on the importance of the courts and their policies in addressing such challenges. It is a strong call to the arbitration community for constant vigilance and for enhanced creativity in finding the right answers to criticism and in safeguarding the image of arbitration.

The first 50 years of the CEPANI have been marked by a steady development of arbitration-friendly support from the Courts. We must act and think proactively to ensure that such a conclusion remains valid for the next 50 years In the meantime, we wish you excellent and stimulating reading.

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The Madrid International Arbitration Centre Takes off Powered by the Unification of Spain’s Largest Arbitral Institutions

Kluwer Arbitration Blog - Sat, 2019-12-14 02:00

Jose Antonio Caínzos

The swift and far-reaching development experienced by arbitration in Spain over the past few decades is unprecedented in the context of other arbitration-friendly jurisdictions. In little more than 40 years, a fully-fledged arbitration system was set up virtually from scratch. In 1977 Spain ratified the New York Convention without reservation, thus entering the international arbitration legal order. The ICSID Convention was ratified in 1994. The enactment of the 2003 Spanish Arbitration Act turned Spain into a genuine UNCITRAL Model Law country, thus paving the way for the consolidation of Spain as an attractive and reliable international arbitration venue.

More importantly, Spain boasts a sophisticated and vibrant arbitration community. The Spanish Arbitration Club (CEA) has played a prominent role in both promoting the use of arbitration in the Spanish and Portuguese languages, with a special focus on Latin America, and developing enhanced ethical standards, upon which trust in arbitration ultimately depends. Launched in June 2019, the Code of Best Practices in Arbitration of the Spanish Arbitration Club epitomizes CEA’s untiring commitment to consolidating society’s confidence in arbitration.

It is hardly a coincidence that this arbitration expansion would take place during the most prosperous and dynamic economic cycle that the country has enjoyed so far. Spain is currently the fourth economy of the Euro zone and the fourteenth economy worldwide. It is the sixth most open country in the world in terms of internationalization of its economy.1)Source UNCTAD, IMF. jQuery("#footnote_plugin_tooltip_7770_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7770_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Goods and services exports account for 32.1% of its GDP.2)Ibid. jQuery("#footnote_plugin_tooltip_7770_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7770_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This unmatched period of economic growth, and the profound socio-economic transformation that it entailed, was underpinned by democracy, free-market economy and the rule-of-law, all of which are enshrined in the 1978 Constitution.

As promising as it might look, however, the Spanish arbitration system still had, at least up until recently, some apparent room for improvement. Spain lacked a truly leading arbitral institution for international arbitration. In fairness, it is de rigueur to note that the three major arbitration bodies in Spain – the Madrid Court of Arbitration, the Civil and Commercial Court of Arbitration and the Spanish Court of Arbitration – have built over the past 30 years robust expertise in handling both international and domestic cases. None of them, however, can claim to have developed an international profile akin to other international arbitration centres.

One plausible reason for the limited visibility of Spanish arbitral centres beyond our boundaries lies precisely in the fact that they engaged in competition among themselves at the international level early on and that, more importantly, they did so under the same national flag but with diverging arbitration rules, organizational frameworks and appointment of arbitrators systems. The distortions resulting from that setting are generally thought to have driven away –not only from the arbitral institutions themselves but also from Spain as a seat for international arbitration– users who otherwise would have been willing to come to Spain and particularly to Madrid, to settle their cross-border disputes.

In this state of affairs, joining forces under a single centre to administer international arbitrations looked like the sensible way forward for the three largest Spanish arbitration courts. Unifying their international activities would not only eliminate a distorting multiplicity of players, but more importantly would create the right conditions for the new centre –and ultimately for international users– to capitalize on their combined experience, expertise and talent.

The circumstances just described, coupled with renovated energies in the managing bodies of the three arbitral institutions, led them to sign a Memorandum of Understanding in 2017 (2017 MOU) that paved the way towards the recently launched Madrid International Arbitration Center (MIAC or in Spanish, CIAM).

It is not hard to imagine the broad range of challenges that the soon to be partners had to deal with at the negotiation table set up further to the signing of the 2017 MOU. To name but a few: devising an appropriate legal structure for the merger, taking into account the partners’ diverse legal nature (a private association and two chambers of commerce); setting out the scope of consolidation, i.e., defining what arbitration proceedings would be handled by the new centre and crafting the appropriate renvoi mechanism; designing an independent, transparent and efficient governance structure; and, last but not least, agreeing on the role that the partners would play in the running of the new centre and, in particular, their involvement in its decision-making processes.

These negotiations crystallized into the MIAC Project. MIAC is the result of the merger of the international activity of the three 2017 MOU signatories, which have been joined by the Madrid Bar Association, as a strategic partner. Through MIAC, the four institutions combine their experience and efforts in order to provide users with an independent, transparent and efficient international dispute resolution service.

In view of the negotiations’ outcome, one can only feel grateful that the partners conducted themselves throughout their dealings with the utmost commitment, loyalty, generosity, legal proficiency, long-term vision and professionalism.

Every aspect of the MIAC project has been carefully geared towards fulfilling the foundational mission of becoming a leading international dispute resolution powerhouse and offering the best quality in the market. In particular, three specific features of the MIAC arbitration system are worth taking a closer look at this point in time: scope of application, governance and appointment of arbitrators.

 

Scope of Application

MIAC will only administer international cases, in accordance with article 3 of the Spanish Arbitration Act, in Spanish, English and Portuguese. Therefore, domestic arbitrations will still be handled by the associated courts.

Apart from disputes deriving from arbitration agreements designating MIAC as administering institution, MIAC will administer international cases arising out of arbitration agreements designating any of the four promoting entities as administering institution, provided that they are signed on or after 1 January 2020. To that end, all four entities will have their Rules amended by that date to include this renvoi clause to MIAC.

As a result, international cases deriving from arbitration agreements designating any of the four promoting entities as administering institution signed before 1 January 2020 will be initially administered by the corresponding promoting entity. The parties, however, will be invited to consider referring the case to MIAC and, if they come to an agreement in this sense, the case will be administered by MIAC. For such purpose, the parties will receive the necessary information to assess the possibility of designating MIAC by mutual agreement.

International cases currently being administered by any of the four promoting entities will continue to be administered by that entity until they finish, with no change.

The rationale for this scope solution is twofold: first, it strengthens MIAC’s exclusive focus on international cases; second, party autonomy is scrupulously respected, in the sense that MIAC will not handle cases resulting from arbitration agreements in which the common intention of the parties to submit to MIAC at the time the agreement was made might be questioned in the slightest manner.

 

Governance

The structure and organization of MIAC are aimed at ensuring that arbitration services are delivered in accordance with the increasingly heightened standards of independence, impartiality, transparency, efficiency and professionalism that users demand.

MIAC’s governance structure consists of several governing bodies. Each of them is entrusted with clear-cut arbitral functions so that the necessary checks and balances are ensured.

MIAC’s key governing body is the 13-member Plenary. All of them must be recognized, experienced and diverse arbitration practitioners from different jurisdictions across the world. They represent the international arbitration community and embody MIAC’s aspiration to be an arbitral centre made up of professionals and devoted to serving professionals.

MIAC’s associated entities share the vision that the staffing of the Plenary must be legitimized by the arbitration community. As a consequence, a majority of its members are appointed by the Plenary body itself through transparent cooptation procedures.

In line with the best governance practices, the Plenary body is entrusted with the core administration functions in connection with arbitral proceedings.

MIAC’s initial Plenary is integrated by renowned professionals in the legal world and the arbitral community, including José María Alonso, Begoña Castro, Adolfo Díaz-Ambrona, Josef Fröhlingsdorf, Elena Otero-Novas, Urquiola de Palacio, Giulio Palermo, Pilar Perales, Dámaso Riaño, Julio César Rivera, Francisco Ruiz Risueño and Juan Serrada plus the President of MIAC.

At the time this story goes to press, MIAC’s Plenary keeps working at full steam in order to have the Arbitration Rules passed at its next meeting at the end of November 2019, so that operations can start without further ado in January 2020.

 

Appointment of Arbitrators

MIAC will not have a list of arbitrators.

MIAC’s arbitrators will be appointed by the Arbitrators Appointment Committee. This board includes the President plus four members who will not be part of the Plenary or any other body of the arbitration center. The members of the Arbitrators Appointment Committee are appointed by the Plenary. They must be expert, recognized and diverse arbitration practitioners.

The appointment of arbitrators will be transparent and will be conducted in accordance with the rules set by the Plenary. These rules will be accessible to the general public.

The appointment of arbitrators will be absolutely respectful with party autonomy. Only when parties fail to nominate arbitrators by mutual consent, they will be appointed by MIAC. Even when the arbitrators are appointed by MIAC, the parties will play a relevant role in their appointment by crossing out and ranking arbitrators in accordance with their preferences.

 

As MIAC’s first President, I am both honored and excited to have the opportunity to participate in this project and to effectively serve the arbitration global community from this office, as this is MIAC’s ultimate purpose.

References   [ + ]

1. ↑ Source UNCTAD, IMF. 2. ↑ Ibid. 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: The Decision-Making Process of Investor-State Arbitration Tribunals
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Navigating Arbitration in the UAE with Dr. Gordon Blanke

Kluwer Arbitration Blog - Fri, 2019-12-13 02:01

Gordon Blanke

This year, I had the extraordinary pleasure of speaking at the Emirate Maritime Arbitration Centre (the “EMAC”) inaugural event of Dubai Arbitration Week 2019 (for the full presentation, see here). The EMAC, as readers may know, is the only arbitration institution specialized in the administration of maritime disputes through arbitration in the UAE and the wider Middle East (the recently established CIAMA sharing its focus between maritime and aviation dispute). The EMAC is headquartered in the Dubai International Financial Centre (the “DIFC”), but open to the administration of maritime disputes both onshore and offshore. The EMAC embraces the UAE’s unique positioning on the regional and international arbitration landscape as a hybrid civil and common law jurisdiction that has created a fully integrated common/civil law system that allows parties from differing legal traditions to resolve disputes in a common or civil law environment or in a combination of the two in the heart of the Middle East.

In this sense, the UAE offers unique opportunities for forum shopping between onshore and offshore arbitral seats and onshore and offshore enforcement fora. Whereas other jurisdictions, such as Qatar and Bahrain, have experimented with the concept of offshore free zone jurisdictions embedded within a wider civil law environment, the UAE is the only jurisdiction in the world so far that has succeeded in the full functional integration onshore/offshore: In this sense, both Dubai and Abu Dhabi constitute genuine hybrid civil/common law legal systems. Their success has in fact been such that the system has more recently been exported to other developing economies that are intent on providing a safe legal environment for attracting foreign direct investment. One such example is the Astana International Financial Centre in Kazakhstan, which has been closely modeled on the DIFC free zone.

In the following, I discuss in detail the UAE arbitration landscape, explaining the differing legal, judicial and institutional framework of the onshore and offshore systems. In doing so, I will highlight in particular the onshore/offshore area of free movement of judicial instruments, including ratified awards, between the onshore and offshore courts and the role of the offshore UAE courts as a conduit for the enforcement of onshore awards for onward execution onshore.

 

The UAE Arbitration Landscape: Mainland v. Free Zone Arbitration

Arbitrations in the UAE can be seated onshore (i.e., in mainland UAE, typically onshore Dubai or Abu Dhabi) or offshore, i.e., within a judicial free zone. The UAE hosts two judicial free zones, the DIFC and the Abu Dhabi Global Market (“ADGM”). Both constitute autonomous, stand-alone jurisdictions that operate on the English common law model. Both have their own courts, the DIFC and the ADGM Courts respectively, each staffed by their own English-speaking judiciary sourced from leading, arbitration-friendly common law jurisdictions worldwide and local judges. The DIFC common law jurisdiction is carved out of mainland Dubai and the DIFC Courts exist side by side with the Dubai civil law courts. Likewise, the ADGM common law jurisdiction is carved out of mainland Abu Dhabi and the ADGM Courts exist side by side with the Abu Dhabi civil law courts. Importantly, constitutionally speaking, there is no judicial hierarchy between the onshore and offshore courts, both form an integral part of the UAE family of courts. In this sense, both the DIFC and the ADGM form a jurisdiction within a jurisdiction, one common law (the DIFC and the ADGM), the other civil law (local courts).

Both the DIFC and the ADGM have their own body of substantive laws, which are modeled on English common law and statute. At the risk of oversimplification, the ADGM, more specifically, has incorporated English common law and statute wholesale by reference, which turns it into a “little England and Wales” in the heart of the Middle East. From a comparative law perspective, therefore, the DIFC and the ADGM serve as a common law legal transplant fully integrated in the civil law environment of onshore UAE and have, as such, metaphorically been likened to “common law islands in a civil law ocean” by the former Chief Justice of the DIFC Courts, Michael Hwang SC.

 

The Legislative and Judicial Framework of Arbitration in the UAE: Onshore v. Offshore

Each free zone has adopted its own arbitration law, the 2008 DIFC Arbitration Law and the 2015 ADGM Arbitration Regulations, each modeled on the UNCITRAL Model Law. Seating an arbitration in the DIFC or the ADGM will trigger the application of the DIFC Arbitration Law or the ADGM Arbitration Regulations as the procedural law of the arbitration and engage the competent free zone courts as the curial courts of the arbitration. In this way, the free zones support and facilitate common law style arbitration in the heart of the Middle East.

It is worth mentioning that the DIFC Courts more specifically have also adopted a couple of practice directions that make use of the availability of free zone arbitration: PD 2/2015 enables the enforcement of DIFC Court money judgments through arbitration (by dint of conversion into a DIFC-LCIA award that in turn will be enforceable internationally under the New York Convention); PD 1/2017 provides for cost sanctions against recalcitrant award debtors and empowers the DIFC Courts to issue securities in the amount of the awarded debt pending an action for enforcement.

Hence, free zone arbitrations seated offshore offer a viable alternative to arbitration onshore, that is arbitrations seated in mainland Dubai or Abu Dhabi. Seating an arbitration onshore will trigger the application of the UAE Federal Arbitration Law (the “FAL”), which entered into force on 16 June 2018, and engages the curial competence of the onshore local, e.g. Dubai or Abu Dhabi, courts, which in turn operate in Arabic and source their judiciary from other countries in the MENA region, in particular Egypt. The FAL replaces the arbitration-relevant provisions of the UAE Civil Procedures Code, also known as the UAE Arbitration Chapter. The FAL is in part based on the UNCITRAL Model Law and as such codifies best arbitration practice and procedure. That said, it retains some of the procedural idiosyncrasies that made the arbitral process under the former UAE Arbitration Chapter unreliable (for a comparison of the provisions of the FAL and the free zone arbitration laws, see The Procedural Acquis of UAE Arbitration: Onshore v. Offshore, here).

Needless to say, arbitration users that are looking to seat their arbitration in the UAE, are free to shop between a common and a civil law forum, a truly unique proposition that is on offer nowhere else in the world.

 

The Institutional Framework of Arbitration in the UAE: Onshore v. Offshore

The institutional framework of arbitration in the UAE mirrors the common/civil law offering that lies at the heart of the UAE’s hybrid legal system. Thus, arbitration users have a choice between onshore and offshore arbitral institutions, each of which administer arbitration under their own set of procedural rules. The better-known institutions are headquartered in Dubai and Abu Dhabi, whether onshore or offshore.

The Dubai International Arbitration Centre (“DIAC”) is the longest-serving onshore institution. The Abu Dhabi Commercial Conciliation and Arbitration Centre (“ADCCAC”) follows suit and is primarily used for resolving disputes involving Abu-Dhabi based governmental entities. The DIAC has ventured offshore with a DIFC-DIAC representative office and has entered into a Memorandum of Understanding with the offshore Dispute Resolution Authority (“DRA”) with the objective to enhance the enforcement of DIAC awards in the DIFC. The DIFC hosts the DIFC-LCIA, the sister organization of the London Court of International Arbitration (“LCIA”). The DIFC-LCIA Rules are identical to the LCIA Rules bar the default seat being the DIFC rather than London (as provided for under the LCIA Rules). Importantly, all administrative decisions under the DIFC-LCIA Rules, such as in relation to the default-appointment and the challenge of arbitrators, are taken by the LCIA Court in London. In this sense, opting into the DIFC-LCIA Rules with a seat in the DIFC allows the parties to stage an LCIA-style arbitration locally, i.e., in the UAE. As mentioned previously, EMAC also operates offshore and administers its own, maritime-specific set of rules from within the DIFC, default-seating EMAC arbitrations in the DIFC.

By contrast, the Abu Dhabi judicial free zone, the ADGM, does not host any fully operating arbitration institutions. For now, it has opted for hosting ad hoc arbitrations, championing a model of representative offices that operate from within the ADGM. The first one such office is the ADGM-ICC, which operates as a regional arm of the Paris-based arbitration division of the International Chamber of Commerce. For the avoidance of doubt, disputes continue to be administered by the Middle Eastern case teams operating from Paris. Other international arbitration institutions are currently contemplating setting up representative offices within the ADGM. In addition, the ADGM Arbitration Centre (“ADGMAC”) serves as an arbitration logistics provider and arbitration venue, offering state-of-the-art hearing facilities for domestic and international arbitration in the heart of the ADGM. More recently, the ADGM has promulgated the ADGMAC Arbitration Guidelines to assist arbitrators and parties in the conduct of the arbitral proceedings locally and internationally.

 

The Onshore/Offshore Area of Free Movement

In order to achieve the full functional integration of the offshore common law free zones and the onshore civil law jurisdiction into one hybrid legal system, the Emirati legislator has created an area of free movement of judicial instruments, including ratified awards, onshore/offshore and vice versa. This area of free movement is based on a system of mutual recognition and builds on the mutual trust between the onshore and the offshore courts. This is, no doubt, supported by the equal constitutional status accorded to the onshore and offshore courts within the UAE legal system, absent any judicial hierarchy between them. More specifically, according to Article 7 of the Judicial Authority Law (as amended) and the corresponding provisions of the Memorandum of Understanding between the Abu Dhabi Judicial Department and the ADGM Courts, the onshore courts are required to accept offshore orders for recognition and enforcement of an award for execution onshore without any examination on the merits and vice versa. In this context, it is, of course, important to note that both onshore and offshore courts are subject to the same principles of UAE public policy.

Importantly, conflicts of jurisdiction between the onshore Dubai and the offshore DIFC Courts, e.g., in relation to parallel proceedings between the same parties for a challenge of an arbitral award before the onshore Dubai Courts and for enforcement before the offshore DIFC Courts, are presently dealt with by a Dubai-DIFC Joint Judicial Tribunal, which was established by Ruler’s Decree in 2016 and which is composed of a mix of Dubai and DIFC Court judges. It is proposed that conflicts of jurisdiction within this context could be more efficiently addressed by the introduction of a legislative framework based on a first-seized rule and/or requiring the exhaustion of any moratorium for a challenge by an award debtor before the courts at the seat (e.g. 30-day pursuant to Art. 54 FAL) before initiation of any enforcement action by the award creditor offshore and vice versa.

 

The Free Zone Courts as a Conduit

Last but not least, the free zone courts have actively served as so-called conduits for the enforcement of both domestic non-free zone and foreign awards for onward execution onshore, even absent any assets in or any other geographic nexus to the relevant free zone. This essentially allows domestic and international award creditors to enforce their awards through multiple fora. This, in turn, enhances the overall choice of enforcement fora open to an award creditor that is seeking to execute an award in the UAE, whether onshore or offshore. The role of the both onshore and offshore courts as a conduit is facilitated by the existence of the area of free movement onshore/offshore between the onshore Dubai/Abu Dhabi and the offshore DIFC/ADGM Courts. For the avoidance of doubt, like the onshore courts, the free zone courts are bound by the terms of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards with respect to any foreign award, whether Convention or non-Convention, given the fact that the UAE did not enter into the reciprocity reservation.

 

Conclusion

The UAE are uniquely placed in offering arbitration services across a fluid spectrum of civil and common law jurisdictions from a fully integrated civil/common law platform. This enables domestic and international users of arbitration to shop for a common/civil law seat for their arbitration and for multiple civil/common law fora of enforcement, as best suits their needs, without having to look outside the Middle East. The EMAC more specifically serves as a welcome institutional catalyst in maritime dispute resolution between onshore and offshore, offering its services irrespective of the location of the arbitral seat, i.e. whether onshore or offshore.

More from our authors: The Decision-Making Process of Investor-State Arbitration Tribunals
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Call for Papers: Renewable energy dispute resolution included

ADR Prof Blog - Thu, 2019-12-12 16:08
I am pleased to post this Call for Papers for a symposium entitled Decarbonizing America’s Electricity Infrastructure which is taking place next fall at Pace. The Call includes a request for papers related to renewable energy dispute resolution. Pace Environmental Law Review & Pace Energy and Climate Center,  Elisabeth Haub School of Law at Pace … Continue reading Call for Papers: Renewable energy dispute resolution included →

Quebec Court orders “modest” $1 million suretyship for short-term stay of Canadian enforcement pending U.S. annulment

International Arbitration Blog - Thu, 2019-12-12 12:22
In Lakah v. UBS, the Court of Appeal of Québec denied leave to appeal a Superior Court decision that ordered than an arbitral party post a $1 million suretyship...

Rethinking Counsel Ethics in International Arbitration

Kluwer Arbitration Blog - Thu, 2019-12-12 01:04

Iris Ng

Counsel ethics has been a recurring talking point in arbitration circles. Most recently, the topic was raised at the 2018 SIAC Congress, then again by a panel at the 2019 Australian Bar Association Conference. The continued interest in this issue is unsurprising. As arbitration becomes more international, we must increasingly confront the difficulties that arise from diverging ethical standards in multiple jurisdictions. A range of approaches has been proposed, ranging from mandatory regulation through a binding code of conduct, to soft law instruments such as the IBA Guidelines, to a laissez-faire approach of no additional regulation. This article argues that to resolve the counsel ethics issue, it is worth considering a choice of law rule for ethics rules that is implemented via a non-enforcement pact by bar associations or law societies (referred to in short as “ethics enforcement bodies”) around the world.

 

Problems arising from the plurality of ethical views

As explained by Prof Catherine Rogers in her book Ethics in International Arbitration, there are two main problems arising from the plurality of ethical views in international arbitration.

The first is the double deontology problem, which arises where a lawyer is regulated by the legal professional or ethical rules of more than one jurisdiction and these rules conflict. Counsel is then left in the catch-22 position of violating a rule no matter what he or she decides to do. Prof Rogers raises the example of a German attorney who ended up being jailed in England for refusing to make disclosure under English law, when he would have been disciplined for violating a client’s confidence under German law had disclosure been made.

The second is the “inequality of arms” problem, where proceedings are procedurally unfair because one side “gains” an advantage that is not open to the other because its counsel is permitted to engage in conduct the other side’s counsel is not. There are at least three contentious areas:

  • Witness preparation. What happens when an English lawyer is barred from witness preparation, but the opposing side’s American lawyer is obliged to do so by his professional conduct rules?
  • Document disclosure. US-style discovery is infamous for being more extensive than disclosure in civil law traditions.
  • Lawyer-client communications. Lawyers are sometimes subject to different disclosure duties vis-à-vis their clients. This divergence is illustrated by the Commentary on Article 5.3 of the Council of Bars and Law Societies of Europe (CCBE) Code, which states: “In certain Member States communications between lawyers … are normally regarded as to be kept confidential as between the lawyers … [and] cannot normally be passed to the lawyers’ clients … In yet other Member States, the lawyer has to keep the client fully informed of all relevant communications from a professional colleague acting for another party, and marking a letter as “confidential” only means that it is a legal matter intended for the recipient lawyer and his or her client, and not to be misused by third parties …”.

 

Review of current proposed solutions

Two of the more popular proposed solutions to the above problems are a uniform ethical code or institution-specific codes of conduct. The former entails getting an independent third party to formulate a uniform code of ethics for counsel. The most fruitful attempt thus far is the IBA Guidelines on Party Representation in International Arbitration (“IBA Guidelines”). The latter involves arbitral institutions themselves coming up with codes of conduct. Examples include the LCIA’s General Guidelines for the Parties’ Legal Representatives that are annexed to the 2014 LCIA Rules (discussed here and here).

In between is the hybrid approach of uniform ethical codes that are co-opted as part of institutional rules. This has been done in respect of the IBA Guidelines by the 2016 Australian Centre for International Commercial Arbitration Rules and the 2016 Lagos Chamber of Commerce International Commercial Arbitration Centre Rules.

However, all these approaches share one key shortcoming: They do not resolve the double deontology problem, even though they would resolve the inequality of arms issue (given that both sides are bound by a single code). As Prof Gary Born points out, the difficulty with such a regulatory framework is that any guidelines issued would “sit on top of” national ethical standards that apply to counsel. In that sense a uniform ethical code adds to, rather than cuts through, the morass of rules that counsel faces.

 

Solving the double deontology problem through choice of law analysis

My argument is essentially that to solve the double deontology problem what we need is not more rules, but a way to choose which of the existing rules should apply and a mechanism of implementing this rule.

The choice of law solution is the next-best solution to binding, universal harmonisation, given that an international convention is probably too much to hope for in light of the numerous more pressing issues plaguing the international community. There is also the challenge of formulating truly “universal’” or representative codes of conduct (e.g., the IBA Guidelines have been criticised for their North American and European focus) that are also concrete enough to give useful guidance.

 

Formulating an appropriate choice of law rule

Conflict of laws, or private international law, deals with the issue of which law should be applied to a dispute that has cross-border elements (amongst other things). This is done through the formulation of choice of law rules specific to each kind of dispute (e.g., contract, tort or property disputes). There are at least five possible choice of law rules to decide which law governs when the double deontology problem arises:

  • Rule 1: Rules of the lawyer’s jurisdiction of origin prevail.
  • Rule 2: Rules of the qualification that the lawyer is acting under prevail.
  • Rule 3: Seat rules prevail.
  • Rule 4: Contractual approach – the parties’ choice of ethics rules applies to both parties’ lawyers.
  • Rule 5: Self-determination – the lawyer’s choice of ethical rules applies to himself or herself.

I argue that Rule 5 is the most suitable rule.

In favour of Rule 1, a lawyer-centric choice of law rule makes sense because the lawyer is the object of regulation. The jurisdiction of origin would have to be the jurisdiction of first qualification, given that other potential indicia such as nationality and domicile of the lawyer are unhelpful (these are not necessarily connected to the lawyer’s working life). But even leaving aside the arbitrariness of this rule (if first-qualified, why not last-qualified?), Rule 1 is arguably too parochial for international arbitration. Even though a jurisdiction retains an interest in regulating the conduct of its legal professionals no matter where that professional is, that understanding is traditionally formulated in relation to a lawyer qualified in one jurisdiction who would otherwise be unregulated abroad. A more flexible view is arguably needed for lawyers qualified in multiple jurisdictions who act in international arbitration cases.

Rule 2 is a transaction-specific rule that focuses on the capacity in which the lawyer is acting in any given case. For example, for a French and English dual-qualified lawyer, is he or she being retained for expertise in French or English law? While superficially attractive, Rule 2 runs into difficulty when we recall that lawyers are not always retained specifically for their legal expertise in one system of law. Other factors include their commercial acumen, their familiarity with certain subject matter, etc.

Rule 3 – opting for the ethical rules of the seat – is simple, clear, and effort-saving in that it piggybacks on something that must generally be established in international commercial arbitration. Against this, there are three counterarguments. First, we appear to be indirectly allowing parties to select ethical rules for their lawyers because they are allowed to choose the seat (granted, this concern might not be significant in practice because parties arguably have more important factors on their mind than counsel ethics in choosing a seat). Secondly, it would be excessively onerous for the lawyer, who would be subjected to a system of ethics regulation that he or she may be unfamiliar with (and could unknowingly breach). Thirdly, there is the issue of who bears responsibility for disciplining lawyers who fall afoul of seat ethics rules. We could leave this to the ethic enforcement bodies, but they would have little incentive for disciplining lawyers who are not even part of the local bar.

Rule 4 finds some support in the literature. The idea is that “parties may choose the ethics rule applicable to the lawyers in the proceeding, exactly as they may choose the governing law”.1)N M Crystal and F Giannoni-Crystal, ‘”One, No one and One Hundred Thousand” … Which Ethical Rule to Apply? Conflict of Ethical Rules in International Arbitration” (2013) 32 Mississippi College Law Review 283 at 284. jQuery("#footnote_plugin_tooltip_3102_1").tooltip({ tip: "#footnote_plugin_tooltip_text_3102_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Commentators point to the similarity between law and ethics rules to justify this – both embody public policy, regulate conduct, and exist to facilitate transactions.2)J M Little “The Choice of Rules Clause: A Solution to the Choice of Law Problem in Ethics Proceedings” (2010) 88 Texas Law Review 855 at 874. jQuery("#footnote_plugin_tooltip_3102_2").tooltip({ tip: "#footnote_plugin_tooltip_text_3102_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); But there is, in my view, an important conceptual distinction. In choosing the substantive and procedural law, parties are choosing the system of law applicable to themselves and their transaction. In choosing ethical rules, parties are choosing rules to apply to their lawyers. Party autonomy justifies the former (affecting parties inter se) but not the latter. Additionally, there are practical difficulties if parties do not expressly choose the applicable ethics rules. Would we then have to look for an implied choice, or a choice with the closest and most real connection (applying by analogy the test for substantive law of a contract or law governing the arbitration agreement)?

We then come to Rule 5. When faced with the double deontology problem, you allow the lawyer to choose which jurisdiction’s qualification he or she would like to be treated as acting under. That must be declared at the outset of the arbitration and counsel will not be allowed to change his or her mind along the way. Counsel must then play by the chosen ethical rules, or risk being hauled up for disciplinary action before the ethics enforcement body of that chosen jurisdiction. Rule 5 is fair to the lawyer, who will not be subject to an alien system of law. It is efficient because resources need not be spent on an inquiry into the lawyer’s background or connections to the case. It accords with comity, because its foundational assumption is that all ethical systems are equally worthy of consideration and choice. As for the potential objections to Rule 5:

  • It might be argued that lawyers will be opportunistic and simply pick the rules that are perceived as more “lenient”. But even if they do, is that not pursuant to a moral decision that they are entitled to make for themselves? There are various views of what it means to be a good lawyer (see e.g., David Thunder, “Can a Good Person be a Lawyer?” and Stephen Pepper, “The Lawyer’s Amoral Ethical Role: A Defense, a Problem, and Some Possibilities”). The decision of which model of lawyering to adopt is one that can only be made by the lawyer in his or her exercise of autonomy and practical reasonbleness.
  • It might also be argued that it is objectionable for lawyers to be free to choose their fetters. But the objection is misdirected because in Rule 5, lawyers are not choosing whether to be ethically regulated but which set of ethical obligations to be regulated by. The entire premise of invoking Rule 5 is that there are at least two sets of ethical rules the lawyer may be bound by. The lawyer is being asked to pick one; “none” is not an option.

 

The role of ethics enforcement bodies

Any solution to double deontology problem through choice of law analysis must involve ethics enforcement bodies because they are the ultimate decision-makers on whether to prosecute wayward lawyers. I suggest that ethic enforcement bodies could agree on a non-enforcement pact or pledge in accordance with Rule 5. That is, they come to an understanding that they should only initiate proceedings regarding the conduct of a lawyer if the lawyer has opted to be bound, in that arbitration, by that jurisdiction’s ethical rules.

The incentives for ethics enforcement bodies is essentially maximum payoff with minimum effort. There is understandably little appetite for extensive reform because it is not even clear how big of an issue the double deontology problem is in practice. Besides the empirical question of how many lawyers are qualified in multiple jurisdictions, sometimes the conflict that leads to the double deontology problem might be illusory: (a) There may be exceptions that a lawyer can invoke (such as client consent), that would take the sting out of one of the rules and resolve the conflict. (b) National law may carve out international arbitration from general regulation to give counsel some wiggle room. For example, Swiss or French law-regulated counsel may engage in pre-testimonial communication with witnesses in international arbitration, even though this is banned in litigation or domestic arbitration.3)Rogers, Catherine A., Cross-Border Bankruptcy as a Model for Regulation of International Attorneys (June 20, 2010). Making Transnational Law Work In A Global Economy: Essays In Honour Of Detlev Vagts, Pieter H. F. Bekker, Rudolf Dolzer, Michael Waibel, eds., Cambridge University Press, 2010, p 645. jQuery("#footnote_plugin_tooltip_3102_3").tooltip({ tip: "#footnote_plugin_tooltip_text_3102_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Only if these two situations do not apply is there a “true” conflict that bring the double deontology problem into play. With the non-enforcement pact that codifies Rule 5, the onus and initiative is placed on the lawyer (the party with the most interest) to declare which system of rules applies. Only after that determination is made will the chosen jurisdiction’s rules apply, and the ethics enforcement body be called upon to act if there is a breach.

Such a pact can take a similar form to the Equal Representation in Arbitration Pledge or the Women in Law Pledge, albeit one with ethic enforcement bodies as pledgees or signatories.

To sum up, a choice of law rule combined with agreement by bar associations on a non-enforcement pact would go some way towards solving the double deontology problem.

 

*The article is written in the author’s personal capacity, and the opinions expressed in the article are entirely the author’s own views.

References   [ + ]

1. ↑ N M Crystal and F Giannoni-Crystal, ‘”One, No one and One Hundred Thousand” … Which Ethical Rule to Apply? Conflict of Ethical Rules in International Arbitration” (2013) 32 Mississippi College Law Review 283 at 284. 2. ↑ J M Little “The Choice of Rules Clause: A Solution to the Choice of Law Problem in Ethics Proceedings” (2010) 88 Texas Law Review 855 at 874. 3. ↑ Rogers, Catherine A., Cross-Border Bankruptcy as a Model for Regulation of International Attorneys (June 20, 2010). Making Transnational Law Work In A Global Economy: Essays In Honour Of Detlev Vagts, Pieter H. F. Bekker, Rudolf Dolzer, Michael Waibel, eds., Cambridge University Press, 2010, p 645. 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: The Decision-Making Process of Investor-State Arbitration Tribunals
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Theory of Change Symposium – Part 4

ADR Prof Blog - Wed, 2019-12-11 17:01
This part of the symposium includes several pieces focusing on key skills in legal and dispute resolution practice.  Lisa Amsler highlights the importance of interpersonal and process skills as technology is radically changing legal practice.  Russ Bleemer identifies deficiencies in mediators’ listening behaviors as mediation practice becomes routinized, and he encourages mediators to keep focusing … Continue reading Theory of Change Symposium – Part 4 →

Monstrous

If you are learning here for the first time that a divided panel of the US Ninth Circuit Court of Appeals vacated an arbitration award, on the Federal Arbitration Act ground of “evident partiality,” rendered in a JAMS arbitration by a retired California trial judge who had served as a JAMS arbitrator in over 1500 cases since 2000 (Monster Energy Co. v. City Beverages, LLC, 2019 WL 5382062 (9th Cir. Oct. 22, 2019)), perhaps you have been diverted to a lengthy hearing or a languorous holiday. Before I elaborate, to explain why the Ninth Circuit took umbrage at the arbitrator’s...
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Arbitration Jurisprudence Takes Strange Turn

Business Conflict Blog - Tue, 2019-10-22 12:38

The twisted course of arbitration jurisprudence in New Jersey has taken yet another peculiar detour. In the most recent development, it is hard not to infer a judicial bias against arbitration reminiscent of the 19th century.

In Itzhakov v. Segal (A-2619-17T4, August 28, 2019), the mid-level Appellate Division reviewed the trial court’s denial of defendant’s motion to compel arbitration. The court below had determined that the parties — commercial entities engaged on a breach of contract claim — had not conveyed their intention to arbitrate with sufficient clarity, and ordered plenary discovery in preparation for trial. The Appellate Division modified the order below to the extend of limiting discovery to the issue of the validity and scope of the arbitration agreement. On the way, however, the court wreaked havoc like a tornado.

The contract at issue was for the sale of an interest in a business. The contract was drafted by Mr. Yisroel Knopfler, was written in Hebrew, and contained a provision that in the event of dispute over the contract’s meaning the parties would “accept his interpretation as if it were one hundred valid and credible witnesses.” A second dispute resolution clause reads in translation:

It is hereby agreed between us that any questions of Jewish law that are relevant to this sale and to this document shall be decided by the Lakewood [NJ] Rabbinical Court, and we are required to do as they decide, and signing this document constitutes an acceptance of everything in the arbitration agreement that the said court regularly uses, and under no circumstances shall any dispute between us come to the civil courts, G-d forbid.

A subsequent contract for a related deal also contained language that “all disputes arising from this transaction shall be decided solely by the Badatz Rabbinical Court of Lakewood, in accordance with the standard arbitration agreement of the Rabbinical Court, which is hereby incorporated into this agreement.”

In determining “the validity and enforceability of the arbitration agreements,” the Appellate Division relied upon New Jersey Supreme Court’s 2014 Atalese opinion, which invalidated an arbitration agreement between an individual consumer and a debt adjustment firm on the ground that the term “arbitration” was not explained. The absence of express language advising the consumer that “arbitration” meant that the consumer had waived the right to sue in court was, to the Atalese Court, evidence of the lack of a meeting of the minds, and thus resulted in no enforceable agreement.

Those many of us who were alarmed by Atalese and its progeny took some solace in the fact that it and subsequent cases were in the settings of consumer or employment disputes. It was a case (we told ourselves) of well-meaning paternalism disguised as legal principle. But the Itzhakov Court dispelled even that faint hope by holding that “the principle that a person must knowingly waive the right to sue in court applies to any contracting party,” even commercial parties. “[E]ven a sophisticated party, or one represented by counsel, will not be deemed to waive his or her rights — whether constitutional, statutory, or common-law — without clear and unambiguous language.” Because the agreement at issue “does not explain with sufficient clarity that the parties waived their right to sue in civil court… [or] clearly contrast arbitration with litigation,” the court below correctly declined to compel the parties to arbitrate, absent “extrinsic evidence that illuminates the meaning of the arbitration provision.”

Thus, pursuant to this interpretation, the law of the State of New Jersey is that any contract containing an arbitration clause between any two parties — of any level of sophistication — must feature an “explanation” of what arbitration is, and “clear and unambiguous language” that agreement to arbitrate constitutes a waiver of the right to sue. And the required clarity of this required language — whatever the standard — is not satisfied by “under no circumstances shall any dispute between us come to the civil courts, G-d forbid “

Auto supply dealers, credit card companies, e-commerce enterprises, banks, national wholesalers, suppliers and retailers of business-to-business commerce, international internet service providers, take note. Your arbitration clauses may be enforceable in 49 states and the District of Columbia. But in New Jersey? G-d forbid.

Arbitral Method on Corruption: Another Installment

There are a variety of ways you might attempt to learn more than you already know about how international arbitrators handle allegations of corruption that are presented as claims or defenses in a pending case. You might sign up for a conference and, at some expense, hear condensed remarks by very knowledgeable individuals who have participated in such cases as counsel or arbitrators (e.g. a one-hour session at the ICC event in New York on October 4, from 2:30 to 3:30 p.m.). You might download the GAR “tool kit” on corruption. (I will). You might download a recently published arbitral...
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The post Arbitral Method on Corruption: Another Installment appeared first on Marc J. Goldstein - Arbitration & Mediation.

Who Decides Who Decides? – The Turf War Continues

When you see me in the street, you can tell that I’m a pro-arbitration kind of guy. I wear my FAA hoodie, usually with the hood down, the better for you to admire my snowy white hair and furrowed, gravitas-laden brow. So when a US Court of Appeals takes a swing at arbitration, my instinct is to swing back. Fifth Circuit, take this 🤜. (As a response to the decision here discussed, Archer & White Sales, Inc. v. Henry Schein, Inc., 2019 WL 3812352 (5th Cir. Aug. 14, 2019)). Actually, the Fifth Circuit got punched already this year for being...
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The post Who Decides Who Decides? – The Turf War Continues appeared first on Marc J. Goldstein - Arbitration & Mediation.

Bolivia case proceeds after claimant’s death

An UNCITRAL case against Bolivia concerning mining concessions is underway at the Permanent Court of Arbitration in The Hague despite the death of one of the claimants at the start of this year. US...

Tanzania too late to challenge ICC award

A US court has entered a default judgment confirming an ICC award worth over US$60 million against Tanzania, ruling that the state had wilfully failed to comply with a deadline to respond to the confirmation...

Kenya faces bid to annul “black swan” award

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

Samsung liable over Australian mining project

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

ICSID claimant seeks to annul “black swan” award

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

Mining company fails to revive billion-dollar ICSID claim

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

LCIA decides dispute over £100 billion asset management deal

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

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