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An Appealable ‘Decision’ Before CAS: What Exactly Are We Talking About?

Fri, 2021-03-12 04:39

In accordance with S20.C of the Code of Sports-Related Arbitration (the Code), the Appeals Arbitration Division (AAD) of the Court of Arbitration for Sports (CAS) has jurisdiction “to resolve disputes concerning the decisions of federations, associations or other sports-related bodies insofar as the statutes or regulations of the said sports-related bodies or a specific agreement so provide.” Almost identical wording is also repeated in R27 and R47 of the Code. The Code, however, is silent on the meaning and characteristics of a “decision” as referred to in relevant provisions of the Code, which has raised some controversies among scholars as to what may be called a ‘decision’ appealable before AAD and what formal or substantive requirements are necessary for a document to be considered as such.

Previously, CAS had dealt with the issue when deciding on its jurisdiction to engage with an appeal (see for example CAS 2009/A/2000, or CAS 2018/A/5933). Nevertheless, the most recent decision of the CAS in Karim Safaei v. World Archery Federation & I.R. Iran Archery Federation (CAS 2018/A/5871) – issued on 20 November 2020 – is a notable example as to what shall be considered as an ‘appealable decision’.

 

Relevant Facts of the Case

The case concerned an appeal filed by Mr. Karim Safaei (Appellant), the former president of I.R. Iran Archery Federation, against World Archery (1st Respondent / WA) and I.R. Iran Archery Federation (2nd Respondent / IAF). The Appellant challenged a letter issued by WA on July 31st, 2018. In the letter, WA accepted the outcome of I.R. Iran Archery Federation presidential election, in which the Appellant had applied to be a candidate, but was not qualified as such.

The challenged letter was issued in response to Mr. Safaei’s complaint to WA. Mr. Safaei believed that the election was not held in conformity with the WA rules and regulations and that he was wrongly disqualified to become a candidate in the election. The WA, after investigating the matter and studying all the relevant documents, issued a letter, which, in relevant parts, read as follows:

the World Archery Executive Board looked at all papers submitted and came to the conclusion noting especially that none of the people that submitted the complaints were present at the assembly.

In his submissions, the Appellant referred to the letter as WA’s “decision” (para. 43), while WA considered it as merely a “letter” and “not a “decision” (para. 44), and accordingly, WA requested the Soler Arbitrator to declare the appeal as inadmissible (para. 45).

The Appeal was rejected by CAS Sole Arbitrator, Michael Beloff QC, on the grounds of a lack of jurisdiction with regard to both Respondents, since the letter in dispute was not among the decisions subject to CAS jurisdiction under the Statutes of WA and IAF. Thus, the Sole Arbitrator did not deal with the substantive submissions of the Parties. The award, nevertheless, contains a remarkable ruling on the meaning of a “decision” which may be appealed before CAS AAD.

 

The Meaning of an Appealable Decision

In deciding on jurisdiction, the Sole Arbitrator referred to R47 of the Code and recalled that for the CAS AAD to have jurisdiction in a given case, there must be, inter alia, an “appealable decision” (para. 49.1). The Sole Arbitrator, therefore, as a primary requirement of its jurisdiction, was required to determine whether WA’s letter of July 31st, 2018 could be qualified as an “appealable decision”.

In doing so, the award is based on the criterion recognized in Swiss case law related to administrative procedure that a decision

is an act of individual sovereignty addressed to an individual, by which a relation of concrete administrative law, forming or stating a legal situation, is resolved in an obligatory and constraining manner. The effects must be directly binding both with respect to the authority as to the party who receives the decision.” (para. 51)

Therefore, in the view of the Sole Arbitrator, for a document to be considered as a ‘decision’ it must have ‘legally binding effect’. In other words, if a communication may have the effect to bind the addressee or the issuer in the legal sense of the word, it will be considered as a ‘decision’ appealable before CAS AAD.

On this basis, since WA’s communication of July 31st, had, inter alia, confirmed the conformity of I.R. Iran Archery Federation election with WA’s rules and regulations, it could be considered as a ‘decision’. In the Sole Arbitrator’s view, the fact that the letter constitutes a ‘decision’ would be better understood if one bears in mind that had the letter not approved the outcome of the election, IAF would have faced certain sanctions based on WA’s Statute (para. 53).

Therefore, contrary to WA’s submissions, the Soler Arbitrator ruled that the letter of July 31st, 2018 was a ‘decision’ within the meaning of R47, although he further held that the decision was not appealable due to limitations under article 1.30.1 of WA’s statute.

 

A Step Too Far?

CAS jurisprudence, specifically in this most recent case of Karim Safaei v. WA & IAF has taken a substantive approach, rather than a formalistic one, when deciding on the nature of documents to be considered as a ‘decision’. The logical implication of such approach is that unlike presumptions that a decision is a document which has satisfied some formal or administrative requirements, it suffices for the CAS panels that the said document may be characterized, in whole or in part, as a “legally binding” communication for the issuer or the addressee, regardless of its form as a letter, memo, report, notice or other similar forms.

In the author’s view, although the formalistic approach is not defensible when dealing with appealable decisions before CAS, in the case of Karim Safaei v. WA & IAF, the sole arbitrator neglected the fact that the WA’s communication of July 31st was addressed to IAF, and not to Mr. Safaei. Moreover, the WA’s communication was only an administrative communication between WA and IAF without any animus decidendi (i.e. an intention to decide on the matter). In other words, the door was wide open for Mr. Safaei to raise his case before competent bodies within WA or before any other national or international judicial body, meaning that the said communication was not a decision of any kind, especially for the purposes of R47 of the Code. In Al-Hilal Club v. FIFA, for instance, the CAS panel held that a letter issued by FIFA for the execution of points deduction, would not constitute a ‘decision’, since it was merely an ‘administrative letter’ and “there was no animus decidendi in the said letter (para. 67). This was the same, at least in WA’s view, for the letter of July 31st issued by WA’s secretary, since it was only of an ‘informative’ nature without affecting the rights of the Appellant, or even IAF to follow the matter by resorting to competent bodies within WA. The fact that the WA’s letter contained certain recommendations for IAF to improve clarity in the election was another indication that the letter was only an ‘administrative’ communication, without any animus decidendi.

In any event, the ruling in this case may be considered as a stricter approach when compared to the previous jurisprudence of CAS arbitrators mentioned above. It leaves no doubt for further cases that the term ‘decision’ must be construed in a broad sense and what is crucial in characterizing an instrument as a ‘decision’ is whether it affects, or intends to affect, the rights of the addressee(s). Therefore, sports bodies shall think twice of the content of their communications towards athletes, coaches or other recipients, since regardless of the form of such communications, and regardless of the genuine intention of the said sport body to issue a decision or not, in the view of CAS arbitrators, they may constitute a ‘decision’ appealable before CAS.

***

The author of this post was a Legal Counsel for I.R. Iran Archery (second respondent) in the case discussed above.

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What Has Changed in Six Years Since the Latvian Arbitration Law “Reform” and What Needs to Be Changed?

Thu, 2021-03-11 00:43

Latvia is an infamous unicorn in the field of arbitration because of its record-number of institutional arbitration courts. In November 2013, there were 214 arbitration courts in Latvia. Regretfully, this is not because we as a nation love arbitration that much. Liberal regulations have allowed any legal entity to establish an arbitration court which to a large extent has been misused by creating the so-called “pocket” arbitration courts. This term reflects that, in practice, the Latvian courts have frequently dealt with cases involving  legal entities (or their subsidiaries) that at the same time were the founders of the arbitration court. In other words, on many occasions, the operation of an arbitration court raised questions regarding its impartiality.

Since the entry into force of the newly adopted Arbitration Law, the number of institutional arbitration courts in Latvia has dropped to 68 in February 2021. Although this number is still extremely high, the Latvian Parliament’s efforts to combat the “pocket” arbitration courts and to raise society’s trust in arbitration have generally been effective.

This post illustrates why Latvia nevertheless has a mile to go to be considered as an arbitration-friendly country. Furthermore, I suggest five areas that the Latvian Parliament must immediately address to raise the credibility of Latvian institutional arbitration courts and Latvia as a country for the safe recognition and enforcement of foreign arbitral awards. Overall, this post demonstrates why currently Latvia cannot be considered as a potential seat of international arbitration.

 

Area 1: Form of the Arbitration Agreement

Latvian law only allows arbitration agreements signed by hand (wet ink) or with a secure electronic signature. Although the legislator’s initial aim was to follow Article 7 of the UNCITRAL Model Law on International Commercial Arbitration, it appears that the fear of “pocket” arbitration courts misusing their powers was decisive in the exclusion of arbitration agreements concluded over e-mail. Accordingly, parties to the arbitration agreement from Latvia (or from states which are not parties to the 1960 European Convention on International Commercial Arbitration) will find that their arbitration agreements concluded over e-mail are treated under Latvian law as void. If a Latvian arbitration court accepts its jurisdiction under an arbitration agreement in an e-mail format, recognition and enforcement of an arbitral award in such a case would still be impossible. In Latvia, the state ensures control over the local institutional arbitration courts at the setting aside stage, which means that in such a scenario the Latvian state courts would deny recognition and enforcement. Likewise, it is likely that such an arbitral award would not be recognised and enforced under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).

 

Area 2: Appointment of the Arbitrators

The Latvian arbitration courts operate on the basis of closed arbitrator lists. Each arbitration court must have a list of at least 10 arbitrators from which the parties must appoint an arbitrator for their dispute. 60% of the arbitration courts have listed 10 arbitrators, 31% have listed up to 15, and only 9% have listed more than 16 (with the maximum being 58) arbitrators. Accordingly, in almost all cases the parties will have a very limited choice of arbitrators for their dispute. The choice narrows down even more if most of those potential arbitrators are not attorneys-at-law or do not speak the language chosen by the parties to be used in their arbitral proceedings.

 

Area 3: Court Support for Arbitration

Latvian arbitration courts do not have the competence to grant interim (provisional) measures. This power lies only with the Latvian state courts and is limited in time. The Latvian state courts can grant interim measures in support of local (or international) arbitration only prior to the commencement of arbitral proceedings. This means that the Latvian state courts will not provide any support in terms of interim measures after the case is already in the arbitration court.

The legislator’s reasoning behind this set-up was to maintain the speed and, thus, efficiency, of arbitration as a means of dispute resolution. According to the Latvian legislator, if state courts had the competence to grant interim measures during the arbitral proceedings, courts would have to request the case file from the arbitration court to make such a decision. As the legislator argued, this would extend the arbitral proceedings which would decrease their efficiency. Moreover, the Latvian state courts would not be able to request the case file and make a decision on interim measures in the 10 days prescribed by law.

Regrettably, Latvian state courts will not provide any support also at the recognition and enforcement stage. The law only allows to secure the enforcement of a Latvian court decision on recognition and enforcement of a foreign arbitral award. In practice, this is most often when the most valuable assets have already disappeared due to the simple fact that, in Latvia, the recognition and enforcement of foreign arbitral awards is decided in an open court hearing with the participation of parties.

Enforcement of partial (separate) international arbitration court awards, such as awards on advance payment of costs, is likely possible in Latvia. This is not explicitly addressed in the law and the Latvian court practice is very undeveloped in this respect.

 

Area 4: Witness Evidence

The law does not recognise party-appointed expert witnesses or any fact witnesses at all. The legislator has been of the opinion that, once more, the main advantage of arbitration, as opposed to litigation, is the speed of proceedings. Examination of witnesses, in the opinion of the Latvian legislator, is nothing more than a waste of time. Accordingly, written witness statements, which are commonplace in international arbitration, are also not allowed under Latvian law. In practice, this flaw in the law may be partially circumvented by a party authorising a fact witness through a power of attorney (e.g., a company management board member or an accountant) to give explanations as their authorised representative.

When it comes to experts in the arbitration, the law only allows experts appointed by the arbitral tribunal. The parties can submit expert reports, e.g. on quantum, as written evidence. However, the examination of a party-appointed quantum expert is not possible, unless the quantum expert appears in the arbitration court hearing as an authorised representative of a party.

Therefore, you will be able to properly argue your case in a Latvian arbitration court with fact witnesses and expert witnesses appearing as authorised representatives. An arbitral tribunal composed of attorneys in law experienced in international arbitration will obviously treat such authorised representatives as who they really are.

 

Area 5: Other Procedural Aspects

The procedural rules on recognition and enforcement of foreign arbitral awards are overly formalistic in respect of determining the Latvian court’s jurisdiction and the compensation of legal costs.

The law states that the application on recognition and enforcement of a foreign arbitral award must be submitted to a district (city) court based on the place of enforcement of the arbitral award or the declared place of residence (or legal address) of the defendant. Therefore, if you apply to the Latvian court because the non-Latvian defendant may own assets in Latvia, you must provide credible evidence regarding the location of the assets in Latvia. If you have merely a suspicion that the defendant may have a bank account in Latvia, this surprisingly will not be enough for the Latvian court to establish its jurisdiction.

As regards legal costs, the law does not prescribe compensation of attorney fees incurred as a result of the recognition and enforcement proceedings of a foreign arbitral award in Latvia. Although the state fee is symbolic (max. EUR 285) and it is awarded to be compensated by the defendant, the claimant must take into account that he will have to bear the attorney fees himself.

 

Conclusion

The current arbitration situation in Latvia is an example of how a very liberal regime may severily undermine the trust in arbitration as an effective and generally recognised means of dispute resolution. This loss of trust in arbitration has further resulted in an overly restrictive regime for conducting arbitration in Latvia. The procedure is far from how the international arbitration courts operate. Bringing Latvia closer to the international arbitration community should take at least six more years, but it is not impossible, provided that the legislator initiates reform in the areas outlined in this post.

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Tread Your Arbitral Path in Asia: Navigating the Promise and Perils of Your First Appointments

Wed, 2021-03-10 00:39

On 23 February 2021, the Rising Arbitrators Initiative (RAI) and HK45 co-hosted the third installment of the webinar series The Rising Arbitrator’s Challenge: Navigating the Promise and Perils of Your First Appointments.

As the webinar series aims to shed light on different jurisdictions, the third installment focused on Asia. The overarching topic addressed the thorny issues that rising arbitrators encounter in their first appointments. Ms. Joanne Lau, who moderated the webinar, invited the panel, comprising of Professor Joongi Kim, Ms. Yoshimi Ohara, Mr. Andrew Pullen, and Dr. Ling Yang, to share their views on: their first appointment, conflict of interest issues, case management challenges and tips, as well as the impact of cultural differences in arbitration proceedings.

The panelists offered key insights and advice that are of vital importance for young practitioners who wish to begin their arbitrating career. This post provides a synopsis of the views discussed in the webinar.

 

Insights on the First Arbitral Appointment Experience

Ms. Joanne Lau opened the discussion with a retrospective question, asking the panelists to share their experience of their very first arbitral appointment. All panelists received their first appointments through arbitral institutions. Mr. Andrew Pullen began his quest by applying to the panel of arbitrators of SIAC, which in turn gave him his first appointment as a sole arbitrator. Following a similar path, Ms. Yoshimi Ohara was appointed by the JCAA as a sole arbitrator. As for Professor Joongi Kim, he coincidently received two consecutive appointments within days, one through party appointment in an institution in Paris and the other by a local Korean institution; he sat as wing arbitrator in both instances.

However, obtaining their first appointments were not free of obstacles, as the majority of speakers encountered a number of challenges that would delay the process. Conflicts of interest were the first challenge, as may be expected for those practitioners in large firms. In fact, Mr. Pullen and Ms. Ohara were conflicted several times before they actually landed their first appointment. Other thorny issues tend to emerge during the proceedings, for example, if one of the parties is not experienced with international arbitration proceedings, or worse, if they are defaulting.

On the positive side, it was agreed that sitting as an arbitrator provides enriching insights. To name one, when acting as party advocate after serving as arbitrator, advocates become savvier about how to better persuade a tribunal.

 

The Role of HKIAC in Supporting Rising Arbitrators

Dr. Ling Yang discussed the various efforts exerted by HKIAC to support rising arbitrators. First, Dr. Yang explained that in 2020, 50% of the institution’s appointments were arbitrators who had not been previously appointed in the past three years.  This demonstrates the HKIAC’s efforts in avoiding repeat institutional appointments, which in turn expands the pool of new arbitrators.

Second, besides having a panel of experienced arbitrators, HKIAC also has a list of arbitrators that includes practitioners who do not necessarily have achieved their first or multiple appointments. A prerequisite to being on the list, nevertheless, is to have significant experience in arbitration, such as party counsel.

Third, HKIAC is the first institution to offer a Tribunal Secretary Training Programme. It is well established that one of the paths to a career as an arbitrator stems from acting as a tribunal secretary on multiple cases. Thus, aspiring arbitrators may wish to participate in this assessed program which will qualify them to become tribunal secretaries worldwide.

You may find further discussions on the appointment procedure of HKIAC here.

 

Conflicts of Interest Hindering Rising Arbitrators — What to Do?

While rising arbitrators are encouraged to widen their visibility by networking and by building relations with institutions, this, however, raises conflicts issues. First, they may be perceived as biased due to their closeness with the institution(s) or with arbitration practitioners. Second, when coming to disclose, rising arbitrators may not know how much should be disclosed; in this respect, the panelists suggest that it is better to disclose any matter that the arbitrator is hesitant of. Third, Professor Kim added that parties who lack the understanding of disclosure guidelines might exclude independent and impartial arbitrators.

 

What Are the Different Challenges Faced When Sitting as a Sole Arbitrator as Opposed to Sitting in a Three-Member Tribunal?

For rising arbitrators, sitting as a wing arbitrator in three-member tribunals may be easier to handle in the first appointments, yet, the panelists also argued that assuming the sole arbitrator hat can have its unique advantages.

Acting as wing arbitrator allows the person to benefit from the wisdom and experiences of the other members to overcome the complexities of the proceedings, as all panelists suggested. Professor Kim, particularly advised novice arbitrators not to be intimidated and to assist the other tribunal members as much as possible by being diligent, timely and meticulous and to try to create a team effort.

Ironically enough, most of the first appointments are sole arbitrator positions as Dr. Yang indicated and as evident from Mr. Pullen and Ms. Ohara’s experience. However, there is no cause for exaggerated worry, as a sole arbitrator often has special advantages. One apparent benefit is the amount of flexibility in determining the right decision whether on a substantive or a procedural level. Moreover, panelists strongly advised young arbitrators to regularly seek assistance from the institution, as they will clarify the application of the rules and the best practices in managing cases.

 

Cultural Differences and their Impact on Arbitration Proceedings.

The impact of cultural diversity and different legal regimes was addressed; concerning the differences in legal regimes, Dr. Yang offered interesting insights pertaining to proceedings in China.

According to her, the arbitral institutions handle the management of the case mainly; they deal with the procedural issues and then they provide the documents and evidence to the arbitrator(s) who only deals with substantive issues. Another unique trait is that hearings in China typically last for one day only, whereas in other countries they may continue for two weeks.

 

Conclusion

Focusing on Asia, this webinar comprehensively discussed the intricacies of receiving first arbitral appointments. It provided rising arbitrators with tools and insights on how to manage their first cases, whether as sole arbitrators or as part of a tribunal. Additionally, the webinar shed light on how to deal with the perils of conflicts of interest as well as on how to successfully navigate the proceedings in the face of cultural and legal differences.

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A Roundup of Tech and Dispute Resolution News

Tue, 2021-03-09 00:36

Technology continues to transform the practice of law at a blistering pace – something obvious to all of us who suddenly find ourselves holding Zoom meetings from home in professional tops – and pyjama bottoms.  However, technology’s continuing integration into the daily fabric of dispute resolution is much more than endless Zoom meetings, or even e-discovery and technology-assisted review (TAR) software.  Some of the innovations, discussed below, are downright transformational.  At the same time, advances in technology sometimes raise ethical and privacy concerns, bringing the inevitable – but perhaps warranted – scrutiny of legislative bodies. A few newsworthy topics can give a sense of where we are, how far we’ve come, and, most importantly, where we may be headed.

 

A Higher Caliber of Discussion

As the pace of innovation has gone from a trickle to a steady deluge, this has also raised the quality and maturity of the discussion about technology and dispute resolution – we are well past the days of tongue-in-cheek futurist predictions of “robolawyers.”  These days, the discussion is technical, and high-level – for example, whether “on-chain” ADR built on blockchain platforms holds practical advantages over traditional ADR when integrated onto smart contracts, and if so, which types of smart contracts.  (More on this below.)  ArbTech is a global online forum where such discussions take place.  Co-founded by Sophie Nappert (moderator of the hugely successful OGEMID arbitration listserv), ArbTech provides a space for thoughtful debate and collaboration on the application of technology to dispute resolution. (All of the topics below are distilled from recent discussions on the ArbTech forum.)

 

New Kids On The Block(chain): “On-Chain” ADR

The UK Jurisdiction Taskforce (part of the LawTech Panel of the Law Society), which recently published draft rules for resolving disputes arising from new technologies such as cryptoassets, cryptocurrency, smart contracts, distributed ledger technology, and fintech applications. The draft rules opened for consultation with an online event on 26 February. Notably, the draft rules envisage automatic dispute resolution processes being combined into digital asset systems (known as “on chain” dispute resolution), providing an arbitrator, in certain circumstances, with the ability to implement decisions directly on a blockchain or within the system (as opposed to a paper Award).  While the draft rules are clearly cutting-edge and forward-looking, at their heart they still rely on the tried-and-true English Arbitration Act 1996.

 

AI and Litigation Financing: Like Two Peas in a Pod

Artificial intelligence (AI) is increasingly used for predictive analytics – predicting the outcome of disputes.  Not surprisingly, such tools are very attractive for litigation funders, and several funders are betting on the technology giving them a competitive advantage in modelling risk in their case evaluations.  To name but two: Legalist, which claims to use data from millions of court records to help case assessment for litigation funding; and Arbilex, which similarly uses AI and predictive analytics to assess arbitration cases, including the likely costs of a given case, as well as likelihood of success.  The increasing use of AI to predict dispute outcomes raises several interesting issues.  One of these is that the available dataset for court cases is generally much larger than the dataset for arbitration awards.  As the accuracy of AI is directly correlated to the size and quality of the dataset, this poses an interesting question as to whether court litigation may gain a comparative advantage in the future, given potentially greater predictability of dispute outcomes.  Arbitral institutions such as the ICC are sitting on veritable goldmines of raw data; however, selling predictive services to parties might create uncomfortable optics for institutions that are built on a foundation of neutrality and impartiality.  And yet, market pressures could well push institutions to begin mining their own awards data.

 

ODR: Online Dispute Re(v)olution?

There has also been much innovation in online dispute resolution (ODR) platforms – no doubt boosted by the Pandemic.  Perhaps none has garnered as much attention and discussion as Kleros, which uses blockchain technology to create a decentralized arbitration process that relies on crowdsourced adjudicatory expertise.  Very reductively speaking, the Kleros process assigns jurors to cases (the jurors sign up online and are remunerated for their services), and incorporates a point system, inspired by the jury selection system in ancient Greece, and underpinned by game theory concepts.  Jurors are rewarded for deciding cases “coherently,” creating financial incentives for correct adjudication.  (A fascinating, in-depth guide to Kleros can be found here.)  The result, conceptually, is a decentralized adjudication process where anyone can sign up to be a juror, but that nonetheless aims to arrive at correct decisions.

 

DeFi: Financial Services on the Ethereum Blockchain

Moving on to the FinTech world (but with an obvious impact on our dispute resolution world), the Economic Research Division of the St. Louis Federal Reserve recently published an article by Prof. Fabian Schär, which provides an in-depth analysis of decentralized finance (DeFi), its potentials, and risks.  DeFi refers to an alternative financial infrastructure built on top of the Ethereum blockchain, using smart contracts to create protocols to replicate existing financial services, in a more open, interoperable, and transparent manner.  Potential applications include decentralized exchanges, decentralized debt markets, blockchain derivatives, and on-chain asset management protocols.  The advantage of DeFi is that it does not rely on intermediaries and centralized institutions (which, depending on whom you ask, operate in an opaque manner, are vulnerable to fraud, and require users to trust the institution).  Instead, DeFi is based on open protocols and decentralized applications, where agreements are enforced by code, and transactions are executed in a secure and verifiable manner.  The U.S. Federal Reserve’s interest in DeFi may well augur significant disruption in the financial services space, with an equally significant impact in dispute resolution.

 

Read the AI Label Carefully

Of course, the exciting innovations in technology and the administration of justice are tempered by a number of ethical concerns, revolving broadly around privacy and bias/discrimination.

In this respect, Europe leads the way.  At the end of 2020, the European Commission for the Efficiency of Justice (CEPEJ) of the Council of Europe published a study on the establishment of a certification mechanism for AI tools and services used in the fields of justice and the judiciary. The study begins to implement the CEPEJ Charter on the use of AI in judicial systems and their environment, adopted in late 2018.  Broadly, the CEPEJ proposes certification and labeling criteria for AI tools based on principles outlined in the Charter, including (1) the Principle of respect of fundamental rights; (2) the Principle of non-discrimination; (3) the Principle of quality and security (with regards to the processing of judicial decisions and data, using certified sources and intangible data in a secure technological environment); (4) Principle of transparency, impartiality, and fairness; and (5) Principle of “under user control” (ensuring users are informed actors and in control of their choices).  The proposed CEPEJ certification requirements will likely impact a number of “Legal Tech” areas, such as case law search engines, online dispute resolution, predictive analysis, automated legal drafting, and so on.

 

The Monster Lurking Within: Embedded Bias in AI

The risk of bias in AI was highlighted at the end of 2020, when Timnit Gebru, then co-lead of Google’s Ethical AI team, was fired over her publication of a research paper highlighting bias in large language models (AI trained on large amounts of text data) – which happens to be at the core of Google’s search business.  Ms. Gebru is a pioneer in AI ethics and research, and co-authored a groundbreaking paper that showed that facial recognition software is less accurate at identifying women and people of color, largely because the data the AI software trained on utilized white male pictures.  Ms. Gebru’s paper focused on bias in large language models, noting that the AI is trained on text pulled from the Internet, which contains racist, sexist, and otherwise abusive language that ends up in the training data.  As an MIT article (reviewing Ms. Gebru’s research paper) described, “an AI model taught to view racist language as normal is obviously bad”; and that “a methodology that relies on datasets too large to document is … inherently risky… [and] perpetuates harm without recourse.”  As AI makes its way into the dispute resolution realm, we must obviously guard against all sorts of inherent biases hidden in large datasets.

Indeed, hidden biases may have already found their way into the administration of justice.  Many readers may be aware of a controversial program in the U.S. called COMPAS (Correctional Offender Management Profiling for Alternative Sanctions).  COMPAS is used by certain U.S. courts to assess the likelihood of recidivism in defendants who are up for parole.  In 2016, a defendant challenged the State of Wisconsin’s use of COMPAS, arguing it violated his right to due process because it prevented him from challenging the scientific validity and accuracy of the test.  The COMPAS algorithm uses a “violent recidivism risk scale” calculated by looking at age; age at first arrest; history of violence; vocation education level; history of noncompliance; and a weight multiplier “determined by the strength of the item’s relationship to person offense recidivism observed in study data.”  While this algorithm makes no reference to ethnicity or race, a highly publicized study by Propublica analyzed COMPAS assessments and concluded that the algorithm was biased against African Americans: “Blacks are almost twice as likely as whites to be labeled a higher risk but not actually re-offend… [COMPAS] makes the opposite mistake among whites: they are much more likely than blacks to be labeled lower-risk but go on to commit other crimes.”  (Emphasis added.)  COMPAS’ parent company strongly rebutted this claim, but one very problematic point was that it refuses to release its proprietary software, making it impossible for defendants and third parties to challenge the accuracy of the algorithm. The issues raised in the COMPAS saga have obvious implications for international arbitration and other forms of dispute resolution as AI is increasingly integrated into these processes.

 

Technology and the Future of Justice

These stories scratch the surface of the vast range of innovations affecting the dispute resolution world.  Our dispute resolution community must stay abreast of these developments, and hopefully steer them towards a principled, and ethical application of technology, as opposed to a reactive approach which would allow an unprincipled incursion of technology into our dispute resolution regime.  Circling back to ArbTech, these goals are embedded within the forum’s DNA, and are part of its Mission Statement.  The ArbTech community is composed of legal practitioners, developers, engineers and academics, who discuss, debate, and collaborate on bleeding-edge tech innovation in dispute resolution and “the Future of Justice.”  ArbTech is currently open to new participants.

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When is a “Court” not a Court? A Few Thoughts After Helice Leasing S.A.S. v PT Garuda Indonesia (Persero) TbK [2021] EWHC 99 (Comm)

Mon, 2021-03-08 01:25

In a recent High Court case, it was held that a reference in a contract to the “court” did not mean a court at all but meant instead – perhaps alarmingly – arbitration. This decision in Helice Leasing S.A.S. v PT Garuda Indonesia (Persero) TbK [2021] EWHC 99 (Comm) may be a cause of concern for those drafting commercial contracts and dispute resolution clauses. How could the High Court reach such a decision that appears to defy the plain meaning of “the court”? Should drafters be concerned that references in their contracts to a “court” will be construed to mean arbitration? If so, how might they avoid such a conclusion? Below we consider these questions.

The Defendant had become, by novation of a lease agreement, the lessee of an aircraft. The Claimant, the lessor of the aircraft, instituted court proceedings against the Defendant for non- payment of rent. The Defendant then applied, amongst other things, to stay the proceedings under section 9 of the Arbitration Act 1996, on the grounds that the Claimant’s proceedings breached the parties’ agreement to arbitrate.  The lease provided, in clause 15.2, that:

Each of Lessor and Lessee hereby agrees that any dispute arising out of or in connection with this Lease Agreement, including any question regarding its existence, validity or termination, shall be referred and finally resolved by arbitration under the Rules of the London Court of International Arbitration (the “LCIA Rules”), which rules are deemed to be incorporated by reference into this clause.

In response, the Claimant argued that it was not obliged to refer the proceedings to arbitration and that clause 13.2 provided an exception to the arbitration agreement contained in clause 15.2. Under clause 13.2:

If an Event of Default occurs…Lessor may at its option (and without prejudice to any of its other rights under this Lease Agreement or that may arise by operation of Applicable Law), at any time thereafter…proceed by appropriate court action or actions to enforce performance of this Lease Agreement or to recover damages for the breach of this Lease Agreement.

It thus fell on the Court to interpret the contract and to decide whether clause 13.2 carved out from the arbitration agreement a right on the part of the Lessor to bring court proceedings.

 

The Parties’ Arguments

In support of its construction, the Claimant relied on the ordinary meaning of the words, and argued that the reference in clause 13.2 to the “court” permitted the Claimant to proceed by court litigation rather than arbitration.  Clause 13.2 thus was a unilateral option of the lessor to litigate by court, not merely by arbitration, which according to the Claimant made “good commercial sense”. In response, the Defendant contended that the Lessor’s right in clause 13.2 was subject to clause 15.2, and that the “appropriate” action, to use the language of clause 13.2, was arbitral proceedings in accordance with clause 15.2.  The Defendant also noted the reference in clause 13.2 to the “court” was in all likelihood an error, a “remnant” from the original template lease agreement.  That template provided for New York law and New York court jurisdiction.  When the template agreement was amended and arbitration under LCIA rules was adopted, the reference in clause 13.2 to the “court” was erroneously left unchanged.  More importantly though, the Defendant pointed to a circularity in the Claimant’s construction, which “presupposes that which [the Claimant] is required to prove”.  Whether an Event of Default had occurred was one of the issues to be determined in the proceedings, and yet the Claimant could only bring those proceedings if an Event of Default had occurred.

 

Judgement

In granting the stay, Calver J began by noting that clause 15.2 was not expressed to be subject to clause 13.2, which would be expected if clause 13.2 did carve out from clause 15.2 a right of the Lessor to issue court proceedings.  He continued:

in order to give the contract a business common sense construction, I consider that ‘court action’ in clause 13.2(b) must reasonably have been intended by the parties to mean action before the London Court of International arbitration, that is action within clause 15.2.  (Emphasis in original).

That conclusion was supported by clause 2.1 of the lease that appeared also to refer to the LCIA as “the courts” and which “throws some light on what was objectively intended”.

But what was conclusive for the judge was that, on the Claimant’s construction, clause 13.2 was effectively inoperative.  The right under clause 13.2 applied “if an Event of Default occurs”, not “if an Event of Default is alleged.” (Emphasis in original). A dispute over whether an Event of Default had occurred is a “dispute” and could therefore only be resolved by arbitration pursuant to clause 15.2, and not through the courts.

The Claimant’s construction also conflicted with commercial common sense.  If the court could decide whether an Event of Default occurred, that would “emasculat[e]” the agreement of the Parties in clause 15.2 to refer “any dispute” to arbitration.  And if the Claimant had a unilateral right to issue court proceedings, what would happen to any cross-claims brought by the Defendant? Would the Defendant have to bring its cross-claims by arbitration whilst the Claimant sought damages in court? That conclusion, with its potential for “confusion, cost and delay” seemed unlikely and unappealing to the judge.  Since, therefore, it was for the arbitrators to decide whether an Event of Default had occurred, “it makes no sense” for the Lessor to then go to court to enforce the lease, rather than arbitrators themselves enforcing the lease.  To hold that the reference in clause 13.2 to the “court” meant anything other than the LCIA would run counter with the “one-stop shop construction of such arbitration clauses advocated by the House of Lords in Fiona Trust v. Privalov [2007] UKHL 40.

 

A Dangerous Precedent?

Although Calver J only made a passing reference to the Fiona Trust decision in his judgment, and although each contract can only be interpreted on its own terms, that case appears to have encouraged the liberal or commercial interpretation of the contract adopted by the judge. Lord Hoffmann, drawing “a line under the authorities to date” on the interpretation of arbitration agreements, and making “a fresh start”, held that, as a presumption, parties to an arbitration agreement “as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered…to be decided by the same tribunal.”  (at para 13) In other words, arbitration agreements should, as a general rule, be interpreted to give effect to arbitration as a “one-stop method” for the resolution of disputes.

In Helice Leasing, even the express words in clause 13.2, that the Lessor had the right to turn to the “court”, were not enough to overturn that presumption. Commercial commonsense dictated that “court” in fact referred to the LCIA, a conclusion that may seem startling. The judge did not refer to any precedent (other than the Fiona Trust) on this point.

But this is not simply a case of the commercial commonsense meaning of the contract – in particular of the broadly-drafted agreement to arbitrate in clause 15.2 – overriding the plain meaning of “court” contained in clause 13.2; for the court was also satisfied that “court” in clause 13.2 was probably a mistake, a “hangover” from the template agreement.  Thus, Calver J would have been prepared to amend the contract to make clause 13.2 consistent with the agreement to arbitrate in clause 15.2, which however he did not find necessary. This error and the circularity in the Claimant’s construction are the peculiar facts of the contract that led the High Court to reach the decision that it did. Drafters need not be too concerned then, barring a similar error in their contracts, that a liberal interpretation will prevail over their express words.

 

Conclusion

The case nonetheless strikes a few notes of caution.  First, if parties do intend to carve out from a broad agreement to arbitrate a unilateral right to bring court proceedings, they should make that abundantly clear: the agreement to arbitrate should be expressly subject to the right of one party (in this case, the Lessor) to bring court proceedings. Secondly, to avoid the accusations of circularity that the Defendant raised in Helice Leasing, that right should not be conditional on an event of default having “occurred”. And finally, the case is a reminder of the pitfalls of precedents and template agreements.  A drafter may blithely amend the jurisdiction clause (and other boiler plate clauses) in the template.  But the rest of the contract must be checked carefully for consistency. Otherwise, the parties risk time consuming, costly applications, or satellite litigation, that could have been avoided by consistent and unambiguous drafting.

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Equality Won’t Fight For Itself

Mon, 2021-03-08 00:36

This month, we formed the arbitral tribunal in our billion dollar investment dispute. Against the odds, the parties selected a majority female tribunal. What is more, they chose a female President.

At around the same time, a leading US firm picked a woman as both its chair and managing partner for the first time ever. The UK Supreme Court appointed Lady Justice Rose to its bench, where until now Baroness Hale was the lone female voice amongst a dozen judges. On 15 February, history was made at the World Trade Organization when the General Council chose a black African woman, Ngozi Okonjo-Iweala of Nigeria, as the organization’s seventh Director-General. And last year, the International Chamber of Commerce (ICC) reported that the President of its Court of Arbitration in Paris is tipped to be replaced by a woman, Claudia Salomon.

This is all positive news. But does it mean we should be patting ourselves on the back on this symbolic day, Monday 8 March, International Women’s Day? Is the arbitral community able to celebrate its advances in the recognition of the social, economic, cultural and political achievements of women?

 

Yes, but there is still a long way to go.

 

We can’t deny that progress has been made on the gender diversity front. Given that there is more awareness and encouragement of women’s rights one can hardly go backward. But with the passing of another year we have to ask ourselves, how much has been achieved to promote the equal representation of women in the five years that have elapsed since the introduction of the Equal Representation in Arbitration Pledge? And is it enough?

I could focus on many areas but will select two: arbitral appointments, and partnership.

In 2020, an International Council for Commercial Arbitration (ICCA) taskforce undertook a study on female arbitral appointments across all major and specialist arbitral institutions since the Pledge was signed in 2015. Its data leading up to 2020 showed that, since 2015, the proportion of female arbitrators has almost doubled (from 12.2% in 2015 to 21.3% in 2019). This trend of increasing diversity in arbitral tribunals is reflected in the caseload of individual institutions, as well as when averaged across institutions.

What about female partnerships? At the time of the Pledge’s inception, according to the US Bureau of Labor statistics, law was one of the least diverse professions in the nation with women accounting for only 17 percent of equity partners. This was similar in many other major jurisdictions. In the five years that followed, this slightly improved; in 2020 there was a 7% to 23%; in the UK there was an 8% increase.

 

But folks, it’s not good enough.

 

In terms of arbitral appointments, the figure of 20% is still significantly disproportionate to the percentage of women working in the legal profession. When one looks closer at the figures, it can be seen (at page 17 of the study) that the percentage drops to the single figures in the case of some institutions such as the Permanent Court of Arbitration and the Court of Arbitration for Sport. The latest diversity statistics from the Stockholm Chamber of Commerce (SCC), which reviewed 1250 arbitrator appointments in SCC cases over a five-year period, are similarly disappointing. It found that although the SCC as an institution was taking steps to increase diversity when appointing arbitrators (at least 30% being female), when the parties were left to their own devices (over 62% of the time) they only chose women 14% of the time.

Turning to partner promotions, let’s take the USA as an example. This is the country where Justice Ruth Bader Ginsburg fought for the cause of gender diversity throughout her life. According to the Legal 500, across the Atlantic, 47% of associates at the 200 largest US law firms are women. But this translates to only 20% of equity and 30% of non-equity women partners, according to the National Association of Women Lawyers. This is a story that repeats itself all over the world. In the top roles, men still dominate.

 

Why is this?

 

Unconscious bias is one cause. The Law Society of England & Wales concluded a review of barriers to female lawyer retention across a number of jurisdictions in 2019. It found that out of over 7,700 participants globally, 52% responded that “unconscious bias was the main barrier” to women’s career progression in the law. And if this seems incredible, a small anecdote from the world of classical music from the 1980s that I first mentioned in my Kluwer blog post on this subject five years ago will help to illustrate the problem of bias. A certain Ms. Abbie Conant applied for eleven trombone positions advertised in Germany. The trombone was historically perceived as ‘masculine’. Conant received only one audition invitation, and it was, to add insult to injury, addressed to a “Herr (Mr) Conant”. She auditioned along with 32 men, playing behind a screen. A selection panel listened to her without knowledge of her gender. They were enthralled, and she was picked. To their amazement, Ms Conant was a woman. She would never have been selected had she been in front of the screen.

Unconscious bias cannot, however, take all the blame. Women also need to learn to be more forthright in demanding what they believe they are owed. In Deborah Tannen’s article in the Harvard Business Review in 1995, ‘The Power of Talk: Who Gets Heard and Why’, the author explains that research has shown that women are more likely to downplay their certainty and men are more likely to minimize their doubts. Women are also less likely than men to have learned to blow their own horn. She says that this goes back to childhood, where different patterns of social interaction happen between girls playing together compared with boys. It is vital that we assert ourselves in the workplace, if no one else supports us.

But even if we do, that should not absolve our colleagues from responsibility to uphold the message of the Pledge. The need to promote capable women, including women of colour, across the world needs to happen 365 days a year, not one, because the battle for gender diversity is far from over. It will be over when the hiring of a woman to a top job stops making news headlines, and when there will be no more need for articles like this to be written.

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The Advance on Costs in Construction Arbitration: Strategy Where There is Refusal to Pay a Deposit

Sun, 2021-03-07 00:22

Each of the major arbitral institutions requires that parties furnish some form of advance on costs before an arbitration can proceed. The advance on costs is a deposit paid by the parties to cover fees and expenses of the tribunal and the institution’s administrative expenses (“Advance”).

Whilst payment of an Advance is often perceived as one of the more perfunctory steps in an arbitration, in practice it can give rise to strategic considerations, and can have the effect of bringing an arbitration to a standstill. A summary of the main institutional rules addressing the Advance is set out below:

Institution Rule Name Timing for payment Consequences of non-payment International Chamber of Commerce (ICC) Article 37 Advance on Costs Article 37(2): “As soon as practicable…”. Article 37.6: The Secretary General may direct the arbitral tribunal to suspend its work and set a time limit, which must be not less than 15 days, on the expiry of which the relevant claims shall be considered as withdrawn. Hong Kong International Arbitration Centre (HKIAC) Article 41 Deposit for Costs Article 41.1 “As soon as possible…” Article 41.4 but “within 30 days after receipt of the request”.

  Article 41.4: The arbitral tribunal may order the suspension or termination of the arbitration or continue with the arbitration on such basis and in respect of such claim or counterclaim as the arbitral tribunal considers fit.

  Singapore International Arbitration Centre (SIAC) Rule 34.2 Deposit (previously known as Advance on Costs) No specific timing.

  Article 34.6: The Tribunal may suspend its work and the Registrar may suspend SIAC’s administration of the arbitration, in whole or in part.  The Registrar may set a time limit on the expiry of which the relevant claims or counterclaims shall be considered as withdrawn.

  London Court of International Arbitration (LCIA) Article 24 Advance Payment for Costs Article 24(1): “The LCIA Court may direct the parties, in such proportions and at such times as it thinks appropriate…”. Article 24.6: Payment by substitution.

Article 24.8: Failure to pay the Advance is treated by the LCIA Court or the Arbitral Tribunal as a withdrawal from the arbitration of the claim, counterclaim or cross-claim.

 

Approach in the Middle East

In the Middle East, international arbitration is the preferred form of dispute resolution, particularly for resolving construction disputes.  With that said, arbitration is still in its relative infancy compared with more sophisticated markets in the US, UK, Europe and Asia. Accordingly, parties to arbitration agreements in the Middle East still occasionally grapple with the notion that the process is binding.

Certainly in the United Arab Emirates and the Kingdom of Saudi Arabia, respondents tend to treat the payment of the Advance as the claimant’s financial burden to discharge if the claimant wishes to obtain a final award. As such, it is not unusual to encounter a respondent who is unwilling to pay its share of the Advance, a strategy usually only reserved, in other parts of the world, for fervent jurisdictional challenges.

The option of simply waiting for the defaulting party to pay its share of the Advance should be approached with caution. The arbitration will not proceed where the Advance remains unpaid. Aside from causing delays to the timetable and frustrating busy arbitrators, the Court will eventually dismiss the reference without prejudice to either party’s right to bring fresh proceedings concerning the same claims at a later stage. Whilst this may sound superficially appealing to some respondents, thought should be given to the consequences of having a reference dismissed without any conclusion. Where disputes really do need to be fully and finally resolved (such as where the employer is withholding certificates and/or performance security after completion), this uncertainty may not be a satisfactory outcome for either party.

 

Breach of contract without sanction?

The parties’ obligations to make payment of the Advance are an extension of the parties’ obligations in the arbitration agreement. Accordingly, a refusal by either party to pay the Advance will constitute a breach of contract. The usual remedies for breach of contract are available against a party failing to pay its portion of the Advance.

However, the Court or tribunal will not levy any sanction against a party for failing to pay its portion of an Advance. The Court is, at that stage, concerned only with securing payment of its own costs and the costs of the tribunal. Usually, the Court will ask the compliant party whether it wishes to pay in substitution for the defaulting party. A party that elects to pay in substitution has the option of seeking reimbursement, and this is encouraged in the Rules of some of the leading institutions. For example, Article 24(5) of the LCIA Rules provides: “the party effecting the substitute payment may request the Arbitral Tribunal to make an order or award in order to recover that amount as a debt immediately due and payable to that party by the defaulting party, together with any interest.”1) The HKIAC Rules contain a similar provision at Article 41.4. jQuery('#footnote_plugin_tooltip_36439_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_36439_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); These provisions are consistent with the failure to pay the Advance being a breach of contract.

 

Separating the Advance

In some Rules,2) Article 37(3) of the ICC Rules, Article 41.2 of the HKIAC Rules and Article 34.2 of the SIAC Rules. The LCIA Rules do not expressly permit separate deposits. jQuery('#footnote_plugin_tooltip_36439_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_36439_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); either party may request the Court to issue separate Advances. That means the Court will split the Advance – quantifying one Advance for the claimant’s claims, and one Advance for the respondent’s counterclaims, and each party will pay the Advance corresponding to its own claims.

In practice, the Court may be reluctant to fix separate advances on costs. An order separating the Advances tends to impose a greater financial burden on both parties. The aggregate amount of separate Advances will generally exceed the original amount of a single Advance.

Nevertheless, there might be some strategic advantages in seeking separate Advances where one party’s claims are disproportionately higher (or perhaps even inflated) when compared with the other party’s claims, or where there is some material benefit to be derived from having the other party’s claims dismissed.

In construction disputes, the distinction between claims and counterclaims (and the separate Advance that should apply to each) is not always clear. For example, a contractor’s claims for extensions of time will arise from the very same factual matrix as an employer’s claim for delay damages. It is likely to be difficult to separate these claims for the purposes of splitting the Advance and dismissing some claims. As such, in construction disputes arising from the same common nucleus of facts, parties should give thought to the consequences of requesting separate Advances.

 

Relationship with security for costs application   

Where one party refuses to pay its share of an Advance, it can be indicative of cash-flow or liquidity issues. This may raise concerns about whether the party in default holds sufficient assets to satisfy an adverse costs judgment.

Parties might wish to consider whether one party’s failure to pay its share of the Advance on time could be raised in a security for costs application as an example of impecuniosity. Security for costs is a form of discretionary relief in most jurisdictions, and accordingly, the tribunal may be inclined to give some weight to one party’s failure to pay its share of the Advance within a reasonable time.

 

Declaratory or unquantified relief

Where one party seeks declaratory relief, it can be difficult for the Court to quantify readily the value of the claim or counterclaim, and accordingly, assess the amount of Advance to levy. The same can be said of monetary claims where it is impossible to quantify the value of the claims. This is particularly the case where the proceedings have been bifurcated, where issues of liability will be determined before quantum (often arising in large construction arbitrations).

Under Article 34.3 of the SIAC Rules, where the claim or counterclaim is not quantifiable, a “provisional estimate” of the costs of the arbitration will be made by the Registrar.3) Appendix III Article 1(2) of the ICC Rules and Schedule 1 Article 2(6) of the HKIAC Rules. jQuery('#footnote_plugin_tooltip_36439_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_36439_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The estimate will be based on the nature of the dispute and the circumstances of the case.

 

Timing

Unlike in litigation, where public resources are finite and there is less tolerance for non-compliance, institutional Courts and tribunals often demonstrate more patience to parties who fail to satisfy their obligations to pay the Advance.

It is not uncommon to receive reminders from the Court for several months to make payment, and the parties will usually be given multiple warnings before the tribunal is finally instructed to suspend work. It may therefore fall to the parties, rather than to the Court or tribunal, to be proactive in ensuring the expeditious resolution of disagreements about payment of the Advance, where this is achievable.

 

Conclusion

It is not uncommon in the Middle East to encounter a party who refuses to pay its portion of the Advance.

Parties arbitrating in the Middle East should be prepared for non-paying respondents, and should be aware of the important strategic considerations of the options available under the relevant institutional rules – whether paying by substitution, splitting the Advance, or raising the issue in a related security for costs application.

References[+]

↑1 The HKIAC Rules contain a similar provision at Article 41.4. ↑2 Article 37(3) of the ICC Rules, Article 41.2 of the HKIAC Rules and Article 34.2 of the SIAC Rules. The LCIA Rules do not expressly permit separate deposits. ↑3 Appendix III Article 1(2) of the ICC Rules and Schedule 1 Article 2(6) of the HKIAC Rules. function footnote_expand_reference_container_36439_30() { jQuery('#footnote_references_container_36439_30').show(); jQuery('#footnote_reference_container_collapse_button_36439_30').text('−'); } function footnote_collapse_reference_container_36439_30() { jQuery('#footnote_references_container_36439_30').hide(); jQuery('#footnote_reference_container_collapse_button_36439_30').text('+'); } function footnote_expand_collapse_reference_container_36439_30() { if (jQuery('#footnote_references_container_36439_30').is(':hidden')) { footnote_expand_reference_container_36439_30(); } else { footnote_collapse_reference_container_36439_30(); } } function footnote_moveToAnchor_36439_30(p_str_TargetID) { footnote_expand_reference_container_36439_30(); 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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The Petrobras Crisis: Arbitrating Investors’ Claims Against the Brazilian Federal Government

Sat, 2021-03-06 01:40

The recent crisis between the Brazilian president Jair Messias Bolsonaro and the Brazilian national oil company Petrobras may result in a wave of investors’ claims submitted to arbitration against the Brazilian Federal Government for abuse of controlling power and breach of fiduciary duties under the Brazilian Companies Act 1976.

During a live broadcast on February 18th via Facebook, Bolsonaro expressed his unhappiness with the constant rises in fuel prices charged by Petrobras. The next day, Bolsonaro insisted that, while he would not interfere in Petrobras’ fuel pricing policies, he nevertheless foreshadowed that changes would be made in Petrobras. This announcement led to a sharp drop of the shares negotiated in the Brazilian stock exchange, representing a market value loss of approximately USD 5.4 billion, amid investors’ fears that the Brazilian Federal Government would control fuel prices. Later that evening, after the close of the Brazilian stock exchange, Bolsonaro announced that he had appointed a retired army general to replace Petrobras’ current president. The immediate reaction in the market was a drop by 9.45% of Petrobras’ shares’ depositary receipts (‘ADRs’) negotiated in New York through after-hours trading. After trading on the Brazilian stock exchange resumed the next day, Petrobras suffered a further market value loss of approximately USD 14 billion.

Bolsonaro’s row with Petrobras is not new. Back in April 2019 Bolsonaro ordered Petrobras to cancel a rise in fuel prices. Since then, the decline in international oil prices during the first months of the pandemic avoided new fuel prices hikes and kept Bolsonaro’s disagreement with Petrobras out of sight. But after international oil prices regained pre-pandemic levels and the Brazilian national currency Real fell around 40% against the US dollar during the pandemic, Petrobras increased fuel prices once again. According to the Brazilian press, Bolsonaro fears that fuel prices hikes would affect opinion polling on his administration and reduce his chances of re-election in 2022.

The Brazilian Federal Government controls Petrobras together with the Brazilian federal development bank BNDES, but their shareholding sums around 37% of Petrobras’ total shares. The remaining 63% are negotiated in the market and at least 43% of Petrobras’ shares are held by non-Brazilian investors. Since the company lost in 1997 the monopoly over the exploitation of oil resources in Brazil, Petrobras, under Brazilian law and its corporate bylaws, must follow market-oriented policies and compete on equal footing with other oil companies despite being partially owned by the Brazilian Federal Government. On top of that, the Brazilian Companies Act 1976 provides that controlling entities of companies partially owned by public entities have fiduciary duties to the company and to minority shareholders, and they can be held liable for abuse of controlling power.

Pursuant to the arbitration clause available at Article 58 of Petrobras’ bylaws, disputes between shareholders concerning the application of the Brazilian Companies Act 1976 and the company’s bylaws must be settled in accordance with the rules of arbitration of the Chamber of Arbitration of the Market – CAM, a Brazilian arbitration institute created by the Brazilian stock exchange in 2001. The arbitration clause excludes from arbitration disputes arising out of Petrobras’ business orientations by the Brazilian Federal Government, but such exception is limited to disputes concerning votes casted by the Brazilian Federal Government at the shareholders’ general meetings that are aimed at orienting the Petrobras to meet the public interest that justified the creation of the company. It will not be a surprise, however, if the Brazilian Federal Government alleges that the matter is not arbitrable as a matter of law pursuant to the Brazilian Arbitration Act 1996 and, therefore, that any such disputes must be decided by Brazilian federal courts.

In any case, it is not known how investors who acquired Petrobras’ ADRs in New York would prefer to resolve such disputes. They may choose to submit their claims against the Brazilian Federal Government to arbitration pursuant to Article 58 of Petrobras’ bylaws or to bring lawsuits, including class actions, before American courts. There is precedent for the latter approach. In 2015, the U.S. District Court of the Southern District of New York was presented with a class action brought against Petrobras and other defendants. The class members alleged a mixed set of claims, with some plaintiffs having claims arising under the U.S. Securities Exchange Act of 1934, and others with claims arising under Brazilian law, collectively for liability owing to the sharp decline in Petrobras’ value following the disclosure of fraud and corruption scandals. The Court held that the arbitration clause at Article 58 of Petrobras’ bylaws did not cover claims under the U.S. Securities Exchange Act of 1934, but class members with claims arising under Brazilian law would need to arbitrate their claims (In re Petrobras Securities Litigation, 116 F. Supp. 3d 368, 386–89 (S.D.N.Y. 2015)). In practical terms, the decision excluded from the class action all investors who acquired Petrobras’ shares in Brazil, but allowed the class action to move forward in relation to investors who acquired Petrobras’ ADRs in New York because their claims were based the violation of the U.S. Securities Exchange Act of 1934. Accordingly, under present circumstances, for ADR investors to avoid Petrobras’ arbitration clause, they would have to claim the violation of U.S. Securities Exchange Act of 1934, but not the violation of the Brazilian Companies Act 1976 and of Petrobras’ bylaws.

But litigation before American courts is not easy and free of hurdles. First, ADR investors must establish that the case falls within the “commercial activities” exception of the U.S. Foreign Sovereign Immunities Act 1976, which otherwise provides the Brazilian Federal Government with jurisdictional immunity in U.S. courts. Second, ADR investors would also have to convince American courts not to apply the act of State doctrine, according to which a court should refrain from deciding on the lawfulness of an act of a State performed within its territory.

Arbitrating disputes involving public entities in Brazil is nothing new and Brazilian courts have long recognised that public entities may enter into and be bound by arbitration agreements. But most disputes involving public entities submitted to arbitration in Brazil arise out of contracts, including concession agreements. The possibility of investors of Petrobras arbitrating their claims against the Brazilian Federal Government is something certainly new and is a development that should be closely watched.

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What is the Value Proposition of an Arbitration Institute?

Fri, 2021-03-05 00:33

In recent years the arbitration community has embraced digitalisation. Already before the pandemic we were exploring the use of legal tech and even thinking of how artificial intelligence would profoundly change our business and our profession. Most likely the form and content of the services we provide will be different in the future due to the technological development.

The technology driven development is product based – focused on how to change what we do and how we conduct arbitrations. I believe that instead of and on top of focusing on the product and its features, the arbitration community should focus more on our customers and on what they want and need from us.

The first step in focusing on the customer would be to understand who the customer is. As funny as it might sound, I am not sure if this is always that clear in the arbitration community. In arbitration the link to end customers is less clear than in some other fields of law. Part of the business such as arbitrator appointments come mostly through the dispute resolution community and not directly from the end users. From an institute’s perspective remembering who the actual customer is might be even harder. The institutes mostly work with and are in contact with other stakeholders than the parties or the end customers in a broader sense, such as the counsel, the arbitrators, the board members, academics and generally the broad arbitration community. This might easily distort the view on the purpose of what we do.

Most of the discussion on arbitration in general and on the services offered by the institutes is within the arbitration community, of which the parties or the actual end customers in a broader sense are rarely a part of. The arbitration community is often interested in very specific issues rising from within the arbitration community such as interesting procedural problems or innovations, legal questions that are of interest mainly to experts and statistics which might not be a priority for the parties. In other words, the discussion is very product orientated and focused on the work of the community. For us in the institute it is easy to join this discussion and focus on these themes rather than on the needs of the parties and the end users, who do not dominate the discussion on arbitration and who do not seem to have a voice.

It is, however, the parties and the end users in general that in the end pay for all the services provided in the system. It is in the end through the parties that all the added value of the institution of arbitration to the society is created. Our WHY, the increased efficiency of the society though expedient conflict resolution and protection of rights, can be served only through the parties and end users. That is why we should always focus on how to serve the parties, not on how to get the respect and appreciation of our distinguished colleagues or how to serve the interests of other stakeholders in the system.

Knowing that the parties and the end users are our customers, not the arbitrators or the lawyers, we should always remember to ask why the parties wish to use our services. All too often the answer relates to qualities of our product – in relation to institutes we discuss issues such as whether the rules respond to the latest discussion topics of the arbitration community and include rules on emergency arbitration, early dismissal, whether the awards are scrutinised, whether the institute offers a platform for case management or even whether the institute is internationally appreciated and acknowledged. Instead of the qualities of the product we should focus on our value proposition – what is the added value that we provide for the customer, how does using our product benefit the customer, what are the gain creators of our service, which problems of our customers the service solves, and which pains it relieves. All this sounds self-evident, but it has in my opinion been forgotten in the background.

What is the value proposition of arbitration for the end users? What is the reason companies include arbitration clauses in their contracts? The classic arbitration answer would most likely be something in the line of the classic pros of arbitration – speed, expertise, flexibility, enforcement, and confidentiality. These may be competitive advantages of arbitration as a method of dispute resolution but not really value propositions from the customer perspective. From the end customer perspective, I would say, the value proposition is firstly faster, more reliable, and more foreseeable enforcement of their substantive rights than in state courts and thus more foreseeable and financially better result of the project to which the substantive contract relates, as well as shorter duration of uncertainties affecting the business. Secondly, I would emphasise the saving of internal resources and focus on the dispute because of the efficient procedure and thus the alternative results that the resources and time allocated to core operations of the customers. Third value proposition would the saving of legal costs and the alternative results that saved resources produce when allocated to other projects yield. The important thing to remember is that the customer is not really interested in how the value is created.

From perspective of a service provider in arbitration this approach does not really turn the world upside down. To fulfil the value proposition we need to work for an efficient and reliable procedure and keep the costs under control. The procedure has to be flexible and it has to be fair to guarantee enforcement and acceptability. This is often at what many of the aforementioned discussions of the arbitration community are aiming. The value proposition approach, however, helps us in identifying what is most important to the end users. The topics, products and features which are unrelated to value propositions are a luxury that we should not necessarily allow ourselves, especially since there is always room for improvement in issues related to value propositions.

For example, at the Finland Arbitration Institute (FAI), we have applied the value proposition approach firstly in focusing our efforts on shortening the internal duration of the cases at the FAI, before the transmission of the case file to the tribunal. We believe that this is crucial for customer pains and gains. Secondly, we planned our annual arbitration event around the needs and problems of our end customers and our solutions to them. We decided to do this although the audience is mostly the arbitration community.

Ultimately, the value proposition of the service for customers is linked to the purpose of the institution of arbitration in the society. The more efficient disputes are solved and the more efficient the protection of substantive rights is, the more efficient the whole society works. Thus, focusing on value propositions does not mean prioritising business over law.

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International Arbitration and the Future of Holocaust Restitution in the Aftermath of Republic of Hungary v. Simon and Federal Republic of Germany v. Philipp

Thu, 2021-03-04 01:00

Investor-state international arbitration may provide a way forward for Survivors and their heirs after the U.S. Supreme Court’s decision denying claims in two restitution cases regarding Holocaust-era stolen property:  Federal Republic of Germany v. Philipp (for return of Medieval art stolen by the Nazis) along with the companion case of Republic of Hungary v. Simon (for return of personal property stolen from fourteen Holocaust survivors).  Both were bellwether cases for those of us who have advocated with halting success in U.S. courts on behalf of the true owners of Nazi-stolen property still in the hands of foreign governments.  Decided in favor of the sovereigns, the decisions may be the fatal blow to restorative justice in the United States—not only for U.S. citizen heirs to Holocaust victims, but also victims of other genocides and human rights catastrophes, such as the Armenian and Darfur genocides.

The blow fell on February 3, 2021.  A unanimous Supreme Court declined to exercise jurisdiction over Germany, holding that a sovereign’s theft of its own citizens’ property during a genocide is not in violation of international law.  Then the Court remanded Simon to be decided by the lower court in accordance with Philipp, rather than decide whether the “international comity” doctrine, based on foreign policy considerations, required dismissal even if there was jurisdiction over the sovereign under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1330, et seq. (“FSIA”).

Writing for a unanimous Court, Chief Justice Roberts declined to extend jurisdiction over foreign sovereigns under the “takings exception” of the FSIA, lest it “transform[] the expropriation exception into an all-purpose jurisdictional hook for adjudicating human rights violations.” The FSIA was the means by which heirs to Holocaust survivors sued for return of property stolen by the Nazis, such as Maria Altmann, made famous for her quest for return of Gustav Klimt’s “Woman in Gold.”  (See Republic of Austria v. Altmann, 541 U.S. 677 (2004).) While Ms. Altmann’s ancestor happened to hold Czech citizenship at the time of the Austrian confiscation, thereby falling outside of the Philipp decision, human rights violations were also committed by states against their own citizens.  Thus, the vast majority of Holocaust survivors, whose own governments stole their property during the course of mass human rights violations, and their heirs, have no recourse in U.S. courts after Philipp.

In both Simon’s and Philipp’s (virtual) hearings on December 7, 2020, the focus of the questioning by the Justices concerned offending foreign states and inviting reciprocal treatment of the United States as a consequence of providing a forum to pass judgment on a sovereign’s retention of victims’ property, even after mass human rights abuses.  As Germany’s counsel argued:  “Almost 700 judges, as several of you have noted, would sit as new world courts, judging the nations of the world for alleged violations of international human rights and the law of war.” Apparently, that sentiment translated at least in part to the reasoning of the Court in the Philipp decision:

As a Nation, we would be surprised—and might even initiate reciprocal action—if a court in Germany adjudicated claims by Americans that they were entitled to hundreds of millions of dollars because of human rights violations committed by the United States Government years ago. There is no reason to anticipate that Germany’s reaction would be any different were American courts to exercise the jurisdiction claimed in this case. (Id., slip op. at 13.)

At the hearings, the Justices spent considerable time discussing the foreign policy implications of U.S. courts offending foreign sovereigns by adjudicating conduct committed on foreign soil—even conduct arising out of genocide.  However, the Justices clearly exhibited discomfort about the notion of intruding into the purview of the political branches by weighing foreign policy implications vis-à-vis the “international comity” doctrine.  After all, the FSIA’s objective was to lay to rest one-off foreign policy decisions being made by the Executive Branch in favor of legal standards set forth in the statute, to be applied by the courts.  Justice Kagan remarked to counsel for the United States (appearing as amici) that it seemed they wanted courts to do the government’s “dirty work.”  Justice Gorsuch in particular appeared to be exploring other doctrines that would allow dismissal without courts weighing foreign policy, such as the “exhaustion of local remedies” doctrine, based on the notion that claimants should first seek remedies in the courts of the country where the expropriation occurred.  Indeed, courts had dismissed Holocaust restitution cases even where they held jurisdiction existed under the FSIA and required the parties instead to bring the claims in the foreign jurisdiction first, with the opportunity to return if the forum proved unfair or inadequate.  (See, e.g., Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7th Cir. 2012).) After Philipp, such prudential doctrines need not be considered, since jurisdiction will not be exercised by courts in the first place.

The vast majority of the property stolen during the Holocaust has not been restituted.  Poland, where almost half of the six million Jewish victims of the Holocaust lived, has not even passed comprehensive restitution legislation.  So, adopting the position that these cases belong in the courts of the countries where the abuses occurred ignores practical realities.  The victims have usually fled discrimination, the vestiges of which remain within the legal systems.  Especially in Eastern European countries where there are double confiscations by both the Nazi regime and then the subsequent communist regime, property restitution has fallen well short of basic international law standards. (See Bazyler, M., Boyd, K.L., Nelson, K., Shah, R., Searching for Justice After the Holocaust: Fulfilling the Terezin Declaration and Immovable Property Restitution (Oxford U. Press, 2020) (providing a comprehensive inventory of Holocaust Restitution measures across Eastern European countries).) Before Philipp, U.S. courts were thought to offer a fair and just alternative.

Further, former Eastern-bloc countries which were the situs of massive property confiscations during the War, followed Western European countries, and many times as a condition for entry into the European Union, provided for a domestic legal regime for restitution of Nazi- and Communist-era stolen property.  The commitments to do so were codified in the Terezin Declaration on Holocaust Era Assets and Related Issues of 2009 signed by 47 countries.  Unfortunately, Eastern European states have been slow in meeting the Declaration’s aspirations, if at all.

Thus, it bears thinking and revisiting alternative remedies and protections for claimants who fall victim to foreign courts’ often failing, if not corrupt, restitution regimes.  Claimants like Rosalie Simon and Alan Philipp, if indeed their claims are to be heard in foreign domestic courts following the Supreme Court decisions, may have an additional protection not previously considered:  international law as provided by Bilateral Investment Treaties (BIT), including with the United States, Israel, Canada, and Australia, the home to the majority of the Holocaust survivor diaspora.  These states have a broad array of BITs, many of which were negotiated post-Communist revolution with Eastern European countries such as Poland, Hungary, Romania, Bulgaria, Croatia, Lithuania, and the Czech Republic, where there is a significant amount of unrestituted property stolen during the Holocaust and post-World War II by communist regimes. Those BITs provide broad protection for investors in the countries where the Holocaust Survivors fled, post-World War II: The United States, Canada, Israel, and Australia.

As I have previously written elsewhere, such BITs could provide an international arbitration forum, where a BIT is violated by, for example, failure of the domestic courts or administrative agencies to provide basic due process for a foreign claimant’s “claims for money and property” under international standards.  (Boyd, K.L., Watson, T., Valenzuela, K., Justice for Nazi and Communist Era Property Expropriation Through International Investment Arbitration, Loyola L.A. Int’l and Comp. L. Rev. (2018).). Moreover, as I have previously written, such BITs also may provide a remedy for violations by the State to properly protect such “investments” (i.e., claims for money and/or restitution of property), including:  just compensation for expropriation of those claims by the state, protection through guarantees of “fair and equitable” and non-discriminatory treatment—including “effective means” to protect the investment—and broad “umbrella clauses” that encompass a range of investor protections. See id. at 683-84.

States may argue that the actual wrongful conduct predated the BITs and therefore should not be covered. However, a claim to restitution of private property is arguably one where original ownership never lawfully passed to the subsequent Communist regimes because the original taking violated international law.  Similarly, claims to money were in existence “at the time of entry into force” so they too could be covered “investments.” See id. at 686.  This means that, even if the original property has been destroyed, a claimant could still bring a claim under the BIT because her claim to money still exists as a valid investment.  Moreover, Survivors and their heirs may have another “investment” as a result of a State’s actions in connection with restitution. A State may create a new right to property, or revive a right, by passage of a restitution law or, where claims are brought in a state, by acknowledging the claim to the property or compensation. Id. at 686. The State thereby recognizes a proprietary interest that is an “investment” since it is a “claim to money” or a “claim to performance having economic value.”  Id. at 686-87.

International law supports such a theory. The European Court of Human Rights (“ECHR”) has found that these types of actions by the State are sufficient to give rise to a proprietary interest protected by the Convention on Human Rights. Id. at 687.  The ECHR has also found that “failure to enforce an administrative decision recognizing entitlement to compensation and fixing the amount” and that “failure to enforce a court decision recognizing entitlement to compensation, even where the amount of the award has not been fixed” constitute violations of Article 1 of Protocol No. 1 to the Convention on Human Rights.  Id. at 687-688.

From the recent Supreme Court decisions, we see at least one benefit of international arbitration tribunals as opposed to foreign domestic courts is that the foreign sovereign has consented to jurisdiction in the treaty and sovereign immunity is not a concern.  Moreover, there are no concerns of upsetting foreign relations by rendering large money judgments against sovereigns by sister courts, since those concerns would have been considered at the time the sovereign entered the treaty. Issues addressed in Philipp and Simon would not arise in BIT arbitration.

It remains to be seen if international arbitration can provide a true alternative to U.S. and foreign domestic courts for restorative justice for victims of mass human rights violations.  This path is untested and certainly departs from traditional investor-state arbitration.  There are sure to be hurdles for claimants and tribunals, including whether state-created restitution regimes establishing claims for compensation or restitution fall with the BITs’ definitions of “investment;” whether states are entitled to carve out foreign nationals’ claims to receive less than “just compensation” as that term is defined under the BITs; whether states may treat foreign nationals’ claims differently if they are citizens of countries who entered into post-World War II claims treaties; and whether foreign claimants seeking compensation can afford the expense of international arbitration fees and costs.  Over two decades ago, when the prospect of U.S. courts providing a forum for Holocaust survivors and their heirs to bring claims for property was hopeful, wealthy individuals sympathetic to the cause of restorative justice for the crimes of the Holocaust provided financial support for those cases.  In the new world of third-party funding for international arbitration, there may be equivalent benefactors.

But now that the prospects are gone for the United States to provide such a forum, and while states remain reticent to provide meaningful restitution of property to their citizen victims who have fled state-sponsored violence, investor-state international arbitration may offer an alternative for advocates to consider.

 

Kathryn (Lee) Boyd is a managing and founding partner of Hecht Partners LLP, a litigation and international arbitration boutique, and a founding member of Victoria Associates, an international dispute resolution network.  She is a litigator and arbitration advocate specializing in complex transnational cases, human rights, class actions, and property restitution, and is a former academic, having authored and co-authored several articles and a book discussing Holocaust restitution (cited herein).

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Amendment No. 1 of 2020: The 2015 ADGM Arbitration Regulations in Focus

Wed, 2021-03-03 00:58

The 2015 Arbitration Regulations of the Abu Dhabi Global Market (“ADGM”), the Abu Dhabi-based financial free zone, (the “2015 ADGM Arbitration Regulations”) (consolidated text The Amendment focuses on a number of areas to enhance the efficient operation of the 2015 ADGM Arbitration Regulations, including in particular a clarification of the scope of an arbitration agreement under the Regulations, the ADGM Courts’ powers to grant interim measures, the pervasive use of technology throughout the arbitration process, the summary disposal of claims, counterclaims and defenses, the imposition of certain disclosure requirements with respect to third-party funding, and the regulation of party and party representative conduct.

In the following, this blog addresses each of these and other amendments together with their respective objectives in an attempt to provide some initial guidance. In doing so, it takes account of Consultation Paper No. 8 of 2020 – Proposed Amendments to the ADGM Arbitration Regulations 2015, dated 25 November 2020 (the “Consultation Paper”), which was circulated to inform and assist the public consultation process initiated by the ADGM before adoption of the amended Regulations. The Consultation Paper explains the rationale behind a number of the proposals that were ultimately adopted through the Amendment.

 

The scope of the arbitration agreement

Inspired by Section 5 of the 1996 English Arbitration Act, Section 14(2) of the Regulations as amended. allows arbitration agreements to qualify as having been made in writing if their recording in written form is by a(n) (authorised) third party as opposed to the contracting party that is subject to the obligation to arbitrate itself. As a corollary, Section 14(2) also expressly recognises the formation of arbitration agreements that are in writing but have not been signed orally or by conduct. This is intended to facilitate the conclusion of binding arbitration obligations arising from bills of lading that provide for arbitration or from articles of association that provide for arbitration in shareholder disputes (see Consultation Paper, at para. 12).

A new Section 14(6) expressly recognizes the enforceability of unilateral arbitration options under the Regulations as amended: “An arbitration agreement giving any party a unilateral or asymmetrical right to refer a dispute either to an arbitral tribunal or a court does not contravene these Regulations and shall not be rendered invalid for that reason.” This helpfully clarifies the position under the Regulations on a subject that remains unclear in onshore UAE arbitration albeit that unilateral options to resort to court rather than arbitration have been found enforceable onshore (see Case No. 116/2018, ruling of the Dubai Court of Cassation of 16 September 2018).

 

The ADGM Courts’ powers to grant interim measures

A new Section 29 confers upon the ADGM Courts the power to order a claimant to provide security for the costs of the arbitration irrespective of the claimant’s place of residency or incorporation, even if outside the ADGM.

Amended Section 31 has been significantly broadened in its application and now empowers the ADGM Courts to adopt “any interim measure in relation to arbitration proceedings as [they] ha[ve] in relation to proceedings in the Court” (see Section 31(2), amended Regulations), reflecting corresponding powers of the DIFC Courts in DIFC-seated arbitrations under the 2008 DIFC Arbitration Law. In addition, Section 31(3) now relieves the ADGM Courts’ power to award interim relief from any geographic nexus to the ADGM in circumstances where the seat of arbitration is outside the ADGM (other than the location of the subject of the relief being in the ADGM). In addition, it expressly empowers the ADGM Courts to adopt interim measures against third parties, i.e., non-parties to the underlying arbitration agreement. This will facilitate the Courts’ role in providing interim relief outside a strictly curial context and – taking guidance from recent case law precedent of the English Court of Appeal in A v. C. [2020] EWCA Civ. 409 (see Consultation Paper, at para. 16) – the production of third-party witness evidence by non-parties in an ADGM-seated arbitration. Ex parte applications for interim relief by parties and non-parties alike are permissible in cases of urgency only (see Regulations as amended, Section 31(4) and (5)).

Finally, an amended Section 48(1) now provides for a non-exhaustive list of self-explanatory measures that may be adopted by the ADGM Courts to lend assistance in the taking of evidence:

  • the examination of witnesses, either orally or in writing;
  • the production of documents;
  • the inspection, photographing, recording, preservation, custody or detention of any property; and
  • the taking of samples of any property and the carrying out of any experiment on or with any property.

 

Procedural rules

In an endeavour to assist in the fair and efficient procedural conduct of the arbitration, a new Section 34(2) expressly authorises the adoption – in whole or in part – of the ADGM Arbitration Centre Arbitration Guidelines. These entered into force in September 2019 with the objective to “provide parties and tribunals with a set of innovative best practice procedures to assist in bringing greater certainty and efficiency to the arbitral process, while ensuring fairness, equality and due process” (see Introduction to the Guidelines).

 

The use of technology

A new Section 34(5) introduces seven “technology-related solutions” (see Consultation Paper, at para. 19) that facilitate the remote procedural conduct of an ADGM-seated arbitration:

  • the submission, exchange or communication of documents by electronic means;
  • the use of electronic signatures for documents submitted, exchanged or communicated;
  • documents being provided in electronic searchable form;
  • the use of an electronic document review system for disclosure or document production;
  • the use of an electronic document management system for hearings;
  • the use of an online case management platform; and
  • conducting hearings, in whole or in part, by video conference, telephone or other communication technology;

Section 34(5) also offers a residual solution which leaves it to an ADGM tribunal to identify any other suitable technological measures for the expeditious and efficient conduct of the arbitration. Helpful guidance is also provided by the Consultation Paper, which states that “the technology-related solutions set out in section 34(5) are not mandatory as the tribunal retains a broad discretion as to whether they are appropriate to use in any particular case” and that “[t]he seven solutions are also not exclusive, as there is an eighth catch-all category which relates to any other technology that will enhance the efficient and expeditious conduct of the arbitration” (see Consultation Paper, at para. 21).

Further, a new Section 35(5) confirms that arbitration under the Regulations may be conducted at any venue by electronic means, “in whole or in part, in person or by video conference, telephone or other communications technology (or any combination thereof) in one or more geographical places.” This creates an opportunity for the remote hearing of the parties’ legal pleadings and for remote oral testimony tendered by both fact and expert witnesses (see Section 35(4), amended Regulations). In similar terms, Section 43, which deals with the conduct of hearings and the written proceedings in ADGM arbitration, has been amended to reflect the permitted use of technology throughout: hearings may hence be held “[…] , in whole or in part, in person, by video conference, telephone or other communication technology” (see Regulations as amended, Section 43(2)), a party having liberty to apply for the hearing of expert or fact witnesses in the same manner (see Regulations as amended, Section 43(3)); legal pleadings together with evidence may be “supplied or communicated electronically” (see Regulations as amended, Section 43(6)).

Finally, the Regulations as amended provide that an award is deemed made at the seat of the arbitration even if “signed by electronic means” (see Regulations as amended, Section 55(3)) and that “[a]n award signed by electronic means shall have the same legal validity and enforceability and constitute the original award for the purposes of section 61(2)(a) of these Regulations [i.e., for enforcement purposes], as an award with manually executed signatures of arbitral tribunal” (see amended Section 55(4)), with a soft copy of the award being delivered to a party upon issuance, subject to delivery of an original hard copy upon party request (see amended Section 55(5)). Amended Section 55(6) also expressly includes within the term of (recoverable) “cost of the arbitration” “other costs for the conduct of the arbitration, including those for […] technological solutions such as electronic document management and virtual hearing platforms […]” (see amended Section 55(6)(e)).

To be sure, the pervasive use of technology throughout the arbitration process under the amended Regulations follows recent trends in favour of digitalization prompted by the currently pending pandemic across the arbitration industry. That said, it bears mentioning that the regime for the treatment of electronic awards and the digitalization of the arbitration process is by far the most comprehensive and advanced in any arbitration law to date. As explained by the Consultation Paper, “technology-related solutions are part of ADGM’s arbitration DNA” (see Consultation Paper, at para. 20).

 

Seat of arbitration

Following the wording of Art. 14(b) of the ADGM Founding Law as amended (see http://arbitrationblog.kluwerarbitration.com/2020/10/07/adgm-courts-not-open-for-business-as-a-conduit-jurisdiction/), a new Section 35(2) disassociates the application of the Regulations from an ADGM-nexus requirement other than the seat of the arbitration being the ADGM. This finally settles the debate on the proper scope of application of the 2015 ADGM Arbitration Regulations in favour of their application absent any geographic nexus to the ADGM other than the seat of the arbitration (see my prior post on the topic here).

 

Disclosure and third-party funding

Following contemporary trends in international arbitration more generally, a new Section 37 requires a party to disclose to the tribunal and the other parties in the arbitration third-party funding arrangements and the identity of any third-party funder in order, inter alia, to avoid conflicts of interest.

 

Summary dismissal

A new Section 42 introduces a regime for the early summary disposal of claims, counterclaims and defence in whole or in part on the basis that there is “no real prospect of success in respect of the relevant part or whole of the claim, counterclaim or defence” (Section 42(1), amended Regulations). It bears mentioning that the Consultation Paper also expressly envisages a summary disposal on the basis that the tribunal “manifestly” lacks jurisdiction (referred to as the “jurisdiction limb”) in addition to the “merits limb” (see Consultation Paper, at para. 27) albeit that the jurisdictional limb is in any event dealt with in detail under Chapter 4 of the 2015 ADGM Arbitration Regulations (“Jurisdiction of arbitral tribunal”). Importantly, in order to preserve the efficiency of the arbitral process, the summary disposal procedure is at the tribunal’s “full discretion” following consultation with the parties albeit that the tribunal’s summary determination must be in the form of an award, thus making it enforceable before the competent courts (see Section 42(2) and (3), amended Regulations).

 

Tribunal-appointed expert

New Subsections 47(4) and (5) require the communication of a Tribunal-appointed expert report upon which tribunal relies in its decision to the parties but allows this to be done electronically unless otherwise agreed by the parties.

 

Party and party representative conduct

A new Section 44 regulates party and party representative conduct in the arbitration, providing for a sanctioning mechanism in the event of non-compliance. This regime is closely modeled on Module 6 of the ADGM Arbitration Centre Arbitration Guidelines.

 

Recognition and enforcement

Apart from the comments of relevance made with respect to the use of technology above, amended Section 61(2) dispenses with the requirement to submit an original or certified copy of the arbitration agreement in favour of a simple copy (to accommodate the unintended loss by a party of that agreement in its original). Amended Section 61(5) makes that Section expressly subject to Art. 13 of the ADGM Founding Law as amended, which in turn prohibits the operation of the ADGM Courts as a conduit (see more on this topic here).

 

Conclusion

The majority of the amendments introduced by Amendment No. 1 of 2020 aim at rendering arbitrations seated in the ADGM more efficient and effective. These will, no doubt, increase the attractiveness of ADGM-seated arbitrations amongst arbitration users both regionally and internationally and promote the use of free zone arbitration domestically and further afield.

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Should we start with WHY?

Mon, 2021-03-01 22:25

When starting as the secretary general of the Finland Arbitration Institute (FAI) almost two years ago I wanted to properly understand what it is that we do and how we can reach our full potential in it. I had been a part of the arbitration community, arbitrating, teaching and doing research for long enough to know the discussions that define this field of law. Still, I felt I did not have simple enough answers to very basic questions explaining what the Institute does and what arbitration as an institution is about. What is more, I felt I needed a stronger answer to why the customer should use our services instead of other methods of dispute resolution or other institutes. I soon realised that I need a different perspective from the classic pros and cons. I started reading business books, which some of my lawyer friends and colleagues very explicitly considered nonsense and a waste of time.

Start With Why is a global best seller business book by Simon Sinek. The idea is that people, be they customers or employees or other stakeholders, should be inspired rather than manipulated to be motivated. He introduces the “Golden Circle”, a pattern of circles inside each other. In the centre of everything is WHY – why companies do what they do and what is their purpose, cause, or belief.

According to Sinek, people do not buy WHAT you do, they buy WHY you do it. He says most of the businesses think people are their customers because of superior quality, features of the product, price or service. According to Sinek, this means that companies have no clue why their customers are their customers.

As an example of starting with why he uses Apple, as many business books nowadays seem to do. He summarises the WHY of Apple and the way it is communicated this way: “Everything we do, we believe in challenging the status quo. We believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple to use and user-friendly. And we happen to make great computers. Wanna buy one?”.

Looking at the arbitration market, this sounded very convincing to me. We are often selling WHAT’s that our end customers do not really understand or even care about instead of WHY’s. We sell expertise that people cannot even assess and instead of the actual quality of the services customers must often decide based on reputation of law firms, arbitration institutes or arbitrators. The prices of our services are often difficult to compare. We rarely promise to deliver specific outcomes and in any event companies would struggle to rationally assess the promise. In terms of arbitration institutes, people often talk about caseload numbers of the institutes or the market-research based preferences of users. We, as arbitration lawyers, are very much focused on WHAT instead of WHY, and in addition struggle to be concrete on the WHAT.

And it is not just about the customers but also about us – we need to be motivated, too. When drafting a recruitment advertisement for the FAI specialisation programme for arbitration lawyers I searched our web page for a short description of the institute: “FAI administers domestic and international arbitrations governed by its Arbitration Rules and Expedited Arbitration Rules. Further, it appoints arbitrators in ad hoc cases when the arbitration agreement so provides, and acts as appointing authority under the UNCITRAL Arbitration Rules.” I am afraid few people get excited about and motivated by this, as such very correct and precise description, as it only discusses WHAT we do. To motivate our own, to give them a purpose, we need a WHY.

So what should be the WHY for an arbitration institute? In the end, the WHY for any arbitration institute and thus for the FAI too is quite simple and obvious once one starts thinking. We are there to offer efficient dispute resolution and protection of substantive rights for our customers. For the customers this means predictability, reduced costs and efficiently allocated resources. On the level of society this contributes to efficiency, prosperity, and welfare. The efficiency on the societal level does not just mean the saved resources in more efficient procedures but the dynamic effect through efficiently allocated resources, trust and foreseeability. The dynamic effect and increased economic activity lead to welfare.

Basically, the arbitration community, and the institutes as part of it, thus share the same function as state courts, we just perform the function differently. As we know, both systems have features that make them more suitable than the other for certain disputes but in the end they have a similar WHY.

The cynical reader would, firstly, say that we are not there for society but for the companies. Efficient dispute resolution and protection of rights in the society is always realised through single cases, parties and companies. If parties get their dispute off the table quickly and their contract enforced timely, they will most likely contribute to the economic activity of the society more than if they focus on the dispute or if the contract is not enforced and they lose their trust in the agreements they make.

The cynical reader might also say that the stakeholders in the legal market are there to make money, not to act on a purpose or to serve the society. Apple owners want money too, and still we are discussing the WHY of Apple which is challenging the status quo and thinking differently. The logic is, I assume, that a relevant WHY brings you the money in the end, too. As the FAI is (an autonomous and independent) part of the Finland Chamber of Commerce, it is even easier for us to adopt a WHY related to supporting an efficient society, suitable climate for business and creating welfare. And finally, according to the traditional approach of legal ethics also the bar is there to serve justice. Yet in that discussion serving justice does not seem like a sociological purpose but rather a legal principle limiting zealous advocacy.

It is not enough to know why you exist – the why needs to be concretised and realised. According to Sinek, HOW’s are the actions we take to realise the beliefs of WHY’s and WHAT’s are the results of those actions. At the FAI, we have, for example, put much effort in shortening the internal duration of the dispute at the institute before the transmission of the case file to the tribunal. This leads to less uncertainty, less costs and faster enforcement to the end customers. This leads, in the end, to the WHY and a more efficient society.

A cynical reader, again, could say that one need not start with WHY to understand that fast service at an institute is better than slow. The competitive advantage of starting with WHY comes from the little differences that result from a clear and profound understanding of the WHY in the organisation and from the mindset, not to mention the motivation, of people. On the level of the institution of arbitration instead of just one arbitration institute, a clear WHY based on how the added value to the customers also benefits the society as a whole helps arbitration become more accepted, less awards being set aside and arbitration being even more attractive for the end users.

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Back to Basics: Drawing the line between Disclosure, Challenge and Disqualification Standards in International Investment Arbitration

Mon, 2021-03-01 04:38

“To disclose or not to disclose?” no longer seems to be a question for international arbitrators. The narrative and policy space surrounding the independence and impartiality of international arbitrators has been consistently driven towards maximum disclosure obligations. This is evidenced in recent legal instruments seemingly blurring the lines between the recognized ethical standards for arbitrators, their disclosure obligations, and real conflict of interest which could be grounds for challenge and disqualification. Maximum disclosure has also become an inherent expectation of the disputing parties, who have challenged arbitrators for their failure to disclose facts and contacts of little to no consequence to their independence or impartiality. Although most such challenges do not lead to the removal of the arbitrator in question, they cause significant disruptions to the proceedings and expose the arbitrator to additional pressure.

Arbitrators are held to high standards of professional conduct, including the obligation to act with neutrality, “fairly or impartially between the parties; with reasonable efficiency, diligence and industry” and to exercise “independent judgment”. These standards are in line with the level of responsibility placed upon arbitrators, but they are also in tension with the fact that they are mostly appointed by the disputing parties. Even if the arbitrators act with utmost integrity, their decisions are always exposed to potential criticism of bias towards the appointing party. Therefore, arbitrators must not only act as independent and impartial adjudicators, but they should also be perceived to do so. Recently, the well-established ethical standard for arbitrators have been supplemented in practice by a broadening notion of the duty to disclose all facts and contacts which could be considered problematic by the opposing party. Although the broad disclosure obligations artificially lower the standard for arbitrators challenge, while the threshold for the removal of arbitrators remains high under the applicable rules and in practice (manifest lack of independent judgment or justifiable doubts of the independence and impartiality of the arbitrator). As a result, these stricter standards of disclosure are increasing the expectations of the parties, regardless of the fact the standards for removal remain unchanged. This is true in particular in investor-state arbitration.

Draft Code of Conduct for ISDS Adjudicators – Too Much or Not enough?

The intensified scrutiny of arbitrator conduct and accountability in recent years has been driven by the states involved in the reform of the investor-state dispute settlement (ISDS) system under the auspices of UNCITRAL Working Group III (ISDS Reform). One of the proposed reform options is the Draft Code of Conduct for ISDS Adjudicators, which was developed by the secretariats of UNCITRAL and ICSID, with an extensive scope of application and particularly broad disclosure obligations.

For example, in an effort to address the most relevant concerns expressed by States (for instance, conflict of interest, double-hatting, and repeat appointments are among the most commonly raised concern in this area), the Draft Code also provides the option of mandating the disclosure of all publications and speeches.

The placement of the disclosure obligations in the article titled “Conflict of interest: Disclosure Obligations” may create the perception that all the issues that are subject of disclosure are also grounds for challenge. The comments that have been submitted thus far from the relevant stakeholders showcase fundamental differences in the understanding of the nature and purpose of the Draft Code as among States and arbitrators. States have largely been supportive of the disclosure obligations in the Draft Code, while some prominent arbitrators have expressed serious concerns and even disappointment with the provisions of the Draft Code in its current form.

The obligation to disclose all publications and speeches also raises specific practical questions for arbitrators. First, how can they identify all potentially problematic publications and speeches prior to knowing what all the issues will be in the dispute? Second, how will challenges for any failure to identify and disclose all the pertinent materials be managed? Such an obligation also seems obsolete at a time when lists of engagements and publications can be maintained and updated on professional websites (which is done by most arbitrators) making them publicly accessible. Radically expanding disclosure obligations in the new Code would inevitably raise the expectations of the parties, resulting in an increase of challenges. Because the grounds for disqualification remain the same, however, these expanded grounds for challenge would have very little chance of leading to the removal of an arbitrator. However, such a broad disclosure obligation is low hanging fruit for counsel seeking to challenge a particular arbitrator. Despite the fact that the Draft Code is still a work in progress and subject to discussion, as seen below, parties in ISDS proceedings are already relying on its provisions to challenge arbitrators.

The Draft Code of Conduct in Action

The first prominent reference to the Code was seen in an ICSID arbitration against Spain. Following an unsuccessful attempt to disqualify all three members of the tribunal, for allegedly pre-judging issues of the merits in the award on jurisdiction, Spain raised additional challenges in December 2020. Spain challenged all three members of the arbitral tribunal, alleging that the decision to conduct remote hearings demonstrated a lack of high moral character due to their refusal to hold in-person hearings. Spain dismissed the tribunal’s risk assessment related to the Covid-19 pandemic as containing “serious misrepresentations and misleading statements” in order to justify its decision to hold virtual hearings. In addition, Spain characterized the inability of one of the arbitrators to travel due to recovery from surgery and mandatory quarantine as “speculative and misleading” and demonstrating that the tribunal “prioritized their private interest” over the due process rights of the parties.

In addition, Spain challenged two members of the tribunal for their failure to disclose their participation as arbitrators in a moot competition organized by the counsel of the opposing side. Spain argued that this was a violation of ethical and disclosure rules under the ICSID Rules, the World Bank‘s code of conduct, the new, still draft Code of Conduct for ISDS Adjudicators, the IBA Guidelines, and “rules applicable in any civilized nation.” These wide-ranging arguments were not persuasive enough to merit the removal of the arbitrators in question, and all the challenges were ultimately rejected by the President of the World Bank.

This is only a snapshot of the kinds of challenges that may be raised as the lines between disclosure obligations and grounds for challenge are blurred. Parties will seek to remove arbitrators for any omission in their disclosures, only to be reminded by the authority deciding on the challenge that “[a]rbitrators are not disembodied spirits dwelling on Mars, who descend to earth to arbitrate a case and then immediately return to their Martian retreat to await inertly the call to arbitrate another.”

Although the increasing frequency of arbitrator challenges will not necessarily increase their success rate under the existing standards for removal, they still have a disruptive effect on the course of the proceedings and the legitimacy of the system of party appointments. In cases of continuous and hostile challenges, the challenged arbitrator may respond in a manner which will raise actual doubts of bias and warrant their ultimate removal.

Transparency and Data as the Northern Star

The enhanced transparency and accessibility of non-confidential information about arbitrators and their previous appointments could help mitigate the disclosure expectations and reduce the frequency of unfounded challenges raised against arbitrators. Firstly, this could be accomplished by maintaining a comprehensive and up-to-date list of publications, speeches, and consultancy engagements of the arbitrator on their personal websites, as well as the collection and aggregation of such information by a trusted and neutral third party, which could make it searchable and easily evaluated by parties interest in identifying overlapping issues. Meanwhile, increased publication of redacted awards by arbitral institutions, which would indicate the names of the appointing parties, and other data aggregators that make such information available and easily searchable, will help ease the justifiable angst of parties and bad faith attempts to abuse apparent non-disclosures. As long as this information is equally accessible to all the parties involved, parties could not challenge arbitrators for “failing to disclose” matters which are publicly available.

Secondly, the parties should be able to provide feedback on the arbitrators after the conclusion of the proceedings which would enable the development of a transparent track record. In addition to the factual background of the case and case management, parties could also provide evaluative feedback, which would ensure the full picture of the arbitrator’s compliance with the applicable standards of conduct. The potential for feedback would incentivize the arbitrators to self-regulate and to be mindful of their approach to the proceedings from the moment of appointment to the issuance of the award. Arbitral institutions and other appointing authorities could also benefit from the availability of such information in the creation of rosters or individual appointments of arbitrators.

Bright Line Between Disclosure and Conflicts of Interest

The place where the most and most difficult work is needed is in delineating a clearer line between the disclosure obligation and conflicts of interest which should serve as grounds for disqualification. As recent practice has shown, parties seeking to remove an arbitrator are loading the challenges with any and every contact, event, and statement of the arbitrator, which may or may not have any effect on their ability to rule in an independent and impartial manner. This is in large part possible due to the lack of distinction between disclosures which are advisable and those which indicate conflicts of interest.

Future modifications of the Draft Code of Conduct should provide this clarity by using precise wording and providing voluntary disclosures and conflict of interest in separate provisions. Furthermore, the process and standards for arbitrator challenges in the context of investment arbitration should be given more attention in the ISDS reform process, in pursuit of an internationally acceptable framework.

The transition from standards to rules in the realm of arbitrator conduct and accountability should not foster anxiety, paranoia or distrust on either side. Instead, the expectations of the parties should be balanced against the realistic standards for the challenge and disqualification of arbitrators under the applicable rules.  Whatever instrument is adopted to regulate the conduct of arbitrators, it should not create the assumption that the arbitrators who do not “dwell on Mars” are inherently biased and that any disclosure or lack thereof is necessarily an open invitation to challenge. Careful and calibrated solutions in this sphere and the increased transparency of the relevant information could accelerate the ISDS reform process and improve the public perception of ISDS among legal practitioners and the general public.

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First Anti-Anti-Suit Injunction in Germany: The Costs for International Arbitration

Sun, 2021-02-28 00:15

For more than a decade, it was evident that anti-suit injunctions are not permitted in the European Union. Recently, however, there have been developments that could signal the beginning of a new dawn. In late 2019, the Higher Regional Court Munich confirmed the first anti-anti-suit injunction in German history. The court prohibited Continental from further pursuing an anti-suit injunction request against Nokia in the US. Promptly, another anti-anti-suit injunction followed in 2020, issued by the French Tribunal de Grande Instance. Given that the UK – the only country in Europe that regularly orders anti-suit injunctions – has now left the EU, it is now free to grant anti-suit injunctions towards other European countries. This begs the question – will the EU countries take a U-turn when it comes to anti-suit injunctions?

Following a previously related blog post from the perspective of patent law, this post focuses on the consequences of these recent developments for international arbitration. Anti-suit injunctions will most likely become more common in the European Union, but criticism that made the EU countries wary of them in the first place will still continue to loom large.

 

Background: What Are (Anti-)Anti-Suit Injunctions?

An invention of English courts in the fifteenth century, anti-suit injunctions are traditionally absent from civil law jurisdictions. Today, the use of anti-suit injunctions still varies among countries, and so does their reputation.

To enforce an arbitration agreement effectively, the arbitral tribunal needs protection mechanisms in place against risks that threaten the integrity of arbitral proceedings. One of those risks is parallel proceedings. To protect parties from such a risk, a court or arbitral tribunal can issue an anti-suit injunction. This prevents a party from commencing or continuing a suit in another forum.

However, an anti-anti-suit injunction conversely prevents the other party from pursuing an anti-suit injunction in another proceeding. Since both anti-suit injunctions and anti-anti-suit injunctions interfere with principles of international law and coordinative rules, it is questionable whether these remedies are appropriate.

Although courts and arbitral tribunals theoretically have the power to order anti-suit injunctions, there are different views as to their nature and legal bases for granting them. However, anti-suit injunctions are characterized as a provisional form of relief, which corresponds to interim measures. The authority to grant those interim measures is usually determined by the arbitration agreement, the lex arbitri, and the applicable procedural rules.

 

The Decision of the Higher Regional Court Munich Explained

In 2019, Nokia filed a series of patent infringement cases based on various 3G and 4G essential patents against automobile manufacturer Daimler and Continental as one of Daimler’s suppliers. Continental and Daimler in turn hoped to protect themselves through an anti-suit injunction from the US District Court for the Northern District of California. However, the Regional Court Munich banned the parties from applying for those measures, thereby ordering the first anti-anti-suit injunction in Germany (LG München I, decision of 2 October 2019, case no. 21 O 9333/19).

Initially, it seemed like the Higher Regional Court would not uphold the first-instance decision after Continental appealed it. Continental argued that an anti-anti-suit injunction would just be as illegal as the anti-suit injunction itself since, according to German law, a party cannot be prohibited from conducting a lawsuit. This did not constitute a far-fetched argument because anti-suit injunctions have indeed never been granted in German history.

Nevertheless, the Higher Regional Court did confirm the first-instance decision: German law does not provide the courts with a mechanism that could deny a party from pursuing its claims in court (OLG München, decision of 12 December 2019, case no. 6 U 5042/19). However, a comparable constraint such as an anti-suit injunction could follow from contractual obligations or a previous tort. The anti-suit injunction in the present case would impair the rights conveyed by the blocked patents, qualifying as a tort under sec. 823(1) German Civil Code. According to sec. 1004(1) sentence 2 German Civil Code, this interference needs to be removed.

Since Continental can no longer challenge the Higher Regional Court’s ruling under German law, this decision is also final.

 

Evaluation: Why Is This Important?

To understand why this decision is a breakthrough for court practices in Europe, one has to take a look at how reluctant European courts have been to award anti-suit injunctions.

As stated, anti-suit injunctions are usually issued in common law jurisdictions. Therefore, in Europe, they can mostly be found in the United Kingdom. However, the Court of Justice of the European Union (CJEU) has ruled against an anti-suit injunction imposed by a British court (Turner v. Grovit, 2004). The Court declared that such orders were an “interference with the authority of the foreign court,” and that they were incompatible with the Brussels I Regulation (Regulation (EU) 1215/2012).

In West Tankers Inc v. Allianz SpA (Case C-185/07) [2009] AC 1138), the CJEU ruled again that an anti-suit injunction directed at an EU Member State court’s proceedings, while not itself within the scope of the Regulation, undermines the effectiveness of the Regulation. Therefore, it shall be prohibited. These are the reasons why courts have been reluctant to issue any anti-suit injunctions.

However, at the beginning of 2020, the Higher Regional Court Munich was joined by the French Tribunal de Grande Instance, with the latter issuing an anti-anti-suit injunction in the case of IPCom v. Lenovo. In this case, the court directed Lenovo to withdraw a requested anti-suit injunction in the United States (Northern District of California).

These two decisions of the Higher Regional Court Munich and of the French Tribunal de Grande Instance constitute a remarkable shift from the above shown European aversion against extraterritoriality and the interference with judicial proceedings abroad. German and French courts now seem to use the same “weapons” as the Anglo-Saxon courts.

This is particularly reflected in the reasoning of the Regional Court Munich that anti-suit injunctions could not be illegal under public international law because Anglo-Saxon courts have been issuing them for years. This conclusion can be put on record even though the Higher Regional Court Munich found a more formal excuse, namely that an anti-anti-suit injunction is a mere reflex to an anti-suit injunction.

 

What’s Next? Implications for International Arbitration

Taking into account the aforementioned paradigm shift, it remains to be seen how this will affect the European court practice and, as a next step, the international arbitration practice. Given the obiter dicta of a well-respected German court and a French High court, it is not an impossibility that anti-suit injunctions could be granted by other European courts in the future. As a consequence, although the anti-anti-suit injunctions have been granted by courts and not by arbitral tribunals, it is conceivable that the latter will be affected by these developments, too.

The following will lay out three possible consequences for international arbitration that, in the view of this author, could materialise in the future.

Firstly, as briefly mentioned above, other European courts could be inspired by their German and French counterparts, and somewhere down the line could start embracing first anti-anti suit injunctions, and then also anti-suit injunctions. Both mechanisms are anyway subject to the same principle. This could then lead to the situation in which the courts on the Old Continent are showcasing acceptance of the so-called “anti-arbitration” injunctions that restrain arbitration proceedings. In any case, both have been accepted by English courts in the past, while Brexit and the accompanied non-applicability of the Brussels Recast Regulation (Regulation 1215/2012) will now make those measures generally more common in Europe. This can be dangerous in a sense that this form of anti-suit injunctions constitutes a manner in which courts can exercise their jurisdiction to threaten arbitral tribunals’ authority to rule on their own jurisdiction – the competence-competence principle as one of the backbones of arbitration. It would be an exercise of jurisdiction that confiscates contractual rights by blocking access to an agreed forum.

Secondly, in the case of anti-suit injunctions becoming more common in Europe, arbitral tribunals might feel encouraged to turn to anti-suit injunctions more frequently in order to restrain parallel court proceedings. Although this might help to realize an arbitration agreement between parties, it is often argued that it constitutes a radical mean and a one-sided approach to resolve conflicts of jurisdiction. Since arbitration is based on consent, this is one of the reasons why anti-suit injunctions are heavily criticized. However, this does not mean that they should always be judged with prejudice. Because arbitration is based on consent, a party that decides to disregard an arbitration agreement by turning to a state court, would be acting in bad faith. There is no reason to deny the arbitral tribunal the right to order the appropriate remedy.

And thirdly, even an anti-anti-suit injunction might not be the end of the story. The aim of the European courts to defend their jurisdiction, such as in the French and German decisions, is certainly understandable. Yet, what stops the US court from issuing an “anti-anti-anti-suit injunction”? The exchange of anti-suit injunctions will surely have its cost, with the international arbitration incurring its fair share.

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The Revision of Arbitral Awards on Independence and Impartiality-Related Grounds: Delimiting the Parties’ “Duty of Curiosity” in the Age of Social Media

Sat, 2021-02-27 00:13

Regardless of whether you are a sports enthusiast, the Swiss Federal Tribunal’s recent revision of the CAS award in WADA v. Sun Yang is unlikely to have escaped your attention. In its judgment of 22 December 2020 (4A_318/2020), the Swiss Federal Tribunal referred the Chinese swimmer’s case back to CAS, overturning an eight-year ban. A series of offensive comments made on social media prior to the original proceedings, yet discovered only after the publication of the award, led the Swiss Federal Tribunal to question the chairperson’s impartiality, thus granting the petitioner’s request for revision. In this connection, the Federal Tribunal reasoned that the attribution of specific practices to a specific ethnic group (animal cruelty to Chinese nationals in the case at hand), even when coupled with a degree of opposition to the same, would not in itself constitute a factor capable of casting doubt on an arbitrator’s impartiality. However, the case at hand involved aggressive and plainly racist remarks, which far exceeded the boundaries of an emotionally charged empirical observation.

While some of the recent posts examining this case have briefly explored the substantive dimensions of the Swiss Federal Tribunal’s findings on bias, this post aims particular attention at the parties’ “duty of curiosity” about the social media footprint of proposed arbitrators. In an age when social media platforms channel a significant portion of the public discourse, serving as an easily accessible “repository of personal beliefs”, the Swiss Federal Tribunal in Sun Yang did not find it reasonable to expect parties to run extensive social media background checks. Does this approach sit comfortably with the realities of today’s social media-driven world and level of technological education?

 

The Standard of “Due Diligence”

Out of the forty-one revision requests filed before the Swiss Federal Tribunal, only three had until recently been successful. This low rate is largely owing to the fact that, under Swiss law, the revision of arbitral awards constitutes an “exceptional” legal remedy, reflecting a compromise between substantive justice and the need for legal certainty. For this reason, revision requires the requesting party to demonstrate a certain level of “due diligence” as it pertains to the discovery of the previously unknown facts, evidence or grounds of impartiality forming the basis of a given request.

In particular, under Article 190a of the Swiss Private International Law Act (PILA), the revision of an arbitral award is possible when (i) the requesting party subsequently discovers relevant facts or conclusive evidence that they were unable to invoke in the prior proceedings despite having acted with all due diligence; or (ii) the award is tainted by criminal conduct; or (iii) in spite of the party’s exercise of due diligence, a ground for challenging an arbitrator is only discovered after the conclusion of the arbitral proceedings and there are no other means of recourse available.

Prior to 2021, the Swiss Federal Tribunal had questioned whether the ex post discovery of a violation of the provisions governing the composition of the arbitral tribunal could amount to a ground for revision. This ground is now expressly recognized under the new PILA, which came into force on 1 January 2021 and applies to all awards rendered before that date.

 

The Thresholds of “Curiosity” and “Possibility”

The Swiss Federal Tribunal has on many occasions clarified that the standard of due diligence entails a case-by-case assessment. Yet, as per the Sun Yang judgment, cases of revision based on new grounds for challenging an arbitrator all require a minimum level of expected diligence, termed as “curiosity”.

Specifically, in paragraph 6.5 of its Sun Yang judgment, the Swiss Federal Tribunal notes that one must not “be too demanding with regard to the parties, otherwise the duty of curiosity will be transformed into an obligation to carry out very extensive investigations, if not almost unlimited, requiring a considerable amount of time”. The Tribunal then reasons that “a party cannot be required to continue its internet searches throughout the arbitration proceedings, nor a fortiori to scan the messages published on social networks by the arbitrators during the arbitration proceedings”.

This threshold differs from that of “possibility”, which the Swiss Federal Tribunal has applied in revision cases involving newly discovered facts or evidence. The Tribunal did so most recently in judgment 4A_36/2020 of 21 October 2020, which involved an award ordering A to pay B damages and commission fees under a contract. A’s revision request against the award alleged that, during a set of US discovery proceedings which had been initiated after the award, B’s daughter had made certain contradictory statements. Had the facts to which these statements referred been known at the time of the award, the underlying contract would have been declared void.

The Swiss Federal Tribunal acknowledged the fact that the US proceedings which had resulted in the alleged discovery of previously unknown facts or evidence had been initiated after the award. Nevertheless, it emphasized that it would have been possible for A to obtain knowledge of said facts or evidence before or during the proceedings, and therefore assert the same in a timely manner. Indicatively, A could have sought to call B’s daughter to testify as a witness. Absent such actions, A could not validly assert that it had exercised sufficient due diligence prior to the award.

 

The “Duty of Curiosity” in WADA v. Sun Yang

During the original CAS proceedings in WADA v. Sun Yang, Mr. Yang’s counsel had performed a Google search with the arbitrator’s full name, and hired a forensic expert who had not been able to identify any suspicious online statements by the arbitrator in question. The CAS alleged that the disputed tweets had been on the arbitrator’s Twitter profile since 2018, and that a retired journalist had been able to discover the same, indicating that they were widely accessible.

The Swiss Federal Tribunal addressed the above contentions under the notion of “curiosity”, distancing itself from high threshold of “possibility”. The Tribunal first reasoned that a party’s duty of curiosity is not unlimited, for parties cannot be expected “to engage in a systematic and in-depth analysis of all the sources relating to a specific arbitrator.” It further observed that:

while it is true that it is possible to easily access the data appearing on free access websites, thanks to a single click, this does not mean that the information in question is always easily identifiable […] [Even] if all information can be presumed to be freely accessible from a material point of view, it is not necessarily easily accessible from an intellectual point of view.

The Swiss Federal Tribunal added that, while there was no doubt as to the material accessibility of the tweets in question, the use of the arbitrator’s name and surname as keywords in an online search engine during the arbitration proceedings would not have necessarily revealed the disputed tweets. Further, the Tribunal observed that:

the applicant cannot be criticized for not having carried out research by also including the word ‘China’, because that would amount to admitting that the applicant should have speculated from the outset on a possible lack of impartiality […] on the sole criterion of nationality.

The Swiss Federal Tribunal then sought to examine whether Twitter’s status as “mainstream social media” would justify a high degree of curiosity. The Tribunal observed that:

even assuming that we can qualify, once and for all, some of them as ‘mainstream social media’, it would still be necessary to circumscribe the extent of the duty of curiosity over time. At a time when some people frequently use or even abuse certain social media, in particular by publishing countless messages on their Twitter account, it would be advisable, if necessary, not to be too demanding of the parties.

Finally, the Tribunal took note of the specific circumstances of the case, and particularly the fact that the parties had a period of no more than seven days to file a challenge at the time of the chairperson’s appointment. It then reasoned that:

while the person concerned should have consulted, if only briefly, the Twitter account of the arbitrator in question, we cannot […] consider, in the absence of any other alarming circumstance on the existence of a potential risk of bias, that the interested party would have failed in his duty of curiosity, by not detecting the presence of tweets published nearly ten months (May 28, 2018 and July 3, 2018) before the appointment of the arbitrator (May 1, 2019), moreover drowned in the mass of messages from a Twitter account of an arbitrator who seems very active in the social network in question.

 

***

In conclusion, the Swiss Federal Tribunal in Sun Yang navigated the delicate realities of today’s social media-driven and increasingly conflict-oriented society with commendable level-headedness. The Tribunal took issue with the arbitrator’s language and tone, which went beyond a mere empirical attribution of certain practices to a specific ethnic group, and did not find the party’s mere ability to obtain awareness of the disputed tweets at the time of the proceedings compelling, insisting instead on the threshold of “curiosity”. Taking account of the sheer volume of freely accessible online data, the emergence of new social media platforms, the amount of social media posts shared and comments made on a daily basis and the increasingly varied manifestations of racism and prejudice in today’s world, the Tribunal did not see fit to demand an increased level of curiosity from parties investigating an arbitrator’s potential bias as reflected in social media activity. Insofar as the revision of arbitral awards on impartiality-related grounds is concerned, the Swiss Federal Tribunal seems to have gotten it right; will arbitral institutions act in a similar manner when handling arbitrator challenges? The time to find out must be near.

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The Pro-Arbitration Seed Was Sown in Ukraine, But Violation of Public Policy May Still Lead to a Successful Challenge

Fri, 2021-02-26 00:14

There is still a common misconception among foreign arbitration practitioners that in post-soviet countries the courts often tend to refuse recognition and enforcement of arbitral awards based on public policy. Is this characterisation fair with respect to Ukraine?

There have been five recent cases in Ukraine on violation of public policy, with some landmark decisions coming out in 2020 and early 2021. Thus, the state of affairs in Ukraine when it comes to the public policy exception has crystallised substantially, and as will be shown in this post, it can be said that the Ukrainian courts, with limited exceptions, generally exhibit a pro-enforcement attitude towards arbitral awards.

 

Ukrainian Approach to Public Policy

Generally, Ukraine demonstrates a pro-arbitration approach, and especially so since December 2017, when Ukrainian arbitration law and applicable procedural rules were largely revised to introduce many long-expected changes in the field of arbitration.

Even before these revisions, Ukraine’s Supreme Court has been rather reluctant to deny recognition and enforcement of arbitral awards on the basis of public policy.

Nevertheless, this does not stop debtors from relying on public policy to resist the recognition and enforcement of arbitral awards, even on grounds previously rejected by the Ukrainian courts.

For example, debtors have claimed that the following situations result in the violation of public policy of Ukraine:

  • when an arbitral award states the awarded amounts in foreign currency, which allegedly contradicts Ukrainian law;
  • when a debtor is a Ukrainian state-owned company and the enforcement of an arbitral award would cause suspension of its operations and insolvency, which in turn would impact the monetary interests of Ukraine and lead to economic or ecological catastrophe in the country;
  • when an arbitral award does not state a Ukrainian identification code for the Ukrainian debtor, which allegedly makes impossible the correct identification of such debtor;
  • when Ukrainian law does not have a similar legal concept as under the foreign law, applied by the tribunal in the arbitral award while resolving the dispute on merits, etc.

All the debtors’ allegations above on the violation of public policy were held unsubstantiated and, therefore, were not supported by the Supreme Court. The Supreme Court maintained its view with respect to each of such matters in numerous cases. So far so good!

 

Rare Exceptions of Successful Public Policy Defence

To the best of our knowledge, there are only a few exceptional instances in which the Ukrainian courts refused the enforcement of arbitral awards or arbitral interim decisions on the grounds that they would conflict with Ukrainian public policy. A notable example has involved Ukrainian sanctions against Russia.

First, we are going to compare approaches of the Ukrainian and the foreign courts towards the impact of sanctions on public policy. Then, we will examine the Ukrainian courts’ approach with respect to the enforcement of arbitral interim reliefs, another topic that the Ukrainian courts have entertained recently.

 

Do Sanctions Define Public Policy?

Whether sanctions render an arbitral award unenforceable on the ground of public policy has been a long-standing subject of debate in many national courts. This has led to different approaches being adopted by states with regards to the impact of sanctions on their public policy. In 2020 there were several particularly interesting judgements rendered on this issue in different states, and Ukraine was among them.

  1. International Approach

On 3 June 2020, the Paris Court of Appeal expressed its view that the UN and EU sanctions may be integrated into the French concept of international public policy. In contrast, unilateral sanctions against Iraq emanating from the US authorities could not define French public policy because the extraterritorial scope of the sanctions imposed by the US authorities is disputed by both the French authorities and the EU.

Other relevant steps in this regard have also been taken by the Russian Federation and its courts. In particular, on 19 June 2020, the Russian Federation enacted amendments to its Commercial Procedure Code and established the exclusive jurisdiction of Russian courts to consider disputes related to foreign sanctions against Russian individuals and entities (as well as their foreign affiliates).

Furthermore, on 12 October 2020, the Supreme Court of the Russian Federation found an ICC arbitration clause unenforceable because of the US sanctions imposed on the Russian claimant. The court found that the imposition of the US sanctions is a fundamental change of circumstances, justifying the adaptation of the arbitration clause to determine the jurisdiction of Russian courts to consider the disputes under the contract.

  1. Ukrainian approach

It is noteworthy that the Revolution of Dignity and consequent events in 2014 prompted Ukraine to introduce economic sanctions affecting Russian individuals, businesses, and officials. This had a significant impact on the recognition and enforcement of arbitral awards in Ukraine in cases where the creditors were Russian companies under the Ukrainian sanctions.

In 2016 and 2018, there were four ICAC arbitral awards issued in PJSC “Avia-Fed-Service” v State Joint-Stock Holding Company “Artem”. Interestingly, in 2020 the Ukrainian courts reached the opposite decisions with regards to recognition and enforcement of these four arbitral awards.

In particular, in the first case No. 761/46285/16-c the Supreme Court held that private legal relations are independent from the political situation and, therefore, the enforcement of an arbitral award in favour of the sanctioned Russian entity does not violate public policy of Ukraine.

As of now, the above view of the Supreme Court has one exception. That is, in later cases Nos. 824/100/19, 824/174/19 and 824/101/19 between the same parties – a Ukrainian debtor and Russian creditor under the Ukrainian individual sanctions – the Supreme Court refused to recognise and enforce arbitral awards with reference to public policy of Ukraine.

What were the reasons for the opposite decisions reached in 2020? As per the Supreme Court’s reasoning, sanctions themselves are not sufficient grounds to justify violation of public policy when the enforcement of an arbitral award is sought. But, the nature of contracts (i.e., the sale of dual-use items) and characteristics of the debtor (i.e., Ukrainian strategical defence enterprise) became determinative factors to find that the recognition and enforcement of the arbitral awards in these cases would constitute a violation of public policy of Ukraine.

 

Impact of public policy on enforcement of interim measures

The recent case law examined the issue of public policy through the lens of enforcement of emergency arbitral awards. In particular, the Ukrainian courts have refused to enforce two emergency arbitral awards on the ground of public policy of Ukraine.

JKX Oil & Gas plc et al v. Ukraine

In September 2018, the Supreme Court rejected the motion for enforcement of the SCC emergency arbitral decision, by which Ukraine was obliged to refrain from imposing royalties exceeding 28%.

The Supreme Court found that this would violate the fundamental principles of the Ukrainian tax legislation, which mandates the imposition of taxes and duties exclusively by Ukrainian laws. Accordingly, the Supreme Court found in this case that the enforcement of such an emergency arbitral award would violate public policy of Ukraine.

Everest Estate LLC et al v the Russian Federation

On 28 August 2019, following the enforcement of the arbitral award in Ukraine, the emergency arbitrator issued an interim relief banning Ukraine from compulsory sale of shares of Prominvestbank PSC, affiliated with a Russian state corporation “VEB.RF”.

On 14 January 2021, the Supreme Court blocked the enforcement of the emergency arbitral award. Specifically, the court held that there exists a Ukrainian court decision, addressing the same issue as the emergency award (i.e., the Supreme Court’s decision of 25 January 2019), with the former being final and binding under Ukrainian law. For this reason, the enforcement of the emergency arbitral award would contradict the binding effect of the Supreme Court’s decision and, accordingly, public policy of Ukraine.

Undeniably, in light of the respective decisions of the Supreme Court, arbitration practitioners should proceed with caution when requesting the arbitral tribunal to impose specific interim measures as they could potentially be found to contradict the public policy of Ukraine. However, the general discussion on this point is far from being concluded as it remains to be seen whether the emergency arbitral award can be recognized and enforced in Ukraine under the New York Convention.

 

Conclusion

Overall, Ukraine follows a pro‑arbitration approach when it comes to invoking public policy argument as a ground to deny recognition and enforcement of a foreign arbitral award, stepping out of it mainly with a view to Ukraine’s strategic interests.

There is still, however, some room for improvement until Ukraine becomes fully effective with regards to enforcement of arbitral awards and interim reliefs, although the positive court practice in this respect is actively developing each year.

***

The publication is made in our personal capacity. The views contained in this post are not necessarily the views of CMS or its clients.

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The UK-Japan CEPA Investment Protection Standards: A Glass Half Full?

Thu, 2021-02-25 00:12

On 23 October 2020, Japan and the United Kingdom (UK) signed a Comprehensive Economic Partnership Agreement (CEPA) with the agreement coming into force on 1 January 2021. This signifies a historic landmark as the UK’s first trade deal as an independent nation, and represents a key milestone for international trade in a post-Brexit UK. The parties have stated their ambition for the CEPA to go “beyond the existing EU agreement [with Japan], securing bespoke benefits for British businesses and citizens”. The CEPA encapsulates the UK and Japan’s commitment to address the gaps of the 2018 EU-Japan EPA, including to address e-commerce, rules of origin, financial services, and to provide for the UK’s immediate reductions of tariffs on electrical control units used in cars.

Despite CEPA’s ambitious objectives, the absence of a substantive investment protection scheme coupled with the failure to include a potent dispute resolution mechanism have rendered this instrument a missed opportunity for the UK to enact a truly comprehensive agreement. In a similar vein, the absence of an investor-state dispute resolution mechanism therein, was a missed opportunity for the UK to establish itself as a proactive player in the investor-state dispute settlement (“ISDS”) system, contrasting with the EU’s current reformist stance.

This post argues that in the absence of a clear articulation of investment protection standards, this instrument can only serve as an accord de principe, as it mirrors the characteristics of a framework agreement. Further, by examining the UK’s and Japan’s current investment policies, this post considers possibilities for the future revision of the CEPA, with – one can hope – more robust investment protections.

 

The Investment Aspiration of CEPA: A Semantic Move or an Actual Objective?

Similar to the EU-Japan and India-Brazil economic partnership agreements which came into force in 2021, the CEPA moved away from traditional treaty practice by failing to adopt effective investment mechanisms. An investment protection regime was purposefully left outside the scope of the CEPA for the sake of concluding the Economic Partnership as a Trade Agreement, rather than a comprehensive trade and investment agreement. This is partly due to the fact that the drafting and negotiation of the CEPA took place during a time at which there were mounting concerns about ISDS and its viability. Accordingly, negotiating the investment section of the CEPA was slow to take shape and in turn, the investment protection mechanism was decidedly left outside the scope of the CEPA.

Whilst investment provisions were excluded from the scope of the agreement, the importance of investment protection has been echoed in the agreement’s preamble and Chapter 8. The preamble, for instance, recalls “the objective of sustainable development in the economic, social and environmental dimensions, and of promoting trade and investment between them”. Chapter 8 also includes provisions on investment liberalization, setting out the treatment and the level of access to the domestic market granted to investors of the respective parties. This chapter also provides specific provisions related to international maritime transport service and electronic commerce. Article 8.11, for example, prohibits an extensive list of performance requirements as conditions for the establishment or operation of an investment. Article 8.16 also provides a firm commitment to national and Most Favored Nation (MFN) treatment standards. Chapter 9 of the CEPA covers capital movements, payments, and transfers and is therefore also relevant to certain investment activities. Article 9.2, for example, provides a guarantee on the free movement of capital, payments, and transfers between the UK and Japan. Crucially, the objective and the concept of investment protection are alluded to in a number of provisions throughout the agreement.

However, despite echoing the shared values concerning the fundamental right to investment protection, the failure to adequately delineate the scope of investment protection within the context of CEPA is a visible departure from the trends set by other comparable foreign trade agreements – widely characterized as the new generation of Free Trade Agreements.  This begs the question of whether the cursory reference to investment protection standards – without clear guidance on the scope of investment protection– may lead to an effective application of these provisions.

As the investment provisions have been watered down, the CEPA unsurprisingly does not provide for investor-state dispute resolution. It is not clear what recourse investors may have in the event of an investor-state dispute, as there is no UK-Japan BIT. In a previous KAB post, it was suggested that the new UK “free-trade agreements [‘FTA’] are likely to provide for arbitration with regard to investor-state disputes”; alas, the first UK FTA with a country that is not part of the EU does not.

Article 8.5 of the CEPA timidly makes up for the symbolic investment protections and absence of an ISDS mechanism with the possibility to review the CEPA if either of the parties concludes a new agreement with “investment protections or […] investor-to-state dispute settlement”. It is only after the entry into force of that agreement that the party can request a review. The review may commence “within two years of the request and shall be concluded within a reasonable time”. Such a review mechanism is an interesting technique, used in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (to which Japan is a party, and to which the UK has recently sought membership). It is also worth noting, as was commented in this blog, that Japan and the EU are in ongoing negotiations concerning “investment protection standards and dispute resolution”. However, the lag between the request and the actual review may further delay a robust investment regime between the parties.

On the investment side, the CEPA as it stands is more similar to a framework agreement, much like the US-Trade and Investment Framework Agreements (TIFAs) which provide “strategic frameworks and principles for dialogue on trade and investment issues” in which the scope of application of investment protection regime is not clearly identified and no substantive protection measures have been introduced that would ensure the achievement of the parties’ envisaged commitments.

 

The UK’s Potential to Provide a Contrast the European Union’s ISDS Reformist Stance

In view of the ambition of the CEPA in advancing the rule of law in areas including digital trade, data, e-commerce, and promoting commitment to free and rules-based trade, as well as the symmetry between Japan and the UK, the CEPA could have been more than a paper tiger. The traces of investment protection in the CEPA may indicate that the parties will review the CEPA to include investment protection in the future, or otherwise may pave the way for the parties to negotiate a separate investment treaty at a later stage. For any future investment agreement, it remains unclear if the UK will opt for the EU’s reformist stance on ISDS or consider different avenues. Furthermore, the UK could have leveraged the CEPA as an opportunity to clearly indicate its stance towards ISDS and differentiate itself from the EU by embracing ISDS as a potent mechanism to resolve investor-related disputes.

While Japan has thus far opted for a “quiet approach” to ISDS, as a “treaty signatory and host state, or as a seat for claimants”, it has nevertheless remained a supporter. This is evidenced by most of the agreements recently signed by Japan which contain ISDS provisions. Japan was also the main architect of the CPTPP, “[taking] the lead in the negotiations”. Japan’s posture was evidenced in the January 2020 Session of United Nations Commission on International Trade Law WGIII, whereby Japan along with a few other countries pushed for incremental reform rather than addressing more substantive and controversial ISDS issues. Japan has also tabled a proposal at UNCITRAL for a Multilateral Investment Reform Agreement (“MIRA”) – a menu of reform solutions that states can opt into “a la carte”. Japan has advocated for the reinforcement of investment protections in the ECT through the ongoing ECT modernization reform process as well. It has, for example, proposed the inclusion of “pre-establishment” protections for the making of investments, and has been a voice against wholescale reform in recent modernization negotiations. Japan’s proposals for enhanced investment protections may well influence future investment talks with the UK.

 

Concluding Remarks

Seeing the glass half full, the absence of substantive investment provisions in the CEPA may well foreshadow an enhanced degree of investment protections via the possibility of review of Article 8.5 and a pro-ISDS political stance from both parties. However, one cannot fail to notice the missed momentum and the protracted nature of the review mechanism that the CEPA provides in the emerging post-Brexit landscape.

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The Possibility to Request a Supplemental Arbitral Award Under the Brazilian Arbitration Act

Tue, 2021-02-23 21:08

Five years ago, the Brazilian Arbitration Act (Law No. 9,307/96 or BAA) was amended by the Law No. 13,129/2015.

Law No. 13,129/2015 repealed the item V of Article 32 of the BAA which provided for the annulment of an arbitral award when it does not address the entire dispute submitted to arbitration (infra petita award).

Infra petita awards then started to be covered by the paragraph 4 of Article 33 of the BAA, which was also included by Law No. 13,129/2015. The provision sets forth that “The interested party may file a request for the rendering of a supplemental arbitral award if the arbitrator fails to rule on all matters submitted to arbitration”.

The legislative innovation aimed at safeguarding as much as possible the acts practiced by the arbitral tribunal (Article 5º, LXXVIII, Brazilian Constitution; Articles 277 and 281, Brazilian Code of Civil Procedure); however, there have been only a few requests for supplemental arbitral awards since then.

 

Recent case ruled by the Court of Appeals of the State of São Paulo

The recourses against arbitral awards are usually under confidentiality in Brazilian courts. Thus, it is not possible to ascertain how frequently such remedy has been used since the Law No. 13,129/2015 became effective. In a recent event of Fundação Arcadas, during the 2020 São Paulo Arbitration Week, Appellate Court Judge Manoel de Queiroz Pereira Calças and Court Judge Andrea Palma mentioned that they had never judged any request for supplemental arbitral award.

Nevertheless, an interlocutory appeal was recently ruled by the Second Panel of Corporate Law of the Court of Appeals of the State of São Paulo (TJSP, Interlocutory Appeal No. 2170826-30.2020.8.26.0000). The claimant sought an emergency relief to suspend the ongoing arbitral proceeding before the CAM-CCBC until the state court decided if the supplemental award was necessary. The lawsuit is not under confidentiality.

The emergency relief was rejected by the First Corporate and Arbitration Conflicts Court. The Court concluded that the requirements of Article 300 of the Brazilian Code of Civil Procedure were not met (relevance of claimant’s reasoning and possibility of serious harm). The arbitration is currently ongoing.

The suspension of arbitral proceedings by state courts is not uncommon; however, the relevance of claimants reasoning, and the possibility of serious harm must be supported by strong evidence. In the case mentioned above, the First Corporate and Arbitration Conflicts Court understood in a prima facie analysis that there would not be any harm resulting from the continuity of the arbitration.

The claimant appealed but the decision was maintained by majority. Appeals Court Judge Sérgio Shimura dissented from the reporter, Appeals Court Judge Grava Brazil. He understood that the interlocutory appeal should be granted once there was evidence that the partial arbitral award did not entirely addressed claimant’s requests.

Now the lawsuit has returned to the lower court to have its merit analyzed extensively (i.e., to decide whether a supplemental award is necessary). The final decision can take years depending on the extension and complexity of the production of evidence requested by the parties.

This dispute can contribute to the judicial interpretation of paragraph 4 of Article 33 of the BAA; however, it may take some time to find out how the judiciary will overcome the complexities of its application.

In international practice, for example, Article 34 of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) holds an exhaustive list of grounds for setting aside an arbitral award but there is no explicit reference to infra petita decisions.

Article 33(3) of the Model Law, nonetheless, mentions that the parties “may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award”. It suggests that infra petita awards are never meant to be set aside.

In Brazilian practice, the omission correction request is well-known (and maybe overused) as “motion for clarifications”. This possibility is foreseen in Article 30(I) of the BAA. If the omissions remain, then the provision set forth in paragraph 4 of Article 33 can – and should – be applied.

Some might say that the legal provision of paragraph 4 is not technical since Brazilian courts are committed to the minimal intervention rule. The wording of this paragraph might give the idea that the state court could decide about the merits of the arbitral proceeding, which is not the case. Given the existence of a valid and binding arbitration agreement, the state court has no jurisdiction to judge the merits of the case. It should only set aside or order the arbitration tribunal to issue a supplemental award when absolutely necessary.

Another issue is that the jurisdiction of the arbitral tribunal might have already been terminated when the state court finally decides upon the request for a supplemental arbitral award. It may result in the necessity to initiate a new arbitral proceeding.

 

Conclusion

The author understands that Law No. 13,129/2015 should only have repealed item V of Article 32 of the BAA, but not included paragraph 4 in Article 33. This legislative amendment instead of bringing more legal certainty brought doubts that discouraged lawyers from applying it.

In this sense, the comprehensiveness and completeness of the award cannot be overstated. The arbitral tribunal must be careful in setting out the decision issue by issue (see guidelines of the Chartered Institute of Arbitrators – CIARB). It would avoid the allegation of arbitrators’ failure to address claims submitted by the parties.

The same goes for lawyers, who must be careful in formulating precise requests in the terms of reference or the initial allegations; an infra petita decisions is not desirable in any circumstance or jurisdiction.

Disclaimer: The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of the CAM-CCBC. All the information mentioned above is public.

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2020 in Review: Another Eventful Year for the Indian Arbitration Landscape

Tue, 2021-02-23 01:00

The “2019 in Review: India” started with a quote from Jeff Bezos that the 21st century belongs to India. Little did we know then that, one year later, Jeff Bezos’ Amazon would be fighting tooth and nail in a SIAC arbitration and related litigation in the Indian courts to claim a share of the burgeoning Indian market.

Despite the Covid-19 pandemic, 2020 (like 2019) has been an eventful year for the Indian arbitration landscape. This post considers some major recent developments on key topics. The three branches: the judiciary, executive, and legislature continued taking significant measures to reform the domestic and international arbitration landscape in India. While important judgments were delivered by courts across India, institutional arbitration continued making inroads in India. Similarly, the government continued its spree to amend the arbitration law. Overall, the developments paint a positive picture of India’s consistent efforts to ground itself as a pro-arbitration jurisdiction. Of course, there is a scope for improvement and the journey continues.

 

New India-Brazil BIT

As covered in a prior post, India and Brazil signed a BIT at the dawn of the new decade to usher in a new era of BITs. The BIT is noteworthy for its departure from the widely used investor-state arbitration mechanism in favor of state-state arbitration with a focus on dispute prevention. A noticeable feature of this BIT is the restriction on an arbitration tribunal in awarding compensation, which resembles shades of the WTO dispute settlement mechanism.

 

The Invalidity of Unilateral Appointment of a Sole Arbitrator

Historically, the unilateral appointment of a sole arbitrator was rife in the Indian arbitration ecosystem, especially in domestic arbitrations. This gave unreasonable power to one party and created a power imbalance between the parties in an arbitration. However, as discussed, in this post, the Indian Supreme Court (“Supreme Court”), in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. made unilateral sole arbitrator appointments invalid under the 2015 amendments to the Indian Arbitration and Conciliation Act, 1996 (“Act”). The judgment was delivered towards the end of 2019 and continued to influence several arbitration proceedings in 2020 (and in 2021) such as the Delhi High Court’s judgment in Proddatur Cable TV Digi Services v. Siti Cable Network Limited (2020) and City Lifeline Travels Private Ltd v. Delhi Jal Board (2021). There is still a need for further clarity on other aspects of the appointment of an arbitrator. The exercise is underway as the Supreme Court in Union of India v Tantia Construction (2021) has referred the issue to a larger bench while opining that once the appointing authority itself is incapacitated from referring the matter to arbitration, it may not appoint an arbitrator.

 

Choice of Seat or Venue

The choice of a seat or place of arbitration is critical. Arbitration-related disputes often land in courts when the choice of seat or venue is debatable. As discussed in this post, the Supreme Court’s decision in Union of India v. Hardy Exploration and Production (India) Inc., (2019) (“Hardy Exploration”) was criticized for failing to delineate the concepts of place, seat, and venue. The Supreme Court in BGS SGS Soma JV v. NHPC Ltd., (2019) (“BGS SGS”) provided the much-needed clarity. It laid down a test for determining the venue and seat of arbitrations. It went on hold Hardy Exploration as per-incurium for failing to follow the Supreme Court’s seminal decision in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services. The BGS SGS decision was expected to put a lid on this issue. However, subsequently, in Mankastu Impex Pvt. Ltd. v. Airvisual Ltd.(2020), when the rival contentions were based on the findings of Hardy Exploration on one hand and BGS SGS on the other, the Supreme Court chose to rely on neither of these decisions to come to its conclusion. This lack of clarity is likely to lead to further litigations in India.

 

Anti-Arbitration Injunctions

The Delhi High Court has taken divergent views on the issue of a civil court’s jurisdiction to grant anti-arbitration injunctions. In Mcdonald’s India Private Limited v. Vikram Bakshi and Ors. (2016) (“Mcdonald’s”), a division bench of the Delhi High Court held that civil courts had jurisdiction to grant anti-arbitration injunctions where it was proved that the arbitration agreement was null, void, inoperative, or incapable of being performed. However, in Bina Modi and Ors. v. Lalit Modi and Ors (2020), a single judge of the Delhi High Court concluded that a civil court did not have the jurisdiction to entertain suits to declare the invalidity of an arbitration agreement or injunct arbitral proceedings. In an appeal against the single judge’s decision, the division bench, relying on Mcdonald’s, set aside the single judge’s judgment. As discussed in this post, this judgment conforms to the previous Supreme Court judgements which have held that a civil court in India has inherent jurisdiction to grant injunctions in restraint of arbitration.

 

The Negative Effect of Kompetenz-Kompetenz

The arbitration between Devas v Antrix has been in the news for various reasons, the latest being the stay granted by the Supreme Court on the execution of the award in November 2020. The doctrine of Kompetenz-Kompetenz grants power to arbitrators to decide upon their own jurisdiction. However, the negative effect of Kompetenz-Kompetenz allows the courts to consider a jurisdictional challenge only on a prima facie basis while allowing for a complete review only by an arbitral tribunal. In the context of this arbitration, this post argues for a positive Kompetenz-Kompetenz with concurrent jurisdiction between national courts and the arbitral tribunal (with a condition of issuing a partial award on jurisdiction before considering issues of merits).

 

NAFED v. Alimenta S.A.: Opening a Pandora’s Box on Enforcement of Foreign Awards?

In 2020, the Supreme Court issued two significant judgments relating to the enforcement of foreign awards in India. While these judgments analysed the same legal provision regarding enforcement, they adopted contrary approaches and not surprisingly, reached diametrically opposite conclusions. As this post discusses, the earlier judgment in Vijay Karia v. Prysmian Cavi E Sistemi Srl (delivered in February 2020) eschewed reviewing the merits of the award in enforcement proceedings. However, just two months later in National Agricultural Co-operative Marketing Federation of India (NAFED) v. Alimenta S.A., the Supreme Court extensively reviewed the merits of the award and held it to be unenforceable. The fate of future enforcement proceedings could hinge on which precedent is relied upon by the enforcing court.

 

Clearing the Mist on Arbitrability of Fraud

Raising allegations of fraud had become a frequently used shield for respondents in Indian arbitrations. Unfortunately, various cases over the years did not provide much succor for the claimants, for whom the battleground would shift from tribunals to courts, where the recalcitrant respondent would argue on the basis of the (alleged) fraud that the dispute is no longer arbitrable. Ultimately, the Supreme Court in Avitel Post Studioz Ltd. v. HSBC PI Holdings (“Avitel”) laid down what would exactly constitute the “serious allegations of fraud” exemption to the arbitrability of disputes. This post discusses the pros and cons of Avitel.

 

Clarity on the Limitation Period for Enforcement of Foreign Awards

As discussed in this post, the Supreme Court, in the case of Government of India v Vedanta settled the debate on the applicable limitation period for enforcement of a foreign award in India. The Supreme Court held that the enforcement of a foreign award under Part II of the Act would be covered by Article 137 of the Limitation Act, which provides a period of three years, starting from when the right to apply accrues. The Supreme Court also made a passing remark and reaffirmed in this case that the courts should stay away from reviewing the merits of a case in enforcement proceedings. It echoed that the courts should only look at such cases from the narrow prism of Section 48 of the Act, which enumerates the limited grounds of refusal for enforcement of a foreign award.

 

Indian Parties Choosing a Foreign Seat of Arbitration

In the absence of any authoritative ruling by the Supreme Court on the issue of Indian parties choosing a foreign seat of arbitration, various High Courts have taken inconsistent positions over the years. In the latest decision dealing with this issue, the Gujarat High Court in GE Power Conversion India Private Limited v. PASL Wind Solutions Private Limited held that two Indian parties can choose a foreign seat of arbitration. As discussed in this post, the award in such arbitrations would be a foreign award under the Act. Significantly, the remedy of seeking interim measures from Indian courts in such a scenario would not be available.

 

Transitioning into 2021

2020 kept the domestic and the international arbitration community involved in India engaged. As 2020 came to an end, a few developments that started taking shape last year will define how 2021 proves for India to position itself as an arbitration hub.

Following are a few arbitration developments in India that are already attracting eyeballs of the international and domestic arbitration community alike.

 

The 2021 Amendments

The 2021 amendments to the Act (passed by the Lower House of the Indian Parliament on 12 February 2021) came on the heels of the 2019 amendments. The amendments were earlier promulgated by way of an ordinance in November 2020. As discussed in this post, the highlights include:

  • amendment to Section 36(3) of the Act that allows a court to unconditionally stay a domestic award where it is prima-facie satisfied that the underlying arbitration agreement or contract which is the basis of the award or the making of the award was induced by fraud or corruption.
  • the deletion of the controversial eighth schedule (that had onerous qualification requirements to be appointed as an arbitrator) to the Act that was introduced in 2019 but was never entered into force. In this regard, the amendment provides that norms for accreditation of arbitrators will be specified by the Arbitration Council of India.

 

150% Growth in MCIA’s Caseload

India’s home-grown institution, the Mumbai Centre for International Arbitration (MCIA) has released its Annual Report for 2020 where it reports having registered more than 150% growth in the total number of cases being administered by it. The sentiments are further boosted by recent referrals that the Supreme Court and the Bombay High Court have made to MCIA. Please read more about MCIA from its CEO and secretary-general/registrar here in our recent “Interviews with Our Editors” series. The post lays down MCIA’s journey in the last five years of its existence and how MCIA is registering more cases under its rules with every passing year.

 

Recognition and Enforcement of SIAC Emergency Arbitrator’s Award

As noted above, Amazon is currently involved in legal proceedings with Indian entities including Future Retail and Reliance Retail. Amazon commenced an emergency arbitration under the SIAC Rules, which culminated in the Emergency Arbitrator inter alia enjoining Future Retail from proceeding with its agreement with Reliance Retail. This arbitration is seated in Delhi, India. The related court proceedings before the Delhi High Court raise important questions as to the validity and enforcement of emergency arbitrations in India-seated arbitrations. As discussed in this post, none of the previous cases relating to the enforcement of emergency arbitration awards in India had the seat in India. In another positive development, a single judge of the Delhi High Court held that the provision for emergency arbitration under the SIAC Rules is not contrary to any mandatory provisions of the Act. However, an appeal against this decision is pending.

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Arbitrator Intelligence Announces Arbitrators of the Year for 2020

Mon, 2021-02-22 00:53

What is perhaps the greatest source of praise for an arbitrator? A party or lawyer who believes that they lost the case, but has positive things to say about that arbitrator. That is the criteria Arbitrator Intelligence started with to select its Arbitrators of the Year for 2020 and other Distinguished Arbitrators.

Intensive debate exists about what makes for a “great” arbitrator. One reason for this debate is that the evaluation of who is a “great arbitrator” can be highly (and unfairly) subjective. A long-time friend of an arbitrator is more likely to say positive things about that person than a professional rival. In debates over diversity, we worry that people may give more positive reviews to arbitrators with shared backgrounds or may unduly discount those from different backgrounds. And, of course, we all assume that winning parties will heap praise on arbitrators while losing parties will be unduly harsh.

But what if we could identify arbitrators who defy these expectations and earn positive feedback even from losing parties? At Arbitrator Intelligence, we have done exactly this.

Through our confidential and anonymous internet platform, after an arbitration is completed, parties and counsel submit detailed feedback about the case through our detailed Arbitrator Intelligence Questionnaire (AIQ). We collect facts about the case (but not the parties or attorneys’ names) as well as evaluative feedback through the AIQ.

Among the questions in the AIQ, we ask the parties and counsel who complete it to self-identify as the winning or losing party in the arbitration. [Aware that proud lawyers and parties may be reluctant to check a box saying they “lost,” the AIQ question is actually phrased in terms of whether the award was “more favorable,” “less favorable,” or “as expected.”] This question allows us a unique perspective in evaluating other details regarding the case and the feedback we receive on particular arbitrators.

To pick our Arbitrators of the Year and other Distinguished Arbitrators, we started by identifying all arbitrators in our database who received feedback from a person who self-identified as having lost the arbitration. Although we began with this fact as a prerequisite, we should underscore that many arbitrators in our database have impressive track records and receive highly positive feedback from individuals who thought they won the arbitration or who received what they expected. For our inaugural Awards, however, we focused only on those arbitrators who received feedback from losing parties.

From among arbitrators on whom we have feedback from a self-identified losing party, we assigned points for individual responses to questions in the AIQ that requested the responder’s “professional judgment.” These evaluative questions sought feedback about particular rulings of the tribunal, conduct of the arbitrator, or characteristics of the award. Parties and counsel responding to the AIQ were invited to identify, from a range of options, which qualities they would attribute to the tribunal’s rulings, arbitrator conduct, or award. For some questions, the feedback pertained to the entire tribunal, while for a few (see below) the feedback was specific to an individual arbitrator on the tribunal.

After we tallied the points for each arbitrator, we were able to identify our two winning Arbitrators of the Year.

Congratulations to Professor Dr. Nayla Comair-Obeid!

Arbitrator Intelligence’s Presiding Arbitrator of the Year for 2020

Arbitrator Intelligence selected Prof. Comair-Obeid because she garnered numerous points for consistently positive praise in the feedback we received from someone who considered their side to have lost the arbitration.

For those who do not know, Prof. Comair-Obeid is a Lebanon-based arbitrator and the former President of the Chartered Institute of Arbitrators (2017). She is the founding partner of Obeid Law Firm, and a professor of international commercial arbitration at the Lebanese University. She has actively participated in more than 100 domestic and international arbitrations, both ad hoc and institutional, as party-appointed arbitrator, presiding arbitrator, sole arbitrator, counsel and expert.

Prof. Comair-Obeid holds pre-eminent positions at various international legal institutions, including the International Chamber of Commerce (ICC) and the Cairo Regional Centre for International Commercial Arbitration (CRCICA). She sits on the ICSID panel of arbitrators and conciliators. Prof. Comair-Obeid is the author of ‘The Law of Business Contracts in the Arab Middle East’ (Kluwer Law).

In a Dubai-seated DIAC commercial arbitration, a losing party or their counsel (i.e., someone who reported that the final award was less favorable than expected) nevertheless had some impressive praise for Prof. Comair-Obeid.

Despite being disappointed in the outcome, the person who gave feedback agreed that the procedural rulings in the cases generally promoted fairness and efficiency, and that the number of hearing days was appropriate for the case.

That same feedback from the losing side also praised the questions Prof. Comair-Obeid asked during the hearings as demonstrating familiarity with the record and legal issues and helping to clarify factual or legal issues. Prof. Comair-Obeid’s questions were also assessed as fair and respectful. This person, who thought the award went against their or their party’s interests, nevertheless characterized the award as balanced and well-reasoned.

Given all this favorable feedback, it is not surprising that this responder also indicated that they strongly agreed that they would be comfortable having Prof. Comair-Obeid as a sole arbitrator in a future unrelated case.

That is a lot of praise for an arbitrator coming from a self-identified losing party or counsel who might have been expected to be less rosy in their assessment!

Congratulations Alfredo Fernández López!

Arbitrator Intelligence’s Co-Arbitrator of the Year for 2020

Like Prof. Comair-Obeid, Mr. Fernández López defied expectations by receiving positive feedback from a party or counsel who regarded themselves as having lost the arbitration. By way of background, Mr. Fernández López is a partner of BTA, a boutique law firm based in San Jose, Costa Rica. He is a member of the Spanish Arbitration Club-Costa Rica and ICC-Costa Rica. Mr. Fernández López is an expert in Alternative Dispute Resolution, major public infrastructure projects, FIDIC contracts and construction contract claims.

The case at issue was a Costa-Rica seated commercial arbitration administered by the Costa Rican Chamber of Commerce. The person who provided feedback seemed to be fairly impressed with Mr. Fernández López’s performance as an arbitrator, despite being on the losing side.

In their feedback, this person assessed the procedural rulings in the case as generally promoting fairness and efficiency. They also regarded the number of hearing days as appropriate for the case.

Feedback from the losing side also praised Mr. Fernández López for asking questions during the hearings that demonstrated familiarity with the record and legal issues and helped to clarify factual or legal issues.

Finally, the party or counsel providing feedback described the award as both well-written and persuasive, assessments that seem to suggest that, after reading the award, the person understood why they lost and was persuaded by those reasons. Perhaps in light of these assessments, it is not surprising that the person providing feedback also indicated that they would be comfortable having Mr. Fernández López as a sole arbitrator in a future unrelated case.

Congratulations to Our Distinguished Arbitrators!

Although Prof. Comair-Obeid and Mr. Fernández López got the top spots for 2020, many arbitrators from among the more than 300 on whom we have Reports received positive feedback of various sorts. Based on objective criteria from this feedback, in addition to our two winners for 2020, we have selected several Distinguished Arbitrators who also received favorable feedback from self-identified losing parties, but in fewer categories than our winners. It should also be noted that there were many other arbitrators who received positive feedback across the board, but not from self-identified losing parties. Our full list of Distinguished Arbitrators for 2020 will be published on our website shortly.

 

Picking the RIGHT Arbitrator for Your Case

Evaluative feedback is valuable in assessing potential arbitrators and was our focus in identifying our winning and distinguished arbitrators. Our Reports, however, also empower parties and counsel to identify specific features and trends that reflect their priorities and promote their case strategy. For example, claimants tend to look for arbitrators who have higher than average rates of damages awards, while respondents might focus on arbitrators who have a track record of declining jurisdiction or awarding costs and fees to prevailing respondents.

In our Reports on investment arbitrators, parties and counsel can see which expert witnesses, which leading arbitral awards, and which scholarly treatises were relied on by (or in the case of awards, rejected by) tribunals on which an arbitrator sat. Research on arbitrators can now include the rates at which tribunals on which they sat granted or denied (in whole or part) specific investment claims, and which jurisdictional challenges were accepted or denied by individual tribunals. They can see the duration of cases in which a particular arbitrator sat, how long their tribunals take to deliberate and render awards, and whether that timing is affected by dissents, bifurcation, or whether an arbitrator was presiding.

By expanding the categories of information that are available about arbitrators, by analyzing detailed data regarding those categories, and by providing evaluative feedback that complements facts in those categories, our Reports enable parties and counsel to refine their searches and increase predictability in their arbitrator selection strategy.

Parties and counsel can always supplement and build on this information from their own experience and by telephoning people in their professional network. But they are no longer limited to those sources. Detailed data and feedback about arbitrators allow us to recognize and consider newer, talented but less-well-known arbitrators who have earned the confidence of parties and counsel but may not be in our professional network yet.

The arbitration community has been calling for more information on arbitrators, as well as improved diversity in arbitral appointments. More information—both factual and evaluative—can help on both issues.

Our winners this year are excellent examples. Both are diverse arbitrators. Both are well known in their regional communities, but perhaps not as familiar to everyone. Both were selected based on objective criteria from specific provided by parties or counsel.

Now, you can see that our two winners received the ultimate compliment—positive feedback about their personal performance and that of their tribunal from the losing side of an arbitration.

Congratulations again to our Arbitrators of the Year for 2020!

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