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15th Annual WIP Conference

ADR Prof Blog - Wed, 2022-05-25 13:23
This October, the University of Oregon School of Law will be hosting the 15th annual AALS ADR Section Works in Progress Conference. This is one of the best ADR conferences of the year, and we are thrilled to be hosting it again in Eugene! Please check out the conference website for more information and to … Continue reading 15th Annual WIP Conference →

Breaking Traditions in Favor of German Efficiency? Frankfurt As a “Safe Seat” for International Arbitration

Kluwer Arbitration Blog - Wed, 2022-05-25 01:00

Frankfurt am Main (“Frankfurt“) – Germany’s No. 1 city for international arbitration – could serve as a cost-effective and safe seat for international disputes. A “safe seat” of arbitration offers a fair, just and cost-efficient dispute resolution mechanism by offering effective arbitral law and practice (see here). The criteria for distinguishing a safe seat of arbitration is based upon objective parameters, as enshrined in the London Principles. Reputation, tradition, and recognition are therefore not relevant aspects for classifying a seat as safe but are rather crucial factors that determine the seat’s final selection in the arbitration agreement (see here). In this sense, safe and traditional seats of arbitration (e.g. London, Paris, Singapore, New York, Geneva, and Hong Kong – see here) are usually at the forefront of a party’s mind for good reasons. Frankfurt however could join the race of arbitral seats and be considered as a viable alternative.

 

A Safe and Cost-Efficient Seat

Frankfurt, known as the most important financial centre in continental Europe, could serve as a safe and cost-efficient seat for international arbitration users. This is mainly due to its excellent legal infrastructure, arbitral practice, accessibility, and reasonable costs.

The German law of arbitration is substantially based on the UNCITRAL Model Law on International Commercial Arbitration from 1985 (the “Model Law“). In this sense, the Tenth Book of the German Code of Civil Procedures (available in English here) is inspired by the Model Law and conforms with Germany’s modern legislation for both domestic and international arbitration (Sections 1025-1066). With regard to the few deviations made in respect of the Model Law, practitioners have considered the German arbitration law as more “arbitration-friendly” than the Model Law (see here). Importantly, Germany is also a signatory to the New York Convention (here).

As to the arbitration rules, parties are always free to choose the rules that they prefer when selecting Frankfurt as the seat of arbitration (such as the ICC Rules or the DIS Rules). Regarding the latter, the latest DIS statistics reveal that one third of the arbitration proceedings carried out pursuant to the DIS Rules are conducted in the English language (here).

From a practical perspective, the courts of Frankfurt have demonstrated experience with arbitration. Courts have traditionally been receptive to the notion of arbitration both at a regional and federal level:

  • The Higher Regional Court of Frankfurt (“OLG Frankfurt“) carries out most of the judicial functions for international arbitrations seated in Frankfurt. The OLG Frankfurt has a specialized chamber (No. 26) dealing with arbitration-related matters (here). This feature highlights the level of competence of the Frankfurt judiciary in arbitration.
  • The 26th Chamber of the OLG Frankfurt has stressed that an arbitral award may only be set aside in extremely exceptional cases (26 Sch 1/19), interprets arbitration clauses broadly to uphold the parties’ choice to pursue arbitration (26 Sch 1/18), and has refused to review whether tribunals had wrongly admitted belated evidence (26 Sch 18/20 and here). Recent studies show that only 3.31% of the cases before this court from 2012 to 2016 have been successful whereby a party raised a public order ground to set aside an award (here).
  • German courts are also known for strongly favoring arbitration, and can generally be relied upon to uphold, recognize, and enforce arbitral awards (see here, and here). The German Supreme Court has also adopted a non-interventionist approach towards international arbitration (here, here, or here). Furthermore, after reviewing more than 500 decisions concerning the setting aside and enforcement of awards in Germany, a study concluded that German courts generally treat foreign and domestic parties equally (here).

In terms of convenience, Frankfurt is one of the most accessible cities in central Europe (and worldwide). The Frankfurt International Airport is one of the largest passenger airports in the world and is located only 12 km away from the city centre (here). The Frankfurt Hearing Centre also offers rooms and accommodating services for arbitration hearings in the middle of Frankfurt (here). These features strongly highlight the attractiveness of Frankfurt as a place where in-person (or hybrid) arbitration hearings could be conducted. In this sense, it is not uncommon for Frankfurt to be considered as a place for arbitration in investment disputes as well.

In terms of costs, which are often perceived as arbitration’s worst feature, daily hotel rates in Frankfurt have been reported to be less expensive than in other European cities. Hourly rates for German counsel are also very competitive, especially the rates of boutique law firms specializing in international arbitration. German counsel may also be more inclined to avoid or limit the use of discovery and document production, thereby reducing the overall cost of the arbitration.

The above affirms that, due to its legal framework, judiciary, accessibility, and cost-efficiency, Frankfurt can be catalogued as a safe and cost-effective seat for international disputes.

 

Frankfurt as an emerging seat for international arbitration

If Frankfurt is such a safe and convenient seat, then why is it only now improving its visibility within the top ranked arbitration seats?

First of all, it is important to mention that Frankfurt has seen an exponential growth of international arbitrations in the last few years (here). Frankfurt was mentioned as one of the preferred seats in the 2021 International Arbitration Survey by Queen Mary University and White & Case, and was listed by 4% to 2% of the respondents, together with other eminent seats such as Zurich, Vienna, Washington DC, Miami, Shenzhen, São Paolo, and The Hague.

The fact that Frankfurt is not in the current “top 10” of the most preferred cities could be due to the parties’ unwillingness to grant a home-field advantage. As the world’s third largest exporter (after the US and China), German parties are largely involved in international transactions. Thus, non‑German parties may protest against the selection of a German seat or opt for a seat, which they perceive as being more neutral.

Furthermore, due to the German federal system, Frankfurt closely competes with other German cities (e.g., Hamburg, Munich, Düsseldorf, Stuttgart, Berlin, Cologne) that are known for offering arbitration‑related services. Thus, there may be a decentralization of arbitral seats in Germany. As competition tends to improve quality, this factor may ultimately contribute to a higher degree of sophistication in the German arbitration market at competitive prices.

The use of language may also be a relevant factor within this discussion. The standard rule is that German is the court language in German court proceedings pursuant to Section 184 of the Courts Constitution Act. Nonetheless, courts in Frankfurt are well acquainted with international proceedings. This is highlighted by the introduction of an English-speaking Chamber for International Commercial Disputes at the Regional Court (Landgericht) of Frankfurt in 2018. Furthermore, lawyers in Germany usually have a very high proficiency in English.

Finally, tradition and biases may play an important role in the selection of an arbitral seat and, as described above, Frankfurt may not yet be perceived as the “go-to” city in international arbitration.

 

Conclusion

The newly launched GAR CIArb Seat Index rates various seats of arbitration in one-page reports in accordance with each of the London Principles. Right now, the index only covers six jurisdictions (namely, Hong Kong, London, New York, Paris, Singapore, and Switzerland). According to the page, the index will be expanded over time to include additional cities and will be sorted according to grades in the style of bond ratings, or country risk (AAA, AA, A, BBB, BB, B, CCC, etc.). For the reasons mentioned above, Frankfurt should be included in the next round of expansions with a high rank, revealing Frankfurt as a hidden gem for international arbitration.

 

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HBO Documentary on Social Critic George Carlin

ADR Prof Blog - Tue, 2022-05-24 18:55
HBO recently presented a great two-part documentary, George Carlin’s American Dream.  He started as a conventional, clean-cut comic in the 1960s, and evolved into a counterculture icon in the 1970s.  He continued performing until shortly before his death in 2008. This post is another in my What I’m Reading series. Mr. Carlin really came to … Continue reading HBO Documentary on Social Critic George Carlin →

New Directions in International Investment Law: Towards Energy Transition

Kluwer Arbitration Blog - Tue, 2022-05-24 01:53

The investor-State dispute settlement system (ISDS) is increasingly confronted with disputes related to climate-related measures. Consequently, this fora has been described as the new frontier in climate-change disputes, as tribunals are slowly becoming a de facto source of climate policy making that directly impacts the regulatory landscape. This blog post discusses the following issues: (i) whether the international investment arbitration system protects fossil fuels, and (ii) whether the international investment system can be used to foster investments in renewable energies.

 

Does The International Investment Arbitration System Protect Fossil Fuel Investments? 

Both the latest IPCC Report and the International Energy Agency (IEA) Net- Zero by 2050 Report emphasized the need to reduce carbon emissions from fossil fuels to limit global temperature rise to a maximum of 1.5°celcius. Nonetheless, international investment treaties continue to protect investments in fossil fuels. The mere threat of an investment proceeding may forestall a State from taking climate change measures to limit fossil fuel exploitation, resulting in regulatory chill. On this basis, civil society and other that international investment law (and ISDS) conflict with the imperatives of the Paris Agreement.

Certain ISDS cases indicate that such criticisms may be correct. For example, in Grenada Private Power & WRB Enterprises Inc v. Grenada, Grenada sought to implement its Nationally Determined Contributions (NDCs) under the Paris Agreement, diverging from fossil-fuel energy to renewable energy. To accomplish this, Grenada enacted legislation that ended the monopoly of GRENLEC – a fossil fuel energy provider and the island’s sole energy provider – over the energy sector. In response, GRENLEC swiftly commenced investment arbitration against Grenada. In the arbitration, Grenada made several policy arguments invoking, inter alia, its national interest in renewable energy development, the failure of GRENLEC to act as a good corporate citizen, and the energy cost savings for Grenadians that would be gained from renewable energy. In a unanimous decision, the Tribunal rejected these arguments stating: “the task of the Tribunal is to determine whether the complex contractual arrangements between the Parties have been complied with and, if not, what remedy should be awarded.” (para. 8) The Tribunal ultimately found that Grenada’s 2016 energy restructuring legislation violated the investment contract between Grenada and GRENLEC and ordered Grenada to repurchase shares in the investment vehicle.

Such a decision illustrates the capacity for ISDS awards to act as de facto tools of climate governance. The Tribunal’s award prevented Grenada from ending GRENLEC’s monopoly, and thus, limited the capacity of the island to reform its regulatory environment to foster investment in renewable energies to comply with its NDC commitments. In this regard, the award limited the capacity for Grenada to implement its energy transition policy, thereby exemplifying civil society’s criticism that the international investment law system may undermine the capacity for States to adopt energy transition measures.

 

Can the International Investment System Foster Investments in Renewable Energy? 

The nature of clean energy projects makes it critical that countries create a stable operating environment for investors. Clean energy projects are highly capital intensive, require long repayment periods, and are exposed to regulatory risks. Confronted with these risks, without investment protection, there are weak prospects for long-term return on renewable energy investments. Additionally, countries that do not provide a strong framework for the protection of renewable energy investments may find it challenging to attract foreign investors, compared to countries which offer a protective investment environment. Therefore, the international investment law system may foster investments in renewable energy because it grants foreign investors a sense of security over their investments.

Thus, international investment law may be used to encourage and protect investments in renewable energy and low-carbon technology, by creating a stable operating environment for investors. Post-COP 26, the IEA estimates that annual clean energy investments must more than triple by 2030 to around USD 4 trillion if States are to fulfill their decarbonization pledges. For emerging and developing economies, receiving trillions of dollars in private investment will be key to achieving decarbonization. Thus, many countries are designing incentive regimes to attract foreign investment in clean energy.

ISDS has indeed been used to protect investments in renewables. The Energy Charter Secretariat reports that 60 % of ISDS filed under the ECT have been to protect investments in renewables. UNCTAD Dispute Navigator shows that foreign investors have initiated at minimum 35 arbitrations in  , Italy and the Czech Republic over the rollback of incentive regimes. In at least 18 of the arbitrations against Spain investors have been successful. The saga of arbitrations against Spain show that, despite the lack of uniformity in these rulings, some tribunals do favor stability and certainty in the legal frameworks of renewable energy cases. In arbitration cases  against Italy, at least 3 awards have been rendered in favor of the investor. Given the success of ISDS in protecting renewables, it would be inappropriate to generalize the international investment law system as inimical to the energy transition.

ISDS being invoked to protect renewables shows no sign of abatement. In 2021, investors initiated arbitrations against Currently, there are many investment arbitration scenarios confronting Mexico because of the Electricity Industry Law 2021, which  reverses incentives initially granted to renewables.

 

New Trends in IIAs Can Incentivize Investments in Renewable Energy

International investment arbitration is changing with the introduction of new generations IIAs containing carve-outs, a state’s right to regulate and the obligation of investors to protect the environment and respect human rights. These novel provisions in new generation IIAs are welcome considering that, historically, environmental provisions were not a feature of most IIAs. OECD  research shows that since 2008, 89% of newly concluded IIAs contain references to environmental matters. This development highlights the growing concern of States to balance their environmental policies with the commitments made to foreign investors.

New generation IIAs such as the Netherlands Model BIT, Morocco- Nigeria BIT or the Singapore- Indonesian BIT, contain progressive features recognizing an explicit right to regulate and investors’ environmental obligations. For instance, Article 11 of the Singapore – Indonesia BIT expressly grants the host State the right to regulate for environmental objectives. Similarly, Article 8 (2) of the Morocco- Nigeria BIT provides that investors have the obligation not circumvent international environmental law duties. Such language in new generation IIAs rebalances the States’ environmental policy against the investors’ economic interests by expressly protecting the State’s environmental concerns in activities conducted by foreign investors.

Additionally, new generation IIAs, for example, Article 6.6 of the Netherlands Model BIT, incentivize foreign investment that aligns with the imperatives of the Paris Agreement. This provision reminds the Parties they are not free to opt-out of their obligations under the Paris Agreement, but what is more, they reaffirm their commitments within the scope and application of international investment law.. In this regard, in sectors difficult to decarbonize, investments should consider carbon set-offs, and where available, carbon capture and storage technologies. The strength of language in new generation IIAs is that, if drafted accurately, they are capable of limit new fossil-fuel investments and encourage renewable energy investments aligned with the Paris Agreement.

Another benefit and incentive from new generations IIAs, is that investors in renewable energy can structure their investment to take advantage of investment protection. For example, new generation IIA containing an environmental non-regression provision may potentially safeguard an investor from a state derogating environmental standards and incentives existing at the time when the renewable energy investment was made. For instance, Article 1114(2) of NAFTA first introduced a non-regression clause in an IIA, providing that parties shall not induce investment by relaxing measures of general application introduced to protect, among others, the environment in their territories. Similarly, Article 24.4.3 of the USMCA provides that parties recognize that it is inappropriate to encourage trade or investment by relaxing environmental law protection. This is particularly useful for renewable energy investments, which are capital intensive and immovable, such as photovoltaic plants or wind energy project, that require predictable investment environments. As noted before, despite the lack of uniformity in the rulings, the Spanish Saga Cases, are again, proof that international investment law fosters a stable legal framework where investors are entitled to have a legitimate expectation of legal certainty at the initial time of investment and throughout the life of the investment.

 

Conclusion

The foregoing analysis has examined how IIAs and ISDS create a predictable and secure operating environment for foreign investors, including guaranteeing a fair and equitable standard of treatment and protection against indirect expropriation. Despite this, the global energy transition has many questions including whether ISDS protects fossil fuel investments and whether it is subject to fostering investments in renewable energies. The new trends in ISDS are likely to foster investment in renewables. Thus, the future of IIA suggests that tribunals can become a tool of global climate governance, serving as a de facto source of climate policy that impacts the internal regulatory landscape of host countries.

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Arbitration Tech Toolbox: Interview with Dr. Nikos Lavranos and Ewa Cairns-Szkatuła on the Wolters Kluwer Data-Driven Profile Navigator and Relationship Indicator Tools

Kluwer Arbitration Blog - Mon, 2022-05-23 01:32

Wolters Kluwer recently launched the Profile Navigator and Relationship Indicator tools within the Kluwer Arbitration Practice Plus suite of arbitration products. Kluwer Arbitration Blog recently met with Dr. Nikos Lavranos and Ewa Cairns-Szkatuła to discuss this new development.

Dr. Lavranos is Founder of NL-investmentconsulting and acts as legal counsel, arbitrator, mediator and offers a broad range of services covering investment law and arbitration, EU law and WTO law.

Ewa Cairns-Szkatuła is Associate Director for Technology Product Management at the International Group within Wolters Kluwer Legal and Regulatory US.

 

  1. Selecting arbitrators can be a laborious process. What are the Profile Navigator and Relationship Indicator tools, and how can they facilitate better decision-making during arbitrator selection?

Ewa: Indeed, putting the pieces together to gain confidence in the choices you make can be time-consuming. Our tools are based on data extracted from Kluwer Arbitration’s rich collection of commercial and investment awards and from appointment data published by arbitral institutions. Collating the data, the tool can assist in the selection of an arbitrator and in the investigation of potential conflicts of interest of arbitrators as well as other stakeholders involved in the case, such as expert witnesses and counsel. The tools also provides links from the profile to awards and publications associated with the arbitrator, for easy navigation and review of their views and approach.

Nikos: The advantage of these tools is that they help to verify the initial selection of a potential arbitrator by using objective and comprehensive data. They also allows for the consideration of potential arbitrators that were not initially considered. In this way the selection process can be more inclusive and thus help achieve a better balance regarding gender, age, experience and geographical representation.

 

  1. How do the new Profile Navigator and Relationship Indicator tools complement existing solutions offered by Kluwer, such as the “practical insights” modules within Kluwer Arbitration Practice Plus?

Ewa: Kluwer Arbitration Practice Plus (KAPP) is a practical extension of Kluwer Arbitration. KAPP provides enhanced support in case preparation and strategy by combining deep domain expertise and comprehensive collection of international awards with practical tools and guidance. Other tools of Practice Plus, such as Practical Insights by Topic or Quick Answers cover, among other arbitration steps, the appointment and challenge of an Arbitrator, including the opportunity to compare by jurisdiction or institutional rules. An advantage of these tools is that they quickly direct users to key information about the topic, thereby allowing users to focus on the subsequent steps of their legal work, such as developing their legal strategy.

 

  1. Why are data-driven decisions so important for the field of commercial and investment arbitration?

Nikos: Using data to support decision-making ensures that the decisions taken are supportable and comprehensive. It allows for a comprehensive analysis of all relevant aspects both regarding the suitability of a potential Arbitrator as well as any potential conflicts of interest or issue conflicts. It also helps to reduce the risk of challenges of a selected Arbitrator. Finally, it helps in discussions with the client, who is ultimately the one that must feel comfortable with the selection of the Arbitrator.

Ewa: The stakes in arbitrator selection are high and using data to support these decisions provides confidence in your case strategy and chosen arbitrator.  Below is a sneak preview of the Profile Navigator and Relationship Indicator tools, but it only shows a small portion of the extensive information available.

  1. How do the Profile Navigator and Relationship Indicator tools approach issue conflicts, particularly with regard to the disclosure obligations found within the draft Code of Conduct being discussed at UNCITRAL Working Group III?

Nikos: The new Code of Conduct that will soon be adopted by UNCITRAL Working Group III will impose significant disclosure obligations on potential and selected Arbitrators (more analysis of the UNCITRAL code of conduct, including earlier drafts, here, here and here). These obligations include inter alia the disclosure of all the cases in which the prospective arbitrator was involved in various roles, not only as arbitrator but also as counsel or expert. The comprehensive data provided by KAPP allows all parties involved to verify the information disclosed by the arbitrator. It also enables the user to analyse with whom a prospective arbitrator has worked in past cases. In this way KAPP’s comprehensive tools are already taking into account this development, which in no doubt will spill over into commercial arbitration practice.

 

  1. How do you ensure the accuracy and currency of information?

Ewa:  Over more than 30 years Wolters Kluwer has developed a reputation for delivering high quality expertise to support decision making. That is where the expertise of Nikos Lavranos comes in as one of our lead Subject Matter Experts (SMEs). We are grateful to have excellent SMEs working on this project in combination with machine learning. Regarding currency of information – we are continuously adding awards from various sources and use robot/automated scraping. Importantly, our technology makes sure to retrieve the information on any new award released publicly and accounts for data that reflects any changes to the tribunal’s composition.

Nikos: Generally, it is important to highlight that all information is double checked by the various layers of SMEs, so that the information in the system is as accurate as possible. If necessary, the data is verified by confirming it with other publicly available information. The system is also constantly updated and new data is rigorously double checked. In this way the combination of machine learning and human data collection and verification ensures the highest possible standard.

 

  1. Can arbitrators supplement their own profiles?

Ewa: The data-driven arbitrator profiles that already exist in our database can be supplemented by information that is presented in a structured way. Please contact [email protected] if you would like further information.

 

  1. There is still much work to do within the international arbitration community to boost diversity. Do you see the Profile Navigator and Relationship Indicator tools as playing a positive role in profession-wide initiatives to promote diversity, equity and inclusion?

Ewa: Our database includes nearly 14,000 (and growing) professionals including arbitrators, expert witnesses and counsel at all stages of their career, with expertise across all geographies and sectors. All the information is based on data so the user can easily assess the expertise and fit for the case. Our advanced search allows users to search by criteria that fit the case needs and suggests profiles that otherwise would have not been considered. As Nikos has previously mentioned, using objective and comprehensive data allows the selection process to be more inclusive.

 

  1. Do you have plans for further enhancements to the Profile Navigator and Relationship Indicator tools?

Ewa: Absolutely. The obvious one is adding more profiles, more awards, more data, and increasing the involvement of artificial intelligence (AI).

The practice of international arbitration has been evolving and our products do as well. By use of technology, combined with our rigorous quality control measures, we want to equip our users with the most comprehensive database of arbitrators and other stakeholders involved in the arbitration process. Applying the data opens many doors and new options on how technology can be applied to other aspects of the arbitration process and decision making.

 

  1. What parting words do you have for Kluwer Arbitration Blog readers?

Ewa: We are continuing to expand Kluwer Arbitration’s capabilities as a full-service solution that provides our customers with the right tools to drive to the best possible outcomes during the arbitral process. However, we cannot do it without you. Kluwer Arbitration and KAPP have been developed in collaboration with the arbitration community. Any feedback, including constructive criticism, suggestions and ideas are welcome! We will consider them all.

Nikos: Ultimately, the aim is to provide accurate and comprehensive information to serve the arbitration community in resolving disputes as well and as cost-effective as possible.

Arbitrators wishing to amend their profiles on the Profile Navigator and Relationship Indicator tool can contact Wolter Kluwers here.

Further posts on our Arbitration Tech Toolbox series can be found here.

The content of this post is intended for educational and general information. It is not intended for any promotional purposes. Kluwer Arbitration Blog, the Editorial Board, and this post’s authors make no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information in this post.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Communication and Conflict

Communication and Conflict Blog - Sun, 2022-05-22 16:24
A website about the relationship between communication and conflict. Articles on conflict resolution, mediation, why effective communication is important for conflict management in relationships.

4-word-build, A Conflict Resolution Exercise and Teamwork Exercise

Communication and Conflict Blog - Sun, 2022-05-22 16:14
4-word-build - a conflict resolution exercise for gaining a shared understanding of a concept in a group or team. The exercise enables all present to participate in the creation of the shared view.

Open Position: Assistant Editor of Kluwer Arbitration Blog

Kluwer Arbitration Blog - Sun, 2022-05-22 01:51

The Editorial Board of Kluwer Arbitration Blog announces the opening of the following position with Kluwer Arbitration Blog: Assistant Editor for South and Central America.

The Assistant Editor reports directly to the coordinating Associate Editor and is expected to (1) collect, edit and review guest submissions from the designated region for posting on the Blog, while actively being involved in the coverage of the assigned region; and (2) write blog posts as contributor. You have the opportunity to work with a dynamic and dedicated team and liaise with the best arbitration counsel in the world.

The Assistant Editor will work remotely. Please note that this is a non-remunerated position. If you are interested, please submit a resume and cover letter by email to Dr Crina Baltag, [email protected]. Only shortlisted candidates will be contacted. The deadline for receiving the applications is 5 June 2022.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
by Arif H. Ali & David L. Attanasio
€ 202
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KluwerArbitration ITA Arbitration Report, Volume No. XX, Issue No. 7 (May 2022)

Kluwer Arbitration Blog - Sat, 2022-05-21 03:15

The Institute of Transnational Arbitration (ITA), in collaboration with the ITA Board of Reporters, is happy to inform you that the latest ITA Arbitration Report was published: a free email subscription service available at KluwerArbitration.com delivering timely reports on awards, cases, legislation and current developments from over 60 countries and 12 institutions. To get your free subscription to the ITA Arbitration Report, click here.

 

The ITA Board of Reporters have reported on the following awards/court decisions.

 

A. v. B and C. Ltd, Court of Appeal of Turku, Case No. S 21/334, Decision No. 68, 01 February 2022

Ina Rautiainen and Anna-Maria Tamminen, Hannes Snellman Attorneys, ITA Reporters for Finland

The Turku Court of Appeal evaluated whether the decision of the District Court regarding the appointment of an arbitrator may be appealed. Pursuant to Section 17(3) of the Finnish Arbitration Act, a decision of a court regarding the appointment of an arbitrator is not subject to appeal. The Court of Appeal found, however, that the decision can be appealed because a prohibition of appeals would not be acceptable on the grounds presented. Without a possibility to appeal, the parties’ legal protection could be compromised as well.

The Court of Appeal also evaluated whether the court should appoint an arbitrator in the dispute between the parties. Pursuant to Section 17(1) of the Arbitration Act, when a party has requested the court to appoint an arbitrator (except for certain exceptions), the court should make the appointment, unless it is apparent that there are no legal grounds for the arbitration. The Court of Appeal found that in this case, contrary to the District Court’s decision, the lack of legal grounds for the arbitration was not apparent. As the parties had intended to resolve their disputes in arbitration, the matter was returned to the District Court for the purposes of appointing an arbitrator.

In conclusion, the Court of Appeal found that an error in an arbitration clause does not render the arbitration clause entirely invalid if that has not been the intention of the parties. There is no prior publicly available case-law regarding the issue.

 

Parties Not Indicated, Supreme Court of Greece, A.P. 35/2019, 10 January 2019

Ioannis Vassardanis, Ioannis Vassardanis & Partners, ITA Reporter for Greece

Following the rendering of an arbitral award in Athens (seat of arbitration), one of the Parties submitted a request to the Athens Court of Appeal in order to annul the arbitral award on the grounds that the arbitration agreement was not valid under the law the parties had chosen (Greek Law). The arbitration agreement formed part of a public procurement multi-page contract which was signed on all pages (and on the last page), except for the pages on which the arbitration clause was written. Both before the arbitral tribunal and before the Greek Courts, the party seeking the annulment of the Award claimed the invalidity of the arbitration agreement. The Athens Court of Appeal annulled the arbitral award, ruling that the arbitration agreement contained in the contract was void. However, the Supreme Court of Greece (‘Areios Pagos’) held that, in finding that the arbitration agreement is void, the Athens Court of Appeal incorrectly interpreted the applicable law; therefore, it annulled the Court of Appeal decision.

 

Parties Not Indicated, Supreme Court of Greece, A.P. 760/2019, 01 July 2019

Ioannis Vassardanis, Ioannis Vassardanis & Partners, ITA Reporter for Greece

Arbitral award. Invalidity of the advance waiver (ex ante) of the right to annul an arbitral award. Validity of the advance waiver of the right to annul an arbitral award when the ex ante waiver of the right to annul an award has been ratified by law. The ICC Rules have the force of law. Implied waiver of the right to object to any irregularity of the constitution of the arbitral tribunal since it has not been brought before it (Art 39 2012 ICC Rules). This procedural forfeiture should be invoked by the defendant. Criteria for qualifying an arbitration as international.

 

SSK Ingeniería y Construcción S.A.C. v. Técnicas Reunidas de Talara S.A.C., Superior Court of Justice of Lima, Expediente Judicial Electrónico N°00207-2021-0-1817-SP-CO-01, 15 February 2022

Fernando Cantuarias Salaverry, Law School of Universidad del Pacìfico, ITA Reporter for Peru

The Commercial Chamber of the Superior Court of Justice of Lima recognizes a foreign award under the 1958 New York Convention.

 

CC/Devas (Mauritius) Ltd. v. Republic of India, United States District Court, District of Columbia, No. 1:21-CV-106-RCL, 24 March 2022

Viva Dadwal, King & Spalding LLP, ITA Reporter for the United States of America

A court adjudicating recognition and enforcement proceedings may grant a motion to stay before deciding its own jurisdiction using the court’s ‘inherent powers.’  In such instances, the court will weigh the ‘competing interests’ of judicial economy and potential hardship.  A request for security is premature if a court has not yet established jurisdiction.

 

Olin Holdings Limited v. State of Libya, United States District Court, Southern District of New York, No. 1:21-cv-4150 (JGK), 22 March 2022

Hanna Azkiya, King & Spalding LLP, ITA Reporter for the United States of America

The Court had two items before it: (1) the petition by Petitioner Olin Holdings Limited (‘Olin’) to confirm a Final Award (‘Award’) issued by the Arbitral Tribunal of the International Chamber of Commerce (the ‘Tribunal’), pursuant to an arbitration Olin brought against Respondent the State of Libya (‘Libya’) under the Agreement on the Promotion and Reciprocal Protection of Investments between the Government of the Republic of Cyprus and the Great Socialist Libyan Arab Jamahiriya dated 30 June 2004 (the ‘Agreement’), and (2) Libya’s motion to dismiss the Olin’s petition on forum non conveniens grounds.

The Court stated that a petition to confirm an arbitral award is treated as a motion for summary judgment, which must be granted if the movant can show that no genuine dispute as to any material fact exists and the movant is entitled to judgment as a matter of law.

The Court treated the Tribunal’s jurisdictional ruling with ‘considerable deference,’ as opposed to reviewing it ‘de novo,’ agreeing with Olin that the threshold issue between the parties was not an issue of arbitrability (i.e., whether there is a contractual duty to arbitrate at all), but a procedural gateway issue about when the contractual duty to arbitrate arises. The Court also held that ‘there is clear and unmistakable evidence’ that the parties intended to arbitrate arbitrability, thus ‘the Tribunal’s jurisdictional ruling is entitled to deferential review.’

Under the ‘deferential review’ standard, the Court must confirm the Award so long as the arbitrators ‘explain their conclusions in terms that offer even a barely colorable justification for the outcome reached,’ no matter how persuasively litigants argue for a different result.

The Court held that Libya failed to carry its heavy burden to prove that one of the seven grounds under the New York Convention to refuse enforcement of an arbitral award applies. Libya relied on only one ground under the New York Convention to refuse enforcement, i.e., Article V(1)(c), which the court of appeals has explained should be ‘construed narrowly’ and not be used to second guess the arbitrators’ decision. The Court found that this was precisely what Libya asked from the Court, despite the issue being one already agreed by the parties to be submitted to the arbitrators.

The Court further found that the Tribunal unanimously agreed that Olin’s decision to bring proceedings in Libya did not preclude a subsequent arbitration proceeding, and that such a conclusion was obtained after considering several factors, all of which the Court found to be reasonable or ‘there is at least a barely colorable justification for it.’

With respect to Libya’s motion to dismiss, the Court followed the three-step framework established by the United States Court of Appeals for the Second Circuit in Iragorri v. United Techs. Corp., 274 F. 3d 65, 73-74 (2d Cir. 2001), and held that (1) on balance of various factors, and heeding the United States Supreme Court’s guidance in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947) that the petitioner’s choice of forum should rarely be disturbed, Olin’s choice of forum is entitled to a small degree of deference; (2) there is one adequate alternative forum to adjudicate this dispute, however; (3) upon weighing the private and public interest factors, in this case neither the private interest factors nor the public interest factors weigh in favor of forum non conveniens dismissal. The Court therefore denied Libya’s motion to dismiss.

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LIDW 2022: Back to the Future: A Look at the Future of Energy Disputes in a Post-Covid World

Kluwer Arbitration Blog - Sat, 2022-05-21 01:32

On the last day of the #LIDW22, Herbert Smith Freehills, Linklaters, Norton Rose Fulbright, Twenty Essex, Vinson & Elkins, and Clyde & Co hosted a session on “The future of energy disputes in a post-covid world”.

The speakers – Michael Ashcroft QC (Twenty Essex), Rebecca James (Linklaters), Colin Johnson (HKA), Richard Power (Clyde & Co), James Robson (Herbert Smith Freehills), Holly Stebbing (NRF), Louise Woods (Vinson & Elkins), and Rachel Lidgate (Herbert Smith Freehills) – shared their perspectives on how the energy disputes landscape will look in the years to come.

 

An Increase in Price Reviews and Force Majeure Claims

The session kicked off with one panellist reflecting on contractual disputes amid volatility in energy prices. The last couple of years has put a lot of uncertainty in the energy markets. The post-covid recovery has not been steady, and there are still disruptions in both the demand and supply. On top of that, the war in Ukraine has added an extra layer of pressure on energy prices.
The panellist anticipated an increase in the number of disputes regarding price reviews, hardship clauses, contractual flexibility, and force majeure. In particular, one recent case before the Commercial Court, MUR Shipping BV v RTI LTD, highlights the effects of force majeure clauses in international sanctions disputes.

 

Trends in Climate Change and Environmental Disputes

In line with this year’s #LIDW22 focus on sustainability and awareness of climate change issues, the panel also addressed current developments in climate change litigation. Two panellists expressed their views on climate change disputes, and particularly on how strategic climate litigation, shareholder activism, and government pressure are shaping the future of the energy sector.

They explained that climate change litigation is often pursued for strategic reasons, with claimants seeking to change States’ regulations and individual companies’ corporate policies. There are examples in the recent wave of claims seen against governments in relation to climate change, as well as significant cases brought against multinationals in relation to climate change impacts and climate change transition plans, some of which have succeeded. This increase reflects that claimants are being increasingly creative in pleading their cases and is a trend which is set to continue; it also underscores that the climate disputes landscape is rapidly evolving on a global scale.

The panellists then analysed three trends to watch:

  1. Consumer behaviour is increasingly shaped by concerns for the environment, leading to so-called “greenwashing” when companies are trying to advertise themselves as eco-friendly and use misleading environmental representations. Both regulators and the public may inquire about the accuracy and evidence supporting claimed sustainability commitments.
  2. More claims against States in response to climate actions are expected. Claimants will rely on bilateral investment treaties and contract-based stabilisation clauses to obtain redress for amendments to the regulatory framework affecting investments. The RWE v The Netherlands case is one example, though many such cases are expected to follow. Whether these cases will be successful is yet to be seen. However, as some have argued before, they might serve a strategic purpose aiming at having “chilling” effects.
  3. Amid corporate environmental commitments, there is room for conventional contract claims for breaching specific climate obligations in an agreement. For example, a company may require that its suppliers meet specific climate commitments. A breach of environmental obligations could give rise to the right to terminate the contract or obtain liquidated damages.

Ultimately, they encouraged the conference attendees to “become climate lawyers” by staying informed about new developments in the field and understanding climate litigation hotspots.

 

Issues Arising from Incomplete or Inaccurate Information and Assumptions

Another panellist referred to the issues arising from incomplete or inaccurate information and assumptions in contracts for offshore decommissioning. The analysis was based on the LOGIC General Conditions (2018) and its Guidance Notes. The panellist argued that in these standard conditions, numerous indications suggest that a gap in the information provided to the contractor may justify a variation under the agreement.

 

Impact of Climate Change on Valuation and Risk

The next panellist emphasised that, in general terms, climate change is not factored into the valuation of companies. The panellist predicted a shift in this trend, as environmental risks become more evident. In fact, disclosure obligations are stricter than they were a few years ago, and companies will soon be compelled to disclose the impact of climate change on their business. Be that as it may, there is no clear way to factor climate change risks into business valuations. The audience was left with a thought-provoking statement regarding valuations: will we eventually see a premium for climate change risks equivalent to the premium we have for country risks?

 

Low Carbon Hydrogen Projects

The panel then focused on the industry of low carbon hydrogen projects. In one panellist’s view, there will be disputes in three main areas. First, this industry will require substantial infrastructure investments in order to be viable in the future. And since it is a relatively new sector, not many experienced contractors are suitable to undertake these types of construction projects. As a result, this is an area with significant risks of construction disputes. Second, similar to other energy industries, joint venture agreements to develop hydrogen projects will be a source of potential conflicts. Third, the lack of regulation poses a risk to ongoing projects. The enactment of new regulations may negatively impact existing facilities, including by leading to delay, disruption, and devaluation of certain projects.

 

Decarbonisation, Decentralisation, and Digitisation

Finally, the panel shared some views on dispute resolution in decentralised and digitised networks. The energy transition requires three “Ds”: decarbonisation, decentralisation, and digitisation. It is not only about producing green energy. Transmission and distribution are also issues, as there will be enormous pressure placed on the transmission and distribution network.

A panellist described a scenario where part of the demand for energy in a particular area could be satisfied by locally producing and distributing energy, effectively decentralising the process in microgrids. Buildings could produce small amounts of renewable energy (i.e., solar energy) and sell the excess to other consumers or energy aggregators.

As for digitisation, the panellist argued that it would play a key role in the development of microgrids. “Prosumers” (producers and consumers) do not have the time or ability to track and record all the small-scale energy sales between each other. This process must happen automatically. Therefore, self-executing smart contracts will be central to operations. In this context, digitisation could have a potentially dramatic effect on the future of energy disputes. They will be driven by an increasing number of small players with low-value claims, which may be challenging to litigate cost-effectively. Additionally, many of these disputes will be related to the operation of smart contracts.

 

Conclusion

In conclusion, this session offered an insightful overview of the recent developments in energy disputes. Whilst there are relevant issues in more traditional energy industries, renewable energies and climate change concerns are shaping the future of energy disputes and, in consequence, litigation and arbitration practices.

 

More coverage from LIDW is available here.

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Who is Bound by an Arbitration Agreement? A Conflict of Laws Analysis in Lifestyle Equities v Hornby Street

Kluwer Arbitration Blog - Fri, 2022-05-20 01:29

In Lifestyle Equities CV v Hornby Street (MCR) Ltd [2022] EWCA Civ 51, the English Court of Appeal (or the “Court”) considered what law applied to the issue of whether a non-party to the arbitration agreement is bound by it.

According to the majority of the Court, the issue is one of the scope of the arbitration agreement, and should therefore be resolved by the proper law governing it. Snowden LJ (dissenting), however, characterised the issue differently, as “whether the assignment of certain trademarks from an original owner to the claimants have the effect of binding the claimants to an arbitration agreement contained in a contract (a “Co-existence Agreement”) between the original owner and the defendants.” That led him to conclude that it is the law governing the trademarks, rather than the law governing the arbitration agreement, that applies to the issue of whether a non-party to the arbitration agreement is bound by it.

This post will further analyse these views, arguing that the divergent reasoning highlights the fraught issue of characterisation under the English choice of law rules, and poses a question ripe for clarification from the Supreme Court: what are the limits on the application of the law governing the arbitration agreement?

 

Lifestyle Equities: Facts and Majority Opinion

The claimants own trademarks in the UK and the EU that protect the “Beverly Hills Polo Club” logo. The logo was originally owned by a Californian entity (the “Original Owner”), who subsequently assigned the trademarks to a different US entity, and eventually to one of the claimants.

Unbeknownst to the claimants at the time of the assignment, when the trademarks were still owned by the Original Owner, the latter had a dispute with one of the defendants, who uses the logo “Santa Barbara Polo & Racquet Club”. To resolve that dispute, the Original Owner and the defendant in question (or the “Club”) entered into a Co-existence Agreement in 1997 on the use of the two logos. The Original Owner consented to the use of the Santa Barbara logo by the Club, and to the Club registering the relevant marks as trademarks in any country in the world. The Club granted equivalent consent to the Original Owner to use and register the Beverly Hills logo. The Co-existence Agreement also contained a choice of law clause for Californian law, and an arbitration clause for a California-seated arbitration under the rules of the American Arbitration Association.

The claimants brought the proceedings analysed in this post against the defendants before the English courts for infringement of the UK and EU Beverly Hills trademarks. The defendants applied for a stay under section 9 of the Arbitration Act 1996 on the grounds that the dispute should have been resolved in arbitration in California. In response, the claimants argued that they had no knowledge of the Co-existence Agreement, and that they were not bound by that agreement when they took assignment of the trademarks by virtue of Article 27(1) of Regulation 2017/1001 on the EU Trade Mark, and section 25(3)(a) of the Trade Marks Act 1994. These provisions provide that “An assignment of a UK (or EU, as appropriate) trade mark must be in writing, and until an application has been made to register the assignment, is ineffective against any person acquiring a conflicting interest in ignorance of it.”

The defendants argued that under Californian law, the claimants were bound by the Co-existence Agreement as assignees of the trademarks, and that in any case the claimants were estopped from denying that they were bound, because the claimants had earlier relied upon the Co-existence Agreement to apply for a trademark in Mexico.

In deciding whether the proceedings should be stayed in favour of arbitration, the Court drew an important conceptual distinction: whether a person becomes a party to the arbitration agreement, as distinct from whether a non-party is bound in some way by the arbitration agreement.

In relation to the first issue, both the majority and Snowden LJ decided that the claimants had not become parties to the arbitration agreement. The question here is whether a contractual consensus existed between the claimants and the defendants, and the law that applies to the issue is Californian law, being the law governing the putative agreement. There had been no Californian law evidence on this matter, and the judge in the lower court had been wrong to consider the position on this issue under English law.

The Court’s reasoning then diverged. The majority held that the issue of whether the claimants were bound by the arbitration agreement is governed also by Californian law, being the law applicable to the arbitration agreement. The majority considered that whether a party is bound by an arbitration agreement is an issue of the scope of that agreement. Since the law governing the arbitration agreement governs the issue of who becomes a party to it (as per the recent Supreme Court decision in Kabab-Ji v Kout Food Group [2021] UKSC 48, [18]) logically the same law must apply to the question of who is bound by it.

 

Dissenting Opinion

Snowden LJ, however, gave a powerful dissenting opinion. He considered that the issue should be characterised as whether the assignment of the trademarks have the effect that the claimants are bound by the arbitration agreement. The law applicable to this question is not the governing law of the arbitration agreement.

In support of this reasoning, he cited Egiazaryan v OJSC OEK Finance [2015] EWHC 3532 (Comm). There, C and R1, a Russian company, entered into a joint venture agreement, which contained a London arbitration clause, and which was expressed to be governed by English law. R2, another Russian company, owned R1 but was not a signatory to the arbitration agreement. C initiated arbitration against both R1 and R2, and in response to R2’s jurisdictional objection argued that R2 could be joined to the arbitration because under Russian law, R2, as the parent company, would be liable for the contractual obligations of R1. The judge agreed.

The judge accepted the conceptual distinction between who was party to the arbitration agreement and who could be joined to the arbitration. He went on to hold that:

“…if the question is one as to whether a non-signatory of the agreement can be joined by virtue of a concept such as agency or, in this case, a principle that shareholders or parents are obliged to arbitrate on contracts entered into by the signatory, then it is not the proper law of the contract which gives the answer, but English conflicts rules would look to another law, in this case the law of incorporation of the signatory.”

To Snowden LJ, Egiazaryan demonstrates the “limits on the application of the governing law of the arbitration agreement” and stands for the proposition that where the question is whether a non-party must be treated as being bound by the arbitration agreement, the law governing the arbitration agreement “would not be applicable”. As he noted, “Where it is sought to treat a person who is not a party to an arbitration agreement as bound by it, the contractual consensus between the existing parties cannot provide an answer. There must be some other relevant factor to justify that conclusion.” The other “relevant factor”, here, is that the claimants took assignment of the trademarks (in Egiazaryan it was the corporate relationship between R1 and R2). Since the law governing the trademarks would apply to the underlying dispute as to whether the co-existence agreement bound the claimants, that law (English law for English trademarks, and EU law for EU trademarks) would apply to whether the claimants are bound by the arbitration clause.

The majority, on the other hand, thought that Egiazaryan merely showed that it was permissible, but not mandatory, to look outside the law governing the arbitration agreement (which in this case is Californian law) to determine whether a non-party is bound by it. In this case, there is no need to look outside Californian law. Here the issue is one of the Californian law of contract which take a broad view as to who is bound by it.

 

Clarification Needed

Regardless of whether Egiazaryan was correctly decided, and whether Snowden LJ’s or the majority’s interpretation of that decision is correct, all three justices in Lifestyle Equities acknowledged the limits of the law governing the arbitration agreement. It is at least permissible, if not mandatory, to look outside that law to determine whether a non-party is bound by the arbitration agreement in certain circumstances.

In Lifestyle Equities, what law applies to whether claimants are bound by the arbitration agreement partially boils down to a question of characterisation of that issue – whether the issue is one of the contractual scope of the arbitration agreement, or of the effect of the assignment of trademarks. The limits of the law governing the arbitration agreement, as well as how such limits apply in this case, are ripe for clarification.

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The 2022 Agreement between Mainland China and Macau: Judicial Interim Measures in Support of Arbitration in the Pearl River Delta

Kluwer Arbitration Blog - Thu, 2022-05-19 01:00

On 25 February 2022, the Supreme People’s Court (“SPC”) and the Secretary for Administration and Justice of the Macau Special Administrative Region (“Macau”) signed an Agreement for mutual assistance regarding interim measures issued in arbitration proceedings in Mainland China and Macau (“Agreement”), which entered into force on 25 March 2022.

The Agreement permits parties to institutional arbitration seated in Mainland China or Macau to cross-request judicial measures from courts in the other jurisdiction. The available measures to applicant of one jurisdiction and their respective requirements are in accordance with the civil procedural rules of the other jurisdiction. Further, applications for court-ordered interim measures must be processed as expeditiously as possible. In addition, subject to the applicable local legal requirements in each jurisdiction, courts may make request that parties provide certain guarantees prior to issuing the interim measure (Article 7) and parties may have a right to appeal (Article 8).

 

Features of the Agreement

Specifically, parties to civil and commercial disputes which have been submitted to institutional arbitrations in Macau in accordance with Macanese arbitration legislation can request the Second Instance People’s Courts of the domicile of the responding party in Mainland China or of the location of the assets or evidence, to issue measures to safeguard assets, preserve evidence or preserve certain conducts (Articles 1 and 2). If parties apply for such measures prior to commencing arbitration proceedings, they shall furnish evidence of having initiated the institutional arbitration proceedings within 30 days of the issuance of such measures, or such measure will otherwise be discharged (Article 2).

On the other hand, parties to institutional arbitrations in Mainland China may file their request with the First Instance Court of Macau for interim measures seeking to conserve or anticipate certain effects in protection of the rights of the applicant (Article 1). Similarly, where the request for interim measures is filed with the Macanese Court prior to commencing the arbitration, evidence that an arbitration is commenced must be provided within the specified statutory period, failing which the granted measures will expire (Article 5).

In terms of requirements, parties seeking the support of Mainland Chinese courts must provide, inter alia, the arbitration agreement, documents related to the arbitration request and proof of admission of the case by the relevant arbitral institution; non-Chinese materials must be accompanied by Chinese translation (Article 3). They may also provide information of any assets located in Mainland China for the provision of warranties and certificates of financial standing (Article 4). In parallel, parties applying to the Macanese Court are required to submit comparable materials in either Portuguese or Chinese, or to provide translation in either of the two official languages. Specifically, parties will need to provide proof of threat to the legitimate rights of the applicant and of justification of such fear of harm to such rights (Article 6).

 

Commercial Context of the Agreement

The Macanese government officials highlighted in a recent announcement that not only does this Agreement contribute to an improved and increasingly comprehensive judicial cooperation in civil and commercial matters between Mainland China and Macau, it also facilitates the promotion of Macau as a viable choice of seat of arbitration. This is in line with the development plans attached to the Hengqin Cooperation Zone between Guangdong and Macau, as well as the Greater Bay Area economic plan to promote regional development and cooperation in the Pearl River Delta (previously reported here), which altogether support the “One Belt, One Road” global investment initiative announced in 2013, as Macau was considered to have strategic internationalization value due to its exceptional legal environment as a civil law country with trilingual capacity, as well as its favourable infrastructure and hospitality conditions.1)Ana Coimbra Trigo, “Arbitragem e Providências Cautelares no Delta do Rio das Pérolas. Comentário ao Ac. do Tribunal de Segunda Instância da Região Administrativa Especial de Macau de 15 de março de 2018” [Arbitration and Interim Measures in the Pearl River Delta], PLMJ Arbitration Review, N. 3, 63-80, 2019. jQuery('#footnote_plugin_tooltip_41483_24_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41483_24_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

 

Legal Context of the Agreement

This Agreement comes as no surprise to regional practitioners.

Tellingly, the new 2019 Macau Arbitration Law (reported here) provides in its Article 15(4) that courts have jurisdiction to render interim measures related to arbitration proceedings irrespective of whether the seat is in Macau. However, until this Arrangement, parties that sought to rely on interim relief rendered and enforced in Mainland China had to initiate arbitration proceedings in Mainland China.

In addition, the model of cooperation adopted in the Agreement follows and complements the 2007 Agreement on the Mutual Confirmation and Enforcement of Arbitral Awards between Mainland China and Macau. Interestingly, Article 11 of this 2007 instrument allows the award creditor to request that the enforcement court, under lex loci executionis, to issue interim measures before or after recognition of the award.

Most relevantly, the Agreement mirrors in structure and content (with adaptations to Macanese legal particularities), the 2019 Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“PRC-Hong Kong Arrangement”) (reported here in a previous post). The experience already accumulated by Hong Kong and Chinese arbitration institutions and courts under the PRC-Hong Kong Arrangement is relevant,2)Statistics available from the HKIAC show that as of 22 March 2022, there were 67 HKIAC applications related to pending arbitral proceedings and show that 38 out of the reported 41 decisions issued by Chinese courts on requests for interim measures were granted. jQuery('#footnote_plugin_tooltip_41483_24_2').tooltip({ tip: '#footnote_plugin_tooltip_text_41483_24_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and may guide Macanese institutions and courts which appear to have limited track-record in this regard. It is noted that the SPC has issued a Note regarding the interpretation and application of the PRC-Hong Kong Arrangement, as well as template documents to be used in the process (English translation available here and here). Similar guidance and templates will be useful under this Agreement.

Overall, the existence of the Agreement and the PRC-Hong Kong Arrangement appears to be a unique feature of arbitration in the Pearl River Delta, as no similar framework seems to exist in the international arena for the request of judicial interim measures outside of the arbitral seat in aid of arbitration.

 

The Future

Where there is a will, there is a way. China’s persistent plan for Macau’s role as a global tourism and leisure center, as well as an economic and trade cooperation platform between China and the Lusophone countries, has led to the establishment of several recent arbitration initiatives worth mentioning. These include the promulgation of the Model Law-inspired 2019 Arbitration Law, an innovative Macau tax incentive scheme to choose arbitration in lease agreements in 2020, as well as the consolidated revision of the two Macanese main arbitration institution rules (both reported here).

On the one hand, it can be said that this Agreement constitutes an additional promising commercial advantage to parties seeking to arbitrate in Macau, now able to seek help from Mainland Chinese courts in cases of urgency. The reverse can also take place. Therefore, parties to arbitrations taking place in China and Macau and with assets in these locations should be aware of this Agreement, and the implications arising thereof. All in all, this Agreement has the potential to contribute to effective safeguarding of the rights and interests of parties to arbitration in the Pearl River Delta.

On the other hand, these arbitration modernization steps are attempts to compete with Hong Kong and Singapore, which remain Asia’s favorite arbitral seats. Arbitration institutions and courts in Macau will be further involved in building this arbitration bridge between Mainland China and Macau. It will be interesting to see how the results of these steady and complementing efforts, including the Agreement, will materialize in the coming years in promoting Macau as an arbitration seat.

References[+]

References ↑1 Ana Coimbra Trigo, “Arbitragem e Providências Cautelares no Delta do Rio das Pérolas. Comentário ao Ac. do Tribunal de Segunda Instância da Região Administrativa Especial de Macau de 15 de março de 2018” [Arbitration and Interim Measures in the Pearl River Delta], PLMJ Arbitration Review, N. 3, 63-80, 2019. ↑2 Statistics available from the HKIAC show that as of 22 March 2022, there were 67 HKIAC applications related to pending arbitral proceedings and show that 38 out of the reported 41 decisions issued by Chinese courts on requests for interim measures were granted. function footnote_expand_reference_container_41483_24() { jQuery('#footnote_references_container_41483_24').show(); jQuery('#footnote_reference_container_collapse_button_41483_24').text('−'); } function footnote_collapse_reference_container_41483_24() { jQuery('#footnote_references_container_41483_24').hide(); jQuery('#footnote_reference_container_collapse_button_41483_24').text('+'); } function footnote_expand_collapse_reference_container_41483_24() { if (jQuery('#footnote_references_container_41483_24').is(':hidden')) { footnote_expand_reference_container_41483_24(); } else { footnote_collapse_reference_container_41483_24(); } } function footnote_moveToReference_41483_24(p_str_TargetID) { footnote_expand_reference_container_41483_24(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_41483_24(p_str_TargetID) { footnote_expand_reference_container_41483_24(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Behind Closed Doors: Confidentiality and Arbitration

International Arbitration Blog - Wed, 2022-05-18 17:09
Confidentiality and privacy have long been regarded as the cornerstones of the arbitration process.

Interviews with Our Editors: Professor Hi-Taek Shin, Chairman of KCAB INTERNATIONAL

Kluwer Arbitration Blog - Wed, 2022-05-18 01:00

Professor Hi-Taek Shin is the Chairman of KCAB INTERNATIONAL, which is the international division of the Korean Commercial Arbitration Board (“KCAB”), Korea’s sole commercial arbitral institution. In addition to his duties as Chairman of KCAB INTERNATIONAL, he sits regularly as an arbitrator affiliated with Twenty Essex, both in international commercial arbitrations and investment treaty arbitrations. He is on the panel of arbitrators for the major international arbitral institutions, such as HKIAC, ICDR, ICSID, KCAB and SIAC. He recently retired from Seoul National University School of Law, where he had taught international business transactions and dispute resolution arising therefrom since 2007. Prior to moving to academia in 2007, he was a partner at a leading Korean law firm, where he specialized in mergers and acquisitions, cross-border investments and the resolution of disputes arising from cross-border investment projects.

Professor Shin, thank you for joining us on the Kluwer Arbitration Blog!  We are grateful to hear your perspective on Korea as an arbitration hub, the dynamic rise of KCAB INTERNATIONAL and your experience as an arbitrator.

 

  1. You have witnessed most, if not all, of the major milestones of Korea’s rise to prominence on the modern international arbitration scene. Can you please describe what you consider to be the watershed moments?  Also, why is it that Koreans seem to love international arbitration so much?

The KCAB was established in 1966 and celebrates a rich history, with its 56th anniversary this year. I think it is probably one of the most enduring arbitral institutions in Asia. Since its establishment, we have seen the number of arbitration cases grow substantially with each passing year. In fact, last year we received a total of 500 new arbitration cases.

KCAB was initially established at the initiative of the Korean government as a dispute resolution center largely focused on disputes arising from export and import business transactions. In more recent years, KCAB has been keenly aware of the growing expectation of local and global companies for high-quality international arbitration case management, and accordingly KCAB has invested in its capacity for international arbitration services. Such efforts have progressed significantly since 2010 when Korea started to reflect on the main contents of the 2006 amendments to the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).

Korea’s Arbitration Act was amended in 2016, and the KCAB International Arbitration Rules were revised in 2016 as well. To establish arbitration infrastructure that satisfies the existing demand for arbitration in Seoul, we also constructed a facility for hearings in 2013 called the Seoul International Dispute Resolution Center (“Seoul IDRC” or “SIDRC”). Subsequently, in 2018, recognizing the importance of our growing international case load we established KCAB INTERNATIONAL, an institution exclusively dedicated to our international arbitration cases. In the same year, SIDRC and KCAB were also merged as one of the finishing touches of our effort to adapt.

I would say Korea’s attitude toward wanting to be ahead of the curve and its adaptability are the reasons why Korean companies are willing to adopt new systems to manage and resolve their legal risks. This has contributed to the success of international arbitration in Korea.

 

  1. In the time you have been closely involved with the Seoul IDRC and KCAB INTERNATIONAL, what are some of your proudest achievements?

As mentioned above, the SIDRC was established in 2013 as part of an effort to make Seoul a more arbitration-friendly place and provide professional services with a reasonable fee system for the hearings of major arbitral institutions around the world, including KCAB. Since its establishment, the SIDRC has received positive feedback for its advanced IT services and has also supported various institutions such as ICC, SIAC, and HKIAC who have held their hearings at SIDRC. We are pleased to have served all those who have visited Korea and also to have repeatedly hosted relevant arbitral events through this platform.

The fact that the SIDRC has risen to all of the challenges posed by COVID-19 and that it has enabled arbitral tribunals, legal counsel, and parties to utilize our sophisticated virtual hearing facilities where in person hearings were not feasible, has helped us garner appreciation and respect from the arbitration community.

It has personally been extremely rewarding for me to have been involved with the expansion of the SIDRC and KCAB INTERNATIONAL.

 

  1. I understand that you took part in the task force to revise Korea’s Arbitration Act in 2016 to incorporate the 2006 amendments to the Model Law. What were some of the key amendments to the Arbitration Act and are you aware of any notable cases that have interpreted such amendments or other ways in which the amendments have had a practical impact on the arbitration environment?

I believe the reason for continuous amendments to the Act was to expand the versatility of arbitration. By broadening the scope of arbitration, the amendments have sought to achieve arbitrability of disputes across several fields, in turn facilitating greater party autonomy and improving the overall framework for arbitration of disputes.

The amended Arbitration Act reflects relaxation of several former formal requirements of arbitration, which is in line with the 2006 amendments to the Model Law. Particularly, the inclusion of non-property rights within the scope of arbitrability has made it easier for more people to get their disputes resolved by arbitration.

Also, extensively adopting the interim measure provisions from the 2006 amendments to the Model Law is another crucial improvement. As is well known, the court’s active cooperation and support are essential to make arbitration effective. It was essential, therefore, to set strong timelines for the court to assist with interim measures by strengthening the court’s cooperation in the examination of evidence.

Furthermore, the recognition and enforcement procedure of arbitral awards, for which improvements were constantly requested, was simplified.

 

  1. As you have mentioned, the KCAB International Arbitration Rules (“KCAB Rules”) were revised significantly in 2016 to include, among other things, an emergency arbitration procedure, joinder and consolidation provisions and a higher monetary threshold for the expedited procedure. Have users taken advantage of these provisions?

As you are likely aware, the rules of the major arbitral institutions worldwide are increasingly converging in a positive way. Each institution has been closely looking at the other institutions’ rules, and they are constantly benchmarking each other.

Accordingly, KCAB also revised its rules in 2016 based on the then-current needs of the industry. The rules adopted back then, such as the emergency arbitrator and the joinder of additional parties, have been actively in use ever since. I have noticed that several arbitral institutions have recently revised their rules or are working on revisions. Having been closely monitoring these details and considering the needs and expectations of users, we are going to launch a task force for the amendment of our rules based on the suggested improvements that have been discussed during the proceedings with our rules.

For parties who use the KCAB International Arbitration Rules, we work hard to constantly assess what KCAB can provide to cater specifically for user convenience while tackling any specific issues or requirements that parties might think of, and we think that this flexibility in our approach sets us apart from other major arbitral institutions.

 

  1. Sue-Hyun Lim, who served as Secretary General of KCAB INTERNATIONAL from June 2018 to the end of 2021, accomplished a lot for the organization and helped raise its profile internationally. What are your overall impressions of her tenure as KCAB INTERNATIONAL’s first secretary general? Can you tell us about her successor?

With the appointment of our first Secretary-General for KCAB INTERNATIONAL, we wanted to convey a strong message within both the international arbitration and business communities that we had finally arrived. Internally, we had to work towards solidifying the position of KCAB INTERNATIONAL as the sole international arbitral institution based in Seoul and, externally, we had to constantly demonstrate that we are comparable to other international arbitral institutions in line with global standards. There were high expectations for Ms. Lim from the start of her term.

Following her appointment, KCAB INTERNATIONAL reviewed every aspect of its case management process and upgraded it to international standards. In particular, under her leadership, the Secretariat revised its overall process for appointing arbitrators, including through nuanced considerations for the nationality of the parties as well as the diversity of arbitrators, in order to ensure neutral and impartial proceedings.

Ms. Lim worked with our case managers and ensured the best training for them through each stage of the arbitration process so that parties approaching KCAB INTERNATIONAL would find a dedicated, efficient case-management team. Ms. Lim was particularly instrumental in conveying to the international arbitration community that KCAB INTERNATIONAL is evolving and strongly committed to providing sophisticated international arbitration services. We truly laud her for her achievements.

Also, I am delighted to welcome Mr. Steve Kim as our new Secretary General. He has served as the Director of the International Centre for Dispute Resolution (ICDR) of the American Arbitration Association (New York). During his tenure as Director at ICDR, he facilitated an increase in the ICDR’s annual caseload and growth at ICDR. I have great confidence that he will successfully lead KCAB INTERNATIONAL so that it continues to meet the sophisticated and diverse demands of its ADR users, enhancing the reputation of KCAB INTERNATIONAL as a trusted arbitral institution.

 

  1. Institutions such as the HKIAC and SIAC maintain a presence in Seoul, but KCAB has also opened its own offices in Los Angeles, Shanghai and Hanoi. Can you tell us about the role of these offices, their progress up to now, and how they function as part of KCAB INTERNATIONAL’s larger strategy?

The common feature of all three of these overseas offices is that Korean companies and Koreans are actively investing and conducting business in those locations. Along with this fact, even statistically, among the international arbitration cases filed with the KCAB, those from the United States, China, and Vietnam occupy the top three ranks.

Thus, it is practical from a business development point of view to retain these offices. Besides providing consultancy services for parties involving Korea-related disputes within these respective regions, I can tell you that we have also had requests for some cases from Vietnamese or Chinese parties which have been handed over from our overseas offices, after their consultations.

As you might be aware, in Vietnam, Korea is the number one investor in terms of Foreign Direct Investment. Some of these investors will inevitably face cross-border disputes. Setting up overseas offices in these three locations thus helps us to closely support Korean companies and their counter-parts in such regions by providing an efficient dispute resolution system.

 

  1. Besides serving as the chairman of KCAB INTERNATIONAL, you lead an active practice sitting as arbitrator. What type of cases do you gravitate toward the most?

My cases are equally split between commercial arbitration and investment arbitration cases. I strongly feel that my transactional background has proved a valuable asset for my work today as a sitting arbitrator. For most of my practice, 27 years at Kim & Chang, I was a transaction counsel working on international agency agreements, joint-ventures, M&A transactions and also some financial derivatives work. As time progressed, my corporate clients wanted me to also manage their disputes work, as if I had been their in-house counsel, serving as an intermediary between them and their arbitration lawyers. These experiences were very valuable to me.

 

  1. As one of the leading Korean and Asian arbitrators, do you have any tips for the younger generation on how to distinguish yourself and gradually build a personal brand as an arbitrator?

I think the main challenges for young lawyers who aspire to be arbitrators is about how to get their first appointment. Motivation and persistence are essential ingredients for a successful career in international arbitration.

I would say that working with a reputable law firm is a definite indicator of strong capacity and could be one of the building blocks that leads you toward your first appointment. But, even if you are not involved with a leading firm or institution, there are several ways of building your own brand. The primary method is making yourself visible and letting your interest be known to the relevant community.

Attending seminars, arbitrator related courses offered by institutions, and writing articles could also offer a good start. Authoring or co-authoring small pieces and gradually shifting toward writing articles on more serious issues could be a great way to ease into academic writing. Serving as an editor of an arbitration publication could also help to make great connections with members of the community. It is the tiny steps that ultimately lead to gradual recognition and consideration for appointments. Therefore, as I said earlier, there is no substitution for motivation and persistence.

There are many aspiring arbitrators who want to be featured on institutional lists/rosters to sit as arbitrators. I think contacting and making a great impression on case managers/counsels at institutions is helpful in this regard. Regular contact with case managers/counsel while working on cases with an institution assists one with getting introduced to the institution. Gradually, the institutional staff will take notice of your credentials and you may be considered for subsequent appointments. At KCAB INTERNATIONAL I always encourage the team to look for fresh candidates for appointments. You may start with small cases and humble appointments, but these will build your record and help you expand your opportunities. Moreover, your efforts to efficiently manage the flow of the case such as attention to details and judicious compliance with deadlines will let the case managers or case counsel know that you are a dependable arbitrator.

Lastly, as a parting note, I would also advise aspiring arbitrators to familiarize themselves with the art of patience. It is great to have a vision for one’s future prospects. However, one should not shift all focus away from their current responsibilities. Thus, if you are currently working as counsel, focus on establishing yourself as reputable counsel first. This will help you establish credibility before both arbitrators and the parties involved. Your future nomination will then come from both parties as well as arbitrators who may be listed with several institutions and this will follow as natural result of your reputation as a counsel.

Thank you for your time, Professor Shin.  We wish you and KCAB INTERNATIONAL continuing success.

This interview is part of Kluwer Arbitration Blog’s “Interviews with Our Editors” series.  Past interviews are available here.

 

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Africa Arbitration Academy: Survey on Costs and Disputes Funding in Africa

Kluwer Arbitration Blog - Tue, 2022-05-17 01:00

The increasing cost of resolving disputes has become very concerning. While this phenomenon is not altogether new, the rising trend in recent times has given rise to a situation in which impecunious claimholders may be deprived of access to justice. Indeed, even companies with deep pockets now seek innovative ways of managing the costs of their dispute portfolios, and given the current economic realities in different countries, budgets for legal departments of small companies in general, are shrinking, and large corporations, with ostensible financial strengths, may lose the gusto to spend, in preparation for the financial aftershock of the pandemic. So, what does this mean for the disputes market in Africa and how do impecunious or solvent parties manage the financial impact of increasingly expensive litigation and arbitration claims?

In April 2022, the Africa Arbitration Academy (AAA) published the Report of its Survey on Costs and Disputes Funding in Africa (the Survey). Launched in July 2021, the project was supported by the African Legal Support Facility (ALSF) and is the first Africa-wide survey focusing on costs of resolving disputes, the financing of claims, the impact of the COVID-19 pandemic on litigation and arbitration costs and measures to drive cost- efficiency in African disputes. Based on responses from 25 African jurisdictions, the Survey provides useful insights from sole practitioners, associates, partners of law firms, in-house counsel, academics, third-party funders, representatives of arbitral institutions and other users of litigation and arbitration in Africa.

This blog post provides a summary of the key findings of the Survey and gives a comprehensive overview of the dispute funding landscape in Africa. The Survey also assesses the state of regulation of third-party funding (TPF) on the continent.

 

Purpose of the Survey

Research shows that very few empirical studies have documented the costs of dispute resolution especially in Africa. Some of the reasons for this are obvious – companies are hesitant to provide data to researchers because of concerns about confidentiality, coupled with the difficulty of retrieving data for the time periods sought. In the absence of empirical data, the significant issues relating to litigation and arbitration costs have, thus, been addressed primarily through anecdotes – which are easily dismissible.

The objective of the Survey is therefore two-fold. First, to shed light on how businesses and stakeholders may approach costs of disputes in Africa – something which until now, was rarely explored. Also unexplored is empirical data on TPF in Africa. The survey demonstrates that practitioners in Africa are familiar with TPF and other types of external funding mechanisms in litigation and arbitration. Most respondents have a positive perception of TPF, so there is a great potential for the development of the TPF market in Africa.

 

Key Findings of the Survey

Cost of Resolving Disputes in Africa

Some of the significant concerns of foreign investors seeking to do business in Africa and international lawyers advising clients on disputes in the continent, is the costs of dispute resolution and the efficiency of the process. Empirical research in this area is nearly non-existent, which bolsters the importance of the Survey.

Majority of the Respondents agreed that the choice of dispute resolution method will impact the cost of disputes, and more than half of the Respondents stated that litigation and arbitration costs are almost at par and that in some instances, arbitration costs may be slightly higher than litigation. When asked about the factors that drive up litigation costs in their jurisdictions, the two most selected factors were “counsel fees” and “duration”, while “nature or value of the dispute” and “counsel fees” were chosen as the factors that drive up arbitration costs. Over 62% of the total Respondents opined that, with respect to arbitration disputes, construction matters are the most expensive, and disputes relating to corporate/commercial matters are the second most expensive.

Furthermore, about 60% of the Respondents stated that delay in court proceedings has an impact on litigation costs in their jurisdictions while approximately 38% of the total Respondents stated that the lack of subject-matter expertise of judges impacts litigation costs. 57% of the Respondents noted that mediation is a more cost-effective dispute resolution option than arbitration and litigation.

 

Dispute Resolution Funding Options 

The Survey shows that dispute resolution funding is a trending phenomenon in Africa. Its availability and legality vary, depending on the jurisdiction and enabling laws in that jurisdiction. Given the cut in the budget size of state funded legal aid in different jurisdictions, other funding options are, discernibly, available to fill the gap that arises from impecuniosity or cash- flow constraints – (a) legal expense insurance, (b) TPF, (c) loans, and (d) attorney financing (contingency and conditional fee arrangements).

71% of Respondents confirmed that state funded legal aid is available in their jurisdictions, but it is limited to certain cases. When asked what other funding options are available for litigation and arbitration in their jurisdictions, the two most selected options are “contingency fee arrangement” (25%) and “third-party funding” (21%).  Relatedly, 31% of Respondents chose “third-party funding” as the option to explore where they lack financial capacity to pursue a claim, while 24% of Respondents chose “contingency fee arrangement”.

A total of 51% Respondents noted that TPF is not legally regulated and not commonly used in their jurisdictions, while 21% of Respondents are not aware of TPF. Out of the funding options available in the various jurisdictions, legal aid, contingency fee arrangement and TPF were noted as the most popular options.

 

Driving Efficiency in African Disputes

Results of the survey show that online dispute resolution and the use of technology (artificial intelligence) is the future in Africa. Indeed, this is not surprising and the experience with the pandemic bolsters these results. Given that efficiency will be driven by technology; the time has come for governments and institutions in Africa to invest in critical technology and related infrastructure to ensure a more efficient dispute resolution system. Respondents believed South Africa, Egypt, Kenya and Nigeria have arbitrators with expertise that meets global standards. Respondents’ choice of Nigeria and Kenya was driven by the fact that there is an availability of experienced arbitrators from those countries.

South Africa, Nigeria, Kenya, Rwanda and Egypt were ranked by the Respondents as the most cost-efficient African jurisdictions for international arbitration, while Kigali, Cairo and Nairobi were identified as the most accessible cities owing to good transport connectivity. Respondents expressed their faith in these three cities as good seats and venues with a track record in handling arbitrations and availability of support services. Availability of a variety of good quality affordable hotels for accommodation during arbitral proceedings was also raised as a factor in determining cost efficiency.

Additionally, Respondents favoured South Africa as a jurisdiction with the state-of-the-art facilities. Kenya emerged top for availability of technology and as the hub for East Africa. Respondents suggested that technology coupled with appropriate legal structures would mean less time to conclude an arbitration, hence reducing costs. Respondents pointed to Egypt, South Africa, and Nigeria as having good internet connectivity and facilities. Majority of the Respondents indicated that (a) there should be more jurisdictional recognition of TPF in dispute resolution processes, (b) a unified system of institutional arbitration in Africa should be established, and (c) the use of African institutions for arbitral proceedings makes the processes more cost-efficient.

 

Conclusion

The Survey provides comprehensive data on costs and disputes funding in Africa. At its core, it shows the huge appetite and market opportunity for TPF and the potential it has in improving access to justice. The Survey also highlights the key drivers for growth in Africa’s disputes market and the factors that enable its efficiency. It provides a basis to make a compelling case for increased recognition of TPF in more jurisdictions in Africa – Nigeria is one of the African countries that is seeking to introduce permissive statutory framework for TPF through a new arbitration bill (now awaiting the assent of the President). See previous post on the Bill here.

It is our hope that the survey will contribute to the design and development of an efficient dispute resolution system in Africa. It is also expected that arbitral institutions and governments in Africa will find the survey useful when establishing or revising their rules in relation to costs and disputes funding.

 

The full version of the Survey is available in four different languages (English, French, Portuguese and Arabic) here.

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Interviews with Our Editors: In Conversation with Patricia Vera, Director of the ‎Center for Arbitration and Mediation of the Ecuadorian-American Chamber of ‎Commerce (CAM-AMCHAM Ecuador)‎

Kluwer Arbitration Blog - Mon, 2022-05-16 02:00

Welcome to the Kluwer Arbitration Blog, Ms. Vera!  We are grateful for this opportunity to learn more about the Center for Arbitration and Mediation of the Ecuadorian-American Chamber of Commerce (CAM-AMCHAM Ecuador), and its administration of complex disputes, as well as about the attractiveness of Quito as a seat for international arbitration. 

  1. To start, can you briefly introduce yourself and explain your role at CAM-AMCHAM Ecuador?

With great pleasure. First of all I want to thank Kluwer Arbitration Blog for this invitation. I want to start by telling you that I am the mother of a boy. I am also an Ecuadorian lawyer from the Universidad de las Americas, and hold a master’s degree in Arbitration and International Litigation from Universidad San Francisco de Quito. My entire professional career has been focused on arbitration and I have had the opportunity to work for different arbitration centers such as the arbitration center of the Lima Chamber of Commerce in Peru and, now, for some years at the CAM-AMCHAM Ecuador.‎

At CAM-AMCHAM Ecuador, I am the Director of the Center and I am mainly in charge of the administration of all the arbitration and mediation cases that we receive. According to the provisions of the Ecuadorian Arbitration and Mediation Act, it is up to me to assess the notices of arbitration, as well as the answers to such notices and, if applicable, the counterclaims. My main functions entail the administration of an arbitration from the beginning until the Arbitral Tribunal is constituted. After that, it is the arbitrators who take charge of the arbitration.

On the other hand, it is also a very important part of my work to carry out events that promote both arbitration and mediation in Ecuador. I am in charge of organizing national and international conferences that each year contribute to the Ecuadorian arbitration community which discuss relevant and current developments. We carry out these conferences with the support of the Ecuadorian Arbitration Institute (Instituto Ecuatoriano de Arbitraje), Universidad San Francisco de Quito and Universidad de las Americas. Another very important academic event for our Center and our country is the National Arbitration Moot Competition (Concurso Nacional de Arbitraje), which takes place year after year and encourages the participation of students who are preparing to defend a mock case as either plaintiffs or defendants before moot tribunals made up of local lawyers and arbitrators who collaborate with this project. Part of my responsibilities also include the development of webinars or training sessions that contribute to the development of arbitration in Ecuador.

Finally, my role also involves administrative duties including presenting potential candidates to the Center’s Board of Directors to be part of our list of arbitrators, mediators and secretaries for their approval.

 

  1. Please tell us more about your users and their disputes. Does CAM-AMCHAM Ecuador focus exclusively on disputes between Ecuadorian and American parties or does it serve other types of parties? What percentage of your arbitrations relate to international disputes?

In the Center we have different users, some of them members of AMCHAM Ecuador and others not, most of them are law firms dedicated to arbitration practice, as well as medium and large local and international companies that have operations in our country. We provide an open service to the entire community in general and also to parties located anywhere in the world, including the United States. ‎

The majority of our users belong to the private sector and generally submit commercial or civil disputes for resolution through arbitration. We have also had some construction, telecommunications, and insurance cases among others.

Starting this year, we have implemented emergency arbitration for the first time in our country and we have already had some cases that have been successfully resolved. We hope that this will allow our users to be able to request precautionary measures before an emergency arbitrator and not have to wait until the arbitral tribunal is constituted.‎

 

  1. What is an important highlight of CAM-AMCHAM Ecuador’s services that sets it apart from other arbitration centers based in Ecuador?

CAM-AMCHAM Ecuador provides a service of excellence. In all our cases, we personalize our services from the moment a claim is filed until the arbitration ends. We manage internal response times that allow us to provide immediate attention to the requirements of our users. This is complemented by our new Rules, which entered into force on January 1, 2022. These Rules follow an innovative approach which allows to maintain more flexible arbitrations and at the same time provide a better service to our users. As way of context, the Ecuadorian Arbitration and Mediation Act was issued in 1997 and partially amended in 2006. The Regulations to the Act were issued in August 2021.  Therefore, prior to the Regulations’ enactment, parties and arbitral institutions could solely rely on the arbitration rules of each center for the administration of arbitrations. The AMCHAM Ecuador’s Arbitration Rules has always been cutting-edge, so much so that, even before the COVID-19 pandemic, it already provided for virtual hearings and the storing of digital files. In addition to this, we have a list of arbitrators specialized in different fields and with a great professional career. ‎

 

  1. What impact will the new Regulations to the Arbitration and Mediation Act – regulating arbitration with State entities, enforcement and annulment of domestic and international awards, precautionary measures, etc. – have on cases administered by the CAM-AMCHAM Ecuador?

I believe that, in all arbitral institutions, this will have a positive impact since, as I mentioned before, our Arbitration Act did not have Regulations dealing with the implementation of the law. The centers self-regulated through their respective internal operating regulations. In our case, the first Amcham Quito Arbitration Rules were issued together with the creation of the center in 2000 and were amended in 2012. Our current Rules were issued on January of this year. In this sense, I believe that the new Regulations to the Arbitration and Mediation Act came to complement the gaps left by the Act itself and to strengthen local arbitration, as well as to promote arbitration involving state agencies.

 

  1. Please tell us about the attitude of local courts toward international arbitration, in particular about their approach to recognition and enforcement of arbitration agreements and awards, as well as the extent of their assistance to arbitration tribunals seated in Quito. Will the new Regulation to the Arbitration and Mediation Act impact or change said approach?

Local courts never had a very clear parameter regarding the enforcement of international awards, but nevertheless, depending on the judges who had to hear these petitions, they acted based on their own criteria and following the few standards established in the law. Undoubtedly, the Regulations now clarify and define the procedures to be followed for recognition and enforcement of awards.

In relation to judicial assistance to arbitral tribunals, there has been little interpretation. As arbitration is a procedure regulated by the Arbitration and Mediation Act (and not procedural rules), there has not been a strong relationship between judges and arbitrators. However, in those cases in which there was an arbitration agreement, but a lawsuit was nevertheless submitted before local courts, the judges have correctly recognized the existence of an arbitration agreement and referred these processes to the corresponding arbitration center. In this sense, I believe judges understand and recognize the existence of the arbitration agreement and the arbitration system by the judges. Maybe not all of them, but most of them.

Another circumstance that relates to arbitration and local judges is the request for precautionary measures. Under Ecuadorian law, arbitration begins with the filing of a notice of arbitration before the director of the arbitration and mediation center. The director is responsible for admitting the claim and summoning the defendant, who in turn must answer to it before the director. This entire process, until the arbitral tribunal is constituted, can take approximately three months. This implies that, if the claimant requires that a precautionary measure be issued, they must wait until the constitution of the tribunal. In these cases, the party that needed the measure resorted to a judge and requested the precautionary measure prior to filing its arbitration claim. The judge could grant or reject the request. Now, in our Center, parties can resort to emergency arbitration thanks to our new 2022 Rules, as an alternative to seeking relief before local courts.

 

  1. On January 1, 2022, the new Regulations for the Operation of the CAM-AMCHAM Ecuador (CAM – AMCHAM Ecuador Regulation) (“Estatutos y Reglamento para el Funcionamiento del Centro de Arbitraje y Mediación de la Cámara de Comercio Ecuatoriana Americana”) entered into force. Can you tell us about the most important developments brought by this new regulation?

Of course, this was a project that we had been working on for several years with the previous Director of the Center, Hugo García. This new Regulation contains standards that propose to generate greater equality for the parties and at the same time flexibility, always respecting the right of due process and defense, as well as the right to procedural swiftness. The Regulation builds on the procedural provisions established in local law and aims at improving and expediting the arbitration process. Among the novelties that the regulation brings is the method for appointing arbitrators, the consolidation of arbitrations, the option to choose between in-person or virtual arbitrations and especially the figure of the emergency arbitrator. ‎

 

  1. The CAM – AMCHAM Ecuador Regulation includes the Rules for Local Arbitration for the Operation of the CAM-AMCHAM Ecuador (“Reglamento de Arbitraje Local para el Funcionamiento del Centro de Arbitraje y Mediación de AMCHAM Quito”). Does CAM – AMCHAM Ecuador, also have rules for international arbitration? If not, what rules do disputes administered by the Center usually implement?

Indeed, we have Rules for International Arbitrations which allows the parties and arbitrators who are in different countries to carry out procedures with international procedural rules. ‎This Regulation has been in force since 2013.‎

 

  1. The COVID-19 health crisis has caused unprecedented disruptions to several sectors of the economy and business relationships, and it has also given rise to creative solutions. Is the recently-published General Online Arbitration Proceeding a tool created by CAM-AMCHAM Ecuador, as a result of the pandemic? Could you tell us more about it?

Evidently, we have all been affected by the crisis generated by the pandemic. ‎However, one of the advantages that we had as a center with the publication ‎of the 2012 Rules is that said rules already provided for virtual hearings and the use ‎of any technological mechanism allowing the proper conduction of processes. This has allowed us to have an immediate response due to the experience we already had doing virtual hearings. As soon as the pandemic and related restrictions were decreed, we issued virtual process manuals that indicated how arbitrations and mediations could be filed. We quickly obtained positive results and this allowed us to continue providing our services in times of great uncertainty. Thanks to all this, we were able to refine certain things and incorporate them into what would later become our new Rules. We introduced details that we saw could be done in a better way and thus continue to provide a personalized service remotely. In this sense, in response to the question, it was not the pandemic that led us to update our Rules. The new Rules are the result of work that began a long time ago before the COVID 19 pandemic.

 

Thank you for the interview – we wish you and CAM-AMCHAM Ecuador all the best!

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There’s an East Wind Coming All the Same, Such a Wind As Never Blew on the Vis Moot Yet

Kluwer Arbitration Blog - Sun, 2022-05-15 01:00

“The winner is Sofia University St. Kliment Ohridski”, announced Dr. Günther Horvath – the presiding arbitrator of the final round of the 29th Willem C. Vis International Commercial Arbitration Moot (Vienna) before the crowd gathered in Hofburg Palace rose to their feet to applaud the Bulgarian team that prevailed over their esteemed opponents from University of Hamburg after an outstanding performance by both teams in the final round.

In the journey to the finals Sofia University met teams from all over the world, in the true spirit of the Vis Moot – SLCU (Bangalore), University of Heidelberg, University of Indonesia, Tbilisi State University, University of Mannheim, University of Göttingen, Rafael Landivar University, Bucerius Law School, and University of Pretoria.

The announcement came off the heels of Sofia University also winning the Werner Melis Award for Best Memorandum for Respondent. А team winning both the Eric Bergsten Award for the Prevailing Team in the Championship Round and the Werner Melis Award has only ever occurred three times in the history of the Vis Moot. The last time was fifteen years ago. Then, it was the University of Freiburg that won both awards. Notably, that year there were only approximately 180 competing team whereas this year’s Vis Moot hosted twice as many. Sofia University was also recognized with an honourable mention for the Martin Domke Award for Best Oralist.

The afternoon of 14 April 2022 became the crowning achievement of the 11-year journey of the Bulgarian team of Sofia University in the Vis Moot. Despite consistently winning awards for their written submissions and individual oralists over the years, the Bulgarian university had previously proceeded to the direct elimination rounds only once – in 2020 when it reached the Top 16.

The University’s team members for the 29th Vis Moot were Joana Valova, Ivan Ivanov, Sofia Lefterova, and Dayana Zasheva. The team was coached by Anastas Punev, Lia Harizanova, and Oleg Temnikov.

 

The 2022 Vis Moot

The 29th Vis Moot (Vienna) comprised 365 teams from 84 jurisdictions and over 2,500 students, in keeping with its reputation as the biggest international legal competition in the world.

As always, the final round of the Moot was judged by three distinguished figures in international commercial arbitration – Dr. Günther Horvath, Dr. Lisa Spagnolo, and Chiann Bao (herself a Vis Moot alumna).

The 29th edition of the Vis Moot marks the first time a team from the Balkans and the second time a team from Central and Eastern Europe has won the competition. It was also the third time a team from the Balkans has won an award for Best Memorandum – not since the University of Zagreb in 2001 and the University of Belgrade in 2013.

Sofia University’s win is in line with the notable recent rise in interest in international commercial arbitration in the region. Several other universities like the University of Pristina, the University of Belgrade, Ss. Cyril and Methodius University in Skopje, the University of Zenica, the University of Bucharest, and the University of Zagreb, have also consistently made it to the rounds of Top 64. In 2019, the University of Zenica even achieved the prestigious Second Runner-up place in the 26th Vis Moot.

The Balkans have also been known for hosting multiple successful pre-moots – in Belgrade (the biggest yet, with a turnout of around 60 teams every year), Sofia, and Pristina all judged by local arbitration practitioners and distinguished foreign guests. Thus, even due to its sheer size, the popularity of the Vis Moot is a key part of the competence-building efforts of Eastern Europeans to advance the prominence of international commercial arbitration in the region.

Undoubtedly, the continued success of Eastern European teams is a key part in developing Eastern Europe as an international commercial arbitration hub after numerous Central and Eastern European jurisdictions have made continuous efforts to modernise their arbitration laws, making them compliant with prevailing international arbitration practices and responding to the needs of arbitration users. In line with this, Bulgaria can be proud of being one of the first jurisdictions to adopt the UNCITRAL Model Law in its domestic law.

The celebration of Eastern European teams was not limited to Sofia University. Each year the Vis Moot also gives a Michael L. Sher Award for the Spirit of the Willem C. Vis Moot for embodying and advancing the idea of international cooperation and educational zeal the competition strives to foster. This year the award went to the four Ukrainian teams which persevered in the face of Russia’s war and a humanitarian crisis and refused to be deprived of the opportunity to participate – Ivan Franko National University of L’viv, Kyiv National Taras Shevchenko University, Ukrainian Catholic University, and Yaroslav Mudriy National Law University.

 

The Prevailing Team

As all other teams, Sofia University’s team has always embarked on the competition with the same dream – to win the Vis Moot. However, the gap between a dream in Summer 2021 and winning in Spring 2022 is made up of a tremendous amount of hard work, teamwork, creativity, zeal for advocacy, and a pinch of luck.

Many of the limited number of teams which have won the Vis Moot – only 23 universities since 1993 (and only seven European, of which three from Germany and two from the UK) – come from traditional arbitration jurisdictions and boast rich arbitration programs with the participation of both prominent scholars and masters in oral advocacy. However, Sofia University has competed for only 10 years and despite its supportive faculty, it has no course in either international arbitration or international sales law. It only shows that hard work, dedication, and talent are so fundamental, as to overcome any challenges a team might encounter. It also shows that the world of international arbitration is ever widening and the Vis moot is accomplishing its main purpose – to foster the dialogue between different legal backgrounds and expand the geography of jurisdictions that are well prepared in arbitration.

Sofia University’s success has been built on four key pillars:

First, the team harnesses the unique opportunities in the large and international Vis community. They take part in the Vis Moot School Switzerland and later on, they use every opportunity to schedule friendly pleadings with teams from all over the world. Additionally, a supportive local community of Vis alumni provides a lot of valuable feedback during training pleadings.

Secondly, the summer training includes drafting mini-submissions on selected issues from previous Vis problems. Acquiring the instinct and acumen for well-structured and persuasive legal writing takes time and it is best to give the students as many chances as possible. This includes having the participants revise their old drafts after some time has passed and they have developed their issue-spotting and analytical abilities. In any case, the main priority of the team has always been to plead only the best legal arguments, and this uncompromised legal substance played significant role in the success.

Thirdly, the team remained open to constructive criticism to the very end. They took into account the pleadings of other teams and arbitrators’ feedback from every training session and every pre-moot. In fact, the team changed entirely their strategy on one of the four questions after the Belgrade Pre-moot, a mere week before the official Vis rounds began.

Finally, the decisive factor in many excellent rounds is the demeanour of the participants. Sofia University’s oralists entered the Vis arena confident in their preparation and ability to think on their feet and held themselves as winners to the very end, even if they began a round as the underdog. At the end of the day, win or lose, the Vis moot is an educational opportunity and any participant should be proud of the investment they have made in themselves and their progress as a lawyer.

The success of Sofia University in the Vis Moot has spurred a previously unimaginable public interest in moot court competitions – from newspapers, through radio stations, to TV channels. The team was even invited to meet with the Minister of Justice of Bulgaria.

The coaches have only one future objective – popularizing the Vis Moot amongst the students not only of Sofia University, but in Bulgaria as a whole, and supporting their young colleagues’ interest in international commercial arbitration and international sales law.

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Paris Arbitration Week Recap: Blockchain, NFTs and the Metaverse

Kluwer Arbitration Blog - Sat, 2022-05-14 01:00

As part of the 2022 Paris Arbitration Week, Bird & Bird, with the support of ArbTech and the Chartered Institute of Arbitrators (CIArb), held an event on Blockchain, NFTs, and the metaverse: Is arbitration ready to verse into a new universe?. Paris-based international arbitration partner Jalal El Ahdab (Partner, Bird & Bird) and IP partner Géraldine Arbant (Partner, Bird & Bird) from the Lyon office co-moderated the hybrid event, which was attended by more than 40 people in person and over 200 online. During the two-part event, the speakers explored blockchain technology, its relationship to cryptocurrencies and NFTs, as well as the rising world of the metaverse. Beyond the basics of these novel technologies, the discussion covered the consequences for international arbitration, whether in terms of the disputes they may generate or their implications for the arbitration procedure itself.

London Tech Transactions partner Jonathan Emmanuel (Partner, Bird & Bird) added his expertise together with key players in this space, including Margarita Kato (Legal Case Manager, WIPO Arbitration and Mediation Center), Caroline Le Goffic (Professor of IP and digital law, Lille University of Law), Sophie Nappert (Arbitrator in independent practice, 3VB), Charlie Neuner (Strategy, XR & Metaverse, PwC), Stan Putter (Partner, Smallegange Advocaten and CEO, Court of Arbitration for Art), and Colin Rule (President and CEO, Mediate.com and Arbitrate.com, formerly Director of Online Dispute Resolution for eBay and PayPal in the Silicon Valley).

In the first part, topics covered included blockchain technology, NFTs, and the metaverse.

Blockchain, NFTs, and the Metaverse: Underlying Technology and Various Applications

Venture capital investment in crypto assets reached just over US$8 billion between January and July of last year, surpassing the total combined investment in the previous two years and representing an increase of over 700 percent since 2015. There are now over 1,600 cryptocurrencies. A Cosmos token went up 1,200 percent in value. These are just a few figures that Jonathan Emmanuel cited to illustrate the confidence in the success of the blockchain market, despite some violent fluctuations, before explaining the key terms (blocks of data, cryptography, nodes, accounts, public/private keys, wallets, hashes, and digital signatures) and characteristics (decentralised and immutable) of blockchain technology.

Beeple’s “Everydays: The First 5000 Days”, a digital work of art, sold for over US$69 million at Christie’s in March 2021. NFTs can also be linked to tangible items, such as Hennessy’s BlockBar, a platform that allows consumers to purchase an NFT that is linked to a physical bottle of luxury liquor stored in a Singapore-based facility, redeemable at any time. As Caroline Le Goffic explained, the blockchain ledger allows the unique identity and ownership of an NFT to be assigned, claimed, and verified. Such tokens are not objects, works or media, but function instead as certificates of authenticity of the asset in question. Other applications of NFTs include land records, the certification of the authenticity of medical drugs and vaccines, ticketing to sports games and concerts, and gaming, especially play-to-earn games.

It is estimated that the value of the metaverse will reach US$800 billion, generating US$1 trillion in revenue, by 2024. Tech companies are scrambling to provide the tool kits necessary for its creation. Noting the opportunities for the legal industry to move into this digital world, Charlie Neuner described a metaverse as an evolving, immersive digital world where we can live, work, and play together. The metaverse promises a collection of digital 3D worlds that supports continuity of purchased and created identifies, objects, data, and can be experienced simultaneously by an unlimited number of users.

In part two, the panellists considered the arbitration of blockchain-related disputes and the use of blockchain technology in the dispute resolution process, arbitration in the field of arts and NFTs, and the resolution of metaverse-related disputes.

Disputes Relating to Blockchain, NFTs, and the Metaverse

“Wherever there are human minds transacting, there will be disputes”, as Sophie Nappert observed. Whether “on-chain” (i.e. on the blockchain) or “off-chain” (i.e. where a blockchain-based transaction gives rise to a dispute that is settled through a more traditional dispute resolution process), disputes are already occurring.

In a judgment issued in March 2022, Bird & Bird successfully defended 12 developers of Bitcoin in Tulip Trading Ltd v Bitcoin Association for Bitcoin SV (BSV) and others over the claimant’s allegation that it suffered a hack and was prevented from accessing its crypto assets. The Court found that the developers did not owe fiduciary duties or a common law duty of care to users of the code in question. For another example, consider the disputes involving the cryptocurrency trading platform Binance, as reported previously on Kluwer Arbitration Blog.

Is international arbitration well-suited to the resolution of blockchain-related disputes? According to Sophie Nappert, we’re not there yet. The immediacy of transactions, the anonymity of users, the principles of due process… these and other factors must be considered to ‘dust off’ arbitration in its current form to align with the values championed by blockchain and metaverse users. Other issues considered include whether a cryptocurrency asset is a “protected investment” under international law (on Kluwer Arbitration Blog, see here and here) and whether blockchain can be used for evidentiary purposes, such as for record-keeping in preparation for a potential construction dispute (see also the blockchain-based IP protection offered by KODAKOne).

The trading of NFTs raises novel IP issues. As Stan Putter explained, an NFT can either be sold separately from or together with the underlying asset. In the case of Bored Ape Yacht Club NFTs, for example, holders acquire IP ownership rights. As NFT marketplaces take steps to prevent the infringement of IP rights, Margarita Kato outlined the procedures that they have implemented, such as OpenSea’s notice and takedown process). The NFT space has already generated high-stakes disputes, including between luxury retailer Hermès and digital artist Mason Rothchild over his creation of MetaBirkins. More recently, Nike is pursuing online resale marketplace StockX LLC over its sale of NFTs linked with the name and image of Nike shoes. Although the Court of Arbitration for Art (CAfA) in The Hague has yet to administer any NFT-related disputes, it should not be long before the emergence of this new era of arbitration cases.

Although considering that international arbitration, in its present form, lacks the efficiency required to resolve the high volume of cross-border disputes likely to be generated in the metaverse, Colin Rule expects significant innovation in the coming years. The key players building these marketplaces and metaverses will need to consider how to build trust and contribute to the redesign of dispute resolution processes to reflect the dynamics of these environments, i.e. “fit the forum to the fuss”. One example is decentralized justice, which is not dependent on national laws or geography, but rather on code.

Whether the metaverse is fundamentally different from gaming environments or Second Life, launched nearly two decades ago, remains a subject of debate. What is certain, however, is that the advent of Web 3.0, and the many metaverses that will exist within it, will require those both within and outside the international arbitration community to grapple with these questions.

Conclusion

As cryptocurrencies, blockchain, and the metaverse assume an increasingly important role in our society, disputes are sure to follow, whether in relation thereto and/or therein. Just as international arbitration has managed to rapidly adapt to the “new normal” brought on by the COVID-19 pandemic, there is reason to believe that this form of dispute resolution could become an effective means to resolve the multitude of disputes that are likely to be generated from and in relation to these rapidly-evolving technologies. Whether the tenets of arbitration, notably due process, are ultimately compatible with the efficiency that is expected by the users and creators of these new technologies remains to be determined.

If you would like to view a recording of the event, please click here.

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LIDW 2022: London: Leading or Lessons to be Learned?

Kluwer Arbitration Blog - Fri, 2022-05-13 08:18

The last session of LIDW’s two-day main conference saw a panel of world-renowned international dispute resolution experts turn the spotlight on London as a leading centre for international dispute resolution.

The panel was composed of Sylvia Noury QC (Freshfields Bruckhaus Deringer), David Falkenstern (Kroll), Michelle MacPhee (BP), Poonam Melwani QC, (Quadrant Chambers), and Laurence Shore (BonelliErede).

The panellists offered a very rich debate. They examined London’s strengths and weaknesses (perceived and factual), reflected on any viable long-term threats to the city’s leading position on the global stage, and considered the available opportunities for London to continue to thrive and ensure future success in all forms of dispute resolution, including litigation.

 

London – From a Diversity of Expertise to a Diversity of Experts

All members of the panel agreed that London is a hotspot for legal and technical expertise (i.e., inclusive of engineers, accountants, and scientists).

In particular, there is a real “diversity of specialist skillset”, from full-time arbitrators to specialised judges, maritime engineers, architects, specialized societies, counsels, accountants, and mediators. This diversity offers a great asset to litigants, who can draw upon these experts while also relying on a system of courts and arbitration institutions that are both of an excellent level and highly responsive.

Two examples of London’s excellence were given by a panel member:

  1. First, the special court system was deemed unique. For instance, the technology and construction courts are capable of adjudicating technical and complex cases in record-time. The example of a highly complex compensation case was given, in which English judges were required to apply a foreign law in a highly technical case. The court rendered a 600 pages judgement, reflecting an incredible feat and an attention to fairness that only London could offer.
  2. Second, the flexibility of the LCIA rules was considered unique. In an arbitration case in which resolution of a contract dispute was extremely time sensitive, the parties agreed to have an expedited arbitration under LCIA rules. The parties set out a timetable for a five-month full arbitration on liability. Thanks to the flexibility of the LCIA rules, an arbitral panel was constituted within 5 days, memorials and counter-memorials were exchanged, experts heard, and the award was rendered in time.

To that panel member, these two examples constituted clear evidence of the diversity and quality of services litigants find in London.

The panel then addressed the diversity of gender, ethnicity and socio-economic background of London’s disputes environment.

One panel member noted that the presence of women on panels and talks did not reflect the reality of the legal profession. While it was important to set an example, there were still important inequalities in the profession, which are showcased by recent reports on gender and ethnic diversity. Statistically, women and ethnic minorities still face a “glass ceiling” in their careers. In particular, the lack of inclusion of black and black British students was criticized. Significant hurdles and obstacles were pointed out. It was argued that law firms and the pool of experts had to work towards greater diversity at three stages: (1) outreach in schools and universities, (2) recruitment and (3) retention and progress.

The panel welcomed London’s improvements on diversity issues but recommended that the legal profession aim to avoid exclusionary behaviours, create more demand for ethnic minorities in university degrees and maintain career momentum for professionals who are also balancing family obligations.

In short, a diverse pool of legal and technical experts is not sufficient. It is essential to developing gender and ethnic diversity to attract and retain talents and for London to continue to be a leader in international dispute resolution.

 

London – Costly but Worth It?

Another topic was the cost of legal proceedings in London. According to a panel member, when asked if the city was expensive, the litigants’ answer is a clear ‘yes’. The reason why London is expensive was twofold: experts’ costs are high and English law is expert-intensive, and London is expensive for physical hearings.

However, the panel members recognised that the cost reflected the general quality of service offered in London. They also acknowledged that, compared to the laws of other jurisdictions, London courts offered the possibility to recover costs. The possibility to obtain summary judgement and the English cost regime were thus seen as decisive factors for London maintain its place as a leading venue for litigation and arbitration.

Similarly, the panel members emphasised the speed at which English courts were capable of adapting to unforeseen circumstances, such as the Covid-19 lockdowns. They also praised the technological culture of English courts and cited the example of paperless proceedings. They expressed the view that the judiciary was very proactive in London – for example, devising novel ideas on how to improve litigation procedures and finding ways to make them faster, modern and global.

 

London – The Flexibility of Precedence

One panel member expressed the view that “English law is our greatest export and asset”. Since it is not based on a code, but on principles, and methods, it was argued that judges were well equipped to adapt to the changing conditions of the commercial world.

Another panel member argued that litigants, often opt for a “global package”, meaning that they often adopted London as a seat when choosing English as the substantive law. In this sense, London, as a seat, profits from English law’s “certainty and commercial flexibility”.

Another panel member argued that English law had a better approach to the good-faith principle than many other  continental or North American jurisdictions. Citing the traditional debate between “textualism” and “conceptualism”, the panel member argued that successful arbitration spots adopt a textualist approach to the interpretation of contracts. A “deal is a deal” and with no possibility of appeal in arbitration, litigants preferred an arbitrator who clearly interprets the text rather than tries to interpret the commercial reasonableness of the parties.

A note of caution came at the end with panel members citing the major investments in the dispute centres of Singapore or Hong Kong. To them, London would need to keep up with the pace to maintain its leading position.

 

Conclusion

The 2021 survey on arbitration by Queen Mary University of London demonstrates that London is the favourite seat of international arbitration users. The panel members agreed that English law retains its importance and dominance among common law jurisdictions. Alongside the 1996 Arbitration Act, the judges and the court system in London are highly trustworthy and knowledgeable. Nevertheless, London may remain the leading centre for international dispute resolution, only if it continues to challenge itself – by leading on inclusion, expertise and quality of service delivered to the parties.

 

More coverage from LIDW is available here.

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LIDW 2022: Changes in Construction and Infrastructure Disputes: 2022 and Beyond

Kluwer Arbitration Blog - Fri, 2022-05-13 08:01

On the fourth day of the LIDW22, the session on “Changes in construction and infrastructure disputes: 2022 and beyond” looked at how construction contractors and employers have found ways to either avoid liability or impose extended liability on their counterparties. It also examined how English law has responded to these new developments.

The conference was hosted by Atkin Chambers, HKA, Jones Day, Keating Chambers, and White & Case. The speakers were Julian Bailey (White & Case), Franco Mastrandrea (HKA), James Pickavance (Jones Day), and Jennifer Wild (Keating Chambers). The moderator was Fiona Parkin QC (Atkin Chambers).

The conference started with Jennifer Wild discussing fiduciary duties in construction disputes. It was indicated that fiduciary duties arise in relationships of trust and confidence under English law. There are two types of relationships implying these duties: 1) established categories, such as solicitors and clients, and 2) relationships on which facts might impose such duties. In short, the core duty imposed under the concept of fiduciary duties is that of loyalty, which can be understood as not putting yourself in a position where conflicts of interest may arise.

She highlighted the case Secretariat Consulting Pte Ltd, Secretariat International UK Ltd, and Secretariat Advisors LLC v A Company and its reflection of three recent developments in fiduciary duties:

  1. Fiduciary duties owed by the expert to their clients, where she argued that experts or any professional in a similar position might have an obligation to avoid conflicts. However, it is still unclear in which cases the law would impose such duties.
  2. More certainty in English law in cases where it is necessary to separate fiduciary duties and their remedies from other kinds of duties, such as good faith or expert duties to the court.
  3. Finally, the judgment’s reasoning suggests that, under English law, parties to a construction agreement could include clauses that exclude or limit the liability for breach of fiduciary duties.

James Pickavance addressed the concept of good faith in English law. Even though he recognised that English courts are still reluctant to accept good faith as an overarching duty, it is evident that the notion of good faith is becoming more relevant. In that regard, he explored five circumstances that prompted this discussion: 1) the pandemic has triggered the search for extracontractual remedies, 2) commonly, both bespoke and standard form construction contracts contain provisions of good faith, 3) parties to construction disputes are increasingly pleading a duty of good faith, 4) the concept of good faith is not settled under English law, and sometimes it is confused with other doctrines, and 5) some senior members of the judiciary are advocating for a more prominent role of the notion of good faith.

Julian Bailey discussed economic duress in renegotiated construction contracts. Current circumstances such as Brexit, Covid, supply chain deadlocks, and international conflicts have caused the widespread need to renegotiate construction contracts. He argued that there is no general contractual right for a party to seek the agreement’s renegotiation under English law. However, parties could pressure their counterparties to agree to  renegotiate the contract.

Therefore, he discussed a recent UK Supreme Court ruling in which the court analysed whether lawful acts could constitute economic duress and what implications this may have on construction contracts. Although the facts of the case are not related to construction projects, it offers some guidance applying such a concept. In short, the Supreme Court established that economic duress exists under English law. It arises in rare exceptional cases where one party is making an illegitimate threat, and the other party does not have any other alternative than to give in to the threat.

Franco Mastrandrea addressed current trends in the evaluation of delay analysis. Firstly, he discussed the application of liquidated damages before and after the termination of the construction contract. After that, regarding delay analysis, he concluded that where the agreement does not provide a method for running such analysis, English law favours the retrospective analysis over the prospective approach. Additionally, he talked about the 2021 FIDIC Green Book and how it addresses liquidated damages for prolongation costs associated with a compensable extension of time.

Finally, Fiona Parkin QC raised the issue of whether these changes will impact on the choice of English law to govern construction contracts. The panel concluded that there are no fundamental adjustments to English law as recent developments represents only subtle variations to the law within the common law framework. Therefore, English law continues to be a choice of law that offers certainty to parties operating in the construction industry.

 

More coverage from LIDW is available here.

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