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Halliburton v. Chubb: Waiving a Mandatory Duty

Wed, 2021-04-28 01:58

In November last year, the UK Supreme Court (the “Court”) pronounced judgment in Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48. It held, among other things, that there was a duty of disclosure for arbitrators in English law. Recognizing the importance of the principle of party autonomy, the Court concluded that parties could, by agreement, waive this duty. This presents a problem since the duty itself has been implied in a mandatory provision of the English Arbitration Act 1996 (the “1996 Act”) and thus ought to, by definition, be beyond waiver.

In brief, Halliburton concerned an ad hoc arbitration governed by the laws of New York and seated in London. Halliburton sought the removal of the presiding arbitrator before the High Court on various grounds, including that his failure to disclose certain appointments had given rise to justifiable doubts as to his impartiality. A useful overview of the underlying facts and the Supreme Court’s judgment may be found here. The decisions of the High Court and the Court of Appeal have been discussed here. This post discusses the role disclosure plays in arbitration. It notes the Court’s decision to base the duty of disclosure in a mandatory provision of the 1996 Act before examining whether the duty should, as a consequence, be capable of waiver.

 

The role of disclosure

Arbitrators perform a judicial function. They are required to act as judges would, without fear or favour, affection or ill-will. One way of satisfying the parties as to an arbitrator’s impartiality is disclosure. The role of disclosure was neatly summarised in the decision by Lord Hodge in Halliburton, who delivered the opinion of the Court:

“70. An arbitrator, like a judge, must always be alive to the possibility of apparent bias and of actual but unconscious bias. … One way in which an arbitrator can avoid the appearance of bias is by disclosing matters which could arguably be said to give rise to a real possibility of bias. Such disclosure allows the parties to consider the disclosed circumstances, obtain necessary advice, and decide whether there is a problem with the involvement of the arbitrator in the reference and, if so, whether to object or otherwise to act to mitigate or remove the problem…”

 

Locating the duty of disclosure

Unlike arbitration laws in France, Singapore or India, the 1996 Act places no express obligation on potential or serving arbitrators to make disclosures to parties regarding matters that concern their independence or impartiality. Further, such a duty had not been previously established by the courts in England. The Supreme Court in Halliburton was thus required to determine where such a duty existed in English law.

The Court found that the duty of disclosure for arbitrators was implicitly based in section 33 of the 1996 Act, which provides that arbitral tribunals shall act fairly and impartially as between the parties. As the Court said at [78], the legal obligation to disclose matters that could give rise to justifiable doubts as to an arbitrator’s impartiality was “encompassed within the statutory obligation of fairness.” It was “also an essential corollary of the statutory obligation of impartiality.” Further, while discussing the duty, the Court considered at [77] the example of an arbitrator who had a financial relationship with a party to the dispute in which he or she was appointed. It found that in such cases it would “be incumbent on the arbitrator to disclose the relationship in order to comply with his statutory duty of fairness under section 33 of the 1996 Act.” The Court concluded at [81] that there was a legal duty of disclosure in English law which was “encompassed within the statutory duties of an arbitrator under section 33,” while adding at [154] that this duty, which was “a component of the arbitrator’s statutory duty to act fairly and impartially,” did not override the separate duty of privacy and confidentiality.  

The nature of the duty is thus clear. The duty is implicit in or “encompassed within” section 33. The Court has read into that provision a duty that requires arbitrators to disclose matters that would or might give rise to justifiable doubts as to their impartiality. It follows that this obligation, though termed a “legal duty” by the Court, is in fact a statutory duty. Once found encompassed within section 33, the duty is as much a part of that provision as its express words. There is, then, no difference between the express and the implied. As Francis Bennion wrote in his seminal work on statutory interpretation, “neither portion is more compelling than the other.” For the courts, they are of equal force.

 

Can the duty be waived?

Section 33 of the 1996 Act is a mandatory provision. By virtue of section 4 and Schedule 1 of the Act, it applies to all arbitrations seated in England and Wales or Northern Ireland “notwithstanding any agreement to the contrary.”  Parties cannot contract out of section 33.

Thus, with the decision in Halliburton, it ought to have followed that parties could not opt-out of an arbitrator’s duty of disclosure. As a necessary consequence of implying the duty in section 33, it ought to have been incapable of waiver. And yet, it is not. The court held that parties can expressly or implicitly waive the disclosure requirement (See [78] and [154]).

A likely justification for this conclusion is a single sentence in the judgment which proposes that the duty lies in contract. The Court said at [76] that the statutory duty of arbitrators to act fairly and impartially “gave rise to an implied term in the contract between the arbitrator and the parties that the arbitrator will so act.” How this leap from statute to contract occurs is hard to see. Regrettably, the judgment is bereft of any reasoning on this point. It provides little guidance for future courts faced with similar questions. This problem is only aggravated in light of the several instances where the duty of disclosure is described as one encompassed within statute.

Notably, Lady Arden concludes in a separate opinion that the duty of disclosure is rooted in both section 33 and the contract of appointment between the arbitrator and the parties. This, she said, was also the opinion of the majority. Even if this were the case, waiver would remain impermissible. Once found encompassed within a mandatory provision, the duty is mandatory. In fact, while speaking of the obligation to disclose, the Court itself said that “an arbitrator who knowingly fails to act in a way which fairness requires to the potential detriment of a party is guilty of partiality.”  In other words, by failing to make necessary disclosures, an arbitrator would be violating his express duty under section 33. There should, therefore, be no possibility of waiver.

 

Conclusion

Principally, the duty of disclosure does not exist for the benefit of the parties and, therefore, it is not for the parties to waive any right to it. The duty exists because adjudication by a fair and impartial tribunal is an element of public policy and an indispensable requirement of the Rule of Law. Any benefit to the parties is incidental. This is, however, not the position the Court adopted.

We are left then with the most peculiar of situations. A duty of disclosure has been declared waivable despite it forming part of a mandatory provision in the 1996 Act. It seems to me that deference to the parties’ choice has been stretched too far in Halliburton. Among the principles on which Part I of the 1996 Act is founded is that “the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest” (section 1(b)). These safeguards include the mandatory provisions of Part I. While party autonomy is unquestionably important, judicial reasoning cannot always mould itself to support it, ignoring the language and purpose of legislation. What appears to be a victory for party autonomy comes at the cost of supporting an untenable legal proposition.

Another approach available to the Court in Halliburton would have involved holding that the duty was mandatory while leaving its precise contours to be determined by the parties. Parties (through contract or institutional rules) could then address matters such as the form in which disclosures should be made and the detail with which arbitrators should disclose relationships and appointments. Parties could even be permitted to limit the matters that an arbitrator ought to disclose, though they would not be able to waive or abandon the duty in its entirety. This approach would have paid sufficient service to the principle of party autonomy and maintained the sanctity of mandatory provisions.

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The Contents of the Yearbook Commercial Arbitration, Volume XLVI (2021), Upload 1

Tue, 2021-04-27 01:00

Subscribers of KluwerArbitration.com enjoy access to the ICCA Yearbook Commercial Arbitration. The first upload of materials for the 2021 volume of the Yearbook contains a small selection of interesting cases. These are my favorites.

First, the French Cour de cassation and the United States District Court for the Western District of Washington both dealt with the enforcement of an ICC award rendered in respect of a contract for the construction and operation of two satellites between two Indian companies, Antrix and Devas. The issues discussed were whether the arbitration clause in the contract, which provided for arbitration in India in accordance with either the ICC or the UNCITRAL Rules, was pathological, and whether Devas could rely at the enforcement stage on the ground of the improper constitution of the ICC tribunal, which it had not explicitly raised in the arbitration.

Second, the landmark UK Supreme Court decision in Halliburton affirmed the decision of the lower courts not to remove an arbitrator in a London arbitration commenced by a policy holder against an insurer in respect of the Deepwater Horizon disaster. While the arbitrator had violated his duty to disclose his appointment in other related arbitrations, the Court held that a fair-minded and informed observer would not conclude under the circumstances of the case that there was a real possibility of bias.

Finally, for the first time, this upload includes three cases from Iran and one case from Cuba, showing how courts in these jurisdictions engage with the New York Convention.

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Checking In With Competition In Europe: Where Do International Commercial Courts Stand?

Mon, 2021-04-26 01:00

Over the last few years, the arbitration community’s attention was drawn to the establishment of English-speaking international commercial courts in various jurisdictions around Europe, Asia and the Middle East. Some said these courts would become a competitor of arbitration, providing an alternative forum to the international business community. Others were sceptical that the mere promise of court proceedings in the English language would be enough.

Some years and one pandemic later, arbitration is thriving, but what about the international commercial courts? Where are they now and are they in a position to challenge arbitration?

This post follows several contributions on this blog, including here, here, and here as well as in the Journal of International Arbitration, which provide a more detailed overview of the procedures before international commercial courts. The present contribution aims to check in on the European international commercial courts and their positioning on the disputes market.

 

Germany

The trailblazer of English language proceedings in Germany has been the Cologne Higher Regional Court with its English-speaking senate. It first experimented with running proceedings in English in 2010.

Since then, Germany has seen a boom of international commercial courts. In 2018, two courts were set up: the Chamber for International Commercial Disputes at the Regional Court of Frankfurt am Main and the English-Speaking Civil Division and Commercial Division at the Regional Court of Hamburg. Amidst the pandemic, in 2020, the state of Baden-Württemberg established what it markets as a fully independent Commercial Court with two locations in Stuttgart and Mannheim and a Commercial Court of Appeal. However, those are in fact chambers at the Mannheim and Stuttgart Regional Courts as well as senates at the Higher Regional Courts of Stuttgart and Karlsruhe. In 2021, two International Chambers were also set up at the Regional Court of Berlin. Next to a chamber for commercial disputes, the latter also has an international chamber on construction law and general civil disputes.

These chambers have jurisdiction over disputes with an international element that are filed with the respective court. English will be used during the hearing upon parties’ request, for example for witness and expert testimony. English documents also need not be translated. There is, however, no other difference between the normal German court proceedings and proceedings before the international chambers: written and oral pleadings would, for instance, still be submitted in German. Instead, to appeal to international parties, these chambers focus on the freedoms and wiggle room already available within the tight corset of German procedural law. For example, case management conferences as well as block trials have always been legally possible but are not part of the normal practice in German civil courts. The parties also already have the option to limit court proceedings to one instance by waiving their right to appeal, if they want to have a one-stop-shop. These tools could be implemented by the international chambers without the need for additional legislative reform.

Based on the limited information available, the uptake of what these international chambers offer appears to vary. The Mannheim court completed one proceeding from its inception in November 2020, while the related Stuttgart court appears to have over 100 cases on its docket (but it is not clear whether the number includes purely domestic matters); the Frankfurt court had just one case pending before it within a year of establishment. Universally, however, the use of English appears to be very limited. For instance, the Hamburg court has only ever had two cases (currently in the preliminary stage of proceedings) where the use of the English language was requested.

 

France

In a major hub of international arbitration, Paris, two courts have been set up: the international chambers of the Paris Commercial Court (in 2010) and the Court of Appeal (in 2018).

The procedures of the Paris courts require that “written submissions in English may be given without translation”, however, pleadings must be conducted in French. The parties, witnesses, experts, and foreign legal counsel authorised to appear before the Paris courts are allowed to interact with the court in English. The judgment will be issued in French with an option to request a translation. Some elements of the procedure have also been borrowed from common law, for example, the holding of a case management hearing or the establishment of a procedural timetable. These innovations, however, appear to still be within the confines of the existing procedural rules, i.e. no reform of the French civil procedure rules has taken place.

Since the establishment of the international chamber at the Paris Court of Appeal in 2018, it heard 64 cases. 19 of them were arbitration-related matters in setting aside and enforcement proceedings. It is not apparent in how many cases parties actually made use of English, but translations are available for about 31 judgments, which may be an indicator.

 

Netherlands

The Netherlands Commercial Court (NCC) was created in 2019 with three chambers. The first instance courts are the NCC District Court and the NCC Court in Summary Proceedings. The latter deals with matters requiring expedited proceedings, e.g. interim measures. The second instance is the NCC Court of Appeal.

The NCC accepts international disputes, which are heard in English from start to finish including the final judgment, if the parties give their consent to English language proceedings. Documents submitted in Dutch, English, German or French do not require any translation. The NCC has a fully digital case management system, where the court file remains confidential while the hearings are still public. Otherwise, the NCC functions on the basis of the procedural law applicable in the Netherlands.

Since its establishment in 2019, the NCC issued only nine judgments. Four of the cases landed with the NCC as a result of a jurisdiction clause and subsequent agreement by the parties on the use of the NCC, and one case even involved a waiver of the right to resolve the dispute through ICC arbitration.

 

Belgium

The Brussels International Business Court project was the most ambitious in Europe. The one-stop-shop proceedings were to have no option for appeal and run completely in English including submissions, hearings and judgments on the basis of the UNCITRAL Model Law on International Commercial Arbitration. The court was set to start operating in 2020, but the project has now been abandoned by the government as the project lost the support in the Belgian Parliament.

 

Can European International Commercial Courts Compete with Arbitration?

The above European international commercial courts were designed largely within the confines of local procedural law and in a way that ties them closely to the national court system. It therefore follows that they do not offer the same features as available in arbitration. For example: parties are not able to choose their own adjudicators or agree on confidentiality of proceedings. The latter is something that is particularly unlikely to change – it is hard to imagine European judicial systems dismantling the principle of open justice.

The issue of enforcement is also likely to remain a major benefit of arbitration for the foreseeable future. Arbitration provides parties with access to enforcement in 167 jurisdictions through the New York Convention. European international commercial courts, on the other hand, offer enforcement in the 27 EU jurisdictions through the Recast Brussels Regulation, further seven jurisdictions through the Lugano Convention and the Hague Convention on Choice of Court Agreements, and other jurisdictions through reciprocity.

In the future, however, the Hague Judgments Convention may bring the number of enforcement jurisdictions for court judgments up as it enters into force and is signed by additional countries. The Convention allows for recognition and enforcement of foreign judgments in civil or commercial matters.

An option to conduct hearings and submit documents in English is a great opportunity for the parties to save cost on translations and in-hearing interpreters for witness or expert testimony. It is also great to see various jurisdictions re-discover already existing procedural frameworks to make court proceedings more efficient. These changes, are, however, unlikely to convince the frequent arbitration users to make the switch. On the other hand, however, the frequent court users have gained additional options and flexibility with these internationally specialised courts.

The number of judgments coming out of the international commercial courts appears to be still rather low. But this is something that may improve over time as a bigger investment is made into the visibility and marketing of these courts to the international business community. On this front, the situation varies from the Paris first instance commercial court having a blank English website version to a high quality online presence of the Stuttgart and Mannheim Commercial Court or the NCC.

At this time, European international commercial courts seem to be best placed to market themselves not as an alternative to arbitration but perhaps rather an alternative to courts of other European jurisdictions and even other courts within their own jurisdiction, or as competition to the post-Brexit London. These courts could also be excellent venues for setting aside and enforcement of arbitral awards where the proceedings and the award are already in English therefore not requiring extensive translations, as advertised by the Netherlands Commercial Court.

A better approach may therefore be not to question whether these international commercial courts compete with arbitration, but rather how the two co-exist. Arbitration may have gained an ally on the path to simpler enforcement, setting aside proceedings, and court assistance in support of arbitration.

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Can hybrid mechanisms bridge gaps in arbitration and mediation?

Sun, 2021-04-25 01:00

It is important to first define what are hybrid mechanisms in international dispute resolution. As Voltaire once stated, ‘If you wish to converse with me, define your terms’.  Hybrid mechanisms refer to processes that involve and combine more than one dispute resolution mechanism. Hybrid mechanisms take a variety of forms. By way of illustration, Singapore International Arbitration Centre (SIAC) and Singapore International Mediation Centre (SIMC) jointly provide the Arb-Med-Arb Protocol.

Issues relating to hybrid mechanisms have been covered in previous posts. Emmanuel Chua, in this Blog, discussed the perspectives of Arb-Med-Arb Protocol in Singapore and how it represented a boost for ADR in Asia. The use of mediation at different stages of the arbitral process is not a novel feature and a number of jurisdictions had already provided such a possibility before the adoption of Arb-Med-Arb Protocol. By way of example, Emmanuel Chua refers to sections 16 and 17 of the International Arbitration Act of Singapore, which states that an arbitrator may act as a conciliator if parties consent in writing. The same possibility exists under sections 32 and 33 of the Arbitration Ordinance of Hong Kong.

The inclusion of mediation and conciliation provisions in investment treaties are also on the rise. Romesh Weeramantry, Brian Chang, and Joel Sherard-Chow examined an Asian perspective of the use of mediation and conciliation in the context of investor-State disputes in this Blog. As the authors note, some investment treaties already provide for mandatory mediation and conciliation as a precondition to arbitration for the resolution of investor-State disputes. By way of example, Article 8(3) of the Hong Kong-United Arab Emirates BIT and Article 14.23 of Indonesia-Australia Comprehensive and Economic Partnership Agreement contain an investor’s obligation to refer disputes to conciliation before commencing any other available dispute resolution processes. Furthermore, Article 30 of the ASEAN Comprehensive Investment Agreement consists of a hybrid dispute resolution mechanism, which states that disputing parties may at any time agree to conciliation, which may begin at any time and be terminated at the request of the disputing investor at any time.

Following the International Dispute Resolution Survey: 2020 Final Report (the “SIDRA Survey”) on 3 July 2020, SIDRA has launched the 2021 SIDRA Survey, which calls for responses from lawyers, legal advisers, in-house counsel, and corporate executives who have experience in international commercial disputes and investor-State disputes resolution. The 2021 SIDRA Survey is available in 6 languages (English, French, Spanish, Mandarin Chinese, Russian and Arabic) and will be open until 16 May 2021. Among other dispute resolution processes (international arbitration, mediation and litigation), the 2021 SIDRA Survey will examine and study users’ perspectives, preferences, and experiences in hybrid dispute resolution mechanisms during the years 2019-2020 and provide the findings in the second half of this year. For the purposes of the 2021 SIDRA Survey, hybrid mechanisms refer to any combination of arbitration and mediation.

The findings of the 2021 SIDRA Survey will build on the observations regarding hybrid mechanisms below.

 

Hybrid mechanisms are the third most popular dispute resolution method in 2016-2018

In recent times, after international arbitration (74%) and international litigation (49%), hybrid mechanisms are the third most used dispute resolution mechanism (27%). When the usage was divided between legal and client users, the SIDRA Survey shows that more legal users (30%) opted for hybrid mechanisms compared to client users (23%). Overall, it was interesting to note that hybrid mechanisms are more popular than standalone mediation, as more users opted for hybrid rather than standalone mediation (26%).

Source: 2020 SIDRA Survey, Exhibit 4.1.1 and Exhibit 4.1.2

 

Why are hybrid mechanisms preferred over standalone arbitration and mediation?

The most important factor for users in the selection of a hybrid mechanism over standalone arbitration was the preservation of a business relationship (73%), followed by efficiency (47%), cost (47%), and speed (40%). It may come as a surprise, however, that when the usage was divided between legal and client users, the SIDRA Survey shows that preservation of business relationship was more important for legal users (81%) than for client users (56%). This finding directly challenges the popular belief that legal users tend to prefer more litigious approaches to dispute resolution.

Source: 2020 SIDRA Survey, Exhibit 9.2.2

Users of dispute resolution cited efficiency (53%) and cost (53%) as the most important factors for their choice of a hybrid mechanism over standalone mediation. This was followed by enforceability (48%), speed (45%) and finality (45%). Both legal and client users were on the same page in this regard, as there was not a significant difference when the usage was divided between legal and client users. For client users, cost (56%) and efficiency (52%) were the most important factors and for legal users, speed (53%), efficiency (53%), and cost (52%) were the decisive aspects of their choice of a hybrid mechanism.

Source: 2020 SIDRA Survey, Exhibit 9.2.4

 

Are users dissatisfied with standalone arbitration and mediation?

Users are not satisfied with the cost and speed of arbitration, and the efficiency of arbitrators and arbitral institutions. The SIDRA Survey shows that users were least satisfied with the cost (25%) and speed (30%) of international arbitration even though these criteria played a significant role in selecting arbitration as a dispute resolution mechanism. In addition, while efficiency was one of the most important criteria (85%) in selecting an arbitrator, users’ experience shows that only 59% of them were satisfied with this criterion. Efficiency was also the most important factor (88%) in selecting an arbitral institution. However, only 60% of users were satisfied with their experience in the efficiency of an arbitral institution.

Unlike international arbitration, users were satisfied with the speed (68%) and cost (65%) of mediation.

Source: 2020 SIDRA Survey, Exhibit 6.1.2

Only about half of the users of dispute resolution mechanisms had experiences where mediation was final (55%) and enforceable (55%). Reflecting their experiences, in ranking the factors influencing the choice of mediation as a dispute resolution mechanism, users did not rank the enforceability (67%) and finality (65%) of mediation highly.

Source: 2020 SIDRA Survey, Exhibit 7.1.3

 

Hybrid mechanisms can reduce the perceived disadvantages of standalone arbitration and mediation

The SIDRA Survey shows that hybrid mechanisms have the potential to reduce the perceived disadvantages of standalone arbitration and mediation, and in doing so, to achieve the efficiency that client and legal users take into account in the selection of a dispute resolution mechanism.

While arbitration remains the dispute resolution mechanism of choice for users in both common law and civil law jurisdictions, users are very dissatisfied with the costs and speed of the mechanism, which can make the whole process highly inefficient. With respect to mediation, while the Singapore Convention on Mediation establishes a regime for the enforcement of international mediated settlement agreements, it will take several years before the Singapore Convention on Mediation achieves widespread acceptance and its intended harmonizing effect similar to that of the New York Convention.

Hybrid mechanisms have the potential to reduce and minimize these disadvantages. While it is true that some users may have concerns regarding prolonging already time-consuming arbitration, mediation during ongoing arbitral proceedings may help parties to come to a settlement, which can save a significant amount of time and cost. Mediating a dispute can also save parties’ business relationship, which is usually a high priority for client users. When it comes to mediation, hybrid processes can provide the enforcement regime of the New York Convention to mediated settlement agreements that are recorded as consent arbitral awards. As a result, hybrid processes can reduce the perceived disadvantages of mediation in relation to the lack of finality and enforceability.

 

Have users’ attitudes towards hybrid mechanisms changed since 2018?

Hybrid processes are becoming more and more popular. After the SIAC-SIMC Arb-Med-Arb Protocol, a number of international dispute resolution service providers have followed suit, including the Vienna International Arbitral Centre’s Arb-Med-Arb model clause and Vietnam International Arbitration Centre and Vietnam Mediation Centre’s Arb-Med-Arb protocol.

While the SIDRA Survey has studied the perspectives, preferences, and experiences of users during the years 2016-2018, it is important to analyze any new developments in users’ attitudes towards and experiences in hybrid dispute resolution processes.

The 2021 SIDRA Survey can be accessed at: https://smusg.au1.qualtrics.com/jfe/form/SV_eJRTOTOlwNtYf5P?so=05

The author gratefully acknowledges the valuable comments received from Ryce Lee.

 

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Moldova v. Komstroy and the Future of Intra-EU Investment Arbitration under the Energy Charter Treaty: What Does the ECT’s Negotiating History Tell Us?

Sat, 2021-04-24 01:12

Intra-EU investment agreements and arbitration have been a highly divisive issue in European policy circles for decades. The European Commission has been forcefully pushing for the termination of these agreements since the early 2000s. It criticised inter alia that intra-EU investment agreements and arbitration undermine the European legal order and create inequality among European investors within the Single Market. Many Member States and law firms, in turn, rejected these legal concerns and praised intra-EU investment agreements and arbitration as policy tools to protect European investors against mistreatment in Member States with flawed legal systems and – contested in the economics literature (for an overview see Bonnitcha et al. 2017, pp. 192-193) – to promote investment and economic development in struggling EU economies.

The Court of Justice of the European Union’s (CJEU) Achmea ruling (C-284/16, 2018), partially, resolved this long-standing debate in that it found intra-EU investment agreements and arbitration provisions to be incompatible with the EU law principle of mutual trust and autonomy of the European legal order (see blog coverage here). In August 2020, Member States – many somewhat unwillingly – concluded an agreement on the termination of their 190 intra-EU investment agreements in order to comply with the CJEU ruling. Intra-EU investment arbitration, nonetheless, remains possible under the Energy Charter Treaty (ECT). As of late 2020, the ECT has been invoked in 43 extra-EU investment disputes but also in 83 often high-value intra-EU investment disputes. The ECT is not directly affected by the Achmea ruling as it is not a pure intra-EU agreement among Member States only but a plurilateral energy trade and investment agreement that the EU and its Member States concluded as a ‘mixed’ agreement with a sizeable number of third countries. The EU herself is bound by the ECT under public international law. Ever since the publication of the Achmea ruling, scholars have thus been debating its ramifications for intra-EU investment arbitration under the ECT.

 

Moldova v Komstroy: The AG Opinion

These discussions entered a new important phase with the publication of the opinion of the Advocate General Szpunar in Moldova v Komstroy (C-741/19) in March 2021. In this complex opinion, the Advocate General inter alia assesses the compatibility of Art. 26 ECT, which deals with dispute resolution and notably investment arbitration, with the European legal order. Following the CJEU’s reasoning in the Achmea ruling, Advocate General Szpunar concludes that Art. 26 is in all likelihood incompatible with the European legal order in that it undermines its autonomy. The Advocate General explicitly invites the CJEU to take up this opportunity to finally evaluate the compatibility of intra-EU investment arbitration under the ECT and to conclude this long-standing debate.

 

The Negotiating History of the ECT: Why Mixed Ratification without Disconnection Clause?

The time is thus ripe to take a look at the negotiating history of the ECT (1990-98) and address a number of salient questions in view of the upcoming CJEU ruling: What was the original purpose of the ECT? Why did the EU and Member States conclude this treaty as a ‘mixed’ agreement arguably providing for its intra-EU application today? Why did they not include a disconnection clause to shield intra-EU relations from the ECT? And what does all that mean for reform options to modernise the ECT? I will address these questions in turn below. A more detailed account of the ECT negotiating history and its implications for intra-EU investment arbitration can be found in my recent article in the Journal of International Economic Law.

The EU and her Member States conceived the ECT project in 1990 to promote political-economic integration between Western Europe and the Soviet bloc in Central and Eastern Europe and Eurasia. The ECT project indeed echoed the very founding idea of the European Coal and Steel Community to foster peace and friendship among historically antagonistic states through energy cooperation and economic integration. While the EU and Member States were hoping to turn their Eastern neighbours into stable and peaceful democracies and improve access to Soviet energy resources and markets, the Soviet Union and Central and Eastern European countries were hoping to attract badly needed foreign direct investment, hard currency through energy exports and Western known-how to stabilise their faltering economies. To attain these objectives, Western and Eastern European policy-makers agreed that the ECT should contain inter alia rules on energy trade, investment liberalisation and provisions on investment protection and arbitration. The EU and its Member States thus approached the ECT negotiations with an outward-looking perspective – much like the EU negotiates trade and investment agreements with Australia, India or China nowadays – and indeed negotiated with a ‘single voice’ vis-à-vis notably the Soviet Union and then Russia. Individual Member States only exceptionally took the floor and left negotiating mostly to the European Commission and Council Presidency.

Why then did the EU and Member States conclude the ECT as a ‘mixed’ agreement, which arguably provides for its intra-EU applicability nowadays? This answer lies in the EU-internal allocation of competences and ECT negotiating dynamics. While the EU manifestly sought to appear as a cohesive unitary international actor vis-à-vis the Soviet Union and its Eastern neighbours, it was nonetheless clear that both the EU and the individual Member States would have to accede and ratify the ECT. The EU held an exclusive competence over trade as well as shared and fringe competences over capital movements, energy, transport and environmental matters. The Member States, in turn, remained competent over foreign direct investment, investment protection, services trade and alike. The breadth of the ECT thus made a ‘mixed’ ratification unavoidable – notably in that the allocation of competences in foreign economic relations was a highly sensitive topic in the early 1990s as CJEU Opinion 1/94 illustrates.

To avoid any misconceptions, the EU delegation insisted that the ECT should not govern intra-EU trade and investment relations. It proposed a disconnection clause that clarified that in as far as applicable European law rather than the ECT should govern intra-EU trade and investment relations. This draft disconnection clause, however, at some point disappeared from the negotiating documents and did not become part of the final ECT text. Why is that? Here we enter the realm of speculation though some informed guesses are possible. Towards the end of the core negotiations in 1993/94, the US, EU and Russia zeroed in on a number of challenging negotiating items. The USA demanded an ECT carve-out for her federal states. The EU, in turn, insisted on disconnection and Regional Economic Integration Organisation (REIO) clauses. Russia, finally, started growing weary of the ECT’s ramification for its energy sector and sovereignty and demanded a lengthy transition period to gain more experience with Western economic law and schedule its final investment liberalisation commitments. Each of these demands was met with considerable hesitation from the other parties. Discussions got so tense that the USA ultimately walked away from the negotiations. These developments created a sense of urgency among EU negotiators to avoid that Russia would follow suit. It seems possible that the EU thus dropped its demand for disconnection clause to speed up the conclusion of the negotiations and probably assumed that it was unlikely for the ECT to get successfully invoked in intra-EU relations and disputes. One should indeed recall here that investors had filed only a handful of disputes in the first half of the 1990s.

 

Concluding Remarks: What Way Forward?

These observations are noteworthy. While we do not know with certainty why the EU dropped its demand for disconnection clause, we do know that the EU initially proposed such a clause and that the ECT parties considered it but that the final treaty text does not contain one. The European Commission’s recent claim that the ECT contains an ‘implicit’ disconnection clause and cannot be applied in intra-EU disputes is thus unconvincing against the background of the travaux préparatoires. It is unclear how the CJEU will tailor these observations into its legal assessment in Moldova v Komstroy or indeed Belgium’s recent request for Opinion 1/20 on the modernisation of the ECT. After all, the CJEU’s reasoning in Achmea leaves little doubt that intra-EU arbitration is incompatible with the European legal order. Nonetheless, the EU has manifestly entered into a public international law commitment to that effect. The situation is certainly complex from a legal point of view.

From a political point of view, the situation looks somewhat clearer. The EU will need to take action to stop the intra-EU applicability of the ECT in that it is legally and politically unsustainable. To that end, the EU and Member States could either terminate their ECT membership. Or they could seek the inclusion of a disconnection clause as part of ongoing ECT modernisation negotiations. The second option may seem more appealing to many European policy-makers and lawyers. Though, two important caveats apply. First, third countries may oppose such a disconnection clause. Second, a reformed ECT with arbitration provision in all likelihood will need to undergo mixed ratification due to the CJEU’s findings in Opinion 1/15. Many Member State parliaments and the European Parliament may have little appetite to ratify an agreement with conventional investor-to-state dispute settlement (ISDS) provisions and insist on replacing conventional ISDS with the EU’s new Investment Court System. Yet, convincing all ECT parties of the Investment Court System may show difficult. Finally, it needs mentioning that Russia stopped provisionally applying the ECT in 2009. From the EU’s point of view the ECT thus lost its historic raison d’ être, which was to embed Russia into a rules-based regional energy framework. Instead, in the context of Brexit and the clampdown on intra-EU investment arbitration, the UK is likely to turn into a hub for energy investments and disputes against the EU and Member States putting additional strain on already delicate post-Brexit relations. In sum, the question arises whether the balance of costs and benefits under the ECT is still positive from the EU’s perspective. Moldova v Komstroy may turn out to be a moment of reckoning for the EU and ECT.

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Interviews of Our Editors: Irene Mira, Keilin Anderson, Maria Fanou, and Nicholas Diamond on Arbitration Tech

Fri, 2021-04-23 01:00

Hello, World!

 

Big Tech is a term more commonly used to describe the largest and most dominant technology companies. No doubt Big Tech’s technology has been making extensive and significant impact on our day-to-day lives. The impact of arbitration tech on the arbitration world has also been noticeable. As our readers would know our Blog recently launched a new series called Arbitration Tech Toolbox. It is apt today that our fellow editors share their candid perspectives on arbitration tech. The fifth of our Interviews of Our Editors series continues with our interview of four of our fellow editors: Irene Mira (Assistant Editor for Southeast Asia), Keilin Anderson (Assistant Editor for Australia, New Zealand and the Pacific Islands), Maria Fanou (Assistant Editor), and Nicholas J. Diamond (Assistant Editor).

 

  1. Thank you all for joining me! Please describe yourself with meme(s), in no more than 280 characters, or in a shorter than 60-second GIF.

IM: 

KA:

MF:

ND:

 

  1. What do you think has been the biggest impact of arbitration tech on your arbitration practice and career?

IM: Even though all case management related matters and some of the institutional projects can now be done without in-person interactions at all, arbitration tech has yet to dominate my work as an International Case Counsel at the Asian International Arbitration Center (“AIAC”). It is worth mentioning, however, that the AIAC has launched AIAC Tech Expert Committee (“AIAC TEC”). The AIAC TEC envisions coming up with, amongst others, standard form contracts (“SFCs”) in the tech industry. I do believe that it is just a matter of time before we witness an eruption of tech disputes being resolved by arbitration, be it institutionally administered or ad-hoc.

In terms of my arbitration career, I suppose presently everyone in the arbitration community has embraced virtual aspects of the work, such as virtual proceedings, conferences and webinars alike. This trend will continue to stay even after the pandemic ends. A positive impact that trickles down into the arbitration industry is that more young practitioners can use the online platform to collaborate with other members of the arbitration community. As the current Co-Chair of the AIAC Young Practitioners Group (“AIAC YPG”), I can attest to such development!

KA: As flagged by Irene, it would be impossible in the Covid-19 “new normal” for tech to not have significantly impacted my arbitration career. The move to virtual proceedings, conferences and networking events has meant a proliferation of more accessible career development opportunities for young practitioners – no matter where they are based. For example, during last year’s Australian Arbitration Week we had the fortune of hearing from an array of eminent speakers from every corner of the globe. One panel on gender diversity in arbitration highlighted how a more virtual arbitration community could benefit the push for greater diversity. The combination of arbitration tech and Covid-19 has in many ways, removed the isolation of being an arbitration practitioner “down under”. Suddenly, we can participate in both virtual hearings and virtual professional development opportunities without the long-haul flight (even if the time difference can be cruel!).

MF: Both Irene and Keilin are making a very interesting point linking arbitration tech and Covid-19 to a push for greater diversity, such as gender and age diversity. Although I generally like to see the glass half full, I am not entirely convinced. The pandemic might also be bad news for diversity. Whilst it is true that we have seen a widening of the pool of speakers (and attendees) at events, networking has become more difficult for junior members of the arbitral community in a fully online environment. We should also not neglect the fact that there is unequal access to affordable and reliable technology in all parts of the world.

On a more personal note, arbitration tech and the post-pandemic virtual reality have had an impact on my work in many ways. A notable example is the 2020 QMUL/W&C International Arbitration Survey on which I have been working. The twelfth empirical study of the School of International Arbitration has been inspired by these tech developments. It included, inter alia, questions on the use of information technology in arbitration, remote participation in hearings and other forms of interactions, as well as data protection and cybersecurity issues in the conduct of arbitrations.

ND: I share the sentiments of my Blog’s colleagues on this issue. In my view, the recent emphasis on arbitration tech has had a “net positive” impact. In particular, as we seek new opportunities for the international arbitration community to encourage diversity and inclusiveness, arbitration tech has certainly been a helpful tool. I have seen this in my own work on the intersection of international arbitration and human rights. But, as Maria aptly underlines, not all communities have access to some or all of these tools. This is a new challenge that I hope that the international arbitration community takes on in the coming years – that is, acknowledging and seeking to respond to these access barriers with broader efforts to build a more inclusive professional environment.

 

  1. What new tools in the arbitration tech toolbox would you like to see?

ND: I take a simple view on these issues. In general, we all benefit from new tools (or new iterations of old tools) that can either enhance how we communicate with our team and clients or ensure the highest levels of data privacy and security for our clients. Ultimately, my hope is that we see continued innovation on both of these fronts in the coming years, particularly because the international arbitration field looks to be adopting more of hybrid in-person / virtual approach for post-pandemic professional activities.

 

  1. Artificial intelligence in arbitration: Yea or Nay?

KA: I will go with “sometimes”. I think there is clearly real scope for artificial intelligence (“AI”) to improve arbitration, particularly from an efficiency and cost perspective. For example, the use of AI for e-discovery appears to be a welcome development. However, I am far less sold on the possibility of AI-arbitrators replacing human beings. Whilst we obviously want arbitrators to adjudicate objectively and dispassionately, legal decision-making surely requires some level of cognitive and emotional intelligence that AI does not possess (at least not yet…).

MF: I would say “Yea” but I cannot resist the temptation to go with the favourite lawyers’ answer: “it depends”. Ιt depends on whether, on the one hand, it concerns AI tools for legal research and tools for facilitating the procedure (e.g. technology assisted document review) or, on the other hand, whether it concerns AI tools of predictive justice. With regard to the first, “Yea” comes more naturally with the only caveat being that AI tools are not always affordable. Otherwise, anything that could enhance efficiency should be embraced. With regard to the use of AI tools in the adjudication process, we need to exercise caution. We are certainly not there yet and the questions raised are of a complexity that do not allow for black or white answers.

 

  1. Finally, please share one arbitration tech prediction of yours for 2021.

IM: This is my favourite section indeed as I get to gaze into the crystal ball, metaphorically speaking of course! Considering the necessity of conducting business virtually and the demands from stakeholders of the ever fast-paced of arbitration industry these days, I predict there will be proliferation of not just virtual arbitration protocols (“VAPs”) but cross-institutional VAPs will also be possible in the near future. Additionally, arbitral institutions will play a prominent role in cybersecurity and data protection in international arbitration as elucidated by one of our contributors.

KA: In addition to the inclusion of VAPs in institutional rules (as predicted by Irene), it will be interesting to see whether parties drafting arbitration agreements in 2021 expressly refer to virtual proceedings and the use of other arbitration tech in their arbitration agreements. Whilst such references were, in practice, relatively rare prior to COVID-19, 2021 might be the year parties seek to identify in some detail the extent to which they consent (or do not consent) to the use of particular arbitration tech.

MF: My new year’s resolution was to refrain from any predictions – this was a key takeaway lesson in 2020. I fully agree with Keilin and look forward to seeing whether virtual arrangements will become the norm and if so, how this might be reflected in dispute resolution clauses. Cybersecurity considerations are currently somewhat overlooked, but they will come to the fore. To this effect, as Irene noted, arbitral institutions have a significant role to play. One final thought is that 2021 will hopefully be the year when electronic submissions become the default option – thus a more sustainable year!

ND: I, too, try to avoid predictions! But if I had to read the tea leaves, as they say, I see a convergence between the newfound emphasis on arbitration tech and efforts to encourage a “greener” international arbitration community (as discussed on the Blog). For example, as we look to encourage VAPs, as Irene highlighted, such efforts can facilitate the role of our community in promoting sustainability and broader environmental goals. Electronic filings, virtual moots, and other related efforts are all part of encouraging sustainability in our community, which I hope that we will see more of in 2021.

  

We look forward to seeing if your arbitration tech prediction comes true!

Further interviews in this series of Interviews of Our Editors are published here.

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The Campaign for Greener Arbitration’s Green Protocols: Actions Not Words

Thu, 2021-04-22 01:01

The Campaign for Greener Arbitrations was founded by Lucy Greenwood in 2019 with the goal of reducing the carbon footprint of international arbitrations.  Led by a Steering Committee comprised of various stakeholders from the arbitration community, the Campaign produced a set of Guiding Principles outlining suggested actions to this end.

While the Guiding Principles define broader measures for consideration, the Steering Committee determined early on that a set of tangible action items with clear instructions would aid those eager to reduce the environmental impact of their arbitration practices.

A working group was formed in early 2020 with the goal of developing practical steps which could be implemented to accomplish the Campaign’s Guiding Principles.  Members of law firms, institutions, hearing centers, and arbitrators came together in the working group to produce a set of Green Protocols, a concise set of directives intended to guide members of the community in the effort to reduce the environmental impact of international arbitrations.

Members of the Green Protocols Working Group: Anish Patel, Three Crowns; Cherine Foty, Jones Day; Christine Falcicchio, Sopra Legal; Kiran Sanghera, HKIAC; Maguelonne de Brugiere, Herbert Smith Freehills; Nicola Peart, Three Crowns; Rekha Rangachari, NYIAC; Sarah Vasani, Addleshaw Goddard; Stuart Bruce, ICC UK Energy & Environment Committee.

The Green Protocols primarily focus on three critical areas in which changes in the behavioural practices of arbitration practitioners could have the largest impact in substantially reducing our carbon emissions. Specifically, the community is encouraged to: (i) adopt clean forms of energy, (ii) reduce or eliminate long–haul travel and (iii) minimize waste, for example by eliminating hard copy filings altogether.

Arbitration stakeholders who are committed to effectuate change should begin by reviewing the Protocol(s) which are most relevant to their practices. The below summaries provide an overview of each Protocol prepared by the Working Group.

 

The Framework for the Adoption of the Green Protocols

All stakeholders should begin with a review of the Framework file.  This document provides the roadmap to help navigate through the Protocols and outlines the sustainable measures that reoccur throughout each Protocol. In addition, the Framework highlights the accompanying matters to be contemplated when endeavouring to adopt the Protocols, such as diversity and cost considerations.

The Green Protocols are proposed as a voluntary commitment for members of the arbitration community. They are not intended to derogate from any existing rules, arbitration agreements or orders.

 

The Green Protocols

The Green Protocol for Arbitral Proceedings and the Model Green Procedural Order

Perhaps the quintessential Protocol, the Arbitral Proceedings Green Protocol (and accompanying Model Procedural Order) offers guidance from inception through completion of an arbitration matter.  It outlines a series of measures suggested to conduct proceedings in a more environmentally mindful manner. Use of this Protocol may be initiated by the Parties or Tribunal, and it is best followed from the outset of a matter.

As with all Protocols, the suggested measures are intended to be adopted individually or in their entirety, as appropriate. To the extent possible, stakeholders are encouraged to subscribe to as many of the measures as practical. Examples of measures contained in the Arbitral Proceedings Protocol include conducting remote proceedings, refraining from printing materials and avoiding unnecessary travel.

The associated Model Procedural Order is included to catalyse efforts to conduct greener arbitrations. The clauses herein may be inserted into Procedural Orders, or used in their entirety, to direct the measures to be used during the course of an individual arbitration.

 

The Green Protocol for Law Firms, Chambers and Legal Service Providers Working in Arbitration

This Protocol shifts focus to the day-to-day operations of organisations. To encourage compliance amongst colleagues, firms are urged to appoint “Green Ambassadors”, whose role shall be to help develop policies and best practices within their organisations to subscribe to more environmentally friendly procedures. Firms may also explore the use of incentive programs to motivate adherence to this Protocol and the adoption of its suggested sustainable measures.

 

The Green Protocol for Arbitrators

Individual arbitrators may seek guidance from this Protocol. Once again, the key components of energy, travel and waste considerations are noted as they pertain to the working enviroments and proceedings practices of arbitrators.

As arbitrators are appointed to matters, they are encouraged to set the tone by suggesting the use of the Green Protocols, specifically by integrating the Model Procedural Order.

 

The Green Protocol for Arbitral Institutions

With direct input from Institutional representatives, the Working Group developed this Protocol to provide guidance for both the internal operations of Institutions and in their case management. Institutions are encouraged to empower and guide Tribunals and Parties toward the goal of operating more environmentally sound proceedings conducted under their rules. While the COVID-19 pandemic has forced temporary remote proceedings, Institutions should continue to provide options for remote proceedings where practical thereafter.

 

The Green Protocol for Arbitration Conferences

Stakeholders who plan and host arbitration events should consult the Arbitration Conferences Protocol. Here, the Working Group addresses event planning and implementation, as early on as venue selection through execution and follow-up measures. Organisers are encouraged to partner with “green” organisations, those that practice sustainable behaviours in their operations and offerings. This applies to venue selection, accommodations (for in-person events), caterers and the like.

While the goal of conferences is to gather and engage participants, consideration should be given to hosting virtual events rather than in-person at times, particularly for those who plan multiple conferences annually.

 

The Green Protocol for Arbitration Hearing Venues

Facilitators of hearing venue spaces are referred to the measures included in this Protocol. Among the actions offered here, Facilitators are encouraged to employ technology platforms to promote digital presentations and file sharing as a way to reduce the reliance on paper during proceedings. Particular consideration should be given to powering venues through the use of cleaner forms of energy, wherever practical.

 

Conclusion

The global launch of the Green Protocols in early 2021 was followed by a public consultation period during which the Working Group has sourced feedback on the draft protocols from the global arbitration community.  A series of regional roundtables and workshops for public comment were organized in regions worldwide.  The community voiced overwhelming support for this initiative, with the Campaign winning the GAR Award for Best Development in 2020.  Participants in the consultation process further indicated a commitment to do their part to adhere to these measures.

Following the integration of the comments received, the final Green Protocols are now available on the Campaign’s website.  The final Protocols officially launch today on Earth Day 2021 (22 April), but they must be heeded every day in order to truly effectuate change.

The Working Group, in conjunction with newly formed Regional Sub-Committees of the Campaign designed to implement the Green Protocols in each region of the world with particular attention to regional specificities, will now focus in the coming year on implementation efforts.  These bodies will focus on providing tools, instructions, support, and resources to members of the international arbitration community in order to enable them to practically and effectively implement the Green Protocols.  Individuals and companies can sign the Green Pledge to stay informed of all future developments and initiatives to promote greener arbitrations.

The guidance shared in the Protocols is part of the Campaign’s larger effort of a voluntary agreement among the arbitration community to shift behaviours and act with continuous attention to the impact of our actions on the environment. The collective effect of even small shifts of behaviours, particularly in terms of travel and energy, will have a tangible impact when practiced by this global community. While some of the suggested measures outlined in the Protocols may seem inconvenient or difficult, they will ultimately lead to positive developments in the field and a better future for this community and beyond.

Now is the time for actions not words.

 

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The First Year of Tanzania’s 2020 Arbitration Act

Wed, 2021-04-21 01:52

With the coming into force of the 2020 Arbitration Act, Tanzania certainly has the potential to become a go-to place for international arbitration, at least in Eastern Africa. In addition to its favourable geographical location, now the country also has modern arbitration legislation largely based on the well-established and often tested English model.

Section 1 of this post describes the legislative history of the 2020 Arbitration Act, and Section 2 turns to a controversy about its coming into operation, which has been solved in the meantime. Then, Section 3 analyses the possible impact of the creation of the Tanzania Arbitration Centre, followed by Section 4, which discusses the somewhat confusing regulation of the situation where a party brings a substantive claim in an ordinary court despite an agreement to arbitrate. Finally, Section 5 concludes with a brief look into the future.

 

  1. The Legislative History

A little more than a year ago, on 7 February 2020, the National Assembly of Tanzania passed a new Arbitration Act, and it then took a little less than a year for it to come into operation on 18 January 2021. The 2020 Arbitration Act now applies to Mainland Tanzania – and thus not to Zanzibar, the second entity of the United Republic of Tanzania. On 5 January 2021, four supplementary regulations were approved: (i) the 2021 Arbitration (Rules of Procedure) Regulations, (ii) the 2021 Reconciliation, Negotiation, Mediation and Arbitration (Practitioners Accreditation) Regulations, (iii) the 2021 Code of Conduct for Reconciliators, Negotiators, Mediators and Arbitrators Regulations, and (iv) the 2021 Arbitration Centre (Management and Operations) Regulations.

The structure and content of the 2020 Arbitration Act are largely based on the 1996 Arbitration Act currently applicable in England, Wales, and, for the most part, Northern Ireland. Commentators have therefore labelled the 2020 Arbitration Act “a copy-paste-search-replace of the English Arbitration Act” or at least stated that it “appears to be similar in many respects to the English Arbitration Act”. Yet – as will be illustrated below by two examples – the two acts are by no means the same, the 2020 Arbitration Act also had other sources of inspiration, and it additionally contains genuine Tanzanian provisions. The 2020 Arbitration Act replaces the former Tanzanian Arbitration Act of 22 May 1931, which traces its origins back to the English Arbitration Act of 1889 and was amended several times, for the last time on 30 November 2019.

 

  1. In Operation or Not in Operation?

After the legislative steps taken in February 2020, there was some confusion even within Tanzania as to whether the 2020 Arbitration Act would already apply or not, as evidenced by five decisions of the Commercial Division of the High Court of Tanzania at Dar es Salaam, handed down by the same judge:

In other decisions rendered after February 2020, other judges did not discuss the question of whether the old or the new arbitration acts would apply, but routinely referred to the 1931 Arbitration Act, as amended, in the following decisions:

 

  1. The Tanzania Arbitration Centre

One example of a genuine Tanzanian provision is Section 77 of the 2020 Arbitration Act, which sets forth that “[t]here shall be a centre to be known as the Tanzania Arbitration Centre”, which will perform the tasks of an arbitration institution. The creation of the Tanzania Arbitration Centre could be a positive or a negative sign – which one it will be depends on how the institution will operate in practice. On the one hand, the fact that the Centre would have the legislator’s support could show the potential users of arbitration that the institution is legitimate, since it is based on a law and not mere private “justice behind closed doors”, to quote Lord Thomas of Cwmgiedd, the former Lord Chief Justice of England and Wales. On the other hand, any link between the state and the institution could lead to debates on the independence and impartiality of the institution, in particular in arbitral proceedings involving both Tanzanian and foreign parties. In this context, it is noteworthy that “[t]he funds of the Centre shall consist of … allocation from government, where available” (Section 13(1)(c) of the 2021 Arbitration Centre (Management and Operations) Regulations).

The creation of the Tanzania Arbitration Centre raises yet another question: what will be the new institution’s relationship to the Tanzania Institute of Arbitrators (TIArb), which has been operating officially in Tanzania since its launch in 1999? Only time will tell whether the Tanzania Arbitration Centre and the TIArb will coexist, cooperate, compete – or perhaps even converge. On the one hand, the 2020 Arbitration Act appears to assume that the Tanzania Arbitration Centre and the TIArb may coexist while, however, granting the Tanzania Arbitration Centre a certain superiority. This is evidenced by Section 26(2) of the 2020 Arbitration Act, which provides that “[w]here there is an arbitral tribunal or other institution or person vested by the parties with power to remove an arbitrator, the Centre shall not exercise its power of removal unless satisfied that the applicant has first exhausted any available recourse to that institution or person.” On the other hand, the legal basis for the Tanzania Arbitration Centre to enter into cooperation agreements in Section 16 of the 2021 Arbitration Centre (Management and Operations) Regulations only extends to “arbitration Centres and associations in other countries or jurisdictions”, which, by implication, might not include the TIArb. As a general observation, the 2020 Arbitration Act entrusts the Tanzania Arbitration Centre with tasks which the ordinary courts would exercise in other jurisdictions, notably the function of appointing authority (Section 19 et seq. of the 2020 Arbitration Act).

 

  1. Arbitration Agreement and Substantive Claim before Court

One example of a regulation which took inspiration from various sources can be found in the provisions covering the situation of a substantive claim before an ordinary court despite an arbitration agreement.

Section 13 of the 2020 Arbitration Act, which – according to its title – is dedicated to the “Stay of legal proceedings” appears to have taken inspiration from Section 9 of the English 1996 Arbitration Act, which contains the following subsection (3):

“An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.”

The corresponding provision of Section 13(3) of the 2020 Arbitration Act reads as follows:

“A person shall not make an application under this section unless he has taken appropriate procedural step to acknowledge the legal proceedings against him or he has taken any step in those proceedings to answer the substantive claim.”

Thus, while the English provision does not allow an application to stay legal proceedings after a party has taken any step to answer the substantive claim, the Tanzanian provision seemingly requires the contrary: It would appear that a party must first take any step to answer the substantive claim before being entitled to apply for a stay of the proceedings in court.

In addition to this difference, Section 13(3) of the 2020 Arbitration Act appears to be at odds with Section 12(1) of the 2020 Arbitration Act, which reads as follows:

“A court, before which an action is brought in a matter which is the subject of an arbitration agreement shall, where a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement of claim on the substance of the dispute, and notwithstanding any judgment, decree or order of the superior court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

This Section 12(1) appears to be inspired by Section 8 of the 1996 Indian Arbitration and Conciliation Act, which, in turn, appears to be an adaptation of Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration, a provision based on Article II(3) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Tanzanian arbitration scholar Madeline Kimei thus rightly noted the confusion created by including both Section 12 and 13 in the 2020 Arbitration Act. Ultimately, it will be for the Tanzanian courts to determine the interplay of these provisions.

 

  1. The Potential Future

No one can predict with certainty what the future will hold in store for arbitration in Tanzania. As of today, there appears to be no published court decision interpreting the provisions of the 2020 Arbitration Act (with the exception of the decisions quoted above in the cases of Petrolube Tanzania, High Hope International, and Nextgen Solawazi). However, given that the 2020 Arbitration Act has now come into operation, we will be looking forward to the next developments.

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REAL Gets Real: Launch of Racial Equality for Arbitration Lawyers

Tue, 2021-04-20 01:20

The launch of Racial Equality for Arbitration Lawyers (REAL) took place on 18 January 2021.The date to launch this initiative coincided with Martin Luther King’s Day, to commemorate the birth of this influential civil rights leader, known for his fight for racial equality.

The initiative is led by Kabir Duggal, Rekha Rangachari, and Crina Baltag, with the support of lawyers from all around the world. The energy and enthusiasm surrounding REAL have provided a strong foundation for the initiative, with members and allies representing diverse groups, genders, ethnicities and their intersections. This initiative is already backed by over 70 arbitral institutions.

REAL aims to build a dialogue and generate process-oriented action to address the lack of diversity and inclusion in international arbitration (IA). Some of the core goals of REAL include access and advocacy; to open the door for people of diverse backgrounds to the practice of arbitration, building pipeline opportunities and increasing the number of spotlights on diverse talent.

The launch of REAL was divided into two sessions, with six keynote speakers with impressive credentials leading positive change in their practice and communities. The speakers brought to the table important aspects that need to be addressed in the practice of international arbitration.

 

Why Diversity Matters in Adjudicative Bodies

Judge Navanethem Pillay explained why diversity matters in adjudicative bodies and pointed out that the practice of exclusion (e.g., women and people of color) still happens in international institutions all over the world.

From her experience as the first non-white woman to sit on the bench of the High Court of South Africa and the only woman sitting on the International Criminal Tribunal for Rwanda, she reflected on the importance of the presence of women on tribunals. “Whenever a bench delivered judgments including on rape and sexual violence, invariably women were sitting as judges. Whenever there weren’t any of these convictions, no women had sat on the bench.” The importance of diversity is clear in the ability of the tribunal to evaluate the claims made by the victims.

She also reflected on the impact her upbringing – as a non-white female in Apartheid Africa, with a judiciary entirely integrated of white males – had on her approach to the issue of compensation for victims, and how she advocated for a more restorative form of justice rather than solely retributive. This novel approach was possible because she related to the victims’ experiences, coming from a similar background herself.

For Judge Pillay, diversity and inclusion matter in international arbitration and domestic situations for comparable reasons. Initiatives such as REAL help traditionally excluded groups to achieve the visibility they require and lessen issues of representation.

 

Lack of Diversity Finds its Root in the Lack of Access to Capacity Building

Mr. Kevin Kim shared his personal experience as a young practitioner in international arbitration to demonstrate how the lack of access to capacity building derives in lack of diversity. During the early years of his career, he was surprised to see that clients routinely retained big international law firms for international arbitration cases. He was disappointed but saw an opportunity to change the norm. He focused on enhancing the capabilities of Korean lawyers so that clients across the world sought out their services.

He decided to address the issue of a lack of diversity by passing on his experience and sharing his knowledge with colleagues and competitors alike, to help build a thriving community of international lawyers in Seoul.

The lesson learned is that if the people are equipped with the right skill set, they can perform wonders. Kim stressed the importance of capacity building of people of diverse backgrounds and to give minorities access to the best procedures and practices. He assures “It is through our excellence that clients will start noticing us”.

On the other hand, Kim emphasized that the IA community needs to move away from the raw notion of diversity itself, but encourage a healthy diversity where people are respected and hired for their unique perspectives and skills and not for diversity factors as racial identity.

International arbitration transcends borders and thus, there is a greater need for diversity than in other areas of law. In a case where we encounter different nationalities; diversity becomes the instrument to harmonize differences. Moreover, virtual hearings may be the new norm for IA and, therefore, distance, cannot continue to be an excuse for ignoring the underrepresentation of minorities, since technology has truly brought people together.

The arbitration industry must make an effort to showcase the talent of diverse lawyers and bring them into the spotlight so that they do not go unnoticed by potential clients. This is where REAL could serve as a medium.

 

Being a Woman in International Arbitration

Dr. Nayla Comair-Obeid delivered a thought-provoking speech where she addressed the challenges of being a woman in international arbitration. As a woman arbitrator originally from Lebanon, she was born at a time when being a judge was a position reserved for men and she battled in this professional world. The first time she was proposed as a Chair in a domestic arbitration, one of her co-arbitrators refused to serve in a Tribunal where the chairperson would be a woman. His male colleague argued that “The brain of a woman cannot rule like the brain of a man”.

The challenge grew bigger when she started developing her career internationally and gained more appointments as an arbitrator, where she faced similar prejudices and stereotypes as those of her home jurisdiction. Further, she has learnt to reconcile the roles of being a mother, a wife, and an arbitrator. Dr. Comair-Obeid shared three stories of bias and prejudice she encountered over the years.

First, in 2017 she was appointed president of the Chartered Institute of Arbitrators (CIArb) and was the first woman of the Middle East to occupy that position. Despite having worked many years in the Institution and opening the Lebanon office, her election still prompted skeptical comments about a woman from the Middle East presiding CIAarb.

Second, she noted that unconscious bias and prejudice are present when appointing arbitrators. While arbitral institutions play an important role when appointing arbitrators from diverse backgrounds, this sentiment is not always shared by the parties. For instance, in an ICSID arbitration, one of the parties challenged her appointment exclusively because she was a Lebanese national.

Third, she recounted an experience where she suffered intimidation from a witness in a proceeding where she was acting as sole arbitrator. She felt this would have unlikely occurred if she were a man.

Finally, Dr. Comair-Obeid highlighted that arbitral institutions have a key role in promoting diversity and can help to fight biased perceptions and create bridges between countries and regions.

 

Diversifying ICSID

Ms. Meg Kinnear, as the Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID) at the World Bank, addressed the institutional efforts being undertaken to address diversity issues.

From her unique position, Ms. Kinnear spoke about the role that ICSID plays within the institutional effort of the World Bank to foster equal opportunity and end racial discrimination.

She highlighted that a crucial way to nurture diversity is by nominating arbitrators from diverse backgrounds. She also noted that it is important to shine a spotlight on people with diverse backgrounds to make sure the community and the parties are aware of these profiles when they select arbitrators. Lastly, she acknowledged the positive progress in this regard, with the Secretariat selecting arbitrators from 40 different nationalities in the past year.

Finally, Ms. Kinnear stressed on the importance of accountability. Diversity, she concluded, has to be nurtured and cannot be taken for granted.

 

Diversity and the Importance of Personal Accountability

Professor Dr. Emilia Onyema, a senior lecturer at SOAS University of London and a Fellow of the CIArb, emphasized the importance of personal accountability.

As part of her efforts to foster diversity, Dr. Onyema remarked upon the African Promise and AFAS initiatives. The first is an initiative inspired by the ERA Pledge to help secure fair representation of African lawyers in arbitration bodies and institutions. The latter is intended to help African students with mentorship and opportunities to publish, among others.

She further provided examples of what each practitioner can do to advance diversity. First, she encouraged practitioners to challenge themselves and seek opportunities to make a difference and not to fall back on their comfort zone by opening doors for others. Additionally, she noted that the local arbitration scenes are often dominated by a small clique of people and that practitioners should be inclusive and more generous by sharing their space.

 

Diversity Makes Us Uncomfortable 

Dr. Ucheora Onwuamaegbu remarked that diversity is a topic people are uncomfortable addressing and that not too long ago, these conversations would have been professionally risky.

Dr. Onwuamaegbu has had a very diverse professional background. From a small law firm in London to the United Nation’s Compensation Commission, to ICSID, and again to private practice. From his experience, he shared five lessons:

  1. It is important to be open to different approaches and work cultures. If people do something different is not because they are incompetent or lazy. Accents only mean that people are smart enough to speak different languages.
  2. No one is born knowing international arbitration. People that might have initially been very insecure, now have blossomed to be highly regarded experts in the field. The only difference between those people and the rest, is that they were given the opportunity to grow. We need to extend this privilege to everyone.
  3. Diversity is not rhetoric. Cultural and racial diversity in international arbitration is important because it brings novel perspectives leading to more balanced results. This strengthens the legitimacy of the system.
  4. Achieving diversity is possible and this is done through equal opportunities for all.
  5. All stakeholders have a role to playing ensuring diversity and inclusion.

 

Final Remarks

In both sessions, all participants were presented with certain questions as polls.  The results for these questions were fairly consistent, albeit disappointing.  Below are the results of the polls for us to reflect upon:

Session 1:

 

Session 2:

 

The initiatives shared by the keynote speakers suggest that international arbitration is changing, undoubtedly for the better. Institutional efforts to ensure diversity in tribunals and commitments that promote fair representation are steps in the right direction. Still, the polling results remind us that there is an important lack of diversity and inclusion. The REAL initiative has a key role to play in shining a limelight on talent from diverse backgrounds that can help breach the diversity gap. The time is right to get real about diversity and inclusion. The full recordings of the launch of REAL are available here and here.

Membership to REAL is open to the public for free. Consider signing up here.

 

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Is The Remedy Under Section 9 of India’s Arbitration and Conciliation Act, 1996 Available Post-Award to the Losing Party?

Mon, 2021-04-19 01:00

Similar to Article 9 of the UNCITRAL Model Law (the “Model Law”), Section 9 of India’s Arbitration and Conciliation Act, 1996 (“the Act”) entitles the parties to arbitration proceedings to obtain interim relief from courts. However, there is one major difference between these two provisions. Article 9 of the Model Law allows parties to obtain interim relief from the courts at two stages, i.e. (i) before the commencement of arbitration proceedings and (ii) during the course of arbitration proceedings. On the other hand, in addition to the two stages mentioned above, Section 9 of the Act also entitles parties to obtain interim relief from Indian courts after the arbitral award is made but prior to its enforcement. Section 9 of the Act itself does not bar any party from approaching the court to seek interim measures under any given situation. However, recent court judgments have consistently held that after the arbitral award is made, only the winning party in the arbitration proceedings (“successful party”) is entitled to obtain interim reliefs from the courts, whereas, the losing party in the arbitration proceedings (“unsuccessful party”) is not entitled to seek any remedy under Section 9. This approach of the courts gives rise to a debatable issue which is currently pending for the consideration of the Supreme Court of India in Home Cares Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi (SLP (C) No. 29972 of 2015). This post highlights the important judgments given by various High Courts regarding this issue and then briefly analyses whether an unsuccessful party in the arbitration proceedings should be entitled to seek a remedy under Section 9 of the Act.

 

Key Judgments Highlighting This Issue

The Bombay High Court delivered the landmark judgement on the issue in Dirk India Pvt. Ltd. v. Maharashtra State Power Generation Company Ltd. (2013) (“Dirk India”). In this case, a Division Bench of the Bombay High Court observed that after an arbitral award is made, interim relief can only be sought to safeguard the fruits of the proceedings until the enforcement of the award. It further held that the purpose of providing interim relief after the passing but before the enforcement of the arbitral award is to secure its value for the benefit of the party that seeks the enforcement of the award. Thus, after the award is made, the remedy under Section 9 can only be obtained as a step-in aid of enforcement of the arbitral award. On the aforesaid basis, it held that as the unsuccessful party in the arbitration proceeding has no right over the subject matter of the dispute at the stage of enforcement, such party is not entitled to seek any remedy under Section 9 of the Act.  The Bombay High Court followed Dirk India’s rationale in Windworld India Ltd. v. Enercon Gmbh and Ors. (2017) and Home Care Retails Pvt. Ltd. v. Haresh N. Sanghavi (2015), and the Delhi High Court in the recent case of Technimont Pvt. Ltd. v. ONGC Petro Additions (2020).

Another important point for consideration regarding this issue is whether a party whose claims are partly rejected and partly accepted in the arbitral award would be entitled to obtain interim relief from the Court under Section 9. The Delhi High Court addressed this issue in Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games (2014) where it was held that a party whose claims are partly rejected and partly accepted in the arbitral award, will not be entitled to seek interim relief under Section 9 if the amount of its claims subsume into a larger amount awarded in favor of the opposite party. This judgment impliedly clarifies that after the award is made, only the parties whose claims are pending for enforcement against the opposite party, i.e., the successful party, would be entitled to seek the remedy provided under Section 9.

 

Analysis

While it seems that High Courts have largely agreed with each other on the availability of interim relief following the passing of an arbitral award, there are additional factors that these judgments have not factored in.

Firstly, as already stated, Section 9 of the Act itself entitles ‘any party’ to obtain interim relief from the Court at three stages, i.e. (i) before the commencement of arbitration proceedings; (ii) during the course of the arbitration proceedings; and (iii) after the arbitral award is made but prior to its enforcement. The term ‘party’ has been defined under Section 2(1)(h) of the Act as a ‘party to an arbitration agreement’. Hence, applying the literal rule of interpretation of statutes, all parties, i.e. the successful and the unsuccessful parties, are equally entitled to approach the Court to avail the remedy provided under Section 9 at any stage. The text of Section 9, thus, draws no distinction between the rights of the successful and the unsuccessful party in the arbitration proceedings to seek interim relief from the Courts. Therefore, so long as Court finds merit in the Section 9 application filed by an unsuccessful party in the arbitration proceedings, the courts may grant appropriate relief to the unsuccessful party even after the arbitral award is made.

Secondly, the courts should not incapacitate themselves from granting interim relief in favor of the unsuccessful party in cases where the relief sought creates no negative impact on the rights of the successful party over the subject matter of the dispute. For instance, in Wind World (supra), the interim relief sought by the unsuccessful party under Section 9 was the continuation of confidentiality of certain documents during the pendency of the Section 34 application filed before the court for setting aside the arbitral award. However, the Bombay High Court placed reliance on Dirk India (supra) and dismissed the application. It is pertinent to mention that in Wind World (supra), the Court failed to notice that the aforesaid relief sought by the unsuccessful party did not create any hindrance on the rights of the successful party over the subject matter of the dispute. Such reliefs are preventive measures that ensure the protection of the unsuccessful party’s rights, in case the arbitral award is set aside by the Court. Therefore, in such situations, there can be no justified reason to completely prevent the Courts from granting interim relief in favor of the unsuccessful party.

Lastly, while hearing an application for setting aside an arbitral award under section 34 of the Act, when a Court orders a stay on the enforcement of the arbitral award during the pendency of such application, the unsuccessful party may be entitled to obtain interim relief from the court under Section 9Section 36 of the Act states that courts must have due regard to the provisions of the Code of Civil Procedure 1908 (“CPC”) while granting a stay on the enforcement of the arbitral award. As per the provisions of the CPC, the courts have to be satisfied that there exists a prima facie case, irreparable harm, and balance of convenience in favor of the Petitioner before granting the interim relief on any order/decree, etc. Therefore, once the court is satisfied that the aforesaid pre-conditions are fulfilled in the case filed for setting aside the arbitral award by the unsuccessful party, the remedy under Section 9 may be made available to the unsuccessful party. One instance that highlights the aforesaid proposition is when a court grants a stay on the enforcement of the arbitral award on being satisfied that the unsuccessful party has made out a prima-facie case on the ground of fraud. In such a case, it is essential to protect the rights of the unsuccessful parties by providing them with the remedy under Section 9 even after the making of the arbitral award, in order to protect the subject matter of the dispute during the pendency of the Section 34 petition.

 

Concluding Remarks

In the light of the above, it can be argued that the power of the Courts to grant interim measures under Section 9 should extend to both the parties, i.e. successful and the unsuccessful party in the arbitration proceedings, at any amongst the three stages provided under Section 9 of the Act. An outright restriction on the Court’s power to provide any interim measure to an unsuccessful party in the arbitration proceedings is neither a feasible precedent nor the intention of the legislature. However, the Courts should provide the Section 9 remedy to the unsuccessful party only in exceptional cases and ensure that Section 9 is not used as a tool to abuse the process of law.

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On the Far End of the Trail of Tears was a Promise: Africa and Traditional Knowledge Protection

Sun, 2021-04-18 01:14

Many will recall the historic ruling of Justice Neil Gorsuch in McGirt v. Oklahoma (2020), where the United States Supreme Court upheld an 1866 treaty between the United States and the Muscogee (Creek) Nation, which established the Muscogee Nation’s geographic borders. The Court decided that much of current Eastern Oklahoma is to remain Indian land and prevented State authorities from prosecuting First Nations individuals within the Muscogee Nation’s boundaries. Justice Gorsuch’s seminal ruling in McGirt affirmed the indigenous communities’ inherent right to protect their lands and resources.

In the context of international investment law, the debate concerns not only indigenous peoples’ sovereignty over land; but the importance of developing a conceptual framework for the protection of traditional knowledge against incursion by investors and States. Traditional knowledge is the knowledge, innovations, and practices of indigenous communities, developed from experience gained over a long period and adapted to the local culture and environment.

The questions are to what extent does international investment law protect indigenous communities’ resource rights (particularly, in relation to traditional knowledge), and what recourse, if any, do indigenous communities have to arbitration under bilateral investment treaties (BITs) or international investment agreements (IIAs) for infringements of such rights? Particularly for the African indigenous communities whose traditional knowledge rights have been constantly infringed, should a body of norms develop within the investment law framework to protect those rights? This post answers these questions by analyzing (a) the international legal framework for the protection of indigenous peoples’ resource rights, (b) the issues implicated by the current traditional knowledge systems in Africa, and then proffering (c) recommendations on the effective protection of traditional knowledge in Africa.

 

Protection of Indigenous Peoples’ Resource Rights

Indigenous peoples’ rights to land and other resources, have been articulated under international law through, inter alia, the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the Convention on Biological Diversity (CBD). At the regional level in Africa, the African human rights system has played an essential role in the protection of indigenous peoples’ rights. Notably, indigenous peoples’ rights to lands and resources are inextricably linked to traditional knowledge – which falls within the broader framework of intangible indigenous rights.

Article 31 of the UNDRIP recognises indigenous peoples’ right to:

“maintain, control, protect and develop their cultural heritage, traditional knowledge and traditional cultural expressions, as well as the manifestations of their sciences, technologies and cultures, including human and genetic resources, seeds, medicines, knowledge of the properties of fauna and flora, oral traditions, literatures, designs, sports and traditional games and visual and performing arts”.

The protection of traditional knowledge involves taking measures to ensure that unauthorised parties do not unfairly acquire intellectual property rights over indigenous peoples’ knowledge, innovations, and practices. The UNDRIP also recognises that indigenous people have the right to arbitration against infringement of their traditional knowledge rights.

Article 40 of the UNDRIP provides:

“Indigenous peoples have the right to access and prompt decision through just and fair procedures for the resolution of conflicts and disputes with States or other parties, as well as to effective remedies for all infringements of their individual and collective rights. Such a decision shall give due consideration to the customs, traditions, rules and legal systems of the indigenous peoples concerned and international human rights.”

Despite the protection of traditional knowledge existing at the international level, this right is often violated by States and the private sector by creating intellectual property rights over indigenous peoples’ knowledge, innovations, and practices without equitably sharing the benefits. Thus, indigenous peoples have sought greater protections to ensure that traditional knowledge is used equitably, according to restrictions set by their traditions, or requiring benefit sharing for its exploitation according to the benefits they define. Three broad methods have been advanced for the protection of traditional knowledge:

  • protecting traditional knowledge as a form of indigenous cultural heritage;
  • recognizing traditional knowledge as a collective human right; and
  • using existing or novel sui generis measures to protect traditional knowledge, which is the approach adopted by the World Trade Organisation (WTO) and World Intellectual Property Organisation (WIPO).

India, for example, has established a traditional knowledge digital library and compiled a searchable database of traditional medicine that can be used as evidence of prior art by patent examiners when assessing patent applications. This followed a prominent case in which the US Patent and Trademark Office (USPTO) granted a patent to the University of Mississippi Medical Center for the oral and topical use of turmeric powder to heal surgical wounds and ulcers (U.S. Patent No. 5,401,504). The patent was later revoked by the USPTO given objection by the Indian Council for Scientific and Industrial Research that turmeric is a tropical herb well known to traditional communities in India and documented in ancient Sanskrit texts.

The UN Special Rapporteur on the Rights of Indigenous Peoples issued a report in 2016, noting the negative impact of the current IIA regime on indigenous peoples, given that projects under most IIAs can infringe upon indigenous peoples’ land and resources. Some States attempt to accommodate indigenous rights and interests in their free trade agreements. For example, New Zealand includes in its Free Trade Agreements (FTAs) a Treaty of Waitangi exclusion, which enables the government to take measures to give effect to its obligations to Māori under the Treaty of Waitangi, even if the measures are incompatible with New Zealand’s obligations under the FTAs. Many Canadian treaties also include similar provisions. The Canada-U.S.-Mexico Agreement (CUSMA) includes protections of indigenous rights. While there is no substantive Chapter in CUSMA on indigenous rights, the inclusion of an exception, which carves out measures adopted or maintained by states to fulfil the State’s legal obligations to indigenous peoples, is a significant development. There is also a recognition of the importance of indigenous rights and traditional knowledge in the preamble to the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a free trade agreement between Canada and 10 other countries in the Asia-Pacific.

 

Africa and Protection of Traditional Knowledge

African BITs and dispute settlement mechanisms in FTAs have no standard clauses providing protection for traditional knowledge. This has meant that such agreements have on occasion been used to support the appropriation of indigenous knowledge, innovations, and practices about medicinal, cultural, cosmetic, domestic, or other value and use of bioresources without attribution or compensation. The University of California and Lucky Biotech (a Japanese corporation), for example, was granted patents for the sweetening proteins naturally derived from katempfe and serendipity berries. Thaumatin, the substance that makes katempfe sweet, is 2000 times sweeter than sugar, yet calorie free. The patent covers any transgenic plant containing the derived sweetening proteins; however, no attempt has been made to share benefits deriving from these patents with the indigenous communities which had long used these plants for their sweetening properties.

In recognition of the significance of the protection of traditional knowledge in the investment law context, Article 25(3) of the Pan African Investment Code (PAIC) provides that:

“Member States and investors shall, in accordance with generally accepted international legal standards and best practices, protect traditional knowledge systems and expressions of culture as well as genetic resources that are sought, used or exploited by investors, or are otherwise relevant to their contracts, practices and other operations in such Member States.”

Article 25(4) provides that:

“Member States shall provide, within national laws, principles for the patenting of biological materials or of traditional knowledge systems and expressions of culture for the protection of local communities in such Member States.”

The notions of traditional knowledge systems and expressions of culture in the PAIC were taken from the UNESCO Convention on the Diversity of Cultural Expression. However, the PAIC has no binding force, so indigenous communities in Africa are unable to take direct benefit from its provisions.

 

The Way Forward for Africa

One means of better protecting traditional knowledge in the trade and investment context would be to develop a body of norms in such agreements which protect traditional knowledge and balance the tension between liberalizing trade and indigenous communities’ inclusivity. The protection and promotion of traditional knowledge systems under international investment law should be considered a sui generis measure and ethically imperative during the negotiation and execution of BITs and FTAs. One opportunity to develop such a body of norms is presented by the African Continental Free Trade Area (AfCFTA). As Phase II negotiation is delayed due to the COVID-19 pandemic, a draft legal text of the AfCFTA Investment Protocol (Investment Protocol) has not been submitted to the Assembly of the African Union. Thus, the Investment Protocol should create a refreshing spring from the historical misuse of the traditional knowledge systems and impose standard obligations on States and investors alike to recognize and protect traditional knowledge rights.

Indigenous communities should be empowered to enjoy the appropriate intellectual property rights on their innovations or traditional knowledge and may negotiate with potential investors by establishing Societies or Trusts to protect their interest. Future BITs involving African States should protect the sustainable use of access to traditional knowledge developed by indigenous peoples and local communities while recognizing fair and equitable participation in the benefits derived from the access to the traditional knowledge.

African countries should provide within their national laws general principles for the registration of traditional folklore, historical or traditional designs, native objects, and all other indigenous resources that are sought, used or exploited by Investors. These countries can find guidance in the African Model Law on the Protection of the Rights of Local Communities, Farmers, Breeders and the Regulation of Access to Biological Resources (AML), which was adopted by the 68th Ordinary Session of the Council of Ministers of Organistion of the African Union held in Ouagadougou, Burkina Faso, in June 1998. The AML provides African countries with a framework for the formulation of laws to protect traditional knowledge in accordance with their economic development objectives, political orientations and national interests.

The WIPO Arbitration and Mediation Centre already has a structured ADR mechanism and rules for resolving disputes between Indigenous people and private parties. The WIPO ADR structure can be incorporated into the Investment Protocol and future bilateral investment treaties involving the African States. ADR is appropriate as the first step of dispute resolution mechanism because the issues that arise regarding traditional knowledge often involve complex layering of interests and responsibilities within traditional and local communities.

ADR can therefore allow for a comprehensive understanding of the intricate relationships and enhance the efficacy of arbitration under future international investment instruments. Article 27 of the Convention on Biological Diversity recognizes ADR as an important precursor to arbitration in disputes involving indigenous and local communities.

Investment arbitration tribunals should recognize indigenous communities’ rights to file amicus curiae briefs in arbitrations that impact traditional knowledge. This will mitigate the concern that the current ISDS framework unfairly allows investors to make a claim for the loss of opportunities when a state protects or advances indigenous rights. New Zealand has made headway with its draft ISDS Protocol which is to address the impact of investor- State disputes on the rights of the Maori people.

It is imperative that African countries develop a concrete plan of action and investment standards that will (a) protect and preserve knowledge, innovations and practices of indigenous communities (b) promote the wider application, with the approval and involvement of the holders of such knowledge, innovations and practices, and (c) encourage the equitable sharing of the benefits arising from the utilization of such knowledge, innovations and practices.

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The Rising Arbitrator’s Challenge in Latam: Navigating the Promise and Perils of Your First Appointments

Sat, 2021-04-17 01:30

On 24 March 2021, the Rising Arbitrators Initiative (RAI) held the fourth session of its webinar series “The Rising Arbitrator’s Challenge: Navigating the Promise and Perils of Your First Appointments”. This fourth conference focused on the challenges that first appointments bring to arbitrators in Latin America and has brought together both young and more seasoned arbitrators from the most active jurisdictions in the region, as well as representatives from arbitral institutions.

With Martín Rosati (Ferrere, Uruguay) as host and Renato Stephan Grion (Pinheiro Neto Advogados, Brazil) delivering the opening remarks, the panel was comprised of Valeria Galíndez (Galíndez Arb., Brazil), Juan Felipe Merizalde (JFM Abogados, Colombia), and Sylvia Sámano Beristain (CAM, Mexico). The panellists started by tackling the general do’s and don’ts for arbitrators seeking their first appointments, and shared valuable advice and insights for young practitioners facing common but seldom discussed aspects of the arbitration’s dynamics: deliberations and disagreements within the arbitral tribunal, uncooperative arbitrators, gravitas, and other scenarios for which university and academic training do not prepare future practitioners.

 

With great power comes great responsibility

Renato Stephan Grion opened the forum stressing the appropriateness of the title of RAI’s webinar series: being an arbitrator, especially for the first time, is no easy task. He stressed that first appointments come with great opportunity for young arbitrators, but also with challenges and responsibilities.

Although it is common that arbitrators will have come a long way in their professional careers before receiving their first appointment, he considered that it is rather paradoxical that first-time appointed arbitrators usually sit as sole arbitrators in very complex cases, where there are frequently several incidental requests from the outset. To better prepare and equip starting practitioners for future challenges, he encouraged attendees to check RAI’s website and take part in RAI’s debates and initiatives, which offer them an insight into day-to-day arbitration practice.

 

RAI and mentoring in the development of starting arbitrators’ careers

Valeria Galíndez remarked upon the importance of initiatives such as RAI and similar communication channels in the development of young arbitration practitioners and young arbitrators. She explained that even if the arbitration practice has changed drastically in the last ten years, the role of safe environments to exchange ideas and experiences, as well as mentoring, are as crucial now as they were before.

On this point, Juan Felipe Merizalde questioned the lack of training for starting arbitrators on key aspects of the arbitral process, such as on how to effectively participate in the deliberation process, how to deal with a problematic arbitrator, and the scope of a president’s duties when drafting the award. As such, the development of soft skills is usually neglected.”.

The panel agreed that it was precisely due to the lack of training in such areas, that initiatives and organizations such as RAI are crucial to international arbitration practice.

 

The right combination of elements: opportunities, skills and the role of administering institutions

The panel went on to discuss do’s and don’ts when looking to receive, and when ultimately receiving, a first appointment. Valeria Galíndez commented on how working as counsel for parties and acting as administrative secretary of tribunals allowed her to build strong connections which would later serve as a steppingstone into her career as an arbitrator. In the same vein, Juan Felipe Merizalde agreed that having worked as counsel before accepting arbitrator appointments is valuable and elaborated on the importance of being an active member in the arbitration community. He shared that a key feature of his personal development was in participating in conferences to gain visibility, an invaluable asset in the competitive arbitration arena.

In this respect, he stressed the crucial role of arbitral institutions as inclusive platforms that seek to open forums and offer opportunities to starting arbitrators, that range from inviting them as speakers at conferences to appointing them as arbitrators for the first time. However, he believes that earning the trust and recognition of other important actors in arbitration, such as the counsel for the parties and co-arbitrators, remains a challenge for starting practitioners.

On this point, Sylvia Sámano Beristain noted that administering institutions are aware of users’ needs: to have professional, committed arbitrators. To be able to cover those needs, arbitral institutions must identify profiles matching those expectations. However, the role of arbitral institutions goes far beyond simply identifying potential arbitrators. Sylvia Sámano explained that administering institutions play an important supporting role, especially for starting arbitrators, since they provide guidance on procedural matters. In addition, she pointed out that advocacy for the inclusion of younger practitioners as arbitrators has led administering institutions to act and advance initiatives that promote their participation.

 

The importance of domestic arbitration in an international career

As an area of open discussion, Martíin Rosati invited the panel to address what, in their opinion and experience, is the role of domestic arbitration in the journey to becoming an international arbitrator, and the extent to which having a domestic arbitration background represents an advantage for achieving that goal.

In Juan Felipe Merizalde’s view, a robust domestic arbitration practice is the perfect training ground for a rising arbitrator and an excellent opportunity for starting arbitrators to break into the international sphere. Valeria Galíndez agreed, and went on to note that in addition to opening the door for beginners to enhance their skills by exposing them to real-life situations, domestic arbitration remains an important market even for experienced international arbitrators. In her opinion, international arbitrators in domestic cases play a fundamental role in contributing to the introduction and development of new, more sophisticated arbitral practices in such fora and ensure that domestic arbitration is not erroneously treated as akin to local litigation.

 

To appoint new arbitrators or not to appoint new arbitrators?

Despite the common ground among the panellists that offering opportunities to newcomers is vital, it remained less clear how party appointments of starting practitioners can be achieved.

Sylvia Sámano Beristain highlighted some advantages of appointing new arbitrators, such as their availability and enthusiasm to diligently study and resolve the dispute. Renato Stephan Grion noted that while a solid and consistent career is an important factor for the appointment of new arbitrators, the courage to decide a case is the decisive characteristic that tips the scale. It is challenging to determine whether the potential arbitrator possesses that quality before appointing them, but he suggested that having a look at their professional experience may be revealing.

A common concern raised by Martín Rosati in this respect was how to strike a balance between the parties’ expectations regarding first-appointed arbitrators being courageous in tribunal deliberations, with possible concerns by first-appointed arbitrators of risking being labelled as a “problematic arbitrator”, especially when dealing with more experienced arbitrators. The panel agreed that first-appointed arbitrators should never hold back on expressing their views and that their voice on the tribunal will usually be better received if they have detailed knowledge and understanding of the case and manage to establish personal bonds with their co-arbitrators.

In concluding the webinar, Sylvia Sámano Beristain reminded starting arbitrators that any relevant experience in the field –such as acting as administrative secretary of tribunals or working for an administering institution– provides first-hand experience from an arbitrators’ perspective, which is most valuable when searching for a young arbitrator’s first appointments. She therefore encouraged young practitioners to seek out and seize such opportunities.

 

Conclusion

This webinar addressed shared challenges among starting practitioners and provided attendees with valuable practical insights and advice. An exposure to real arbitration practice is crucial for enhancing rising arbitrators’ skill sets and providing them with such opportunities requires the collaboration of established and young practitioners, institutions, and initiatives such as RAI.

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A Tribute to Emmanuel Gaillard

Fri, 2021-04-16 01:36

On the unexpected passing of Emmanuel Gaillard at age 69, Kluwer Arbitration Blog reached to practitioners around the world, asking them to share how Emmanuel Gaillard influenced them or the practice of international arbitration. 

 It would have been impossible to canvass everyone who has been touched in some way by Emmanuel Gaillard.  Hopefully, the comments from those below will be seen as representing a broad range of those Emmanuel Gaillard influenced during his long career. Kluwer Arbitration Blog invites readers to add their own reflections in the comments section.

Emmanuel Gaillard 1952-2021

 

Emmanuel was arbitration’s public intellectual in the French manner. Learned, witty, immensely charming, skilfully ambitious. He is irreplaceable.

Lord Leonard Hoffmann

 

It is so difficult to imagine the world of international arbitration without Emmanuel; every time I try it makes me very sad… Among his many legal achievements, I will especially remember him as the co-author of the influential Fouchard/Gaillard/Goldmann treatise (F/G/G in my personal abbreviations); as the one who reformulated the lex mercatoria theory as a method of application of the law by international arbitrators rather than a set of rules; as one of the first within the arbitration community to spot the potential of investment arbitration when he started his Chronique of ICSID awards in the Clunet in the eighties… and there would be so much more to say… But above all I will remember him as a great human being!

Gabrielle Kaufmann-Kohler

 

To say that Emmanuel will be missed — which of course he will be — is a giant understatement.  Having worked with Emmanuel for some 40 years, both starting as young faculty, I have never ceased to be inspired by, not only his brilliance, creativity, and professionalism, but also by his boundless capacity for loyalty, collegiality and friendship.

George Bermann

 

Emmanuel Gaillard’s premature and sudden death is an immense loss for the world of arbitration. He joined a great doctrinal creativity and a tremendous success as a practitioner (both counsel and arbitrator).

Pierre Mayer

 

Emmanuel was a monument in international arbitration which he mastered and innovated as an academic, a counsel and an arbitrator. In all these different capacities, he will be badly missed by readers, students, mentees, colleagues, and his many friends among them. His combined legal knowledge, overall wisdom, social responsibility and kindness will be remembered by everyone who had the privilege of crossing his path.

Vera Van Houtte

 

As the few artists able to give a life to their art beyond their own creations, Emmanuel was not just a splendid technician of arbitration but he had also the talent to discover the legal order that international arbitration needed to breathe.

Yves Derains

 

Emmanuel was a brilliant lawyer, advocate, teacher and writer, but he was also a builder, founding and developing one of the top arbitration practices and launching the careers of dozens of budding arbitration lawyers, including myself. He was brave, charismatic, unconventional, he didn’t take himself too seriously and he had a wicked sense of humour. He will be deeply missed.

John Savage QC

 

Emmanuel has greatly contributed to the nourishment of translational law making within the framework of the United Nations. His most recent keystone contribution, the Guide on the New York Convention and its associated web platform, remains a display of Emmanuel’s openness and generosity. We feel an immense gratitude and will remember him very fondly.

Corinne Montineri

 

With Emmanuel, arbitration has lost a global leader. He was one of the best academics of his time, an outstanding arbitrator and a creative legal thinker. In many respects, he fathered arbitration as we know it today. We are all, in a way or another, indebted to him. And he had the passion of defense rooted in his heart; it is perhaps as the grand avocat that he was that I will remember and admire him more. My most friendly thoughts go to his familiars, colleagues and friends in this moment of grief.

Alexis Mourre

 

What I will hold on to from the 10 years I spent working in close collaboration with Emmanuel Gaillard at the start of my career is that being an accomplished international arbitration specialist requires a combination of qualities, those of a lawyer, a judge and a scholar. Emmanuel had all of them, at an unparalleled level.  On a more personal level, he showed me that charisma also comes from paying genuine attention to others, no matter their standing. It is also because he was profoundly humane that his loss is so strongly felt.

Eric Teynier

 

This is what I can say in a few words. From my baby steps as a trainee until now, Emmanuel has been my teacher, my role model, my north. I will eternally remember those watchful eyes observing me with slight amusement as I would try to convince him to endorse my carefully considered argument. An immense privilege in my career has been to witness this arbitration luminary navigate particularly challenging cases and strategize a way forward where there didn’t seem to be any to the rest of us. I will continue doing it the ‘Gaillard way’ to the best of my ability because that’s the only way I know and because I have seen it win the day again and again with tribunals, clients and colleagues.

Tsegaye Laurendeau

 

A giant in our field and a great human being, whom I deeply admired.

Sarah Grimmer

 

There are many of us involved in arbitration not only because it is an intellectually challenging and professionally satisfying activity, but also because we believe that with our work we contribute to facilitating international commerce and therefore to economic progress and welfare. However, only a few truly shine in the international arbitration community by decisively contributing to the development of the institution. Undoubtedly Emmanuel Gaillard was one of them. He excelled as professor, counsel and arbitrator. Emmanuel was very aware of it and his self-esteem matched up his brilliance. He was a paladin of the delocalization theory of arbitration, with which you may agree or disagree, but it is unquestionable that this theory was innovative and has contributed to making international arbitration what it is today: the only sensible course to settle international disputes.

David Arias

 

In my first ever arbitration, ages ago, Emmanuel Gaillard was an impressive opponent.  Last week, a few days after his passing, one of my students presented the Yukos award and included a tribute to him on her slides.  It goes to show that Emmanuel has influenced, and will continue to influence, many generations of arbitration lawyers

Prof. Maxi Scherer

 

Emmanuel was a lawyer with the soul of an artist. He embraced the unconventional and relished any opportunity to shatter orthodoxies, doing so with incomparable grace, humor, and nonchalance.  His understated demeanor was often tinged with a searing, easy wit that devastated his opponents.  He was a caring and empathetic colleague, generous and incisive mentor, and fiercely protective friend; to be in his orbit was to be in a state of constantly learning.  When I first met Emmanuel, he disagreed with everything I said, and then offered me a job.  Little did I know at the time, he also gave me a home.  Always demanding and encouraging, Emmanuel taught me and many others to have confidence in our instincts, yet I know that whenever I am confronted with a challenge, I will always ask what he would do.  As we say in the Jewish tradition, “May his memory be a blessing.” 

Daniel Reich

 

Emmanuel was as kind as he was brilliant. He was a mentor to me when I started in the field, as he was to so many young lawyers: generous with his time and prompt to demystify the world in which we operate with his usual wit and charm. While he was firmly anchored in France’s singular approach to international arbitration, his masterly Hague Lecture on the “Aspects philosophiques de l’arbitrage international” has re-laid the theoretical foundations of the subject in a way which will stand the test of time across all jurisdictions and legal traditions.

Salim Moollan QC

 

Nothing I could write about Emmanuel’s influence would compare with his own voice, sharing his views and counseling me on how to think about arbitration. I am fortunate to have recorded the conversation in a 2007 interview. 

0.00:  The arbitration litigator;

0.39:  Quantifying the value of an arbitration agreement;

1.17:  The advantages of leading civil law seats of arbitration;

4.38:  Why parties should prefer a sole arbitrator for most cases.

Michael Mcilwrath

http://arbitrationblog.kluwerarbitration.com/wp-content/uploads/sites/48/2021/04/Emmanuel-in-his-own-words-2007.mp3

 

 

Emmanuel was one of a kind. Among other things, he created a culture in his team where everyone working on a matter – from junior members to the most senior ones – was encouraged to express their views. His unique capacity and willingness to consider everyone’s thoughts was extremely motivating and led everyone to give their best. That in turn made us all grow.

Coralie Darrigade

 

Emmanuel’s acute intellect – reflected by an enigmatic smile that barely concealed the vivacity of his gaze –, his ability to go to the essentials in any circumstance and to make decisions, sometimes hasty, which set the path to move forward, always amazed me. Beyond the outstanding professional that Emmanuel was, I will always remember him as the affordable, generous and cheerful human being that convinced me to come back to Paris and join his arbitration team, which changed my life forever.

Fernando Mantilla-Serrano

 

Emmanuel possessed the encryption key of international arbitration, both from a theoretical standpoint and from a practical standpoint.  You could learn more in five minutes with him than in ten years working on your own.  It was an invaluable privilege to share the first 20 years of my professional life with him.

Philippe Pinsolle

 

Emmanuel was a “maestro”.  A noun that applies only to a handful of individuals.  He had not only the ability to transmit knowledge making complex subjects simple but a unique ability to understand what others were thinking, even before they could articulate their thoughts themselves. That is, he could “translate” what someone was thinking yet not saying. An uncanny ability to pierce other people’s mind and psyche and to see both the value and the error in their positions and believes.   Emmanuel motivated all of us in his team to reach our potential, to overcome hindrances, whilst allowing us to develop our ideas and self-confidence by letting us find solutions through questioning and dialogue.  

His unparallel ability to “translate” and organise ideas in a logic and coherent manner resulted in, what I believe, is his biggest contribution to the field of international arbitration: a systematization of concepts and formulation of an order.  Emmanuel did not disassociate theory and praxis.  He applied what he taught with generosity and humanity.

Ximena Herrera

 

Emmanuel was one of the few in international arbitration who can truly be counted as foundational, having shaped not only the way we practise but the way we conceptualise this field.  He inspired all who encountered him, with his originality, his brilliance, his effortless style and his wry smile.

Toby Landau

 

Emmanuel, above all else, personified the pleasure of arbitration. Everything that he did reflected his boundless passion, joy, and clarity. He juggled the most formidable legal questions with a youthful playfulness. He had an incomparable ability to step back, in the middle of a complex dispute, and look at it in a whole new light, quickly identifying the key issues that would “move up the needle,” as he liked to say. At the same time, he wasn’t shy about delving deep into thorny details to conceive new arguments. Most of all, he celebrated life … with a mischievous smile and never-ending wit.

Maude Lebois

 

The ICCA Congress in Stockholm in 1990 offered two programmes, one of which was entitled ‘Preventing Delay and Disruption of Arbitration’, as ‘hot’ a topic 30 years ago as it is now. The other tackled the vexed question of effective proceedings in construction disputes. Those who opted for spoiling tactics were in for a treat. The rapporteurs were Johnny Veeder, whom I knew and with whom I had already had the pleasure to work, and Emmanuel Gaillard. That first encounter with Emmanuel was a revelation. Over two days, he and Johnny put on a masterclass of extraordinary and sustained quality, the one delivering insight and innovative ideas wrapped lightly in felicitous English, the other moving swiftly from what, over time, I was to come to recognise as a trademark somewhat hesitant start into full flight, matching Johnny point for point, speaking without notes and in French of the highest quality. In the last session, Johnny switched to French and Emmanuel to English, It would be fair to say that, nonetheless, little was lost in translation. It was, quite simply, a tour de force.

So started a professional association and friendship with Emmanuel which it was a privilege to enjoy and to sustain over the next 30 years. He and Johnny were exceptional lawyers and scholars to whom the international arbitration community owes so much. Both are gone too soon, but none of us who has had the good fortune to know them and to count them as friends will ever forget them

John Beechey

 

A substantive professor, a fierce advocate, and a singular strategist.  Emmanuel not only had it all, but he shared it all, with absolute genius.  He guided me without ever seeking to teach me and in so doing taught me, and countless others, everything we know all the while giving us the freedom and confidence to grow.  His vision and legacy will continue to influence generations of scholars and practitioners to come.

Mohamed Shelbaya

 

An original thinker who influenced a generation of lawyers through his writing and lectures, but also by his example of respect for others whatever the issue.

Julian Lew

 

Prof. Gaillard had the unique gift of being able to conceptualize investment arbitration at every level, from a broad legal philosophical perspective in his writings to the most practical, incisive and strategic approach in his representation of clients.  He was a mentor, a teacher, a role model and a friend to so many in this field, and he will be greatly missed.

Meg Kinnear

 

Emmanuel’s brilliance was obvious to everyone in the wider arbitration community, but working closely with him revealed less obvious values and qualities.  For example, no matter the challenges of a case, his approach was always ethical and honest.  He embraced diversity and led a truly inclusive practice.  And, his unique combination of wit and quickness of mind added lightness and laughter to the toughest cases. What a loss that his journey was far too short.

Todd Wetmore

 

A giant amongst us Emmanuel Gaillard brought style, brilliance, courtesy and humility to his many roles including advocate, arbitrator, teacher, mentor and friend. As an advocate and arbitrator he seamlessly fitted into the common and civil law traditions in a way few have done before him. As a teacher and philosopher he challenged the atrophy of thinking from which many of us lawyers suffer. As a mentor and friend to many his influence was deep and lasting. The sadness of his sudden passing is tinged by the memories we have of him, and in my case the very fresh memory of the skill of his advocacy in an arbitration the week before he left us.

Doug Jones

 

Over the past 10 years, I have had the privilege of working with Emmanuel on a daily basis. We have notably appeared or argued together in over 50 hearings. Emmanuel’s style was unique: he could present the most complex issues in the simplest fashion, forcefully defend an argument without ever raising his voice, use humour to undermine the opposing side’s position or to discredit disingenuous witnesses or experts, while always treating his opponents with respect. He made every hearing a treasurable experience: he would constantly reinvent himself and often catch even his closest colleagues off guard. One could not but admire him and be proud to count among his teammates.

Benjamin Siino

 

Emmanuel Gaillard not only practiced international arbitration, he lived and breathed it. Meeting him in November 2017 when he came personally to Lagos Nigeria to participate on a panel organized by the Lagos Court of Arbitration and Shearman & Sterling discussing  current practice under the New York Convention was evidence of this. He didn’t send someone, he came himself. He was unassuming, unpretentious and ever ready to expand the thresholds of knowledge.

Funke Adekoya

 

Emmanuel was a friend and a permanent source of inspiration through his writings, his personal style as counsel, his creativity, his dynamism, his vibrant personality. Few lawyers have contributed so much to the development of international arbitration. We will miss him enormously.

Bernard Hanotiau

 

Emmanuel Gaillard was a voice, literally and figuratively. In the literal sense: quiet, firm, rhythmic, recognizable among thousands; it lingers in the memory. In the figurative sense: in his advisory or arbitral work, in his courses, his conferences, his publications, firm, confident, clear, often original, always courageous; it will remain present for a long time in the development of international arbitration.

Pierre Tercier

 

Finally, on behalf of the new law firm that Emmanuel Gaillard had recently co-founded and bearing his name, Gaillard Banifatemi Shelbaya Disputes, those wishing to share memories, stories, anecdotes and sentiments are invited to email them to [email protected], so they can be compiled into a book of remembrance. The firm will organize an event later this year in honor of their lost colleague, when conditions will permit in-person gatherings.

 

 

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The Anomalous Case of Sections 8 and 11 of India’s Arbitration and Conciliation Act, 1996

Thu, 2021-04-15 01:00

In a March 2021 decision, Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engineering Pvt. Ltd. (“Pravin Electricals”), a three-judge bench of the Supreme Court (the “Court”) shed light on an “anomaly” that exists in the operation of Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 (the “Act”). The Court clarified its prior judgment, Vidya Drolia v. Durga Trading Corporation (“Vidya Drolia”), to explain that the role of a judicial authority was restricted to ascertaining the prima facie existence of an arbitration agreement in the context of both provisions. However, the Court also drew attention to a seeming irregularity in the law: while the decision of the authority to refuse reference to arbitration is appealable under Section 8, a refusal to appoint arbitrators under Section 11 is immune to judicial review by way of appeal.

This presents two interesting points of discussion: first, understanding whether the standard of judicial intervention applicable under Sections 8 and 11 of the Act is identical, and second, dissecting whether the differing approaches to appeal are justified. In analyzing these propositions, it is evident that the differential treatment of the two provisions is impermissible. Therefore, to bring Section 11 on par with Section 8, an amendment to Section 37 of the Act is imminently required.

 

Contextualizing Sections 8 and 11 – the prima facie standard

Sections 8 and 11 of the Act are complementary in nature, a view that was upheld in Vidya Drolia (see paragraph 15 thereof). The former is paramount to the initiation of arbitration proceedings, being one of the most commonly resorted to provisions of the Act. It empowers a judicial authority to refer parties to arbitration, so long as it is not prima facie satisfied that there is no valid arbitration agreement between the parties. Similarly, in initiating arbitral proceedings, Section 11 plays an equally important role as it facilitates the parties’ appointment of arbitrators. More specifically, Sections 11(4)-11(6) empower either the Court or a High Court to take measures for an appointment at the request of either party. After the 2015 Amendments to the Act, Section 11(6A) was introduced and it clarified that for the purpose of the aforementioned sub-sections, the appropriate Court must confine its examination to “the existence of an arbitration agreement”. In this regard, one of the themes in both Pravin Electricals and Vidya Drolia was defining the scope of the judicial authority’s examination under Section 11.

In fact, this question has captured the attention of the Indian judiciary for a considerable period of time. SBP & Co. v. Patel Engineering Ltd. and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., both decided pre-amendment, laid down that the nature of the role played by the Chief Justice (as the law stood then), in the operation of Section 11, as being one of a judicial nature. Further, both decisions clarified, albeit implicitly, that in ascertaining the existence of an arbitration agreement, the Chief Justice had the authority to examine a wider scope of preliminary issues. Neither of these points is seemingly true anymore: the 2015 Amendment to Sections 11(6A) and 11(6B) has made clear that the appointment of arbitrators is not a judicial function, and that the scope of judicial interference in the appointment of arbitrators is to be minimized – but to what extent? Neither decision makes a tangible comment on the scope of interference by the authority concerned.

Noting this lack of clarity, the Law Commission of India, in its 246th Report, recommended that the same test regarding the scope of judicial intervention (the specifics of which are discussed below) be applied in the context of Sections 8 and 11 of the Act. It was reasoned that both provisions existed to prevent unwilling parties from trying to derail arbitral proceedings by either commencing judicial proceedings or by refusing to appoint an arbitrator. Accordingly, giving judicial authority a different scope of authority in the two cases was impermissible. In defining what this standard ought to be, they referred to the case of Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. where the prima facie standard was applied to applications made under Section 45 of the Act (international commercial arbitrations) and recommended the amendment of both Sections 8 and 11 to reflect this. However, when Parliament passed the Arbitration and Conciliation (Amendment) Act, 2015, it was clear that the legislature had heeded the Commission’s recommendation on Section 8, but not on Section 11. Therefore, the ambiguity persisted.

In Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, the Court sowed the seeds of what is now the law of the land. By specifying that it was the role of the appointed arbitrators to handle all preliminary issues and that the Court merely had to look into the existence of the agreement, the foundation was laid for the holding in Vidya Drolia. Here, for the first time, the aspects of existence and validity of an arbitration agreement at the pre-arbitration stage were held to be crucially intertwined, since an illegal or invalid agreement was no agreement at all. Crucially, the Court linked Section 11 to Section 8 since their object and purpose was materially identical. Accordingly, in the interests of maintaining the temporal advantages that arbitration boasts and appropriately balancing the roles of the Court and the arbitral tribunal, it was held that the “scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.” Finally, there was clarity as to the extent of the Court’s role in the operation of both provisions.

 

The “anomalous” question of appeal

This leads us to the second point of discussion: the appealability of orders made under the two provisions. Section 37 of the Act enumerates those orders made by a judicial authority that may be appealed by parties. In this regard, the 2015 Amendment to clause 1(a) ensured that parties have the right to appeal orders that have refused to refer them to arbitration under Section 8. However, there is no provision that entitles a party to appeal against an order refusing the appointment of an arbitrator under Section 11 of the Act. This position is counterintuitive and lies in direct contrast to what was envisioned by the Law Commission of India. In discussing reforms to the Indian arbitration framework, their 246th Report dissected Section 37 as well and made it clear that amendments were needed to reflect the appealable nature of orders made under both Sections 8 and 11. Specifically, the Commission recommended the introduction of clause 1(c), which guaranteed the right of parties to appeal the decision of a judicial authority in case the appointment of an arbitrator was refused. However, in keeping with the general attitude of the legislature towards the amendments that were suggested to the scheme of Section 11, the 2015 Amendment only made orders under Section 8 appealable.

Thus, the Court in Pravin Electricals was right to analyze and discuss the consequences of the legislature’s inaction. By reiterating the findings in Vidya Drolia, the Court emphasized that the “prima facie” test of Section 8 is indeed applicable to Section 11, and that the law, as it stands today, is anomalous. Accordingly, they recommended that Parliament look into the two provisions concerned and consider amending Section 37 to include appeals against orders made under Section 11.

 

Conclusion

Sections 8 and 11 are pillars on which the Act is built, and the judiciary has done well to circumscribe its own role in their operation. However, at the same time, it has been let down by the seeming unwillingness of Parliament to heed the recommendations of the Law Commission of India and enact a law that is consistent, and appropriately addresses the mischief of party-induced delay. Hence, the rationale behind the Court’s decision in Pravin Electricals is simple: when two provisions share a common purpose and prescribe identical roles to the relevant judicial authority in their application, allowing parties to appeal against orders under only one provision is anomalous and, in a sense, arbitrary. Therefore, an amendment to Section 37 of the Act, guaranteeing the right to appeal against orders made under Section 11, is imminently required.

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Investment arbitration in Chile, Colombia, Mexico and Peru: Where are we and where are we going?

Wed, 2021-04-14 01:27

On November 26, 2020, the #YoungITATalks session took place with the participation of representatives from government offices of different countries: Mairée Uran Bidegain (Chile), María Paula Arenas Quijano (Colombia), Cindy Rayo Zapata (Mexico) and Ricardo Ampuero Llerena (Peru). All panelists are or, at some point, were responsible for organizing and preparing the defense of States in investor-State disputes. The moderators were Sylvia Sámano Beristain and Andrés Talavera Cano.

 

Developments and novelties in the treaties entered into by Colombia, Mexico, Chile and Peru

The panel started with the intervention of Mrs. Arenas, who detailed how Colombia’s approach to international investment agreements (IIA) has evolved. She explained that, when international investment agreements began to be signed, Colombia’s aim was to enhance the country’s visibility in the international arena. Currently, Colombia’s policy of attracting foreign investment focuses on efficiency, namely, on making the local economy more proactive, in order to attract more productive investment that leverages better quality jobs. Within this framework, the Superior Council of Foreign Trade has instructed the Government to engage in the modernization of IIAs by making sure that the language of new agreements and their provisions seek a balance between the interests of the State and the attraction of foreign investment.

In the case of Mexico, Mrs. Rayo stated that the modernization and updating of IIAs began in 2012 with the Trans-Pacific Partnership Agreement (TPP), now CPTPP, and continued in 2017 with the United States-Mexico-Canada Agreement (T-MEC, its abbreviation in Spanish) which includes a modern investment chapter with provisions that reflect the experience of Mexico, Canada and the United States in investment arbitration; the disciplines contained in this chapter reflect the jurisprudence of NAFTA.

On the other hand, Mrs. Uran, analyzed the cooling off period from the point of view of the States. From her perspective, this is an important conflict prevention mechanism that has not had the expected results, among other reasons, because investors do not provide the State with the necessary inputs for it to evaluate and establish on a well-founded basis whether and why an amicable solution would be warranted. This manifests itself in two ways. The first is that investors present claims under domestic law, as if investment arbitration were “an additional instance” of review of State decisions, rather than presenting their treaty claims under international law from the outset. The second is to refrain from submitting relevant background information to the State. Claimants generally fail to submit all the information that would support their claims and monetary claims – notwithstanding a confidentiality agreement – which dooms the negotiation process to failure.

Finally, in the case of Peru, Mr. Ampuero pointed out the steps necessary to enter and implement an agreement to solve a dispute (transaction) with the Peruvian Government. First, a viable solution formula must be determined in two senses: technical (having the favorable opinion of the entities involved in the dispute, which are part of an ad-hoc commission) and legal (not violating any legal provision within the transaction). Then, a Supreme Resolution is signed by the President and the Ministers of the sectors involved in the ad-hoc commission and the Minister whose sector must implement the transaction formula. Finally, the compromise formula is signed. This mechanism has worked well because it divides the evaluation of the transaction into a technical stage (which is carried out by the Special Commission) and a political evaluation stage (by the Council of Ministers, where the political impact, among others, is studied).

 

Relevant aspects in emblematic cases

The second topic addressed by the panelists was relevant defense aspects from emblematic cases. In the case of Chile, Mrs. Uran referred to Pey Casado, in which the State prevailed after 22 years of litigation in which all the remedies and procedural instances provided by the ICSID system were exhausted, making it the longest ICSID case. This case made it possible to point out that compliance with the principle of res judicata in a scenario of parallel proceedings is still a pending issue in the ICSID system and damages its credibility.

In the case of Mexico, Mrs. Rayo focused on best practices for the defense, during the notice of intent to arbitrate stage and the arbitration process. She explained that, when the notice of intent is received, the first thing to do is to establish contact with the agencies or entities to whom the claims are attributed, as well as to gather and preserve information to analyze the merits of the claim and prepare a good defense.  Regarding parallel proceedings, Mrs. Rayo mentioned that this is a recurring phenomenon in ICSID and it usually involves the analysis of the very same measures but claimed by shareholders and/or subsidiaries of an original claimant, under different treaties. This results in increased defense costs, contradictory decisions, double damages, among others. In view of these situations, treaties should have clear rules that allow the parties, with prior consent, to consolidate multiple claims, even when they are brought under different treaties.

With regard to Colombia, Mrs. Arenas commented that, in recent years, Colombia has been one of the most sued States in investment arbitration. Out of a total of 141 countries, Colombia ranks 19th as a respondent country. She also emphasized the importance of the Constitutional Court’s review, in the last stage before the ratification of the Colombia-Israel FTA, in which investment protection, the most favored nation clause and reasonable expectations were reviewed (this issue was analyzed in a previous post here). By the same token, for the Agreement for the promotion and protection of investments concluded with France, the provisions on equal treatment of investments, fair and equitable treatment and most favored nation had to be reviewed as well (this issue was analyzed in a previous post here).

Finally, to close the panel, Mr. Ampuero referred to the possibility of counterclaims by States in investment arbitration, an option that is quite debatable since, in principle, most tribunals have considered that treaties provide for obligations for States and rights for investors. The case of Peru is particular because it decided to include ICSID clauses in investment contracts, a situation that has generated two major effects: (i) an increase in the number of cases that the Peruvian State has to face on the basis of such contracts (Peru currently has 17 arbitrations), and (ii) the possibility of filing counterclaims by the Peruvian State. Moreover, a few years ago, Peru was the first Latin American country to act as claimant in Republic of Peru v. Caravelí case before ICSID a process that was concluded by agreement between the parties.

 

“Coordination Instance” implemented by the Pacific Alliance.

Finally, the panelists highlighted the importance of the creation and adoption of the Coordination Instance implemented within the framework of the Pacific Alliance (PA). From what was explained by the panelists, this Instance is a forum created to constantly share information and experiences between the PA States, in order to implement better decision making in relation to IIA and its controversies.

Mrs. Uran commented on its genesis. In this regard, she indicated that it was born out of 4 observations: (i) the PA States have faced more than 70 arbitrations and have collectively participated in the great changes and developments that the system has undergone since its inception, (ii) the four States face similar realities and have established a great technical capacity in the area of investment disputes, and therefore it is beneficial to share the experience of the four States, (iii) there is an interest in joining positions with respect to the proposals for reform of the ISDS system, in order to increase the degree of influence of each State in international forums and to strengthen the PA, and (iv) the States share the objective of preventing international liability and favoring investment, while safeguarding the regulatory capacity of the States.

To this, Mrs. Rayo referred that as part of several actions being carried out by the Coordination Instance, the dispute prevention project proposes the preparation of a prevention manual that should contain informative material in simple language on the disciplines related to these investment arbitration matters, including examples of the type of measures that, if implemented by the authorities, could result in a violation of the investment agreements. It is not ruled out that training and workshops for officials could be held in the future.

Mr. Ampuero indicated that the reason behind the creation of the Instance is to have more information for better decision making. There are some problems that are inherent to the States and others that are the result of their management, which is why sharing experiences in this regard is important and valuable.

Finally, Mrs. Arenas emphasized the importance of the Pacific Alliance Investment Subcommittee in the creation of the Coordination Instance and its role in the negotiations on investment defense, generating very productive interactions for the analysis of these matters.

In conclusion, Latin American States like Chile, Colombia, Mexico, and Peru have gained important experience in investor-state disputes; this is reflected in their policies to attract foreign investment, the language used in the provisions of new international investment agreements, and the efforts made to implement mechanisms related to the prevention of investor-state disputes that save costs for both parties such as the cooling-off period or agreements; however, these do not always have the expected results.  Last but not least, coordination between States facing similar realities never have been more important, the Coordination Instance implemented by the Pacific Alliance is an example of it, in order to increase the influence of States in the investor dispute system.

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The Contents of Journal of International Arbitration, Volume 38, Issue 2 (April 2021)

Tue, 2021-04-13 01:00

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

 

Richard Garnett, Article 5 of the Model Law: Protector of the Arbitral Process?

The question of judicial intervention remains highly significant in international commercial arbitration. Article 5 of the Model Law was included in the text both to identify those matters in which intervention is permitted and to define the nature and manner of such intervention. While Article 5 has been largely effective in regulating judicial intervention in matters expressly governed by the Model Law, the issue of abuse of process raised by the presence of concurrent court and arbitration proceedings has been more contentious. This article contends that this issue should also fall within the scope of the Model Law as a matter concerning court intervention in arbitral jurisdiction. While Article 5 does not directly apply to foreign-seated arbitrations, the policies of limited court intervention and respect for arbitral jurisdiction should still be influential.

 

Beata Gessel-Kalinowska Vel Kalisz, Admissibility of Electronic Awards in the UNCITRAL Model Law Jurisdiction: Polish Law Example

The author examines whether an award signed electronically can be deemed to constitute an award in writing as provided for in Article 31 of the UNCITRAL Model Law, which is reflected verbatim in article 1197 of the Polish Civil Code. The conclusion is that an electronic signature as such is functionally equivalent to the written signature. Having said that, not all types of electronic signature can be admitted in this respect. The eIDAS Regulation (Regulation 910/2014 of the European Parliament and of the Council on electronic identification and trust services) provides for three types of electronic signature: regular, advanced, and qualified, stating that the qualified signature should be deemed as equivalent to the written signature. The author is of the opinion that both the advanced and qualified electronic signatures fulfil the requirements of the form ‘in writing’, ensuring the safeguards as listed in article 26 of the Regulation. Specifically: it is uniquely linked to the signatory; it is capable of identifying the signatory; it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.

 

Gerhard Wagner & Jan Philipp Koester, Originalism Meets International Arbitration: The US Supreme Court’s Interpretation of the New York Convention

The subjection of non-signatories to arbitration agreements under the New York Convention is one of the fundamental issues of international arbitration, raising questions that touch upon the very concept of an arbitration agreement laid down in Article II. In the case of GE Energy Power Conversion v. Outokumpu, the US Supreme Court took a stand on that matter. It held that the New York Convention does not conflict with domestic law doctrines such as equitable estoppel which may bind third parties to arbitration agreements signed by others. Engaging only in an originalist interpretation of the Convention, the judgment fails to explore the normative depth of the problem.

 

John David Branson, The Abuse of Process Doctrine Extended: A Tool for Right Thinking People in International Arbitration

The abuse of process doctrine is a recognized principle of public international law that prohibits the exercise of a procedural right in contravention of the purpose for which that right was established. This doctrine has been applied in context of investment arbitration where investors manipulate their corporate structure to gain access to jurisdiction after a dispute has become foreseeable. However, while abuse of process has become synonymous with corporate restructuring in investment arbitration, the doctrine is by no means limited to that application. Indeed, more recently, the doctrine has gained momentum as a mechanism to address the problem of multiple and successive arbitrations filed by investors against Sovereigns. This trend culminated in the Orascom v. Algeria decision, recently affirmed by an ad hoc Committee on annulment, that dismissed an investor’s claim ‘in relation to the same investment, the same measures and the same harm’. The application of abuse of process in this context, however, remains unsettled. After review, this article concludes that when an investor initiates multiple arbitrations for the sole purpose of maximizing the chances of success, investment tribunals should consider abuse of process as a means to protect the legitimacy of their proceeding and the Investor-State Dispute Settlement system as a whole.

 

Samy Rais & Kabir Duggal, The Evolution of Brazilian CFIAs from 2015 to 2020: Like Wine, Does It Get Better with Time?

This article undertakes an in-depth analysis of the evolution of Brazil’s Cooperation and Facilitation nvestment Agreements (CFIAs) since the publication of the Brazilian Model CFIA in 2015. It studies the tumultuous history of investment treaties in Brazil and how it may have shaped Brazil’s response to the investor-State arbitration regime through the current model CFIA. It assesses how the reception of Brazil’s Model CFIA among Brazilian stakeholders and commentators may have influenced the trends and evolutions of the fourteen CFIAs signed by Brazil from 2015 to 2020. It argues that the Brazilian CFIAs have improved with time through the progressive narrowing and strengthening of their jurisdictional, substantial, public policy and dispute resolution clauses. At the same time, they may not have fully implemented the criticisms and comments of academia and Brazilian civil society, and some provisions remain to be clarified in the future.

 

Allison Goh, Digital Readiness Index for Arbitration Institutions: Challenges and Implications for Dispute Resolution Under the Belt and Road Initiative

Post-COVID-19, a paradigm shift has occurred in the adoption of technology in arbitration. Leading arbitral institutions have adapted quickly, highlighting the foresight of institutions who have existing technological infrastructure in place. This article proposes a ‘Digital Readiness Index’, which aims to evaluate arbitral institutions on their level of digital readiness based on five evaluative indicators. Crossreferenced against Institute for Management Development (IMD’s) 2019 World Digital Competitiveness Rankings, the findings reveal synergies between an economy’s digital competitiveness and the adoption of technology in dispute resolution. To further the development of dispute resolution processes under the Belt and Road Initiative, strategic cooperation is required under the Beijing Joint Declaration of the ‘Belt and Road’ Arbitration Institutions, to advance best practices and protocols in the use of technology in arbitration, and address challenges such as cybersecurity and data protection.

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Arbitration Agreements in Consumer Contracts: Vietnam Reinforces its Pro-Consumer Approach

Mon, 2021-04-12 00:54

Around the world, there are divergent approaches towards the enforceability of arbitration agreements in consumer contracts. Vietnamese laws protect consumers, who are buyers or users of goods or services for consumption or daily activities, against mandatory arbitration. The Council of Justices of the Supreme People’s Court (“Council”) recently adopted a court decision as a Precedent that reinforces the current pro-consumer approach in Vietnam.

 

Statutory Consumer Protection Against Mandatory Arbitration

In 2010, Vietnam’s National Assembly promulgated the Law on Commercial Arbitration (“LCA”) and the Law on Protection of Consumers’ Rights (“LPCR”). Both laws contain express provisions protecting consumers against mandatory arbitration.

Article 17 of the LCA provides that:

“Concerning disputes between businesses and consumers, even if an arbitration agreement has been incorporated in the general conditions for the sale of goods or the provision of services drafted by the business, the consumer may choose arbitration or a court to settle the dispute. The business can only initiate lawsuits at arbitration if so consented by the consumer.”

In their Commentary on the Draft LCA dated 20 July 2009, the drafters found that the LCA should protect consumers because they were at significant risk of being unfairly treated by virtue of the businesses’ terms and conditions. Hence, Article 17 is formulated to give consumers a choice of dispute resolution method. If the consumer agrees to arbitrate, the dispute will be resolved by arbitration as agreed by the business and consumer. On the contrary, if the consumer feels disadvantaged by being compelled to arbitration, the consumer should have an opportunity to choose dispute resolution in court.

In the Resolution no. 01/2014/NQ-HDTP, the Council clarifies that an arbitration agreement is “incapable of being performed” where the consumer does not agree to arbitration under Article 17 even if there is an arbitration agreement contained in the general conditions for the sale of goods or the provision of services drafted by the business.

Further, Article 38 of the LPCR prescribes that:

“Before concluding a contract, the business must notify the consumer of the arbitration agreement, which the consumer must accept. In case the business incorporates the arbitration agreement in its model contract or general terms and conditions, when a dispute arises, the individual consumer may choose another dispute resolution method.”

In short, the LCA and the LPCR provide statutory protection for consumers against mandatory arbitration.

 

Consumer Protection Against Mandatory Arbitration in Practice

In line with the LCA and the LPCR, Vietnamese courts have consistently safeguarded the consumers’ choice of dispute resolution method. There have been at least two cases where consumers exercised their option to rescind pre-dispute consumer arbitration agreements.

First, in the case of Ms. Th v. Company B (2014), Ms. Th and Company B concluded a contract for the sale of an apartment in July 2010. According to the contract, Company B was obligated to hand over the apartment to Ms. Th in December 2011. However, Company B only handed over the apartment two years later, on 31 December 2013.

In June 2014, Ms. Th initiated a lawsuit against Company B at the People’s Court of Binh Tan District, Ho Chi Minh City. She asked the court to order Company B to pay the penalty for the late hand-over.

In the sales contract, the parties agreed to negotiate, mediate, and arbitrate at the Ho Chi Minh City Commercial Arbitration Centre (TRACENT). However, Ms. Th argued that she had not been notified about the arbitration agreement when she signed the contract. Hence, Ms. Th refused to arbitrate and requested that the court hear her case.

In the first instance judgment no. 608/2014/DS-ST dated 16 September 2014, the court ruled that the contract, which contained an arbitration agreement, was a model contract drafted by Company B. Hence, Ms. Th, as a consumer, could refuse to arbitrate and had the right to request the court to hear her case. The court found that it had jurisdiction over the dispute. On the merits, the court accepted the claim and ordered Company B to pay the penalty for the late hand-over after setting off the penalty for the late payment.

Second, in the case of Mrs. T and Mr. S v. Company V (2018), Mrs. T and Mr. S concluded a timeshare contract with Company V in February 2017. The value of the contract was VND 388 million. As of 15 March 2017, Mrs. T and Mr. S paid a deposit of VND 300 million.

In December 2017, Mrs. T and Mr. S initiated a lawsuit against Company V at the People’s Court of Nha Trang City, Khanh Hoa Province. They asked the court to nullify the contract and to order Company V to reimburse the deposit.

Initially, the court refused to receive the claimants’ petition because there was an arbitration agreement in the contract, in which the parties agreed to arbitrate at the Singapore International Arbitration Centre (“SIAC”) under the SIAC Rules. However, the court later reversed its initial decision and decided to receive the petition.

In the first instance judgment no. 54/2018/DS-ST dated 16 November 2018, the court ruled that the contract, which contained an arbitration agreement, was a model contract drafted by Company V. Hence, Mrs. T and Mr. S, being consumers, could refuse to arbitrate and had the right to request the court to hear their case. The court found that it had jurisdiction over the dispute, but the court rejected the claim on the merits.

 

Reinforcement of the Consumer Protection Against Mandatory Arbitration

On 24 February 2021, the Council adopted judgment no. 54/2018/DS-ST to become Precedent no. 42/2021/AL, which binds Vietnamese courts from 15 April 2021. Pursuant to Resolution no. 04/2019/NQ-HDTP (formerly Resolution no. 03/2015/NQ-HDTP), judges and jurors must research and apply precedents to resolve cases and ensure that similar cases shall be resolved in a manner consistent with Precedent no. 42/2021/AL.

Within the first few weeks after the adoption of Precedent no. 42/2021/AL, three preliminary observations can be made:

First, Precedent no. 42/2021/AL is the first precedent in Vietnamese courts concerning arbitration law. The adoption of Precedent no. 42/2021/AL, which derives from a first instance judgment of a district court, is exceptional because most precedents arise from cassation decisions of the Supreme People’s Court or the Superior People’s Courts. These circumstances reflect the growing importance of protecting consumers’ access to the court and the necessity of having a Council’s precedent on this matter.

Second, Precedent no. 42/2021/AL clarifies the scope of consumer protection against mandatory arbitration under Article 17 of the LCA and Article 38 of the LPCR. Even if a business’ model contract contains an arbitration agreement that refers disputes to international arbitration, the consumer may still refuse to arbitrate and request a competent Vietnamese court to hear the case. One question may be about the legal consequences if a foreign arbitral tribunal is constituted, conducts proceedings, and even renders an arbitral award. Arguably, the competent Vietnamese court may refuse to recognize and enforce such an arbitral award in Vietnam, at least on the grounds of public policy (Article V(2)(b) of the New York Convention and Article 459(2)(b) of the Civil Procedure Code). Thus, Precedent no. 42/2021/AL emphasizes that consumer protection against mandatory arbitration may apply to any consumer contract to which a Vietnamese consumer is a contracting party.

Third, Precedent no. 42/2021/AL also gives clues on what constitutes a consumer’s refusal to arbitrate. Here, the act of filing a claim in court is sufficient for the court to conclude that the consumer had requested to cancel the arbitration agreement. Thus, consumers should be cautious in choosing the most appropriate dispute resolution method when a dispute arises.

 

Conclusion

For a decade, Vietnamese law has been protecting consumers against mandatory arbitration. The recently adopted Precedent no. 42/2021/AL once again prioritizes the consumers’ choice of dispute resolution method. Further, Precedent no. 42/2021/AL sheds light on some remaining legal issues and strengthens the current consumer protection regime.

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A Black Swan Event? Implications of COVID-19 for Damages and Valuations in International Arbitration

Mon, 2021-03-15 00:52

The onset of COVID-19 has brought significant volatility to financial markets and increased uncertainty for investors and businesses of all classes. In the arena of international arbitration, where stakes can be in the multibillions, the ability to assess damages despite this uncertainty is of paramount importance.

This post will address some insights from the webinar organised by FTI Consulting and Freshfields Bruckhaus Deringer, as part of the Delos Guide to Arbitration Places (GAP) Symposium 2020, in navigating damages and valuations amidst COVID-19, specifically:

  • COVID-19 as a Black Swan or force majeure event;
  • Shifts in dispute strategy in response to COVID-19;
  • Challenges in valuation resulting from COVID-19; and
  • Lessons and parallels to be drawn from the Great Financial Crisis (GFC), in 2008.

 

Black Swans and Pandemics

“Black Swan” is a term coined by Lebanese author and former NYU professor Nassim Taleb to describe an event with extreme impact that defies regular expectations, but that is, in hindsight, rationalised as predictable rather than an outlier. When the onset of COVID-19 took most of the world by surprise early in 2020, many were quick to label it as the Black Swan of the decade.

Taleb dismisses this notion. He points to individuals, such as Bill Gates, who have long discussed the possibility of a global pandemic. Indeed, large pandemics have occurred regularly throughout history, and most governments have had some form of pandemic response plan for many years.

COVID-19 is perhaps better viewed through legal lenses as a force majeure event. Notwithstanding the lack of definition of force majeure under most common law jurisdictions, COVID-19 could fall within standard force majeure provisions in commercial contracts.

The key question is one of legal causation: how immediate or remote is the chain of events leading from the onset of COVID-19 to the losses suffered by the claimant? The question may arise more particularly in claims relating to (1) breaches due to parties pulling out of M&A transactions, joint ventures, or supply agreements; (2) delays in construction projects; or (3) price adjustment in long-term supply contracts.

Bilateral investment treaty (BIT) claims may also be brought by foreign investors who have been impeded by restrictions put in place by governments in reaction to COVID-19, although tribunals are likely to give significant leeway to governments for actions perceived to have been taken in the public interest (see prior discussion on the Blog of possible investment claims here and here).

 

COVID-19 and Disputes Strategy

Traditionally, damages are assessed at the date of breach, disregarding events arising after that date. However, due to the high degree of uncertainty in markets brought about by COVID-19, the value of the assets at the heart of a dispute may have changed in significant and unexpected ways by the time of an award.

Tribunals may therefore prefer to consider all available information and apply their judgement in selecting the right mix of data and inputs to produce a reliable assessment. This may imply a shift in the date of assessment away from the date of breach and towards the date of award, thereby incorporating full knowledge of the pandemic, actual events post-breach, and current expectations of future developments.

This approach to the date of assessment is not without legal precedent. The Chorzów Factory (1928) case is seminal in international law for articulating a principle of full reparation for unlawful expropriation – that is, damages must wipe out all actual consequences of the illegal act and are not limited to just the value of the dispossessed asset at the date of breach, plus any interest to the date of award. On the basis of this principle, tribunals evaluating certain BIT claims have ruled for damages to be assessed at the date of award, first in ADC v Hungary (2006), and recently in ConocoPhillips v Venezuela (2013).

An analogue is found in English contract law in the form of the compensatory principle – the principle that damages should only be awarded for losses actually suffered. Despite an accepted practice of valuing damages at the date of breach, the compensatory principle often prevails in limiting damages when events arising after the date of breach have the effect of reducing or erasing the claimant’s losses. In Golden Strait Corp v NYKK (2007), NYKK repudiated its contract with Golden Strait Corp before it was certain that the Iraq War would break out in March 2003, but was liable for no damages after March 2003 on the basis that the Iraq War would have allowed NYKK to exercise an early termination clause (for a relevant analysis of Golden Strait see, e.g., Bunge SA v Nidera BV (2015), at paras. 64 et seq., which refers to the Golden Strait case as The Golden Victory).

The legal approach of assessing damages at the date of award may therefore compensate claimants more fully under the scenario in which COVID-19 leads to larger losses after a date of breach, and protect respondents against compensating for temporary losses that have been reversed by the date of award. However, this may introduce additional strategic complexity when negotiating the procedural calendar of an arbitration. For example, claimants may choose to delay initiating a claim until there is greater visibility of the long-term financial impacts from COVID-19 (e.g., insolvency triggered by delays or failed agreements), in contrast to the typical preference to proceed quickly. Tribunals may choose to bifurcate proceedings, so that issues of quantum can be addressed separately once more information has emerged.

There are also implications for the giving of expert evidence. Uncertainty amidst COVID-19 implies that expert assessments and opinions will evolve over the course of a case. To streamline expert evidence under such variability, it may be desirable to have experts draw up an initial joint report setting out their areas of agreement, and liaise privately with tribunals to resolve residual disagreements. The use of a single tribunal-appointed expert may further reduce the procedural inefficiencies. Such procedural innovations, however, involve parties giving up control and may be resisted.

 

COVID-19 Infected Valuations

In valuing a business, the three classical approaches are: (1) the income approach, which considers future cash flows the business can generate; (2) the market approach, which considers the valuations at which comparable businesses are traded; and (3) the asset approach, which considers the value of its constituent assets, or the cost to replace them. In light of COVID-19, there are increased difficulties to applying these classical valuation approaches in an uncontroversial manner.

Claimants may project a quick recovery in their businesses’ cash flows and suggest immunity to various sources of risks, while respondents may take a view that the adverse effects of COVID-19 will drag on and reduce the claimants’ losses to a minimum. Such arguments imply that valuations based on the income approach will be even more hotly contested than usual. There may also be few transactions in comparable businesses that occurred under market conditions sufficiently similar to those on the date of breach to act as reference points for the market approach.

Despite these difficulties, tribunals arguably have a mandate to arrive at a reasonable quantum of damages, and may consider lowering the bar for what can be considered reasonable certainty in the current environment. After all, stock market participants and investment bank analysts have continually valued businesses even amid such uncertainty. There is no doubt, of course, that assessing damages under such circumstances requires hard thinking. Given that losses may extend beyond a date of assessment, there is the need to have a reasonable forecast for the post COVID-19 world, as well as to model the scenario that would have materialised in such a world but-for the occurrence of a breach.

The use of normalised performance metrics, such as normalised earnings, has been proposed as one answer to the above challenges. The idea is that the valuer would ‘strip out’ the effects of COVID-19 from the business’s current performance, to estimate how it will perform in a post-COVID-19 world. Such metrics are sometimes used in other valuation contexts including post-acquisition disputes following allegations of fraud. They should be employed with caution, however, as they represent an approximation that may not be warranted if the business in question is pending restructuring or even liquidation, or if the pandemic’s effects are longer-lasting and more severe than assumed in the valuation.

Finally, there is evidence that, in the face of significant uncertainty, tribunals exhibit anchoring bias. That is, tribunals are influenced by the reference points provided in each party’s damages assessment. Such bias could be reduced however, if and as tribunals provide more detailed explanations for the rationale behind their decisions.

 

Financial Crisis and COVID-19 Crisis

Some parallels can be drawn with the situation during and after the Global Financial Crisis (GFC), in 2008. For example, in their initial phases, there were similar delays in initiation of claims given that potential claimants were occupied with more immediate issues in their businesses.

The spike in volume of claims reported since by various arbitral institutions also mirrors the experience of the GFC. Another similarity is the apparent tendency for a greater proportion of disputes to proceed to a final award. These trends can be explained by claimants being less willing to walk away from a dispute when they are cash-constrained and see the values of their other assets in decline. As with the GFC, however, there will likely be difficulties in securing payment of an award amidst the financial distress caused by COVID-19.

Another parallel with the GFC is that state and corporate actors have taken advantage of the rapidly changing circumstance to modify their contractual and commercial relationships. For example, both after the GFC and in response to more recent events, various governments reduced their financial support for renewable energy projects to manage public spending. After the GFC, these changes triggered a series of disputes in which investors challenged the validity of the states’ changes to their renewable energy regimes. It seems likely that similar issues will arise in relation to state actions amidst COVID-19.

Both crises have also given rise to an environment of extensive governmental support. While there is typically no need to factor such governmental support into a damages calculation, there are instances where the level of support received by a business may become relevant, for example, if a business received a government bailout to address impending insolvency resulting from a failed contract which it would not have received had the contract been performed. Here too, careful thinking is required.

 

The Only Certainty is Uncertainty

Despite the uncertain and difficult context that COVID-19 has presented, the usual principles for valuation and damage quantification continue to apply. The fact is, uncertainty has always been present in damages and valuations, and the scale of COVID-19 has merely highlighted the need for more thoughtful and rigorous attention to issues of quantum. Perhaps wisdom requires accepting that uncertainty is the only certainty for those dealing in damages.

 

This article draws on insights from a webinar organised by FTI Consulting and Freshfields Bruckhaus Deringer, as part of the Delos Guide to Arbitration Places (GAP) Symposium 2020. The webinar was moderated by Hafez Virjee (Delos Dispute Resolution / Virjee Arbitration, London / Paris). Speakers included Lucy Martinez (Martinez Arbitration, Australia / UK), James Nicholson (FTI Consulting, Asia), and Noah Rubins QC (Freshfields Bruckhaus Deringer, Paris). The speakers thank Oliver WATTS and Quan Wei KOA of FTI Consulting Singapore for their excellent help in preparing this post.

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To What Extent Will the AfCFTA Impact the Number of ISDS Cases Involving African States?

Sun, 2021-03-14 01:00

Cases involving African parties contribute to a significant number of International Centre for the Settlement of Investment Disputes (ICSID) cases. Indeed, 15% of ICSID cases involve parties from sub-Saharan Africa and 18% of ICSID cases involve parties from Middle East and North Africa. The UNCTAD database of Investor State Dispute Settlement (ISDS) cases records 145 cases in which one of the parties is African, which translates into 13.7% of the total number of ISDS cases.

The express provisions of the dispute resolution clauses under the ICSID and the African Continental Free Trade Agreement (AfCFTA) along with its annexures, suggest that the dispute resolution bodies under both agreements have distinct functions and jurisdictions. ICSID’s jurisdiction involves disputes arising directly out of an investment between a contracting state and a national of another contracting state (ICSID, Chapter II, Article 25 (1)), while AfCFTA’s jurisdiction involves disputes between member states in relation to the AfCFTA agreement (AfCFTA Article 20 (1) — (3); Protocol on Rules and Procedures on the Settlement of Disputes, Article 3 (1)). This key difference between the nature of the disputes administered under each instrument suggests that the AfCFTA would not have any significant impact on the number of ICSID and ISDS cases in general.  However, there are factors which are uncertain for now, i.e the proposed Investment Protocol (currently undergoing negotiations) and unratified BITs, which may determine the impact that AfCFTA may have on ICSID cases in the future.

This post will discuss the potential impact AFCFTA may have on ISDS cases involving African States.

 

Factors that imply that AfCFTA will not affect the number of ISDS cases

As mentioned above, the AfCFTA provides for inter-state dispute settlement concerning and in relation to the rights and obligations of the states party to AfCFTA (i.e., trade of goods and services, investments, and intellectual property), while ICSID strictly deals with investment disputes.

Only state parties have access to resolution of disputes under the AfCFTA Dispute Settlement Body (DSB), i.e., the 55 member states of African Union (AfCFTA, Article 20(1)). In this context, member states refer to other member states of the African Union that have ratified or acceded to the AfCFTA and for which the AfCFTA is in force (AfCFTA, Article 1 (v)). Private parties do not, in their own right, have access to AfCFTA dispute settlement mechanisms. However, most trade transactions involve private entities, and home States may be willing to protect their rights in order to ensure certainty and predictability. In this sense, private parties will only be protected if their home State is a party to the AfCFTA, and in cases where the home State is willing to bring a claim.

ICSID, on the other hand, deals with disputes between states and foreign investors. It is also important to note that most of the African ISDS cases were or are being administered by ICSID. As stated above, the ICSID Caseload Statistics show that only 15% of ICSID cases are from sub-Saharan Africa and 18% of ICSID cases are from Middle East and North Africa. The UNCTAD database also records that 127 investor-state dispute claims have been filed against African countries since 1987. However, from the ICSID 2017 Statistics focused on Africa, of the 135 cases which represent cases involving African parties registered in ICSID, as at 31 May 2017, 79% were commenced by investors from States outside Africa. Likewise, from the UNCTAD database on ISDS cases, of the 127 investor claims filed against African countries since 1987, 96.8% were commenced by investors outside Africa. These figures demonstrate that a significant number of disputes submitted to ICSID and/or ISDS claims in general, involving African parties, were between African parties and . Disputes of this nature will most likely continue to be submitted to the ICSID or other institutions to which African states are parties, as AfCFTA does not currently have jurisdiction to deal with these sorts of disputes. Interestingly, only 21% of cases administered by ICSID involve African investors. Although these figures show that most claims were not brought by African investors, this may change with the introduction of AfCFTA, and we may then begin to see more disputes involving African investors and African states.

 

Factors that imply that the AfCFTA may affect the number of ISDS cases

The first factor is that, considering the reservations and concerns regarding ISDS, AfCFTA member states may decide to opt for an active state-state dispute settlement mechanism as an alternative or strong complement to an ISDS mechanism.1)African countries have, in recent times, raised concerns about the traditional investor-state dispute settlement including lack of legitimacy and transparency, exorbitant costs of arbitration proceedings and arbitral awards as well as inconsistent and flawed decisions. Countries have also complained that the system allows foreign investors to challenge legitimate public welfare measures of host states before international arbitration tribunals. jQuery('#footnote_plugin_tooltip_36514_6_1').tooltip({ tip: '#footnote_plugin_tooltip_text_36514_6_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); An example is South Africa, which ratified the AfCFTA on 31 January 2019 and is the only country in Africa that has openly rejected international investment arbitration.2)Following a multi-year review of its BIT framework, the South African Government terminated some of the country’s first generation BITs, decided to refrain from concluding new BITs in future unless warranted by compelling economic and political reasons, and put in place a domestic policy framework for resolving investment disputes. jQuery('#footnote_plugin_tooltip_36514_6_2').tooltip({ tip: '#footnote_plugin_tooltip_text_36514_6_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

The use of State-State dispute settlement mechanisms as an alternative to ISDS is becoming popular and is increasingly found in BITs. While it may be argued that this factor may not affect the cases settled by ICSID because ICSID deals with cases involving a foreign investor and an African host state, there are instances where a State may decide to file a claim on behalf of an investor. Also, in cases where both states are African States, there may be a preference to submit disputes to the AfCFTA DSB. The possibility of this happening is likely as the number of intra-African BITs are increasing. For example, Morocco has concluded BITs with seven other countries in Africa, and South Africa has BITs in force with Zimbabwe, Nigeria, Senegal and Mauritius.

In this instance, where there are disagreements between member states, they will likely be more willing to submit to the dispute resolution body under AfCFTA than ICSID, particularly because there might be an assumption that the former is better suited to handle African cases. This is further strengthened by the fact that although most AfCFTA member states may have signed and ratified the ICSID, dispute resolution under the ICSID only applies where contracting states consent and there is no binding obligation to use dispute resolution under ICSID (ICSID, Chapter II, Article 25). It should however be noted that in instances where the disputes are not covered by the AfCFTA, the AfCFTA DSB will not have the jurisdiction to administer and govern the dispute.

There is however the concern that an arbitral tribunal may interpret dispute resolution clauses in BITs strictly, particularly BITs entered into before the AfCFTA. In this case, arbitrators may hold that the earlier treaty, in this instance, the BITs, and thus ICSID will be applicable.This is supported by the express wording of Article 30(3) of the Vienna Convention on the Law of Treaties, but will only apply where the provisions of the BIT are compatible with the AfCFTA. The provisions of the AfCFTA are also silent on what occurs in relation to conflict issues involving international treaties and only discusses conflict issues involving regional agreements (AfCFTA Article 19).

The second factor is that it has been suggested that most African states may use the AfCFTA Investment Protocol as a basis for future investment agreement negotiations, including for agreements with non-African countries. The question of whether the Investment Protocol, when finalized, will provide for an ISDS mechanism is likely to prove very controversial. A number of factors work together to muddy the landscape.

Notwithstanding this, the AfCFTA Investment Protocol has the potential to streamline the complex framework of intra-African investment by replacing existing intra-African BITs with a single treaty that would regulate all intra-African investments.

 

Conclusion

In view of the above, it is clear that once the AfCFTA becomes fully operational, it will introduce changes into the investment landscape. However, how far these changes will go to impact existing ISDS is yet to be seen. It is however hoped that both ICSID and AfCFTA are able to work in parallel to resolve investment disputes without encroaching on each other’s jurisdiction, and granting parties the distinct dispute resolution mechanisms needed at a time.

 

The author wishes to acknowledge the assistance of Professor Maxi Scherer of WilmerHale in the preparation of this article. This article is based on a speech delivered at the Chartered Institute of Arbitrators, Nigeria Branch conference on ‘Free Trade Regimes and Investor State Disputes: Intersection between ICSID and AfCFTA’, on 26 November 2020.

References[+]

↑1 African countries have, in recent times, raised concerns about the traditional investor-state dispute settlement including lack of legitimacy and transparency, exorbitant costs of arbitration proceedings and arbitral awards as well as inconsistent and flawed decisions. Countries have also complained that the system allows foreign investors to challenge legitimate public welfare measures of host states before international arbitration tribunals. ↑2 Following a multi-year review of its BIT framework, the South African Government terminated some of the country’s first generation BITs, decided to refrain from concluding new BITs in future unless warranted by compelling economic and political reasons, and put in place a domestic policy framework for resolving investment disputes. function footnote_expand_reference_container_36514_6() { jQuery('#footnote_references_container_36514_6').show(); jQuery('#footnote_reference_container_collapse_button_36514_6').text('−'); } function footnote_collapse_reference_container_36514_6() { jQuery('#footnote_references_container_36514_6').hide(); jQuery('#footnote_reference_container_collapse_button_36514_6').text('+'); } function footnote_expand_collapse_reference_container_36514_6() { if (jQuery('#footnote_references_container_36514_6').is(':hidden')) { footnote_expand_reference_container_36514_6(); } else { footnote_collapse_reference_container_36514_6(); } } function footnote_moveToAnchor_36514_6(p_str_TargetID) { footnote_expand_reference_container_36514_6(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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A Conversation with Claudia Salomon: Rising Arbitrators and the Developing World of International Arbitration

Sat, 2021-03-13 00:16

On 21 January 2021, the Rising Arbitrators Initiative (RAI) had the opportunity to speak with Claudia Salomon, the incoming first woman President of the ICC International Court of Arbitration (ICC Court), with closing remarks by Yves Derains, a former ICC Secretary General.

RAI founders Rocío Digón (White & Case), Ana Gerdau de Borja Mercereau (Derains & Gharavi), and Alexander Leventhal (Quinn Emanuel) led the interview, which was opened by Flávia Mange (Mange Gabbay) from RAI’s Executive Committee. The interview was divided in three parts: (i) career advice for rising arbitrators; (ii) plans for her presidency with the ICC Court; and (iii) thoughts about the developing world of international arbitration.

 

Introduction

Mr Leventhal asked Ms Salomon, about how she became acquainted with the practice of international arbitration. Recalling her period at Harvard Law School, she noted that she was actually very interested in election law and voting rights. During her interviews for litigation positions, the notion of international arbitration was introduced, and, later, her practice at Squire Sanders involved some international arbitration work mixed with the litigation practice. During that time, after the events of 9/11, she took an opportunity to go to Prague to represent the firm’s clients in an arbitration against financial institutions, and there she stayed for three years, thence consolidating her practice and passion for international arbitration.

 

Tips for Young Arbitrators

Moving on to her first experience as arbitrator, Ms Salomon highlighted the fact that conflicts of interest were the main issue preventing her from taking appointments, being an associate in a big law firm. The first appointment came from an institution. Ms Salomon pointed out how important the role of institutions is in appointing young and first-time arbitrators, fact which is confirmed by institutional statistics.

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An important aspect of having a breakthrough moment in terms of a first appointment is building a good rapport/profile with arbitration institutions, which can be done in various ways. Giving the example of one of her younger associates at Latham & Watkins, she told listeners how an internal seminar elaborated by the said associate went on to become an article picked up and published by Global Arbitration Review, which then led the associate to become involved with an ICC YAF panel discussion. This in turn led him to a position of leadership within the ICC YAF and, moments later, he was appointed a sole arbitrator by the ICC Court.

Acting alone as a sole or emergency arbitrator, can come with certain challenges for the first-time arbitrator. She praised initiatives like RAI’s as “phenomenal” solutions to assist younger arbitrators to tackle these challenges, by thinking about and discussing these issues before they appear. Her advice for any first-time arbitrator facing these challenges is to confront the problems right away. She elaborated that, as counsel, we are used to discussing in a team, relying on others by working together, but as an arbitrator, one has to do it by oneself. Also, she indicated in passing that the irony of first-time arbitrators, appointed by institutions, is often to act in low value disputes as sole/emergency arbitrators, which often involve complex points of procedure, but involving inexperienced counsel, with no guidance from more experienced members to rely on. Ms Salomon added that we should not be paralysed by the normal fear that may arise in the context of a challenge, and get the job done.

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These challenges will also be faced by younger arbitrators who will need to balance their counsel work with their arbitrator work, usually on a strained timeframe at both ends. Younger arbitrators need, she advised, to focus on the case management conference and think about the process, and the prospect of being able to draft the award in a short period of time. Nonetheless, this comes with a sure recognition from clients, who value the experience that lawyers have once they have sat at the other side of the table.

When asked what she thinks about professional marketing goals, that is, whether it would be advisable (or not) to market oneself in a particular area of the law when putting oneself in the market as an arbitrator, Ms Salomon noted this is actually something that all legal practitioners have to think about during their entire careers. Ms Salomon suggested that practitioners be open to change, and be able to strike a fine balance between focusing and being open to a wide variety of opportunities. She added that while it was not a good idea to specialise too young, one should find strength in one’s particular backgrounds, using them to highlight one’s practice. “‘What do you want to get hired to do?’ You need to highlight this particular experience,” she declared.

Likewise, when dealing with balancing workload between counsel jobs and arbitrator jobs, Ms Salomon mentioned Ms Lucy Reed’s speech on David Caron’s “Rule of ‘X’” in the 25th Goff Arbitration Lecture in Hong Kong, “which, in simple form, is that each arbitrator should set a number – X – as the upper limit of cases that he/she is capable of managing responsibly at the same time, while also balancing his/her own life outside arbitration.

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Projects for the ICC Court of International Arbitration

One of RAI’s Executive Committee members, Dr Crina Baltag, asked what can be done to foster the concerns around diversity of arbitrators with users of arbitration. According to Ms Salomon, this is the issue that needs to be confronted in 2021. The ICC Arbitration Rules are based on user choice, she said; thus, users are demanding that arbitration reflect the actual community of users.

Drawing Ms Salomon’s attention to the recently published ICC Rules 2021, Ms Digón asked her whether there is anything in the Rules that would need modification to further expand the role of diversity and the arbitrator selection process. Ms Salomon promised as the future ICC Court President not to say it is not her problem, and that, should insufficiencies be pointed out, it shall be her task to find a solution for them. She is eager to explore said solutions in the broader landscape of diversity and wants to put the ICC in a leadership position in this respect.

Answering a question from Jose Sanchez about the perceived image of arbitration as accessible only to the elites, Ms Salomon identified how this question is intrinsically related to the issue of legitimacy of the arbitration process, one she wishes to espouse during her presidency. Legitimacy should be achieved through the exposure of new names and more diversity, which will allow for arbitration to become the “antithesis of a club,” she declared.

Moreover, Ms Salomon identified her main objective during her tenure to be twofold. According to Ms Salomon, among her objectives within the ICC Court is to ensure that people see the ICC as the most trustworthy institution, an institution that connects with them and assures their values. Ms Salomon also said that paramount to her objectives is the users’ experience with ICC arbitration and to ensure that such experience exceeds expectations every day. She noted that the arbitration process needs to be predictable, and that it is essential for the ICC to communicate issues such as timing and costs to the parties.

Intrigued about the efforts that arbitration practitioners are now faced in terms of cybersecurity, RAI member Sebastian Kneesel asked Ms Salomon which steps institutions and arbitrators should be taking to tackle these issues. Among the many points raised, Ms Salomon noted the possibility of institutions hosting platforms where documents are shared, but also whether security standards should be imposed on parties when there is no third-party handling documentation, including, for example, the use of free email hosting providers when sharing sensitive information.

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Evolving Arbitration World

Moving to the third part of the conversation, led by RAI’s Dr Gerdau de Borja Mercereau, Ms Salomon had the stage to answer some questions regarding the evolution of the arbitration practice. Echoing Mr Derains’ own observations, she was asked about her opinions on the growing professionalism of arbitrators and what developments could be seen in recent times over this trend. Ms Salomon addressed the flexibility of the role, one which the New York Convention of 1958 makes no express delimitations to, and how important it is to find distinct people with a variety of backgrounds to act as arbitrators. In terms of the professionalism of the practice developed by arbitrators, an increase in such professionalism can only result in the increase in quality of arbitration, generally. Referring to the situation of arbitrators who may not have large experience as counsel, she points that it is a mixed experience, noting how many different backgrounds (such as young judges, in-house lawyers, and those in academia) can bring positives, and sometimes negatives, to the issue of professionalism.

In another question regarding the usage of arbitrators lists, Ms Salomon brought interesting statistics from the AAA experience, where in about 50% of their cases, the parties would opt-out of their list system, therefore emulating the ICC system for selection of arbitrators. Regarding the ICC experience, she pointed to the new ICC Note to the Parties and its express language on the assistance that the ICC Secretariat can give to help with the constitution of arbitral tribunals, whilst still allowing the parties to engage in the selection process.

While making reference to the book “Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order” by Bryant G. Garth and Yves Dezalay, Dr Gerdau expressed how much arbitration and its sociology has changed. Also, by making reference to Paulsson’s “The Idea of Arbitration”, she asked Ms Salomon about her opinions on how both commercial and investment arbitration are evolving. Ms Salomon stated how commercial arbitration is a rather enduring institution, whilst investor-State disputes have seen a rising questioning over its legitimacy, one she looks forward to discussing during her tenure. She mentioned having current initiatives to foster diversity in arbitration in high regard, applauding such initiatives, as she identifies that the world is “craving connections”, and that the development of new ideas within the market will not come from the top, but rather from a wide variety of voices, voices which she will be open to hear what they have to say.

On a question about institutional stance (and overall arbitration practice) on double-hatting, and the prominence of practitioners acting as both counsel and arbitrators, Ms Salomon expects for more independent arbitrators to appear, as law firms dealing with the international arbitration market have over the time gotten larger, further increasing the already problematic issue of conflicts.

 

Closing Remarks by Yves Derains

In his concluding remarks, Mr Derains started stating how impressed he was that Ms Salomon had really learned her arbitrator work the hard way, that is, by starting as an emergency arbitrator. As put by Mr Derains, to be a sole arbitrator is always a difficult task. He indicated his personal preference for three-member tribunal positions instead of acting alone, identifying that having other people to talk to can create better discussions, contradictions can be spotted, and that these features are very difficult to come by when acting alone. An impressive way to start as an arbitrator, he said, as he found it surprising that institutions were/are appointing younger arbitrators as sole arbitrators, often in his experience in smaller cases, sometimes with inexperienced counsel, with hard questions being asked for an arbitrator to decide with no support of more experienced practitioners.

On the bright side, he commended young initiatives such as the RAI for they bring better exposure to young arbitrators, to whom it is essential to show the qualities that are expected from arbitrators in their very first appointment to have better chances at securing future appointments. A first experience sitting as an arbitrator can be frightening, but one must be able to decide. Mr Derains indicated the ability to decide is not really a skill that one learns during law school or in any training courses, but it is rather a skill that is developed through practice and self-assurance. One must be able to take the risk to be wrong, and not only get the trust of the parties, but also the trust of one’s professional colleagues: developing a good reputation is important in the arbitration market. Another important feature for young arbitrators to show is cultural neutrality; and by that, he meant that an arbitrator must be open to any culture and must be sure he knows very little, and therefore learn from the parties, listen to them, and pay attention to the case.

Mr Derains concluded by saying he believes the future of arbitration is not in danger, because international arbitration is, really, a need of international trade. Although we have seen in recent years the reappearance of nationalism and receding international trade throughout many places, Mr Derains is of the optimistic opinion that such stances shall not last very long.

Finally, Mr Derains pointed out that the main obstacle for rising arbitrators is that there are possibly too many of them, sharing a word of advice: one is not to choose to develop one’s career as an independent arbitrator because of the perception of it being glamourous, but out of passion and conviction of having the needed skills.

Final words were shared by Ms Mange, wishing the best for Ms Salomon and her incoming challenges as the next president of the ICC Court.

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