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The Contents of Journal of International Arbitration, Volume 38, Issue 6 (December 2021)

Kluwer Arbitration Blog - Sun, 2021-12-19 00:20

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

 

Markus Burgstaller & Giorgio Risso, Due Diligence in International Investment Law

The obligation to exercise due diligence – which is commonly understood as the degree of care that is legally required or that is to be reasonably expected – emerged in international law in the seventeenth century to mediate inter-State relations. Due diligence then developed throughout the nineteenth and twentieth centuries in the context of the protection of aliens. Against this background, the article analyses the obligation to exercise due diligence in international investment law. The analysis shows that due diligence plays an important role in several aspects of the protection of foreign investments. First, it is accepted that investors should act with due diligence to: (1) benefit from the standards of protection set out in investment treaties; and (2) ensure compliance with host State law. Second, host States are expected to exercise due diligence with regard to substantive standards of protection, particularly the full protection and security (FPS) standard. While investment tribunals have clearly identified the scope of investors’ and host States’ due diligence, there is no conclusive indication as to the precise requirements to comply with the obligation to exercise due diligence.

 

Bas van Zelst & Diederik van Besouw, Private International Law Aspects of Arbitrator Liability: A European Perspective Post-Brexit

This article investigates how various private international law (PIL) instruments relevant in the European context, post-Brexit, deal with questions of jurisdiction, applicable substantive law, and recognition and enforcement pertaining to the contractual liability of arbitrators. Based on an analysis of applicable European Union (EU) case law and the drafting history of, amongst others, the Brussels I (Recast) Regulation and its predecessors, it submits that that the exclusions included in such Regulation with regard to arbitration proceedings do not apply to the Arbitration Contract between the Parties and the Arbitrator or Arbitrators. Second, we submit that the law applicable to a claim for breach of contract by an Arbitrator must be found through the application of Rome I. Rome I provides that the law of the country where the Arbitrator that is alleged to be liable vis-à-vis (one of) the Parties has his or her habitual residence. With respect to enforceability of court judgments pertaining to arbitrator liability, we discuss and assess the Pandora’s Box that Brexit appears to have opened. This assessment leads us to conclude that, whilst the framework put in place by Brussels I (Recast) and the Lugano Convention remains largely in place, on the departure of the United Kingdom from the existing legal frameworks, enforcement and recognition of court judgments between the United Kingdom and the EU will, in the absence of a jurisdiction clause, largely shift to provisions of national law and/or bilateral treaties.

 

Dorothee Ruckteschler & Anika Wendelstein, Efficient Arb-Med-Arb Proceedings: Should the Arbitrator also be the Mediator?

The demand for hybrid proceedings combining elements of arbitration proceedings and mediation is growing continuously. The reason for this is the parties’ desire to make dispute resolution more efficient. A special type of hybrid proceedings are ‘arb-med-arb’ proceedings. These proceedings involve first initiating traditional arbitration proceedings. Before the taking of evidence begins, an attempt is then made to settle the dispute outside the arbitration proceedings in a separate mediation procedure. If the mediation fails, the arbitration proceedings are recommenced, and an arbitral award is issued. In the majority of arb-med-arb proceedings, a third party not involved in the arbitration proceedings is appointed as mediator. However, sometimes the parties ask the sole arbitrator or a member of the arbitral tribunal to act as mediator. This identity of the mediator and the (former and later) arbitrator raises many difficult questions, in particular, when the mediation fails. This article first analyses the pertinent most important regulations worldwide in arbitration and mediation laws, institutional arbitration, and mediation rules, and in soft law. Based on the results of this analysis, the authors develop some practical recommendations for the stakeholders in arb-med-arb proceedings.

 

Luke Nottage, Julia Dreosti & Robert Tang, The ACICA Arbitration Rules 2021: Advancing Australia’s Pro-Arbitration Culture

This article compares the new Rules of the Australian Centre for International Commercial Arbitration (ACICA) with ACICA’s 2016 Rules and those of other arbitration institutions, especially in the Asia-Pacific region. It shows how the revisions help to minimize formalization and promote efficiencies, arguably essential for arbitration’s legitimacy given that many of arbitration’s design features are traded off for an attenuated model of the rule of the law, according to a recent analysis by Singapore’s Chief Justice Sundaresh Menon. The article explains new ACICA Rules aimed at reducing costs and delays, including measures to deepen digitalization of arbitration following the Coronavirus disease 2019 (COVID- 19) pandemic and to reduce the consent-based limitations inherent in arbitration, especially for multi-party and multi-contract disputes. Other new provisions include time limits for awards, and reference to mediation, although not ultimately hybrid Arb-Med. The article also examines how the Rules balance confidentiality with transparency, including new provisions for disclosure of third-party funding. It concludes by reiterating how the 2021 ACICA Rules help meet the expectations of international arbitration users and practitioners, according to recent surveys, and link to possible further reforms to underpin Australia’s increasingly pro-arbitration culture.

 

Jacob Grierson & Thomas Granier, Betamax: Has the Privy Council Gone Too Far in Seeking to Ensure that the Second Look Test Does Not Become a Second Guess Test?

Questions of public policy often arise in international arbitrations, including, in particular, issues of competition law and corruption. Arbitrators’ power to adjudicate these issues is conditional upon national courts’ power to review such issues when faced with annulment applications and/or objections to enforcement applications (the ‘second look’ test). However, national courts are divided as to whether, when doing so, they should be allowed to second-guess an arbitral tribunal’s decision on whether there has been a breach of international public policy. In its recent decision in Betamax, the Judicial Committee of the Privy Council (the highest court of appeal for Mauritius, constituted of members of the UK Supreme Court) came down very firmly against second-guessing. After having presented the different approaches that various jurisdictions have adopted on this issue, this article proposes that national courts should be allowed to further inquire into and potentially second-guess arbitrators’ decisions on issues of international public policy, provided that the party applying for the setting aside of the award establishes before the competent court a strong prima facie case that there has been illegality such that recognising or enforcing the award would give rise to a breach of international public policy.

 

Maxime Chevalier, Enforcement of Emergency Arbitrator Decisions: Dream or Reality? The French Perspective

Emergency arbitration is a recent and significant development in the field of international arbitration. The enforcement of emergency arbitrator decisions is necessary to ensure the full efficiency of the mechanism. This subject is of great interest because the recourse by arbitration users to emergency arbitration for the issuance of interim measures is usually impacted by enforcement concerns. Thus, it is necessary to provide potential emergency arbitration users with an answer with regard to the possible enforcement of emergency arbitration awarded interim measures. This article aims to show that, contrary to popular belief, the enforcement of emergency arbitrator interim measures would be feasible in France.

We will demonstrate that the emergency arbitrator should enjoy a similar status as an arbitral tribunal. Even if there exist no mechanisms for the enforcement of arbitral orders in France, interim measures could be enforced as arbitral awards. Indeed, emergency arbitrator decisions might be considered as being final and, thus, qualify as an award subject to exequatur procedure. Moreover, we will suggest providing emergency arbitration users with an alternative enforcement mechanism which consists of indirectly enforcing the emergency arbitrator decision on the grounds of breach of contract through référé emergency proceedings.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
by Arif H. Ali & David L. Attanasio
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Arbitration in Egypt: A Practitioner\'s Guide
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New Developments in France on the Alstom Saga: The French Supreme Court Overrules the Paris Court of Appeal’s Decision to Deny Enforcement of the Arbitral Award on the Grounds of Corruption

Kluwer Arbitration Blog - Sat, 2021-12-18 01:27

It’s all still to play for. After the Paris Court of Appeal refused enforcement of a Swiss arbitral award against Alstom on the grounds of corruption, the French Supreme Court has now overturned that decision, ruling that the judges misinterpreted the evidence before them.

The case may now be referred to the Versailles Court of Appeal which will rule again on whether the award can be enforced. The Versailles Court of Appeal’s decision may also be upheld, under certain circumstances, before the French Supreme Court. It is not the final end of the saga.

 

The factual and procedural background

Alstom Transport SA (incorporated in France) and Alstom Network U.K. Ltd (incorporated in England) (“Alstom”) signed three consultant agreements with Alexander Brothers Limited (“ABL”), a company incorporated in Hong Kong, which purpose was for ABL to assist Alstom with the submission of three tender offers for the supply of railway equipment in China. Alstom Transport SA was awarded all three contracts. Two of the contracts were with the Chinese Ministry of Transport for the supply of heavy freight electric locomotives and high-speed passenger railcars and the third with Shanghai Shengton Holding Group to supply rolling stock for the extension of the Shanghai Metro.

All three consultant agreements between ABL and Alstom were governed by Swiss law. Alstom Transport SA paid a portion of the amount due under the first two contracts for the assistance received by ABL but did not pay the balance and made no payment under the third contract.

In 2013, ABL initiated a Geneva-seated ICC arbitration against Alstom, claiming the balance of the invoices allegedly due by Alstom under the three contracts. ABL sought almost 3 million euros plus interest in respect of the invoices, 1.5 million euros in damages and 1 million euros in punitive damages. Alstom refused to pay the balance of the invoices claimed, alleging that such amounts may be used to bribe public officials. Such an act would have been contrary to the provisions of the contract and Alstom’s ethical obligations.

The arbitral tribunal handed down its award in January 2016, concluding that there had been no bribery under any of the contracts, ordering Alstom to pay ABL almost 1,5 million euros plus interest and dismissing the remaining claims.

Alstom unsuccessfully attempted to set aside the award before the Swiss Federal Supreme Court in November 2016. When ABL sought to enforce the award in France, Alstom challenged the enforcement of the award in France and in England.

 

The Paris Court of Appeal’s refusal to enforce the Swiss arbitral award in France

In March 2016, ABL was granted permission to enforce the award by the President of the Tribunal de Grande Instance of Paris. In May 2016, Alstom appealed against that order, arguing before the Paris Court of Appeal that paying the amount awarded by the arbitral tribunal would have breached the rules of ethics and compliance stipulated in the contract to prevent corrupt practices in international trade. The enforcement of the award would thus give effect, according to Alstom, to an act of corruption in violation of international public policy pursuant to articles 1525 and 1520 5° of the French Civil Code of Procedure.

In its decision on 28 May 2019 (n°16/11182), the Paris Court of Appeal upheld the appeal and rejected ABL’s motion to enforce the award.

First, the Court reminded the parties that it is not its role to assess whether or not contractual provisions have been correctly performed, including contractual rules relating to compliance. The Court’s role is to ensure that the enforcement or the recognition of the arbitral award does not result in a manifest, effective and concrete violation of international public policy. In other words, it is the court’s duty to assess whether enforcement would have the effect of financing or remunerating a corrupt activity or influence-peddling.

In its judgement of 10 April 2018 (Rev. Arb. 2018, n°3, p.574), the Paris Court of Appeal ordered the production of various documents by Alstom under penalty, and invited the parties to conclude on the existence of corruption. In the same judgment, it confirmed that it was empowered to examine, both in law and in fact, whether the enforcement of an arbitral award breached French international public policy in a way that it is manifest, effective and concrete.

Second, the Court reiterated that bribing State representatives, either foreign or French, is against French and international public policy.

Third, the Court stated that, considering their hidden nature, it is almost impossible to identify precise acts of corruption. Instead, there should be circumstantial evidence which must be “sufficiently serious, precise and consistent“.

In the present case, the Paris Court of Appeal decided that there was sufficient circumstantial evidence to conclude that the enforcement of the award would have given rise to a corrupt transaction. It thus refused ABL’s motion to enforce the arbitral award in France.

The Paris Court of Appeal’s decision was, and still is, of particular interest because it explains what type of circumstantial evidence is to be taken into account to challenge the enforcement of an award in France and to block its application on the grounds of corruption (that is, possible red flags). According to the Court, serious, precise and consistent circumstantial evidence to prove corruption could include, for instance:

  • limited evidence of the services provided. The only contemporaneous pieces of evidence presented by ABL on the services provided for which it claimed payment were (i) a confidential document obtained under unclear circumstances, presumably illicit according to the Court; (ii) translations or summaries from the Ministry of Railways and other Chinese entities without further analysis or explanations or recommendations from ABL;
  • disproportion between the services rendered and the price claimed;
  • limited human and material resources. ABL did not have any activity before contracting with Alstom;
  • distortion of competition. Alstom was informed of the evaluation of the tenders before they were published and one of the contracts was thus awarded on the basis of criteria that remain unclear considering that another bidder had a better score than Alstom;
  • irregular accounting. The Court concluded that ABL was essentially a vehicle for transferring funds to its partners, for uses that could not be verified (or could hardly be verified). In addition, funds were used to purchase expensive goods;
  • one of the parties was not new to bribing foreign State representatives. Alstom recognized before the US Ministry of Justice that it had previously engaged in bribery practices through alleged consultants (with acts being carried out in Indonesia, Saudi Arabia, Egypt and Bahamas). This red flag is interesting because, despite Alstom’s bad faith, ABL was not able to benefit from the principle of nemo auditor propriam turpitudinem allegans (‘no one shall be heard, who invokes his own guilt’). Such a principle was considered by the French judges to be irrelevant in these circumstances where the interest of the parties is less important than an act of corruption and compliance with international public policy;
  • State representatives involved in the project had been sentenced to life imprisonment for bribery. The Chinese Ministry of Transport and its Deputy Chief Engineer involved in the project had been sentenced to life imprisonment for bribery on another case.

ABL appealed against the Paris Court of Appeal’s decision before the French Supreme Court.

 

The French Supreme Court decision: the judges’ obligation not to distort written evidence submitted to them

 On 29 September 2021, the French Supreme Court decided that the Paris Court of Appeal had distorted the evidence before it in reaching its conclusion on the risk of participation in corrupt activities through the enforcement of the award (n°19-19769).

The Paris Court of Appeal referred to the transcript of the arbitration hearing, in particular to the witness examinations of two of ABL’s employees, a manager and an accountant. According to the Paris Court of Appeal, the first refused to answer questions asked of him in relation to the source of certain documents and information (confidential documents sent to Alstom, the reasons Alstom won the tender, etc.). The second witness, on the other hand, maintained that operational expenses paid using credit cards linked to the partners’ personal accounts were supported by documents, without however recognizing that such documents were actual invoices or that they were exhaustive evidence of invoices upon which payment could be claimed under a consultancy agreement.

However, the French Supreme Court underlined the fact that the arbitration hearing transcript did not mention the above and that the judges had misread its content.

First, the manager had answered the questions relating to the confidential documents obtained from the Chinese authorities, but she refused to answer the questions of Alstom’s counsel before the British anti-corruption authorities (and not before the arbitral tribunal) because the arbitration proceedings had been initiated in the meantime.

Second, the accountant affirmed, during the hearing, that the statement according to which the operational expenses had only been justified by bank card receipts and that their purpose was not indicated was incorrect.

The French Supreme Court concluded that the judges of the Paris Court of Appeal had “distorted the clear and precise terms of the transcript“. Accordingly, the decision of the Court of Appeal could not be upheld and the issue should be referred to the Versailles Court of Appeal.

 

The limited impact of the French Supreme Court’s decision

First, the Supreme Court did not disapprove the principle upon which the Paris Court of Appeal based its decision: that is, that in order to prove corruption there should be circumstantial evidence which must be “sufficiently serious, precise and consistent” (a principle confirmed by a consistent line of French case law, including Paris CA, 16 May 2017, n° 15/17442 and 15/23790; Paris CA, 17 November 2020 n°18/07347 and 18/02568; and Paris CA, 7 September 2021, n°19/17531). Rather, the French Supreme Court simply rejected the Court of Appeal’s analysis of the evidence brought before it rather than its underlying rationale. The decision is therefore one based on the circumstances of the case (arrêt d’espèce) rather than a decision of principle (arrêt de principe).

The Versailles Court may still reach the same conclusion as the Paris Court of Appeal and refuse enforcement of the arbitral award if it considers the evidence brought before it (which is not limited to the evidence cited by the French Supreme Court in its decision) sufficient to prove that the enforcement of the arbitral award would have the effect of participating in a corrupt activity.

The Versailles Court of Appeal will certainly pay more attention to the analysis of the factual evidence, but the outcome remains uncertain and will not necessarily differ from that reached by the Paris Court of Appeal.

Second, in issuing a decision on the factual circumstances of the case, the French Supreme Court missed an opportunity to set a point of principle in this area. In doing so, it indirectly confirmed the approach of the Paris Court of Appeal with respect to the procedure to be followed for assessing whether or not an act of corruption capable of impeding enforcement (or of setting aside) an arbitral award is present, in other words by taking into account circumstantial evidence which must be “sufficiently serious, precise and consistent“.

Third, as for the Paris Court of Appeal, any decision on the exequatur of the arbitral award would have consequences only in the country where the party is trying to enforce the arbitral award. Only a set-aside judgment may be relied upon by other domestic courts outside the country of the set-aside procedure (Articles V (e) and VI of the New York Convention). In the present case, Alstom may see the arbitral award being enforced outside France notwithstanding any decision of the Versailles Court of Appeal.

As a demonstration of this, the Swiss Federal Supreme Court confirmed the validity of the arbitral award in 2016 by refusing to set it aside, and the English High Court has previously confirmed the enforcement of this arbitral award in England.

On 18 June 2020, the English High Court dismissed Alstom’s arguments on corruption and its application to resist enforcement (2020 EWHC 1584 (Comm)). The judges considered in the first place whether enforcement should have been impeded by arguments that were or could have been raised before the arbitral tribunal. It concluded that if the arbitral tribunal has already determined this issue and concluded that there was no illegality then there is no need for the Court to re-open the same issue, unless the circumstances are exceptional (for instance, when the allegations of corruption are very serious). In the present case, the High Court considered that the question of bribery had not been addressed in detail before the arbitral tribunal (no witnesses were called on this issue specifically and no defence of corruption was raised), but that Alstom could and should have presented such arguments before the tribunal. The issue could have been re-opened in exceptional circumstances, but such criteria were not met in the case (the corruption was not serious enough – the contract was affected by incidental bribery – and the evidence was not particularly strong).

The Paris Court of Appeal made clear in its judgement of 2019 that it was not bound by the Swiss Federal Supreme Court’s judgment and/or by the arbitral tribunal’s award.

On the one hand, considering the English court’s judgment, a party suspecting acts of corruption (and willing to invoke them) should seriously consider whether to raise them, if already known, during the arbitration procedure. Otherwise, the party may incur the risk of being barred in the future from raising such a defence, potentially during setting-aside or enforcement/recognition proceedings.

On the other hand, public policy issues, such as corruption, may lead to a significant review of arbitral awards before, for instance, the French courts. This approach may oblige arbitral tribunals to investigate any corruption, fraud and/or money laundering allegations more seriously in order to ensure the validity and/or enforceability of the award.

In conclusion, in the present case, in any event, another refusal of enforcement in France (if the Versailles Court of Appeal confirms the Paris Court of Appeal’s decision) may have a very limited impact on Alstom’s interests. If ABL is successful in enforcing the arbitral award in England, because the other party has sufficient assets to cover the payments awarded, Alstom would have still paid the sums awarded, even if in France enforcement is blocked.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Inaugural World Arbitration Update: A New Era for ISDS in the Americas and the Caribbean – Transitioning to the USMCA, Looming Disputes in Mexico and Novel Quantum Approaches

Kluwer Arbitration Blog - Fri, 2021-12-17 00:31

The World Arbitration Update conference, held on 11 to 15 October 2021, aimed to update the international arbitration community on the latest North American continental trends and developments. This blog post addresses two of the WAU’s panel discussions regarding (1) the outlook on the trends and developments in the Americas and (2) Caribbean-related arbitrations involving renewable energy and climate change. The discussions were timely and important, especially in light of the COP26, which was held on 31 October to 12 November 2021.

Ian A. Laird (Crowell & Moring) moderated the panel on the Outlook on the Americas, which consisted of Dr. Todd Weiler (Independent International Arbitrator), Adrian Magallanes (Von Wobeser & Sierra), Marinn Carlson (Sidley Austin) and Lauren Mandell (WilmerHale). The panel analyzed NAFTA’s legacy and discussed what the future holds for the new United States-Mexico-Canada Agreement (USMCA).

Christina Beharry (Foley Hoag) moderated the panel on Arbitration in the Caribbean on Renewable Energy and Climate Change, which discussed disputes in renewable energy in the Caribbean community and whether litigation risks may discourage states from taking climate policy action and developing renewable energies.  The panel consisted of government representatives Senator Sherene Golding Campbell (Jamaica) and Dia C. Forrester (Attorney General of Grenada), as well as Seabron Adamson (Charles River Associates), who provided a counsel perspective, and Daniel Flores (Quadrant Economics), who focused on the quantum aspects.

 

The USMCA: A Post-NAFTA Iteration?

Mr. Laird started the session with introductory remarks on the transition from NAFTA to the USMCA. In particular, he noted that NAFTA’s three-year “sunset” period would play an important role in future disputes, as parties could bring legacy claims up till the beginning of July 2023. Dr. Weiler noted that such legacy claims can only be brought pursuant to investments that existed after NAFTA came into effect on 1 January 1994 but before the USMCA came into effect on 1 July 2020. He also flagged that the 90-day time limit (the “cool-off” period) for giving notice of potential NAFTA claims would apply, which is a mechanism aimed to encourage parties to settle. Therefore, while the USMCA signifies a shift from NAFTA policy, NAFTA may still be relevant for some time, due to legacy investments.

 

Looking at the USMCA and the future

While NAFTA was valuable for introducing key procedural innovations in ISDS, including for example enhanced transparency and a provision for amicus participation, USMCA is the framework for present day developments. In relation to Mexico, Mr. Magallanes observed that the energy sector in Mexico may now be in flux. In particular, the Mexican government implemented a change in policy, which involved the cancellation of long-term public biddings and clean energy certificates and the implementation of a new electricity act. However, the Mexican government suspended these changes following constitutional challenges by investors. Mr. Magallanes noted other proposed energy reforms which, if passed, could trigger protections under Annex 14-E of the USMCA which deals with “covered government contracts”. Although there appears to be no “investor” damages to date as a result of the reforms that were halted, Dr. Weiler raised the interesting possibility that investors could claim damages based on the “amparo” constitutional appeal process that was unveiled as part of Mexico’s 2013 energy reforms (a topic discussed in more detail in a prior post).

Comparing the USMCA and NAFTA, Ms. Carlson considered how investors may “vote with their feet”, for example, by investors scrambling to file NAFTA legacy claims within the sunset period deadline. She also queried whether investors would, moving forward, restructure their new investments through other countries to secure protection under other treaties.

The panelists then discussed the future of ISDS and whether the USMCA signals any change in government policy. The general sense was that the approaches taken by the United States, Canada, and Mexico would not necessarily be determinative of what they would do in the future.  For example, Dr. Weiler noted that Canada appeared to have other specific priorities ahead of ISDS, such as trade and environmental issues for the USMCA negotiations, and that it would be difficult to predict what Canada may do about ISDS in other treaties. Ms. Carlson, noting that the 2012 US model BIT provides for ISDS, concurred that the US-Canada approach of jettisoning ISDS in the USMCA would appear to be one-off.

 

Renewable Energy Policy Action in the Caribbean: The Right to Regulate in The Context of ISDS

The WAU continued its update endeavors with the panel on renewable energy in the Caribbean. Ms. Beharry highlighted the energy concerns in Caribbean states, including the lack of reliable electricity and its high cost, and their vulnerability to the effects of global warming. Indeed, several countries in the Caribbean have turned to renewable energy (i.e. Jamaica). Countries in this region are well placed to become renewable energy producers due to their high annual solar irradiation, high average wind and geothermal energy on volcanic islands, and the potential for biomass on islands with large agricultural sectors. Senator Campbell of Jamaica explained that although Jamaica has relied on fossil fuels for a long time, it is diversifying its energy matrix and transitioning to renewables. Ms. Beharry reminded the audience that with these developments comes the potential threat of high-profile renewable energy disputes.

In this regard, as arbitration in the Caribbean increases, dispute resolution institutions, such as the BVI International Arbitration Centre, Jamaica International Arbitration Centre, Arbitration and Mediation Court of the Caribbean in Barbados, and the Dispute Resolution Centre of Trinidad and Tobago, may be used, offering a pool of experienced professionals in the region.

The panelists identified a few notable cases in the renewable energy sector in the Caribbean, including FW-Oil Interest Inc v. Republic of Trinidad and Tobago, which was dismissed as the claimant did not hold an investment, and Grenada Private Power Limited and WRB Enterprises Inc v. Grenada, which stemmed from the privatization of GRENLEC in 1994, whereby the tribunal noted that “[t]he grant of a monopoly [to GRENLEC in 1994] was important to profitability”, and “affected the price that investors [] were prepared to offer for shares in GRENLEC”. The speakers noted that the complexities of the Caribbean energy market, which were highlighted in these cases, may resurface in future disputes, following Caribbean states gaining independence and the prevalence of privatizations and monopolies in small island states.

 

The Reasonable Rate of Return: A Novel Quantum Approach to Consider for Renewable Disputes in the Caribbean

Damages valuation has also been of utmost importance at the outset of potential renewable energy claims in the Caribbean. Mr. Flores mentioned a shift over the last ten years, as arbitrations involving renewable energy have been brought on the basis of energy regulatory changes (cases involving Spain, Italy, Czech Republic, Romania, Canada and Ukraine) rather than pure breaches of contract.

Mr. Flores explained that a balanced approach to the expectations of investors may be best encompassed in the Reasonable Rate of Return (RRR) metric, most notably argued in the Spanish Energy Charter Treaty (ECT) cases. Mr. Flores further noted that the RRR entailed the expectation of the investor to receive acceptable levels of profitability; whilst investors should not aim at expecting a freezing of the legal framework, regulators should take stock of past disputes and act reasonably. He concluded that renewable energy investments should not be expected to create windfall profits, especially not on the scale of those seen in the last six years.

 

Conclusion

The World Arbitration Update (WAU) panels focused on North America and the Caribbean did not disappoint, updating attendees on the latest ISDS developments in the region, including potential disputes that could arise under the USMCA, and novel quantum approaches that may be used in future energy disputes. Capitalizing on lessons learned from NAFTA and energy disputes, North America and the Caribbean are well positioned to witness future developments, introducing a new era in regional ISDS.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
by Arif H. Ali & David L. Attanasio
€ 202
Arbitration in Egypt: A Practitioner\'s Guide
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Call for Nominations for 2022 Dispute Resolution Advancement Award

ADR Prof Blog - Thu, 2021-12-16 18:33
From Elayne Greenberg: About the Dispute Resolution Advancement Award Given annually through the Hugh L. Carey Center for Dispute Resolution at St. John’s Law, this $5000 Award honors scholars and practitioners whose published empirical research has furthered the advancement and understanding of the values and skills of dispute resolution. Nomination Criteria You are invited to … Continue reading Call for Nominations for 2022 Dispute Resolution Advancement Award →

Another Supreme Court Cert Grant

ADR Prof Blog - Thu, 2021-12-16 13:09
From FOI Imre Szalai: Yesterday, the Supreme Court added yet another arbitration case to its docket, Viking River Cruises v. Moriana, No. 20-1573, which deals with the clash between the FAA and California’s Private Attorney General Act (PAGA).  Under PAGA, California courts have allowed workers to pursue representative claims in court against employers on behalf … Continue reading Another Supreme Court Cert Grant →

‎2021 in Review: Latin America and Investment Arbitration‎

Kluwer Arbitration Blog - Thu, 2021-12-16 00:00

In 2021, we witnessed a number of interesting developments in the field of investment arbitration in Latin America. From Mexico’s actions potentially triggering numerous treaty claims, to Colombia’s four consecutive victories, to Ecuador’s return to the International Centre for Settlement of Investment Disputes (ICSID) Convention. Our authors did a tremendous job covering and sharing their insights on the most important developments affecting our field. In this post, we aim at giving you a quick look back to some of our most impactful publications in 2021.

 

Mexico: A Wave of Investment Claims on the Horizon?

As reported here, during the first months of 2021, the Mexican government adopted and proposed a number of legislative initiatives affecting the country’s power and hydrocarbons (O&G) markets.

In the O&G realm, the Ministry of Energy (SENER) issued the new Hydrocarbon and Fuel Import and Export Rules (the “Import/Export Rules”). Among other things, the Import/Export Rules established a summary proceeding mechanism to revoke existing import/export permits and shorten the validity of new permits from 20 years to 5 years. In addition to the Import/Export Rules, Congress approved an amendment to the Hydrocarbons Act granting State-owned entities a greater role in the mid- and downstream sectors. Specifically, the amendment granted the Government the power to suspend or revoke permits on grounds such as “national and energy security” or the “security of the national economy.”

In the power sector, Congress passed a bill amending Mexico’s Electricity Industry Law (the “Electricity Bill”). The Electricity Bill removed some of the prerogatives granted to private investors when the market was liberalized in 2013. For example, it granted priority access to the grid to State-owned CFE (Comisión Federal de Electricidad), in detriment of private wind and solar energy generators, it eliminated CFE’s obligation to purchase electricity from said generators and allowed CFE to issue Clean Energy Certificates (CEL) which – prior to the Bill – could only be done by private generators.

Given the relevance of these measures, thousands of companies filed “Amparos,” legal action seeking to enjoin them on constitutional grounds. At the time, the courts suspended the application of said measures. However, as of December 2021, some of those courts have already lifted such injunctions. Furthermore, the Executive Branch has engaged in a number of action directed at circumventing the judicial blockage. These actions include the promotion of a constitutional amendment, directed at modifying the electricity legal framework and giving the CFE greater regulatory and market power.

The endeavors of Mexico’s government to modify the market liberalization of 2013 have been defined as the “Energy Counter Reform,” and where the central topic of the Tenth Investment Arbitration Forum‎ that we covered here and here. During the event, several experts discussed the nature of this so-called counter reform and its potential to be considered a violation of some investment protections established in the various treaties to which Mexico is a signatory, including  – at least – thirty-six bilateral investment treaties (BITs), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the United States-Mexico-Canada Agreement (USMCA).

 

Ecuador: New Government Wants to Get Back in the Saddle

In 2017, we summarized Ecuador’s efforts to withdraw from ISDS. Some of the most decisive steps where denouncing all the country’s BITs (2008, 2017), as well as the ICSID Convention (2009). Ecuador also passed a constitutional reform prohibiting the Government from submitting disputes to the jurisdiction of non-Latin American tribunals, whose jurisdiction did not stem from instruments among Latin American parties (2008).

In June 2021, Daniela Páez-Salgado reported Ecuador’s return to ICSID with the signature of the Convention by Ecuador’s Ambassador to the United States. Although under Ecuadorian law, the power to enter into and ratify international treaties lies with the President, a legal discussion arose regarding whether the ICSID Convention fell within one of the exceptions to this presidential power. Such exception is found in Article 419 of the Constitution that states:

Article 419: Prior approval by the National Assembly shall be required in order to ratify or denounce international treaties where:

(. . .)

  1. They bind the country into integration and trade agreements.
  2. They confer competences inherent to the domestic legal system to an international or supranational body.

(. . . )

(Free translation) (Emphasis added).

The answer to the debate was left to the Constitutional Court (the “Court”) which, under the Organic Act of Jurisdictional Protections and Constitutional Control‎, must determine whether prior approval from the National Assembly is required pursuant to said article of the Constitution‎.

A month following Ecuador’s signature, Andrés Larrea reported that the Court ruled in favor of the government and decided that prior approval from the National Assembly was not required. The Court ruled that ratification of the ICSID Convention did not require prior legislative approval because the ICSID Convention does not contain clauses creating obligations intended to regulate trade between its Member States, nor are there any provisions forcing States to enter into a process of economic integration. The Court also decided that the Convention does not confer competences inherent to the domestic legal system to an international or supranational ‎body‎. The Court reasoned that ICSID establishes the possibility, but not the obligation, to submit a dispute to its dispute resolution system. Being a party to the ICSID Convention does not translate to automatic consent to arbitrate. Ecuador would have to consent on a separate instrument such as a BIT, a bilateral investment contract, or an investment protection law to arbitrate a specific investment dispute in order to be bound by such agreement. The Court also clarified that the ICSID Convention does not confer competences of its internal legal order to international bodies, because “the resolution of disputes between States is not a competence of internal legal order”.

 

Colombia: Wave of Victories for the South American Nation

The first half of 2021 saw a wave of investment arbitration case decided in favor of Colombia.

The first decision came in March from the case of Naturgy v. Colombia, initiated under the Spain-Colombia BIT (the “BIT”). Naturgy claimed that its investment in Electrocaribe (power utility) was expropriated following a takeover by the national authority regulating public utility services.  Pursuant to Law 142 of 1994, the State can take temporary control of public utilities as a “preventive” measure in certain cases. Some of the situations include (1) when the company can no longer provide services with the quality and continuity required if such service is indispensable to preserve public or economic order; (2) to avoid serious damage to users or third parties, and (3) if the company has suspended or might suspend payment of its obligations. Colombia argued that intervention in the company was a valid exercise of its police powers, that the requirements for takeover under domestic law were met, and that the intervention was justified. The award concluded that Colombia legitimately exercised its police powers because the requirements for takeover under Law 142 of 1994 were met. The takeover was justified by Electricaribe’s financial distress, the danger of the disruption of service, and a ‘systemic risk’ that the company could no longer comply with its financial duties to purchase energy in the national market (¶ 468). Hence, the Tribunal decided that Colombia’s takeover was not an expropriation and Colombia accordingly did not owe compensatory damages to the claimant.

In May, a tribunal issued another decision in favor of the State in América Móvil v. Colombia, a case initiated under the Colombia-Mexico Free Trade Agreement (the “FTA”). América Móvil claimed that Colombia breached the FTA by expropriating its “Right to Non-Reversion” and certain assets affected to concession contracts granted in 1994 (the “Assets”). América Móvil’s concession contract incorporated a reversion clause providing that at the end of the concession term, all the elements and assets affected to the concession would become property of the Nation, without any compensation from the latter. On July 30, 2009, Congress enacted Law 1341. Article 68.4 of such law provided that in telecommunication concessions in effect at the time of its entry into force, operators would only be obliged to revert the radio frequencies assigned to the Concessions – not the Assets. Joining the new regime entailed the anticipated termination of the concession, thus the operator had to request a new title for operating (the “Transition Regime”).  In 2013, América Móvil requested to join the Transition Regime. Prior to acceptance of the claimant’s request, the Court published Judgment C-555 in which it analyzed whether Article 68.4 should be understood as to derogate the reversion clauses incorporated in public contracts executed before the entry into force of Law 1341 or whether those clauses should remain in force. The Court concluded that the law did not derogate the Reversion Clauses and therefore these continued to be binding for the parties. The majority of the Tribunal concluded that the alleged “Right to Non-Reversion” did not exist under Colombian domestic law or international law and therefore there was no right subject to expropriation. The Tribunal therefore found no breach of the FTA and denied Claimant’s request of compensation of US$ 1,286,517,675.

Finally, Colombia prevailed in two arbitrations under the Colombia-US Trade Promotion Agreement (“TPA”). The claims were filed by the Carrizosa family under the UNCITRAL Arbitration Rules, and under the ICSID Convention. In both arbitrations the Carrizosa family alleged that Colombia breached the fair and equitable treatment and national treatment standards, the affecting their investment in Granahorrar, a financial institution in which the claimants were shareholders. In the late 1990s Colombia suffered an economic crisis, which caused Granahorrar’s financial standing to deteriorate. In consequence, the Superintendency of Finance ordered Granahorrar to raise approximately US$ 99.8 million in new capital to offset its insolvency. Granahorrar could not raise the additional capital. In consequence, the Superintendency issued a report to Fogafín (a Government entity created to protect savings) concluding that Granahorrar was insolvent and illiquid. Fogafín’s board decided that the Government would take over Granahorrar, and ordered the company to reduce the nominal value of its shares to COP 0.01. The financial situation of Granahorrar improved and Fogafín sold Granahorrar in 2005. Following these events, the Carrizosa family initiated a number of domestic legal actions seeking compensations, which ended with the Constitutional Court dismissing their request. In their international disputes, the Carrizosa family also failed as, in April and May 2021, both tribunals found that they did not have ratione temporis jurisdiction over their claims.

 

Conclusion

We expect to see as many interesting developments in 2022 concerning arbitration in Latin America. It will be interesting to see whether the Mexican Executive succeeds in the advancement of the so-called Energy Counter Reform and the response from the industry in turn. From this, we will be able to analyze different legal strategies as well as decisions, based on the plethora of investment treaties to which Mexico is a signatory. Likewise, we expect to see how Ecuador’s return to ISDS develops. As mentioned before, although the country is again a signatory of the ICSID Convention, it still needs to provide its consent to international arbitration through other means such as BITs. It will be interesting to see whether and how the country will be able to overcome the government’s constitutional prohibition to submitting itself to the jurisdiction of non-Latin American tribunals. We also expect to keep hearing from Colombia, especially in view of a couple of claims arising from the mining industry lately, as well as from Peru which was one of the most frequent respondents in 2021. Finally, although we did not get as many reports from Brazil as in previous years, we anticipate the continuance and strengthening of the country’s unique approach to arbitration.1) As many readers may know, Brazil has not yet signed the ICSID Convention, the CPTPP or BITs with investor-state dispute settlement mechanisms. Unlike the vast majority of countries, Brazil believes that it does not need to sign any investment treaties to attract foreign investment jQuery('#footnote_plugin_tooltip_39484_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39484_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Specially, in light of the nation’s adoption of the Government Procurement Act (“GPA”) in April, which contains a chapter exclusively dedicated to dispute resolution (ss. 151 to 154), which reinforces Brazil’s arbitration-friendly framework.

 

We look forward to receiving our readers and contributors’ insights on these and other matters at [email protected]

References[+]

References ↑1 As many readers may know, Brazil has not yet signed the ICSID Convention, the CPTPP or BITs with investor-state dispute settlement mechanisms. Unlike the vast majority of countries, Brazil believes that it does not need to sign any investment treaties to attract foreign investment function footnote_expand_reference_container_39484_30() { jQuery('#footnote_references_container_39484_30').show(); jQuery('#footnote_reference_container_collapse_button_39484_30').text('−'); } function footnote_collapse_reference_container_39484_30() { jQuery('#footnote_references_container_39484_30').hide(); jQuery('#footnote_reference_container_collapse_button_39484_30').text('+'); } function footnote_expand_collapse_reference_container_39484_30() { if (jQuery('#footnote_references_container_39484_30').is(':hidden')) { footnote_expand_reference_container_39484_30(); } else { footnote_collapse_reference_container_39484_30(); } } function footnote_moveToReference_39484_30(p_str_TargetID) { footnote_expand_reference_container_39484_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39484_30(p_str_TargetID) { footnote_expand_reference_container_39484_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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What Do the Updated Arbitration Rules of the Danish Institute of Arbitration Tell Us?

Kluwer Arbitration Blog - Wed, 2021-12-15 00:00

The Danish Institute of Arbitration (the DIA) updated its arbitration rules this year. The DIA Rules of Arbitration 2021 (the DIA Rules 2021) apply to arbitrations commenced on or after 13 April 2021, unless otherwise agreed. The updated rules tell us that the DIA focuses on best practice, pragmatism and efficiency, and that they bolster the Danish position when considering which institution is most suitable to administer a dispute. The updates address a range of matters including disclosure of third-party funders, change of representation and virtual hearings.

 

Introducing the DIA

The DIA, in its present form, has over forty years’ experience and builds upon the cumulative knowledge of institutional arbitration in Denmark since 1894. The DIA Secretariat administers cases and coordinates with the Chair’s Committee to ensure the implementation of the rules, including to confirm arbitrators and to set arbitrators’ fees. Steffen Pihlblad heads the Secretariat, having previously worked in private practice and for the Ministry of Justice. Jeppe Skadhauge and Christian Alsøe constitute the Chair’s Committee as chair and vice-chair of the DIA board respectively.

The DIA is known for its considered approach, as demonstrated by its declaration of acceptance, which arbitrators sign when accepting an appointment. While this declaration provides for the standard statement of impartiality and independence it also, among other points, requires disclosure regarding repeat appointments and confirmation of language ability. The declaration further notes that arbitrators may come under the DIA’s liability insurance in certain circumstances.

 

Best Practice

The DIA Rules 2021, following from the previous 2013 version, ensure that the DIA is up-to-date with, and contributes to, arbitration best practice for the benefit of its users. For instance, the rise of third-party funders has prompted concerns regarding conflicts of interest, and the DIA Rules 2021 (see Article 20), similar to the ICC rules 2021 (see Article 11), now expressly provide that a party must inform the Secretariat, tribunal and other parties of the identity of a third party that has entered into a funding arrangement under which it has an “economic interest in the outcome” of the case. The DIA’s wording could be read to cover broader funding arrangements than the ICC’s as the DIA’s arrangements cover “funding of any costs in relation to the case” whereas the ICC’s arrangements cover “funding of claims or defences”. The update highlights that even insurers or bankruptcy creditors may have to be disclosed if they have an economic interest in a case’s outcome.

Similarly, the DIA Rules 2021 make it clear that a change in a party’s representation may be halted if such a change is considered unreasonable (see Article 23). An example would be if a change were deliberately instigated to cause a conflict of interest for the tribunal. This preventative power is similar to that found in the LCIA rules 2020 (see Article 18) but for a noteworthy distinction. Under the DIA Rules 2021, it is the Chair’s Committee (the equivalent of the LCIA Court) that decides on whether a change of representation is permitted, rather than the tribunal. Leaving the decision to a body other than the tribunal minimises the risk that a tribunal may prioritise its own constitution over the most appropriate procedure for the resolution of the dispute, particularly considering the general principle that a party is able to choose its own representation.

Further examples include proceedings involving joinder of third parties and multiple contracts. The DIA Rules 2021 clarify what occurs as regards the tribunal once a third party is joined (see Article 16). If a third party is joined at the request of an original party to an arbitration and cannot agree to the tribunal’s appointment, the Chair’s Committee shall revoke the tribunal’s confirmation and, unless all parties agree to another procedure, appoint all subsequent tribunal members. If a third party is joined at its own request, and the case has already been referred to the tribunal, the third party is required to agree to the tribunal’s appointment as made by the original parties. The DIA Rules 2021 also clarify that there is not a requirement to commence additional arbitrations if claims come under multiple contracts, subject to the arbitration agreement(s), but there is a requirement of an additional registration fee if there is an additional claim made (see Article 17).

 

Pragmatism

The DIA Rules 2021 are pragmatic. Document production is a standard practice in international arbitration, and the DIA Rules 2021 reflect this by expressly stating that a tribunal can order a party to produce documents or other evidence (see Article 33). The updated rules support such document production by highlighting the power of the tribunal to draw adverse inferences in case of non-compliance with a document production order.

Moreover, the overview of arbitration costs is now set out in a Schedule of Fees and Charges, available on the DIA website. Having a separate schedule outside of the DIA Rules 2021 allows for easier updates compared to when the overview was contained in an appendix to the 2013 rules. An added description regarding the amount in dispute (see Appendix 2, Article 2) also makes it clearer on what basis the arbitration costs are calculated.

 

Efficiency

Lastly, the DIA Rules 2021 demonstrate efficiency by providing that: (1) electronic means is the standard for written communication (see Article 3); and (2) virtual hearings are possible, even if a party objects, so long as they are reliable, appropriate and justified by special circumstances (see Article 37). Both updates reflect the DIA’s environmental considerations and are echoed by the Green Protocol for Arbitral Institutions (see earlier posts on this Blog here and here for further discussion regarding green arbitration). The DIA Rules 2021 further add a provision on the language of the Statement of Claim (see Article 5) that again demonstrates efficiency. The Statement of Claim is the first submission of the claimant in DIA arbitrations and it is now expressly required to be in the language of the arbitration agreement, unless otherwise agreed. This can assist in saving time and costs.

 

Conclusion

The DIA Rules 2021 tell us that the DIA focuses on best practice, pragmatism and efficiency, which build on the institute’s decades of arbitration experience and place the DIA in an enviable position among parties’ institutional options. Denmark’s high rankings for rule of law, lack of perceived corruption, and sustainability, as well as the institute’s growing number of cases, reinforce such a position.

 

=======

The author is presently seconded to the Danish Institute of Arbitration.

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Interviews with Our Editors: Vienna and Beyond, Expanding Horizons and New Opportunities with Alice Fremuth-Wolf

Kluwer Arbitration Blog - Tue, 2021-12-14 00:50

Alice, welcome back to Kluwer Arbitration Blog, and thank you for allowing us to continue our previous conversation published here in 2019. This time we would like to focus on ‘Alice Fremuth-Wolf’ as one of the leading personalities of international arbitration who has promoted and implemented modern approaches to arbitration at the Vienna International Arbitral Centre (VIAC) and in international arbitration, more broadly. As a background to our conversation, Alice has announced that she will step down from her Secretary General position as of 31 December 2021.

 

1. Alice, the arbitration community knows you very well as the Secretary General of VIAC. What would you say are the highlights of your time at VIAC?

There are several highlights worth mentioning that are all somehow interrelated:

VIAC was for me like a sleeping beauty that had to be kissed awake. It needed a little brush-up, a new corporate design and a more modern image. The logo, the corporate design, the design of the website that you are familiar with today all stem back from my early days at VIAC, and were then further developed with my new team.

Next were certain technological developments with which institutions such as VIAC have to keep up. I supervised the introduction of an electronic case-management system in 2018 which permits us to administer cases paperlessly. That was and still is a huge advantage for us during the pandemic since our case-managers can administer cases remotely from home-office if needed. The next logical step was to implement a secure platform that enables communication between the Secretariat, the parties, counsel and arbitrators instead of using emails. I was very proud when on 1 March 2021, the “VIAC Portal” was launched, which is a cloud-based file sharing and collaboration software operated by Thomson Reuters and hosted on HighQ. A separate case site is opened for each case; it is the latest move to increase efficiency in VIAC cases, to enable transparency among case participants, and to address the participants’ ever increasing needs for data security, confidentiality and privacy.

Then there were the several rounds to modernize the Vienna Rules that I oversaw. Here, I am especially proud of two things: 1) the set of mediation rules that entered into force on 1 January 2016 as a second pillar of VIAC’s offers for alternative dispute resolution; and 2) the stand-alone investment arbitration and mediation rules that are available since 1 July this year and that were a product of the latest Rules Revision in 2021.

Another highlight for me was being able to support and to promote new talents, as well as to raise awareness for the importance of diversity when making appointments of arbitrators. I am pleased to say that the number of female arbitrators (and young arbitrators) appointed in VIAC cases has increased steadily under my term of office. I was also fortunate to attract young talents to work at the VIAC-Secretariat and I am super delighted with how my team is composed today.

 

2. If one looks at the statistics of VIAC in the past 10 years, the increasing diversity in terms of parties and their nationalities, and of the subject matter of the disputes, can be easily noticed. Did you have a well-set target to transform VIAC from a regional hub for arbitration to a one-stop international arbitration institution for both commercial and investment disputes?

When I started in 2012 as Deputy SG of VIAC, I quickly realized the potential of VIAC given its historical background and stronghold in the region. I wanted to bring VIAC to the next level, making it the premier arbitral institution in Central and South-Eastern Europe. To do this, I had to break-up the old structures, and convince the Chamber that “because it has always been handled in a certain way in the past” did not mean that it cannot be done better in the future. I wanted to transform VIAC into an international boutique arbitration centre but with a personal touch and with particular regional experience and knowledge. And I was fortunate that Günther Horvath, the VIAC president under my tenure, shared the same vision. I am very grateful to him; he is such an inspiring person and a mastermind with great humour. It was a pleasure and privilege developing new ideas and projects with him.

VIAC’s advantage is that it is a much smaller institution than the big players, with the benefit of less administrative hurdles, which enables us to react much quicker to enquiries. The VIAC Secretariat is a small team, but very efficient and fluent in many languages spoken in our region. That helped create trust with our clients. I was always personally available to speak to parties, counsel and arbitrators in urgent matters, as is my Deputy Elisabeth Vanas-Metzler who is head of case management. She is doing a fantastic job, always full of energy and good spirit.

 

3. In your position as Secretary General, you had to make conscious decisions about certain directions VIAC should not take. I recall from your previous interview with Kluwer Arbitration Blog that one of such decisions was not to include emergency arbitrator procedure in its rules. Can you tell us a little bit more about these strategic decisions?

I have mentioned before that it was one of my goals to modernize VIAC and the Vienna Rules. By that I did not mean that VIAC should follow each and every trend that was introduced by other institutions over time. We wanted to keep our main selling point, i.e. having lean and flexible rules that enable tailor-made arbitration and mediation at affordable costs. So, we had to make certain strategic decisions. One of these was not to offer emergency arbitrator proceedings.

First, emergency arbitrator proceedings are very expensive. Courts very often are able to offer the same service cheaper and are vested with coercive powers to enforce the interim measures issued. Second, we know that that most courts in the regions where VIAC operates are competent and willing to render interim and conservatory measures in support of arbitral proceedings. Third, there is still uncertainty in many jurisdictions as regards the enforceability of such decisions rendered by an emergency arbitrator.

We are of course closely observing UNCITRAL’s Working Group II which aims to improve the efficiency of arbitral proceedings (including emergency arbitrator proceedings), and the experiences of other arbitral institutions which have incorporated such provisions.

Another such conscious decision was to have opt-in rules for expedited proceedings. There is no monetary threshold under the VIAC Rules for proceedings to automatically fall under a fast-track procedure with a sole arbitrator. We are of the opinion that the amount in dispute is not the decisive criteria if a case is suitable for expedited proceedings. We had observed that very often the parties do not appreciate that they are being ushered into expedited proceedings just due to the amount in dispute, as the case may be fundamental for them and deserves thorough attention. In addition, in a fast-track procedure, not only do the arbitrators have to decide fast, but the parties and their counsel also have to be very well-organized. That is not always easy, particularly in smaller cases with less-experienced stakeholders. In general, most of our proceedings are completed within a year’s time which is already considered fast by many parties.

So instead of forced-on expedited proceedings, we chose to provide in the Vienna Rules the general proposition that arbitrators and parties as well as their representatives shall conduct the proceedings in an efficient and cost-effective manner. Such conduct will then be taken into account in determining the arbitrators‘ fees and in determining the allocation of costs by the arbitrators at the end of the proceedings.

 

4. Strategic decisions require exceptional professionals and exceptional professionals have a unique background. I dare to add that your unique background is also a complete one. I will refer first to the dispute resolution specialist side of it: you practiced as counsel in commercial disputes, you had your judicial training with the Austrian courts, and you are trained as mediator. How much of each has helped you in being successful at the helm of VIAC?

Actually, all of it! I think it was exactly the mixture of my work as a court clerk, counsel, arbitrator and mediator that formed a big mosaic of my ever-growing skills. It is often like that in one’s career ‑‑ you collect pieces on your way, and at some point you end up with a wonderful collection that is still growing. I would not want to miss any of these experiences, and it helps me tremendously to have stepped into various roles to better understand the needs and desires of different stakeholders in various dispute resolution scenarios.

 

5. Moving to the other side of your background: prior to and after obtaining your doctoral degree, you have pursued as well an academic path with the Institute of Civil Procedure at the University of Vienna (Institut für Zivilgerichtliches Verfahren, Universität Wien) and have also coached, for a good number of years (and where our paths have crossed) the Willem C Vis Moot team of the University of Vienna. Tell us a little about your time at the University of Vienna, and in particular about how research and teaching in arbitration has shaped your future career.

Academia has taught me many things, amongst these are persistence, precision, humbleness and the ability to persevere. I was very lucky to have had the opportunity to work as an assistant at the Institute of Civil Procedure at Vienna University with bright and inspiring fellow colleagues who have become leading scholars in Austria and beyond. Writing my thesis was a stony path and at my first attempt I stumbled and failed, as I had completely underestimated the perseverance needed for such a task. At that time, I was simply lacking the ability to dig deep and deeper into one topic until you reach the bottom. But fortunately, I realized this quickly and gave in to my longing for studying abroad. I applied to and was accepted at the London School of Economics and Political Science in 1997 for an LLM programme. As one of my choices, I took a course in arbitration at the School of International Arbitration (“SIA”) at Queen Mary that proved to be a game-changer for me. Prof Lew and the late Prof Adams, who were brilliant and inspiring teachers, sparked a fire in me for arbitration that is still burning.

Until then, I had had only one practical encounter with arbitration as a summer-intern in a law firm when asked to assist in an arbitration between an Italian party and a Czech party concerning the delivery of tractors. I had no idea on both issues but was fascinated by the international environment, the site visits, and the exciting hearing days. Instinctively I knew that this was something for me (arbitration, not tractors!). What had been lacking was a sound theoretical backbone that I obtained during my time at the SIA.

After having deepened my academic knowledge in arbitration and upon returning to Vienna, I first went back to practice and took the bar exam. However, the thorn in my side of the unfinished business of my doctoral thesis made me quit at the law firm and bring “this” to an end. I chose the topic of “Singular Succession (Assignment) and Arbitration Agreements“, where I had to answer several difficult and central questions of civil (procedural) law. But this time, I had the passion and necessary steadiness to finish, and this still makes me proud.

So, returning to academia as a coach for the Vienna Vis Moot team in 2004 was very rewarding for me in many ways. I could give back to the university and I also realized that I enjoy teaching and supporting and challenging young talents to help them rise to their best. I still very much remember my first Vis Moot team. When they reached the finals, I was out of my way, also because I had just given birth to my first-born during the Vis week and was attending the ceremony with a baby. Truly unforgettable. I had a slightly better timing for my other two kids who were both born in summer, well after the Vis Moot week.

  

6. You have managed to successfully lead VIAC, to have a truly exceptional career as academic and practitioner in dispute resolution, and to have a wonderful, numerous family, being the mother to three wonderful children. The answer to my question has practical value to our readers – VIAC, all the other arbitration institutions, and all arbitration stakeholders are currently pushing the boundaries of diversity in international arbitration. How do you manage all?

This is a really good question! I am sure that I don’t manage it all but at least I try. And I came to realize three things: 1) “good is sometimes good enough” and “perfect is the enemy of good”. 2) You need to have (with fall-backs) a good plan A but don’t be disappointed if it is eventually only plan F that materializes. 3) Be flexible and take opportunities when they arise. It is impossible to be good at everything all the time; I even think it is not healthy.

It is important to look after oneself because you can only give as much as you actually have and if your life is empty, then it is bad for everyone including yourself. It is ok to take a break, to enjoy a great moment and still give your best. Sometimes giving your best can also mean, doing less, letting others take over and spreading responsibilities within your team and within your family so that all can take their share. This enhances team-spirit and this is a secret for success: to realize that you are always in a team and not a sole marathon-runner (although sometimes it feels like it.

My kids have taught me many things, they have been like a mirror for me and my flaws, challenging me and my beliefs constantly. I want them to grow up in an environment where it is allowed to ask questions, to say no, to have freedom of choice for their careers, to have diversity in society, to have a healthy environment and to have fun living their lives. And I want to contribute to this where I can.

 

7. What’s next, Alice?

After 10 years at VIAC, it was time for me to move on. I was ready to accept a new challenge by entering the field of litigation finance. I will join the European-based third-party-funder Nivalion as of February 2022.

 

8. I am thrilled to hear this! And I wish you best of luck in this next step of your career. Nivalion is truly fortunate to have you and the arbitration community will be pleased to see you when negotiating the next funding agreement. How does this position align with your broader career goals and ambitions?

It was the logical next step. I am a visioner who wants to work for a good cause. I truly believe that third-party funding is beneficial as it enables access to justice for parties that could otherwise not pursue their case. I will be working with a great team of ambitious people that know their business and are very determined to this cause. My new role as Market Area Head of Austria & CEE of Nivalion allows me to contribute to this mission. I want to help build trust and for stakeholders to better understand the way funding works and make use of this instrument. And it enables me to stay within the dispute resolution arena where I have met so many bright people and made lots of friends. I would not want to miss this inspiring environment and the arbitration community. I look forward to partaking in a different function but with the same energy and commitment.

  

9. Judge Brower, in an interview to Kluwer Arbitration Blog, was talking about the “building blocks” of a career. Your career is stellar and each part of it appears to be, indeed, a building block to where you are today. What would be that one advice you would give to our readers who are now at beginning of their careers in arbitration?

Judge Brower is a truly outstanding personality with a remarkable career path – and I still have a long way to go before being even close to such achievements.

My advice to young professionals is simple: Believe in yourself! Be brave. Have faith. Have dreams and pursue them, even if the path is not a straight one. Don’t lose sight of where you are heading to; stay true to your personal goal and cause. Sometimes life takes unexpected turns, embrace them and move on, don’t let anyone get you off the track. My personal mantra when faced with a set-back or tough situation is: “it will be good for something” and it always has been for me, even if I came to realize it only much later. And, don’t forget to have fun, you only got this one life.

 

Thank you, Alice, for your time and candid views! We wish you all the best always.

 

Past interviews in the Kluwer Arbitration Blog’s “Interviews with Our Editors” series are available here.  

 

 

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Supreme Court Grants Cert in Three Arbitration-Related Cases

ADR Prof Blog - Mon, 2021-12-13 09:47
FOI Imre Szalai (Loyola- New Orleans) sent an email around on the DLRE Listserv this past Friday and, with his permission, I am posting it here for readers of the blog: Hi everyone, The big news out of the Supreme Court today involved the Texas abortion ban, but the Court also added some new arbitration … Continue reading Supreme Court Grants Cert in Three Arbitration-Related Cases →

What’s in a Name? The Validity of Arbitration Awards in Qatar

Kluwer Arbitration Blog - Mon, 2021-12-13 00:30

Over the last few years, the courts in Qatar have been criticized from the arbitration community for having issued several rulings setting aside both domestic and foreign arbitral awards on public policy grounds. In particular, these rulings held that like court issued judgments, domestic and even foreign arbitral awards were required to be rendered in the name of the supreme authority of the state i.e., His Highness, the Emir of Qatar, failing which awards could be challenged in the Qatari courts for violating public policy.

The Qatari courts justified their position on the now repealed provisions of the Civil and Commercial Procedures Law (Law No. 13 of 1990) (“Qatar CCPL”) 1)Namely Articles 198, 204 and 207 of the Qatar CCPL jQuery('#footnote_plugin_tooltip_39740_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39740_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });, which previously governed arbitrations seated in Qatar before the issuance of Law No. 2 of 2017 Promulgating the Civil and Commercial Arbitration (“Qatar Arbitration Law”). In addition, the Qatari courts also relied on other general provisions of the Qatar CCPL such as Article 69, which stipulates that all judgments are to be issued and executed in the name of the Emir, without distinguishing between court judgments issued by the state’s judges and arbitration awards rendered by arbitral tribunals. These provisions are underscored by Article 63 of Qatari Constitution, which provides that “judicial authority shall be vested in the Courts in the manner prescribed in this constitution and judgments shall be issued in the name of the Emir”.

In Qatar Court of Cassation No. 64 of 2012, which concerned an arbitration seated in Qatar, the Qatari courts was of the view that rendering judgments in the name of the Emir is supported by public force, and is what makes them enforceable. Analogously, failing to issue an award in the name of the Emir would result in the award being considered null and void, contrary to public order and the courts may sua sponte set aside that award. A commentary on this case can be found here.

Foreign Arbitration Awards Enforced in Qatar

The ineptness of imposing the requirement to issue judgments in the name of the Emir on arbitration awards was brought one step further in 2013 when the Qatari courts not only refused the enforcement, but also annulled a foreign ICC arbitration award rendered in Paris for the same reason, that it was not issued in the name of the Emir. This was a troubling decision for many reasons. First, being a member of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention)”, Qatar was obliged to recognize and enforce arbitral awards in line with its provisions. Second, Qatar was not the seat of the arbitration in this case and its national courts had no jurisdiction to annul an arbitration award that was rendered in Paris. Third, this case created a ripple effect of concerns for potential investors in Qatar. A previous commentary on this case can be found here.

Against the backdrop of these somewhat astounding decisions that were issued by the Qatari courts, the Qatar Court of Cassation seized an opportunity in 2014 to clarify its position with respect to foreign arbitral awards.

In Qatar Court of Cassation No. 164 of 2014, the Qatari courts held that when it comes to the enforcement of foreign arbitral awards, the provisions of the New York Convention are to be adhered to and it would be incorrect to impose domestic requirements (such as the requirement for an arbitration award to be rendered by the supreme authority of the state) on foreign arbitral awards. The Qatari courts reasoned that the New York Convention does not stipulate any provisions regarding the form of the award or its elements. An earlier commentary on this judgment can be found here.

While this was a positive step taken by the Qatari courts towards the recognition and enforcement of arbitration awards in Qatar, it left much to be desired. For one, the position with respect to Qatar seated arbitration awards was still subject to the Qatar CCPL requirements, which remained varied and disjointed at best. Further, in a similar judgment issued by the Qatar Court of Cassation in Appeal Nos. 45 and 49 of 2014, the Qatari courts appeared to mistakenly consider an arbitration seated in Qatar as foreign on the basis that the proceedings took place under the rules of the ICC, which is headquartered in Paris. On this basis, the Qatari courts concluded that this award did not need to be issued in the name of the Emir.

Recent Clarification by the Qatar Court of Cassation Post Issuance of the Qatar Arbitration Law

Since the issuance of the Qatar Arbitration Law in 2017, which repealed the arbitration related provisions of the Qatar CCPL, there is no basis to maintain the requirement for even Qatar seated arbitration awards to be issued in the name of the Emir. In tandem with this, the Qatar Court of Appeal refused to set aside a Qatar arbitration award based on the argument that the award was not issued in the name of the Emir in Qatar Court of Appeal No. 2186 of 2019 dated 6 July 2020.

The Qatari courts firmly held that an application to challenge an arbitration award could only be made out under one of the limited grounds set out in Article 33 of the Qatar Arbitration Law. Accordingly, the Qatari courts held that the appellant’s contention that the arbitral award contravened public policy because it was not issued in the name the Emir and should be set aside was baseless and without merit. While the Qatari courts did not mention the New York Convention, the grounds for setting aside awards under the Qatar Arbitration Law mirror the grounds for refusing the enforcement of foreign awards contained in Article V of the Convention. By this, the Qatari courts have affirmed its adherence to the New York Convention.

Refreshingly, the Qatari courts even went a step further in this case in clarifying the historical misinterpretation and erroneous application of domestic law to arbitral awards, stating that:

“The lack of a statement in the preamble to the judgment that the judgment is issued in the name of HH the Emiri would not undermine its legality or essence for it is clear that the constitution and the Judicial Authority Law do not address the particulars that must be included in judgments. The provision that judgments shall be issued and enforced in the name of HH the Emir of Qatar indicates that such issuance is, of itself, presumed by the force of the Constitution per se regardless of whether it is stated in the preamble to the judgment. The inclusion of a statement is a subsequent physical act that bears out but does not perfect the facts presumed…. The statement’s omission does not produce nullity.”

This is an encouraging decision from the higher court of Qatar, which strengthens the validity and enforceability of both Qatar and foreign seated arbitration awards.

Future of Qatar’s Pro-Arbitration Stance

Shakespeare once shared a similar sentiment, when writing, “What’s in a name? That which we call a rose by any other name would smell just as sweet.” What he was alluding to, and what is equally applicable here is that how something is labelled is arbitrary if it does not change its fundamental and intrinsic qualities. In other words, whether an arbitration award is issued in the name of the Emir should not affect its validity or enforceability as long as the content of the award is sound. For the Qatari courts to have set aside or refused the enforcement of arbitration awards on the basis that they did not include the words “issued in the name of His Highness the Emir”, was not just a wholly erroneous application of Qatari law, but also a contravention of Qatar’s obligation under the New York Convention, which it has ratified and adhered to since 2003, by virtue of Emiri Decree No. 29 of 2003.

The implications of this judgment are four-fold. First, the latest Qatar Court of Appeal judgment hopefully laid to rest the requirement that Qatar seated arbitration awards are to be issued in the name of the Emir. Second, it affirms the position that arbitration awards in Qatar may only be set aside on one of the limited grounds contained in Article 33 of the Qatar Arbitration Law. Third, Qatar has aligned its approach on the validity and enforceability of arbitral awards with that of the New York Convention. Fourth, it solidifies the position of the Qatar Arbitration Law as taking precedence over any provisions of the Qatar CCPL, with respect to arbitrations. Lastly (and perhaps most importantly), it strengthens Qatar’s reputation as a pro-arbitration jurisdiction.

While it remains to be seen how the Qatari courts will determine these issues in future cases, recent applications to set aside arbitration awards before the Qatari courts do indicate Qatar’s intention to develop itself into a pro-arbitration jurisdiction. Since these controversial rulings, the Qatari courts have changed its approach towards arbitration. Indeed, setting aside applications of arbitration awards before the Qatari courts have an increasingly high threshold to meet presently. The future of Qatar as a pro-arbitration hub is certainty optimistic.

The authors acknowledge the contribution of Jeanne Visser to this post.

References[+]

References ↑1 Namely Articles 198, 204 and 207 of the Qatar CCPL function footnote_expand_reference_container_39740_30() { jQuery('#footnote_references_container_39740_30').show(); jQuery('#footnote_reference_container_collapse_button_39740_30').text('−'); } function footnote_collapse_reference_container_39740_30() { jQuery('#footnote_references_container_39740_30').hide(); jQuery('#footnote_reference_container_collapse_button_39740_30').text('+'); } function footnote_expand_collapse_reference_container_39740_30() { if (jQuery('#footnote_references_container_39740_30').is(':hidden')) { footnote_expand_reference_container_39740_30(); } else { footnote_collapse_reference_container_39740_30(); } } function footnote_moveToReference_39740_30(p_str_TargetID) { footnote_expand_reference_container_39740_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39740_30(p_str_TargetID) { footnote_expand_reference_container_39740_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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The Contents of the Yearbook Commercial Arbitration, Volume XLVI (2021)

Kluwer Arbitration Blog - Mon, 2021-12-13 00:00

Subscribers to KluwerArbitration.com enjoy access to the ICCA Yearbook Commercial Arbitration.

For the second year, the Yearbook publishes a selection of awards rendered under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce, the SCC. The ten awards, rendered between February 2019 and April 2021, deal with a variety of substantive and procedural issues. Here are a few examples of what the awards cover.

One award dealt with the important issue of interpreting SCC arbitration clauses in a dispute in respect of the supply of hardware and software systems for mining cryptocurrencies. The sole arbitrator denied the claimant’s argument that the contract containing the SCC arbitration clause was a nominal contract only, concluded for customs clearance purposes, and that the parties’ relationship was governed instead by an earlier contract which did not contain an SCC clause. The arbitrator also found that the reference in the clause to the Arbitration Institute of the Stockholm Chamber of Commerce was a clear indication that the parties intended to make use of the arbitration rather than the mediation services of the SCC, and that therefore the clause was not ambiguous.

Another award, one of two published in the Yearbook, concerned the effectiveness of the SCC Expedited Arbitration rules. The arbitrator held that the claimant could not withdraw his claim unilaterally after refusing to comply with the arbitrator’s decision that he give security for costs in accordance with the Rules, a decision with which the claimant disagreed. Dismissing the case with prejudice, as provided for under the English lex arbitri that was applicable because of the London seat, the arbitrator stressed that any other course of action would undermine the arbitrator’s authority to which the parties had agreed, and constitute an abuse of process. A claimant, he reasoned, should be prevented from withdrawing a case and allowed to reinitiate the case with a differently composed tribunal or arbitrator.

These materials will soon be made available on the ICCA Focus on Sweden page on the KluwerArbitration website. The Focus on Sweden is an initiative collecting all materials published in ICCA’s Yearbook Commercial Arbitration and International Handbook on Commercial Arbitration highlighting Sweden as an important arbitration jurisdiction.

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What I’m Reading – Changing Minds

ADR Prof Blog - Sun, 2021-12-12 19:56
To resolve a dispute, one or more people need to change their minds.  Negotiation and mediation involve techniques to help people do just that. Obviously, this can be very difficult.  People have reasons for their positions and they may not change them easily. This post focuses on two approaches for changing minds, which are highlighted … Continue reading What I’m Reading – Changing Minds →

Mālō e lelei, Tonga International Arbitration Act 2020!

Kluwer Arbitration Blog - Sun, 2021-12-12 00:47

The Kingdom of Tonga is dedicated to furthering the development of arbitration. A little more than a year ago, this blog published a post reporting that Tonga had acceded to the New York Convention on 12 June 2020. The New York Convention came into force for Tonga on 10 September 2020, and exactly three months later – on 10 December 2020 – the Legislative Assembly passed the International Arbitration Act 21 of 2020 / Lao ki he Fakatonutonu Fakavaha’apule’anga – Lao Fika 21 ‘o e 2020, which came into force on 3 March 2021.1)The words “Mālō e lelei” in the headline are a common greeting in Tongan, usually translated as “Hello”. jQuery('#footnote_plugin_tooltip_39685_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39685_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The Act is modelled on the UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006. According to the Lord Chief Justice Michael Whitten QC of the Supreme Court of Tonga, it also contains provisions “adapted from leading arbitration seats in the region, including Australia, Hong Kong, and Singapore”. This post highlights some of the differences between the Act and the Model Law and analyses two recent decisions of the Supreme Court of Tonga.

 

The Tongan International Arbitration Act and the UNCITRAL Model Law

There are some key differences between the Act and the UNCITRAL Model Law.

Section 9(1) and (2) of the Act, dedicated to the situation of an arbitration agreement and a substantive claim before a court, are an adoption of Article 8 of the Model Law. Yet the Act contains two additional subsections. Notably, it clarifies that if the court refuses to refer the parties to arbitration, any provision of the arbitration agreement that an award is a condition precedent to the bringing of legal proceedings in respect of any matter (this type of agreement is known as a Scott v Avery clause) shall have no effect in relation to those proceedings.

The Model Law contains no equivalent to section 10 of the Act, which is dedicated to the death, bankruptcy, or winding up of a party. In any of these events, unless otherwise agreed by the parties, an arbitration agreement shall not be discharged and may be enforced by or against the representatives of that party. This provision, however, does not affect the operation of any law under which the death of a person extinguishes a cause of action.

By virtue of section 18 of the Act, an arbitrator, their employee, or their agent is not liable for anything done or omitted in the actual or purported discharge of their functions as arbitrator unless the act or omission is shown to have been in bad faith. This section does not affect any liability incurred by an arbitrator by reason of their resignation. It is apparently inspired by section 28(1) of the Australian International Arbitration Act 1974 (Cth) and section 25A of the Singapore International Arbitration Act.

Section 34 of the Act stipulates that a party may appear in person before an arbitral tribunal and be represented by themselves or any other person of that party’s choice – a provision apparently inspired by, but less detailed than section 29(2) of the Australian International Arbitration Act 1974 (Cth).

Section 44 of the Act allows the parties to apply to the court to determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties. This appears to be a remnant of the “Statement of Case”, previously contained in section 21 of the English Arbitration Act 1950, which was abolished in England in 1979 for good reasons. The new Tongan provision is a lot less severe than its English predecessor. The right is subject to the parties’ agreement, the arbitral tribunal’s permission, and the court’s satisfaction (i) that the determination of the question is likely to produce substantial savings in costs and (ii) that the application was made without delay.

Section 45 of the Act contains a provision on confidentiality apparently inspired by section 18 of the Hong Kong Arbitration Ordinance.

Sections 59 and 60 of the Act closely resemble Articles 35 and 36 of the Model Law on recognition and enforcement, with the notable exception that section 59(2) sets forth that a corresponding application must be made no later than six years from the date of the award.

Then, section 61 of the Act contains specific regulations on the evidence a party has to submit when applying for the recognition and enforcement of an arbitral award. These regulations may be seen as somewhat contradicting to those of section 59 of the Act. For example, section 59(3) of the Act sets forth that the party relying on an award or applying for its enforcement shall supply the original award or a copy thereof. Whilst this provision alone may be construed to mean that a simple copy of the award would suffice and that the arbitration agreement does not have to be submitted, section 61(1) of the Act requires a party to produce the duly authenticated original award or a duly certified copy and the original or a duly certified copy of the arbitration agreement under which the award purports to have been made.

Another example is section 59(4) of the Act, which states that if the award is not made in the English language, the court may request the party to supply a translation thereof. This provision alone may be construed to mean that if the court is able to read the award in its original language, it may refrain from requesting a translation. Yet, sections 61(3) and (4) of the Act set forth that if a document or part of a document is written in a language other than English, there shall be produced with the document a translation, in English, of the document or that part, as the case may be, certified to be a correct translation.

 

First Decisions mentioning the Tongan International Arbitration Act

The Supreme Court of Tonga so far has handed down two published decisions which make reference to the Act.

The case of Fe’ao Vunipola v Tonga Rugby Union concerned the question of whether the court should stay its proceedings based on an arbitration clause contained in the Constitution of the Tonga Rugby Union. In that context, the court confirmed that the Act, and especially section 9 (which is modelled on Article 8 of the Model Law) do not apply to domestic arbitration, for which Tonga continues to have no legislation. Thus, the court derived the power to stay its proceedings by relying on numerous foreign cases, such as the English case of Scott v Avery and the Supreme Court of Victoria case of Australian Football League v Carlton Football Club. In its decision, the Supreme Court of Tonga pointed out that while not directly applicable, some provisions of the Act were examples of support for the principle of party autonomy in arbitration.

The court ultimately declined to stay its proceedings since the arbitration clause had “…the effect of purporting to exclude or ‘oust’ the jurisdiction of the Courts…”, an argument ultimately based on the infamous English case of Czarnikow v Roth, as followed in Tonga by the case of Touliki Trading Enterprises v Procorp2)[1999] Tonga LR 216, 223 jQuery('#footnote_plugin_tooltip_39685_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39685_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });. It is commendable that in its decision, the Supreme Court of Tonga specifically pointed to the further need for reform:

“…the law relating to private arbitration in other common law [jurisdictions] has, since 1854, been the subject of substantial legislative change, including changes in the extent to which judicial intervention may detract from the finality of an arbitrator’s award. Those changes, insofar as they relate to domestic commercial arbitration, are yet to find their way into the Tongan legal framework.” (at para. 107)

The case of Kacific Broadband Satellites International v Registrar of Companies et al. concerned an application to restore the company Tonga Satellite Limited to the Tongan Register of Companies. One circumstance in which such an application may be granted is where the company was a party to legal proceedings. Kacific had commenced arbitral proceedings pursuant to the Arbitration Rules of the Singapore International Arbitration Centre prior to being removed from the register and before the Act had come into force. The Supreme Court of Tonga confirmed that arbitral proceedings were such “legal proceedings”. In this context, the Supreme Court of Tonga pointed out that in spite of no Tongan domestic arbitration legislation, the court had already in the past given effect to domestic arbitral awards, such as in the case of Fletcher Construction v Montfort Bros3)[1995] Tonga LR 142 jQuery('#footnote_plugin_tooltip_39685_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_39685_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });.

 

Conclusion and Outlook

The International Arbitration Act 2020 certainly is an important step in Tonga’s efforts to modernise its arbitration legislation. At the same time, the English heritage still appears to be very present, as shown by various recent references to cases such as Scott v Avery and Czarnikow v Roth or, implicitly, to the “Statement of Case”. The first two Tongan decisions mentioning the Act have shown what the next step for Tonga should be: Enacting legislation on domestic arbitration.

References[+]

References ↑1 The words “Mālō e lelei” in the headline are a common greeting in Tongan, usually translated as “Hello”. ↑2 [1999] Tonga LR 216, 223 ↑3 [1995] Tonga LR 142 function footnote_expand_reference_container_39685_30() { jQuery('#footnote_references_container_39685_30').show(); jQuery('#footnote_reference_container_collapse_button_39685_30').text('−'); } function footnote_collapse_reference_container_39685_30() { jQuery('#footnote_references_container_39685_30').hide(); jQuery('#footnote_reference_container_collapse_button_39685_30').text('+'); } function footnote_expand_collapse_reference_container_39685_30() { if (jQuery('#footnote_references_container_39685_30').is(':hidden')) { footnote_expand_reference_container_39685_30(); } else { footnote_collapse_reference_container_39685_30(); } } function footnote_moveToReference_39685_30(p_str_TargetID) { footnote_expand_reference_container_39685_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39685_30(p_str_TargetID) { footnote_expand_reference_container_39685_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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US Secondary Sanctions Against Russia: Amidst Rising Tensions, Are Arbitral and Financial Institutions At Risk?

Kluwer Arbitration Blog - Sat, 2021-12-11 00:50

This entry is the last in a series of three regarding issues faced by arbitral and financial institutions as a result of restrictions on transfers of funds under primary and secondary sanctions programmes. In the first post, the authors addressed the impact of asset freezes on arbitral institutions and their banks, while the second post dealt with some of the challenges that such institutions may experience as a result of restrictions that form part of the United States’ (“US”) secondary sanctions against Iran. This final post discusses the potential effects of US secondary sanctions against Russia on arbitral and financial institutions.

 

US Secondary Sanctions Against Russia Related to the Occupation of Crimea

The US maintains extensive sanctions against Russia, including sanctions imposed in response to alleged foreign election interference and other malicious cyber-enabled activities, human rights abuses, weapons proliferation and illicit trade with North Korea. The present post focuses on the US sanctions imposed against Russia following the Russia’s 2014 occupation and annexation of the Crimea region in Ukraine, where tensions have recently flared up once again.

Most sanctions in respect of the Russian occupation of Crimea do not target the Russian state directly. They rather consist of designations of specific individuals, companies and other entities on the SDN List maintained by the Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury. As noted in our previous post, the SDN List contains individuals and entities whose assets are blocked, primarily as a result of the fact that these individuals and entities are acting for or on behalf of, or are owned or controlled by, a target state. By September 2021, the US had designated about 735 persons and entities on the basis of Ukraine-related sanctions.1)Dianne E. Rennack/Cory Welt, S. Sanctions on Russia: An Overview (IF10779), Congressional Research Service, 1 September 2021, p. 1. jQuery('#footnote_plugin_tooltip_39804_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

The US sanctions regime against Russia in respect of its occupation of the Crimea region is primarily based on a series of four Executive Orders (“EO”) issued by President Obama in 2014, namely EO 13660 of 6 March 2014, EO 13661 of 16 March 2014, EO 13662 of 20 March 2014 and EO 13685 of 19 December 2014. These EOs are based on national emergency statutory authorities and provide the framework for sanctions to be imposed on persons and entities the President determines are responsible for or complicit in, directly or indirectly, undermining democratic processes or institutions in Ukraine, illegally asserting governmental authority over any part of Ukraine or misappropriating Ukrainian state assets.

EO 13660 authorises the imposition of blocking sanctions against individuals and entities responsible for, inter alia, violating the sovereignty and territorial integrity of Ukraine or for actions or policies that threaten the peace, security, stability, sovereignty or territorial integrity of the country, while EO 13661 provides for blocking sanctions and travel restrictions against Russian government officials and persons operating in the Russian arms sector. EO 13662 in turn authorises sanctions against individuals and entities that operate in key sectors of the Russian economy, including the financial services, energy, metals and mining, engineering and defense sectors. Finally, EO 13685 prohibits US business, trade or investment in the Crimea region and authorises the imposition of blocking sanctions against those persons that the President determines have operated in, or been the leader of an entity operating in, Crimea.

Each of these EOs also authorises the imposition of blocking sanctions against any person that has materially assisted, sponsored, or provided financial, material or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the relevant EO.2)See section 1(a)(iv) of EO 13660 dated 6 March 2014, section 1(a)(ii)(D) of EO 13661 dated 16 March 2014, section 1(a)(ii) of EO 13662 dated 20 March 2014 and section 2(a)(iv) of EO 13685 dated 19 December 2014. jQuery('#footnote_plugin_tooltip_39804_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

In addition to the four Ukraine-related EOs, Congress passed, in 2014, two acts establishing sanctions in response to Russia’s invasion of Ukraine: the Ukraine Freedom Support Act of 2014 (“UFSA”) and the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (“SSIDES”).

On 2 August 2017, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which includes further sanctions with respect to the Russian Federation. Among other things, this piece of legislation amends the UFSA and the SSIDES, codifies the abovementioned Ukraine-related EOs and identifies several new targets for sanctions.

 

Do the Activities of Arbitral Institutions and their Banks Fall Within the Scope of US Secondary Sanctions Against Russia?

Compared to the often broad and comprehensive US secondary sanctions regime against Iran discussed in the authors’ previous post, sanctions in respect of the Russian occupation of the Crimea region are more targeted.

That said, from a secondary sanctions perspective, section 5 UFSA and section 10 SSIDES, both as amended by CAATSA, have the potential to create significant compliance challenges for non-US persons and entities that engage in certain transactions with sanctioned Russian parties.

Pursuant to section 5(b) UFSA (as amended by section 226 CAATSA), a foreign financial institution risks the termination or restriction of access to its US correspondent and payable-through accounts (“CAPTA sanctions”) if it is determined that it knowingly facilitated a significant financial transaction on behalf of any Russian person or entity included in the SDN List pursuant to the UFSA, EO 13660, EO 13661, EO 13662 or any other EO addressing the crisis in Ukraine.

OFAC will generally interpret the term “financial transaction” broadly to encompass any transfer of value involving a financial institution, including the receipt or origination of wire transfers, while “facilitated” is equally interpreted broadly and includes the provision of assistance for certain transactions, including the transmission of value.3)OFAC, Frequently Asked Questions, n. 542. jQuery('#footnote_plugin_tooltip_39804_27_3').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); OFAC considers the totality of the facts and circumstances when determining whether a financial transaction is “significant.”4) OFAC, Frequently Asked Questions, nn. 542 and 545. jQuery('#footnote_plugin_tooltip_39804_27_4').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

In addition, on the basis of section 10(a)(2)(A) SSIDES (as amended by section 228 CAATSA), non-US persons and entities risk being designated as SDN and face blocking sanctions if they are determined to have knowingly, on or after 2 August 2017, “facilitate[d] a significant transaction or transactions, including deceptive or structured transactions, for or on behalf of […] any person subject to sanctions imposed by the United States with respect to the Russian Federation.”

Similar to the guidance provided in respect of section 226 CAATSA, facilitating a transaction for or on behalf of a person is understood to mean providing assistance for a transaction from which the person in question derives a particular benefit of any kind, which includes the transmission of financial instruments or any other value.

To date, the UFSA and the SSIDES have rarely been cited as independent authority for designations or other sanctions actions.5)Cory Welt/Kristin Archick/Rebecca M. Nelson/Dianne E. Rennack, S. Sanctions on Russia (R45415), Congressional Research Service, 17 January 2020, p. 13. jQuery('#footnote_plugin_tooltip_39804_27_5').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

That said, even if this appears unlikely, it cannot be excluded, on the basis of the guidance provided by OFAC, that the processing and acceptance of a transfer of funds from a sanctioned Russian party by a bank (such as the payment of a registration fee or of an advance on costs), might expose the latter to secondary sanctions pursuant to section 5(b) UFSA and section 10(a)(2) SSIDES. From the perspective of a non-US financial institution, even the slightest risk of CAPTA or blocking sanctions might justify refusing the transaction altogether.

Similarly, the likelihood that an arbitral institution end up in the crosshairs of OFAC appears to be low. Prima facie, administering a dispute in which one of the parties is subject to US sanctions against Russia does not appear to constitute the facilitation of a significant transaction for or on behalf of such sanctioned person or entity.

However, it is difficult to predict how OFAC will implement its arsenal of secondary sanctions in the future, in particular considering that lingering geopolitical tensions in the relationship between Ukraine, Russia and the US may lead the Biden administration to take a more stringent approach in respect of the enforcement of existing or new measures against Russia.

Furthermore, unlike provisions of the US sanctions programme against Iran related to the authorised supply of legal services, which make reference to arbitration proceedings conducted outside the US, the authorisation related to legal services under the Ukraine-related sanctions programme does not contain any such reference.6)See 31 CFR § 589.506. jQuery('#footnote_plugin_tooltip_39804_27_6').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_6', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Therefore, should the administration of arbitration proceedings be deemed to amount to a facilitation of ”a significant transaction or transactions […] for or on behalf of” a designated person or entity,7)For instance, if the parties to an arbitration reach a settlement agreement, which might then be recorded in the form of an award made by consent of the parties in accordance with Article 33 of the ICC Rules of Arbitration. jQuery('#footnote_plugin_tooltip_39804_27_7').tooltip({ tip: '#footnote_plugin_tooltip_text_39804_27_7', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); the relevant arbitral institution might be required to secure a specific license. For that reason, the threat of secondary sanctions continues to constitute a non-negligible risk for arbitral institutions and their banks when dealing with Russian parties and/or certain sectors of the Russian economy. Enhanced due diligence remains the norm.

References[+]

References ↑1 Dianne E. Rennack/Cory Welt, S. Sanctions on Russia: An Overview (IF10779), Congressional Research Service, 1 September 2021, p. 1. ↑2 See section 1(a)(iv) of EO 13660 dated 6 March 2014, section 1(a)(ii)(D) of EO 13661 dated 16 March 2014, section 1(a)(ii) of EO 13662 dated 20 March 2014 and section 2(a)(iv) of EO 13685 dated 19 December 2014. ↑3 OFAC, Frequently Asked Questions, n. 542. ↑4 OFAC, Frequently Asked Questions, nn. 542 and 545. ↑5 Cory Welt/Kristin Archick/Rebecca M. Nelson/Dianne E. Rennack, S. Sanctions on Russia (R45415), Congressional Research Service, 17 January 2020, p. 13. ↑6 See 31 CFR § 589.506. ↑7 For instance, if the parties to an arbitration reach a settlement agreement, which might then be recorded in the form of an award made by consent of the parties in accordance with Article 33 of the ICC Rules of Arbitration. function footnote_expand_reference_container_39804_27() { jQuery('#footnote_references_container_39804_27').show(); jQuery('#footnote_reference_container_collapse_button_39804_27').text('−'); } function footnote_collapse_reference_container_39804_27() { jQuery('#footnote_references_container_39804_27').hide(); jQuery('#footnote_reference_container_collapse_button_39804_27').text('+'); } function footnote_expand_collapse_reference_container_39804_27() { if (jQuery('#footnote_references_container_39804_27').is(':hidden')) { footnote_expand_reference_container_39804_27(); } else { footnote_collapse_reference_container_39804_27(); } } function footnote_moveToReference_39804_27(p_str_TargetID) { footnote_expand_reference_container_39804_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39804_27(p_str_TargetID) { footnote_expand_reference_container_39804_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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New York Arbitration Week 2021 Redux & Interviews with Our Editors: A Look into the State of Play of International Arbitration with Louis B. (Benno) Kimmelman and Edna Sussman

Kluwer Arbitration Blog - Fri, 2021-12-10 00:30

Benno Kimmelman is an independent arbitrator and active in the New York arbitration community. He teaches international arbitration and international litigation courses at Brooklyn Law School, Georgetown University Law Center, and American University’s Washington College of Law. Edna Sussman is a New York-based arbitrator and mediator. She is the Distinguished ADR Practitioner in Residence at Fordham University School of Law and past President of the College of Commercial Arbitrators.

Benno is Chair of the New York International Arbitration Center (NYIAC), while Edna is a past Chair of NYIAC. Both are also Co-Chairs of the annual Fordham Conference on International Arbitration and Mediation, which takes place on the last day of New York Arbitration Week.  

In this interview, Benno and Edna provide insights on their careers and their collaborative leadership and organizing efforts, as well their perspectives on the dispute resolution needs and interests of the New York community. For each of the questions, Benno and Edna have provided joint answers, unless otherwise noted.

Thank you for taking the time to speak with us after another whirlwind New York Arbitration Week! 

 

  1. The annual Fordham Conference on International Arbitration and Mediation has been an important event for the New York arbitration community for many years, and for the past five years has been organized under your joint leadership. How did you begin working together as a team? How do you continue to identify innovative ideas and topics to be addressed by the various panels and programs?

Teaming up to co-chair the Fordham Conference in 2016 was an easy decision.  We first met in 1981 at the National Institute of Trial Advocacy intensive training program in Boulder, Colorado. Like many other international arbitration practitioners in the U.S., our careers began as commercial litigators. Our respective law firms had decided that young litigators needed to have trial skills and so we spent three weeks learning to be trial lawyers.

Years later we both were advisers to the ALI Project on the Restatement of the U.S. Law of International Commercial and Investor-State Arbitration. On a train ride from New York to Philadelphia for one of the meetings, we happened to sit together. Somewhere during that one-hour trip we agreed to co-chair the Fordham Conference since Art Rovine was stepping down from that role. Art created the Fordham Conference and made it an important fixture in the world of international arbitration that is independent of the arbitral institutions. It always addressed important issues for arbitrators, counsel, and arbitration users. Art set a very high bar in terms of the quality of the programing. Our challenge has been to guide the conference forward and to uphold Art’s standards. Each year we discuss many possible programing options; we seek input from colleagues and friends; and collaboratively, we agree upon the program. It is much work, but a lot of fun.

 

  1. New York Arbitration Week was established in 2019 and, since then, the Fordham Conference has been the closing event each year. Can you share with us a few highlights of this year’s Fordham Conference and how they dovetail with emerging developments in arbitration and mediation?

First, there was Neil Kaplan’s keynote address. For many international arbitration practitioners around the world, Neil Kaplan is an important leader of our arbitration community. He is and has been a successful advocate, judge, arbitrator, teacher, and mentor to arbitration practitioners globally. He has a perspective on the arbitration process from his years of experience that few arbitrators or counsel have. Based on his unique vantage point and wealth of experience which few can replicate, Neil has challenged the arbitration community to improve the ways in which we conduct hearings. He introduced what has become known as the “Kaplan Opening” to help counsel and tribunals focus early on the key issues in the case and thereby streamline the arbitration process. In his keynote address, Neil did what he does so well – he shared some ideas on what can be done to get to the heart of disputes more quickly and resolve them more effectively, such as using mid-arbitration reviews and mediation pauses and encouraging arbitrators to produce more focused and shorter awards.

Second, there was the panel on mixed mode dispute resolution. The term “mixed mode” refers to combinations of different dispute resolution processes (e.g., adjudicative processes, such as litigation and arbitration, with non-adjudicative processes, such as conciliation or mediation). The Mixed Mode Task Force is a combined effort by the International Mediation Institute (IMI), College of Commercial Arbitrators (CCA) and the Straus Institute for Dispute Resolution at Pepperdine School of Law. Following the introduction of its work at the Fordham Conference in 2020, at this year’s Conference, the Mixed Mode Task Force released the publication of the learning it has developed in crafting innovative processes tailored to user needs for both dispute avoidance and resolution. The panel discussing those developments was a highlight of the Conference because it offered practical guidance on subjects rarely discussed such as what steps an arbitrator can take to foster settlement and whether and how to organize communications between the mediator and the arbitrator. All work product of the Task Force is public, and its documents and reports are available online.

Finally, the theme for this year’s NYAW was “Getting it Right.” Two panels addressed this issue from different perspectives. Panel 1 took on the questions of how the doctrine of jura novit applies in international arbitration and what the relationship is between arbitrators and the law to be applied in resolving parties’ disputes. This panel looked at how arbitrators determine the law that must be applied in a case, how far arbitrators can go beyond the legal analysis provided by the parties, and how much flexibility arbitrators have with respect to the remedy to be awarded. Panel 2 looked at how technology is impacting the arbitral process. The first session considered how technology is changing what we want and what we need from an international arbitral center. The next session looked at how technology can enable counsel to organize and process voluminous data to tell a compelling story to the tribunal

    

  1. NYIAC, founded in 2013, is another convergence point for the New York dispute resolution community and it is an institution that both of you are involved with, Benno as current Chair and Edna as a past Chair. From your perspectives, what circumstances created the need for an organization like NYIAC and how does it address the present and future needs of the New York and global dispute resolution community?

Former Chief Judge Judith Kaye of the New York Court of Appeals (New York’s highest state court) recognized that leading arbitral seats often have an arbitral center. New York, as a leading international arbitration venue, needed to have one too. With Judge Kaye’s vision and determination, NYIAC was born in 2013. Our understanding of what an “arbitral center” means has evolved over time, particularly because of the pandemic. The international arbitration community in New York has long recognized that there is a need for first-class hearing space in which international arbitrations and other arbitration events can be conducted. But since its inception, NYIAC has been more than just a place for holding hearings. It has become the epicenter of the international arbitration community for the greater New York area. It has provided programing that focuses on topical issues and showcases our talent and resources in New York. Going forward, NYIAC must address both aspects of being a center – a physical presence as well as an intellectual home for the community.

 

  1. Both of you are also involved with educating the next generation of New York lawyers. What’s your best piece of advice to students who wish to pursue careers in international dispute resolution?

Benno:  I believe that a lawyer should have training and experience in representing clients and handling disputes in a national legal system before focusing on international dispute resolution. As advocates and arbitrators in international arbitration cases, we draw on the advocacy and substantive law skills and knowledge that we develop in a national legal system. I also think It is important to understand what it means to represent a client, to present claims and defenses, and to conduct a hearing. This is the background and skill set that a lawyer brings to the challenge of being an arbitrator and an international advocate. Skills are very important.

Edna: Of course, Benno is right about how one should go about developing substantive skill sets which are essential, but to succeed it is also important to become part of the international arbitration community. It is an embracing community and there are many opportunities for meaningful involvement. Local, national, international bar associations and the many other arbitral organizations provide numerous opportunities for identifying specific areas of interest, developing speaking and leadership skills, and meeting and learning from others in the field. So, my advice is to be an active volunteer, speak up at meetings, and identify and follow your passions. They will lead you to opportunities you will likely not have predicted.

 

  1. From your perspective, what is the most interesting substantive development in U.S. or New York arbitration law from this year?

The most interesting development has actually been a non-development. We thought the U.S. Supreme Court would finally resolve the meaning of 28 USC Section 1782, a statute that facilitates U.S. discovery in foreign proceedings – whether it applies to international commercial arbitration – during the 2021-22 term of the Supreme Court. The Supreme Court had granted certiorari in a case that squarely presented this question.  In fact, last year, one of the Fordham Conference panels was a mock Supreme Court argument on this issue. However, that case has been resolved by the parties and therefore will not be heard by the Court. That leaves us with a split in the Circuit Courts as to what Section 1782 means. Until the Court grants certiorari in another case that presents the same issue, and that case remains live long enough to reach a decision, the uncertainty on whether and how this statute applies to international arbitration will continue.

 

  1. As discussed in our recent interview with Rekha Rangachari (Executive Director of NYIAC), for decades New York has been an established hub for international arbitration. Yet, new opportunities continue to emerge. New York continues to thrive on its nexus to arbitrations involving Latin American parties and issues. At the same time, it seems to be opening a gateway to disputes involving Asia, as demonstrated by the newly established SIAC Americas Representative Office in New York. How do each of you see the future of international arbitration in New York?

New York has a bright future in the world of international arbitration. First, New York has been and will continue to be the choice of law for many parties engaged in important transactions.  New York law is one of two bodies of law that are regularly selected by parties to govern their contractual rights and obligations (the other being English law). Second, New York remains a popular seat for international disputes because New York courts strongly support international arbitration. Third, some of the best international arbitration advocates, arbitrators, and experts are based in New York. All of this helps to explain why New York is one of the leading arbitral seats in the world and why it will continue to be so in the future.

 

More information about the Fordham Conference including the video replay is available here. This interview is part of Kluwer Arbitration Blog’s “Interviews with Our Editors” series.  Past interviews are available here.  

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New York Arbitration Week 2021 Redux: The In‐house Counsel’s Roundtable: Discussion on Their Approach to an International Oil and Gas Arbitration

Kluwer Arbitration Blog - Thu, 2021-12-09 00:00

On November 15, 2021, the AAA-ICDR hosted a webinar entitled “In-House Counsel’s Virtual Roundtable” as part of New York Arbitration Week. The webinar focused on the use of alternative dispute resolution in the oil and gas industry. The panel was moderated by Eric P. Tuchmann, the Senior Vice President, General Counsel and Corporate Secretary for the AAA-ICDR, and featured in-house counsel Suzana Blades (Associate General Counsel, ConocoPhillips), Edward Diggs (Senior Counsel and Manager of Claims, Bechtel Energy), Kevin Feeney (Senior Legal Counsel, Shell Oil Company), F. Teresa Garcia-Reyes (Vice President of Litigation, Baker Hughes) and Eugene J. Silva II (International Disputes Group, Exxon Mobil Corporation).1)The panelists made clear that the views expressed were their own and not necessarily the views of the companies they represent. jQuery('#footnote_plugin_tooltip_39414_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_39414_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The panel discussed their views and approaches to participating in and conducting international oil and gas arbitrations and mediations. The highlights are recapped in this blog post.

 

The Panel Has Not Seen An Increase In Claims Due to the Pandemic

Eric Tuchmann observed that there has been significant disruption and price drops in the energy field over the last 18 months because of the pandemic, although the energy sector is now recovering. In spite of this, the panel did not see an increase in claims due to the pandemic. Ms. Blades stated that at the beginning of the pandemic, ConocoPhillips saw many force majeure notices being exchanged. While no claims had been filed on this basis, ConocoPhillips expected a wave of lawsuits and arbitrations that did not materialize. With the recovery of gas prices, Ms. Blades believes everyone wants to get back to business and try to settle outstanding disputes amicably. Mr. Diggs of Bechtel, citing his perspective from the construction side, stated that they also saw an uptick in force majeure notices, but they have not seen an increase in claims related to the pandemic. Mr. Diggs is seeing more of an impact from supply chain problems, where the project may be beyond the procurement phase resulting in disruption and related claims being filed. Mr. Diggs believes the supply chain problems are because of pandemic-related uncertainty and differing restrictions across the country. Due to the foregoing, claims are not being pressed because they are difficult to quantify. Mr. Silva of Exxon Mobil echoed the experiences and expectations shared by Ms. Blades and Mr. Diggs.

Ms. Garcia-Reyes of Baker Hughes noted that while she has not seen as many force majeure claims as expected, the issues arisen have been interesting. For example, usually with a claim based on force majeure, the parties are aligned as when an event occurs, but with the pandemic, parties situated at different parts of the supply chain experiencing disruptions have taken differing positions regarding whether delays were due to force majeure qualifying events. Ms. Blades added that both Winter Storm Uri (which hit the Texas region in February 2021) and the pandemic raised very interesting questions from a legal perspective about force majeure, as companies found themselves on both sides of the equation (both issuing and receiving force majeure notices), which raised consistency questions regarding the positions taken on these issues.

 

The Panels’ Perspective On In-Person Versus Virtual Hearings

The discussion then moved to the panel’s perspectives on in-person and virtual hearings, in light of their experiences during the pandemic. Now that everyone is experienced with virtual hearings and the choice exists, the panel considered whether virtual hearings are here to stay. Mr. Tuchmann prefaced the discussion by noting that the virtual hearing technology now being used had been around for some time at the AAA-ICDR, although there was not much demand for it pre-pandemic.

Ms. Garcia-Reyes’ experiences in virtual mediations converted her to a believer. She believes that in some cases, virtual mediations can be more effective, due to reduced travel costs and the ability to schedule the virtual option quickly. Moreover, having heard that mediators believe it is beneficial to have parties in a room for an extended period, as they are “worn down” and more susceptible to an agreement, Ms. Garcia-Reyes noted that long virtual hearings have the same effect and would certainly motivate her to reach a settlement if possible. As for arbitrations, she stated that the jury is still out. For smaller cases for shorter periods, virtual hearings work well, but she has not formed an opinion on longer cases. Mr. Feeney agreed on in-person hearings for larger cases, which minimize distractions and ensure useful interactions.

Mr. Silva stated that virtual hearings work best for procedural issues but prefers in-person hearings, especially in the international arena where there is great value in personal contacts and interactions, which ultimately provide a better result. In the AAA-ICDR’s experience as it relates to international cases, Mr. Tuchmann stated that it has been difficult to hold hearings in person; and while there was early reluctance to proceed virtually, more parties are now opting in for the virtual option.

Despite consensus that the legal profession is often conservative, Mr. Diggs has been impressed by the speed of alternative dispute resolution’s pivot to virtual proceedings and the growth of related technology, which has led to new views on how best to select counsel, for example, by selecting those who are experienced with this technology. However, Mr. Diggs remains skeptical about how effectively technology allows for presentation of documents and visuals in virtual proceedings.

 

The Panel’s Perspective on Adding Mediation Clauses to Agreements

Citing the panel’s positive experiences with virtual mediations, Mr. Tuchmann asked if this has led to the incorporation of mediation clauses in agreements. Ms. Blades stated that ConocoPhillips has always been a proponent of mediation and considers using it in all cases, but virtual mediations are not part of an adopted company policy.

Mr. Feeney stated that he is generally a proponent of mediation. Mr. Feeney reminds stakeholders that they are in the energy business, not the legal disputes business, and therefore mediation presents a commercially-oriented exit ramp for the dispute that is sometimes better for the business as a whole. Mr. Silva stated that direct communications between parties is an important successful component of dispute resolution. Similarly, Mr. Diggs stated that litigation is the last resort once a dispute has arisen, so he is often looking for an amicable resolution, and mediation offers one such solution. Mr. Diggs added that he has had more success settling cases with senior management level, so he ensures that contracts always include an early opportunity for senior management to try resolving the matter.

 

The Panelists’ Perspectives on the Arbitrator Pool

Mr. Tuchmann asked the panel for thoughts on arbitrator selection. Mr. Diggs stated that there are great arbitrators, but he is concerned that he is not seeing the next generation of arbitrators who have the experience needed for complex cases. He recognized  the challenge arbitral institutions face, because parties often re-appoint the same arbitrators in future cases. Mr. Silva stated that one of the greatest challenges for the development of younger arbitrators is that users need to be more flexible in who they are selecting and opt for younger attorneys who are still developing their careers and expertise. Ms. Garcia-Reyes echoed that sentiment. She added that corporate counsel has a duty to develop the next generation as well. In some of the smaller and medium cases, corporate counsel can take a chance on some of the unknown prospective arbitrators who perhaps have received positive feedback in other arbitrations. Ms. Blades agreed and stated that in-house counsel need to communicate to outside counsel the expectation of a diverse arbitrator list. She noted that arbitral institutions have a huge role to play in suggesting and promoting women and candidates who are more diverse so they can obtain experience and develop a record of accomplishment. Mr. Feeney agreed and stated that Shell is a signatory of the ERA pledge. In one case, Shell received a list that was not as diverse as they had hoped and he was told that it was because they were looking for a high level of experience. With further discussion and review, Mr. Feeney added that they were able to ultimately find a person who was bright, capable, and able to cut their teeth on the particular matter. He concluded that it does take that type of deliberate action to develop the next wave of diverse arbitrators. Ms. Blades agreed and noted that arbitrators interested in developing their careers work hard and dedicate their time to these cases. Mr. Tuchmann welcomed the panel’s view regarding these suggestions and added that the AAA-ICDR encourages diverse candidates to apply to its international panel each year and hopes that it will be able to increase the selection of these new arbitrators who have fantastic backgrounds.

A recordings of this program is available here, and Kluwer Arbitration Blog’s full coverage of New York Arbitration Week is available here

References[+]

References ↑1 The panelists made clear that the views expressed were their own and not necessarily the views of the companies they represent. function footnote_expand_reference_container_39414_30() { jQuery('#footnote_references_container_39414_30').show(); jQuery('#footnote_reference_container_collapse_button_39414_30').text('−'); } function footnote_collapse_reference_container_39414_30() { jQuery('#footnote_references_container_39414_30').hide(); jQuery('#footnote_reference_container_collapse_button_39414_30').text('+'); } function footnote_expand_collapse_reference_container_39414_30() { if (jQuery('#footnote_references_container_39414_30').is(':hidden')) { footnote_expand_reference_container_39414_30(); } else { footnote_collapse_reference_container_39414_30(); } } function footnote_moveToReference_39414_30(p_str_TargetID) { footnote_expand_reference_container_39414_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_39414_30(p_str_TargetID) { footnote_expand_reference_container_39414_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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What I’m Reading – High-Powered Lawyers Protecting a Ruthless Drug-Dealing Mob

ADR Prof Blog - Wed, 2021-12-08 20:50
People in every demographic group and every part of the country became hooked on powerful drugs.  Many lost their jobs, savings, homes, and families and they became ensnared in the criminal justice system.  Hundreds of thousands died from drug overdoses.  Communities were decimated. The drug pushers were protected by high-powered lawyers like Mary Jo White, … Continue reading What I’m Reading – High-Powered Lawyers Protecting a Ruthless Drug-Dealing Mob →

New York Arbitration Week 2021 Redux: Dispelling Cross-Cultural Enforcement Myths: The Arbitral Award in Seats of the Americas

Kluwer Arbitration Blog - Wed, 2021-12-08 00:00

On November 16, 2021, during New York Arbitration Week 2021, several committees of the New York City Bar Association hosted a panel discussion entitled “Dispelling Myths:  Enforcement of Latin American Arbitration Awards in the United States and U.S. Arbitration Awards in Latin America,” which focused on enforcement of foreign arbitral awards in the United States, Argentina, Brazil, Colombia, and Mexico.  Professor Alejandro Garro (Columbia Law School) moderated the panel featuring María Inés Corrá (Partner, Bomchil), Marcela Levy (Partner, Mannheimer, Perez e Lyra Advogados), Elsa Ortega (Partner, Ortega & Gomez Ruano Lawyers), Jennifer Permesly (Partner, Skadden, Arps, Slate, Meagher & Flom LLP), and Eduardo Zuleta (Partner, Zuleta Abogados).

 

United States

Ms. Permesly acknowledged that, while U.S. law on the enforcement of arbitral awards has been “fairly stable,” there is still “room for mischief” because of the U.S.’s common law tradition and decentralized court system.

Ms. Permesly first addressed the commonly held view that U.S. courts do not honor competence-competence and will set aside awards for lack of arbitral jurisdiction.  She noted that this myth is rooted in some truth, because in the United States the final determination of whether an arbitrator has jurisdiction generally is for a court rather than the arbitrator.  At the same time, she explained that an exception nearly swallows the rule:  if there is clear and unmistakable evidence that the parties intended to refer the question to the arbitrators, then courts will not review arbitral jurisdiction de novo at the enforcement stage.  Most U.S. federal courts have now held that the incorporation of arbitral institution rules that delegate questions of arbitrability to the arbitrators is itself such clear and unmistakable evidence.  This becomes increasingly complex, however, where, for example, parties carve certain types of disputes out of their arbitration agreement’s scope (as was the case in the recent case that went up to the U.S. Supreme Court, Henry Schein Inc. v. Archer & White Sales, Inc., 592 U.S.___ (2021)) or where non-signatories are involved.

Ms. Permesly also discussed the commonly-held view that U.S. courts will vacate awards based on an arbitrator’s “manifest disregard of the law,” a ground for vacatur not found expressly within the Federal Arbitration Act.  She clarified that federal circuit courts of appeals have diverging views on whether the Supreme Court’s decision in Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008), invalidated that doctrine, with some courts holding that the doctrine can no longer be applied to vacate an arbitral award and others maintaining it as a limited basis for review.  For example, courts in the Second Circuit continue to apply the manifest disregard doctrine, but, in Ms. Permesly’s view, in very limited circumstances, typically when an arbitrator has blatantly disregarded a clearly applicable law that it was made aware of but chose not to apply.

 

Argentina

Argentina ratified the New York Convention in 1989, and enacted its International Commercial Arbitration Law in 2018, which adopted the UNCITRAL Model Law with minor changes.  Ms. Inés Corrá discussed three Argentinian Supreme Court decisions that, in her view, demonstrate the courts’ support for enforcing foreign awards by honoring the New York Convention’s spirit and its limited scope of grounds for denial of enforcement.

In Armada Holland BV Schiedam Denmark v. Inter Fruit S.A., A. 1159 XLIII (Supreme Court of Justice of the Nation, May 24, 2011), a sole arbitrator found that an arbitration agreement existed where the parties’ charter party agreement referred to a standard form containing an arbitration agreement.  The Supreme Court subsequently rejected one party’s argument that there was no arbitration agreement in writing (as required under the New York Convention), holding that verification of the Convention’s requirements for enforcement did not permit review of the arbitrator’s decision.

In Deutsche Rückversicherung AG v. Caja Nacional de Ahorro y Seguro, 6461/2009/CS1 (Supreme Court of Justice of the Nation, September 24, 2019), the defendant in recognition and enforcement proceedings alleged that the award did not apply the debt consolidation regime applicable to credits against Argentinian State entities.  The Supreme Court confirmed that the enforcing court could grant partial enforcement by modifying the award to adapt it to the proper regime permitted by domestic law, under Articles 3 and 7 of the New York Convention.

Finally, in Milantic Trans S.A. v. Ministry of Production, CSJ 1460/2016/CS1 (Supreme Court of Justice of the Nation, August 5, 2021), the Supreme Court overturned a lower court decision, rejecting enforcement based on the absence of a valid arbitration agreement duly approved by law.  The Supreme Court noted that the power to verify ex officio the New York Convention’s grounds for denial of recognition and enforcement cannot be exercised against other essential principles of law (such as res judicata).  This decision was met with approval by scholars and practitioners alike.

 

Brazil

Ms. Levy noted that Brazilian courts are very arbitration-friendly, which perhaps contributes to Brazil having the second-largest number of parties involved in ICC arbitrations.

Ms. Levy discussed EDF International S.A. v. Endesa Latinoamérica S.A. and YPF S.A., 2011/0129084-7 (2011), where a court at the seat of arbitration (Argentina) had annulled the award.  In enforcement proceedings in Brazil, the court held that a foreign award, whether arbitral or not, must have res judicata effect to be recognized.  Because the award was null in Argentina, it was similarly null in Brazil.  She noted that this was one of the few decisions where the court referred to the New York Convention and other treaties, rather than solely relying on the Brazilian Arbitration Act (which has bases for denying recognition similar to those in the Convention).

Another case, ASA Bioenergy Holding A.G. v. Adriano Ometto Agricola Ltd., 2013/0278872-5 (2015), sparked significant commentary from the arbitration community.  The court denied enforcement of two ICC awards issued in New York because the arbitrator would not have been considered impartial under the Brazilian Civil Procedure Code.  Because impartiality is part of the guarantee of due process, the award violated Brazilian public policy, and could not be enforced in Brazil.  Interestingly, a New York court had already determined that there was no issue with the arbitrator’s impartiality.  See Ometto v. ASA Bioenergy Holding A.G., 549 F. App’x 41 (2d Cir. 2014).

Ms. Levy also noted two cases, Banco de Crédito e Inversiones S.A. v. Aloés Indústria e Comércio Ltd., 2014/0207257-5 (2017) and Subway Partners C.V. v. HTP High Technology Foods Corporation S.A., 2005/0032212-5 (2006), addressing enforcement challenges alleging the lack of proper summons.  In Inversiones, the court held that there is proper notice when there is evidence of indisputable knowledge of the arbitration proceeding; proof of service under Brazilian law is not required.  Yet, in Subway, the court denied recognition because, before the party sought recognition of the award in Brazil, there was improper service in a U.S. court where the party had chosen to validate the award – even though there was no issue with the arbitration itself.

 

Colombia

Mr. Zuleta described Colombia (a signatory to the New York Convention) as a country that “exports arbitrators and imports awards” because its jurisprudence clearly favors enforcement of awards.

Colombia’s arbitration statute, based on the UNCITRAL Model Law, essentially reproduces the Convention’s exclusive grounds for refusal of recognition and enforcement.  Article 114 of the statute contains an additional provision not in the Model Law; it states that the Code of Civil Procedure’s provisions on grounds to deny recognition shall not apply, and may only be applied for the enforcement of judicial decisions.  This came about because, previously, a pair of Supreme Court decisions in January and March 1999 in Merck & Co. Inc. et al. v. Tecnoquimicas S.A., No. E-7474 (Corte Suprema de Justicia) had considered that recognition and enforcement was subject to that code.  Later Supreme Court decisions changed this trend, reaffirming that the only grounds for refusal of recognition and enforcement are those in the arbitration statute and the New York Convention.

Mr. Zuleta presaged two issues on the horizon.  First, though Colombia’s arbitration statute provides for only one round of pleadings for recognition and enforcement, some courts may permit further submissions based on due process considerations.  Second, because the Council of State, which has jurisdiction over recognition and enforcement proceedings against states or state entities, has issued only one decision on recognition, its position on what international public policy is in certain circumstances involving state or state entity action remains uncertain.

 

Mexico

Ms. Ortega explained that, in Mexico, arbitral awards generally are presumed valid and binding, with limited grounds available for opposing enforcement.  Mexico has incorporated the UNCITRAL Model Law into the Mexican Commerce Code, and is also a signatory of both the New York Convention and the Panama Convention.

In Mexico, enforcement of an arbitral award is not an appeal, as the judge may not examine the merits of the underlying dispute, which were decided by the arbitral tribunal.  This distinction is important because, in Mexico, there is a special proceeding—called an amparo—against actions by the government or authorities violating an individual’s human rights or constitutional protections.  While courts have held that arbitral tribunals are not governmental actors for the purposes of an amparo, when a judge makes a decision in an enforcement or annulment proceeding, that judge becomes an authority for the purpose of an amparo.  There has been a debate in Mexico as to whether the direct amparo (against final decisions in a trial or rulings that terminate a trial) or the indirect amparo (against acts that are not final decisions) was the appropriate vehicle to challenge these enforcement or annulment decisions.  Despite a 2011 amendment to the applicable law indicating otherwise, the Mexican Supreme Court of Justice ruled in December 2019 that the indirect amparo applies because, in an annulment or enforcement proceeding, the judge does not resolve the merits of the dispute.

Ms. Ortega also discussed the constitutionality of the Mexican Commerce Code’s authentication requirement for arbitral awards.  While the Model Law eventually removed the requirement that the party seeking enforcement had to provide the original award, duly authenticated, Mexico did not.  However, in October 2020, in the amparo with docket number 7856/2019, the Supreme Court of Justice found the requirement was disproportionate and unnecessary, and therefore unconstitutional, because arbitral awards in Mexico are inherently valid and of binding force.

 

Conclusion

The panelists dispelled the myth that it is a “herculean” task to recognize and enforce foreign arbitral awards throughout the Americas.  While each jurisdiction’s particular and sometimes complex requirements must be accounted for, the panelists agreed that there is a clear trend favoring enforcement of awards in the Americas.

 

The views expressed in this article reflect those of the authors and not necessarily those of Skadden, Arps, Slate, Meagher & Flom LLP or any of its clients.

A recording of the program is available here and Kluwer Arbitration Blog’s full coverage of New York Arbitration Week is available here

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New York Arbitration Week 2021 Redux: Getting it Right: Building Quality + Trust in the Arbitral Process

Kluwer Arbitration Blog - Tue, 2021-12-07 00:00

During New York Arbitration Week 2021, the New York International Arbitration Center (“NYIAC”) and the Chartered Institute of Arbitrators (“CIArb”) New York branch hosted two panels dedicated to the theme of “Getting It Right in International Arbitration.”  This post presents some highlights.

 

Getting it Right:  How Arbitrators, Counsel, and Institutions Can Improve the Quality of the Arbitral Process

This panel tackled how arbitrators, counsel, and institutions can improve the quality of the arbitral process.  The program was moderated by Professor Gabrielle Kaufmann-Kohler (Partner at Lévy Kaufmann-Kohler).  The panelists were Adriana Braghetta (Independent Arbitrator, Adriana Braghetta Advogados), Dyalá Jiménez Figueres (Independent Arbitrator, DJ Arbitraje), Joseph E. Neuhaus, FCIArb (Partner at Sullivan & Cromwell LLP), and Elliot E. Polebaum (Independent Arbitrator, Polebaum Arbitration).  Each panelist proposed a method to improve the arbitral process, which was put up for debate.

  1. Early Definition of Key Issues

Mr. Polebaum proposed that arbitrators create a list defining the key legal issues early in the proceedings to focus counsel on the main points of resolution.  He believes parties can become distracted by side issues and narrative disputes that distract from the core issues requiring resolution, leading to inefficiencies.  Recognizing that issues evolve throughout a proceeding, the list of issues should be dynamic, giving the parties flexibility.

The panel was skeptical because there is a danger in memorializing issues too early.  Ms. Jiménez Figueres noted that it presents the risk of prejudging the issues, especially at a time when the arbitrator might not have fully immersed themselves with the context of the dispute.  On the other side, there is a concern that memorializing the issues too late could harm procedural efficiencies, because the parties already have a strategy locked in place.

  1. Circulating Draft Procedural Orders

Ms. Jiménez Figueres proposed that arbitrators circulate drafts of procedural orders to parties that solve interim, non-final issues rather than holding oral hearings.  Collateral issues or pre-hearing motions often come before an arbitrator is fully aware of the case and orders can have unintended consequences.  By foregoing extensive oral argument and allowing parties to trade drafts of the proposed order, the relief granted is less likely to contain error and will incorporate the parties’ relative positions.

The panel again expressed skepticism, noting that this practice can create inefficiencies, risk the possibility of interested parties crafting orders for personal benefit, or raise due process risks that would affect the enforcement of the award.  As an alternative, arbitrators may pose direct questions to the parties and allow for submissions of factual errors after the order is entered.

  1. Continuing Arbitrator Education

Continuing the focus on arbitrators, Ms. Braghetta proposed ongoing, and possibly required, continuing education for arbitrators in core substantive areas of law that arbitrators often encounter in their practices.  Not only might this decrease errors and avoid the intervention of an institutional scrutiny process, it also prepares the next generation of arbitrators.

While most panelists agreed that continuing education of arbitrators is a virtue, the benefit of such requirement would have limitations.  With international arbitration, it would be difficult to implement mandatory education on substantive areas of law where the approaches vary greatly across jurisdiction.  Further, if institutions provided or required this substantive training, they may open themselves up to criticism for exceeding their scope as a procedural body meant to facilitate proceedings, not determine the application of law.

  1. The Case for Episodic Justice

Mr. Neuhaus presented the case for what he termed “episodic justice.”  Arbitral tribunals often place efficiency as the predominant value of arbitration, and thus are reluctant to engage in dispositive motion practice unless there is a strong showing that it will shorten the overall length of a proceeding.  Episodic justice, however, would look more favorably on motion practice even with no efficiency gain.  Such motion practice could cull bad claims, focus the hearing on the larger issues, and provide the parties with early and continual feedback throughout the proceeding that would increase the chances of settlement.

Feedback for episodic justice was generally favorable, with only slight caution.  This practice presents opportunities to focus the parties on the main issues and can create efficiencies, both in terms of cost and prospects of resolution.  However, arbitrators may want to ensure that they make a threshold determination that the movant has shown a reasonable prospect of success in making its motion to prioritize efficiency.

 

Getting it Right:  Should the Functus Offico Rule be Reformed?

The panel focused on the functus officio doctrine, which prevents arbitrators from clarifying or correcting an arbitration award after it is issued.  The panel was led by Richard F. Ziegler, FCIArb (Independent Arbitrator at Acumen ADR).  The panelists were Martin F. Gusy (Partner at Bracewell LLP), Eduardo Silva Romero (Partner & Co-Chair of International Arbitration, Global Practice, Dechert LLP), Professor Janet Walker, C.Arb, FCIArb (Independent Arbitrator, Arbitration Place and Outer Temple Chambers & York University Osgood Hall Law), and Professor Anne Marie Whitesell (LLM Program & Faculty Director, Program on International Arbitration and Dispute Resolution at Georgetown Law School).

  1. Functus Officio Reveals Schisms between Competing Values, Civil and Common Law

The panel began with a robust discussion on whether the functus officio rule should remain in its current state or be reformed.  Professor Whitesell engaged in a passionate defense for the preservation of functus officio, contending that arbitrators should be generally prohibited from substantively modifying awards to promote finality.  Parties typically choose arbitration instead of litigation to guarantee only narrow bases for “appeal,” through the limited grounds to resist enforcement of arbitral awards in the 1958 New York Convention.  If arbitrators were permitted to re-open final awards, it could “open the door to chaos.”

Building off this focus, Mr. Silva Romero noted that the functus officio doctrine illuminated a tension between two core values in international arbitration: (1) finality and (2) the quality of arbitral justice.  Mr. Silva Romero observed that if a party places the quality of arbitral justice over finality, then it may want functus officio to provide some flexibility to allow arbitrators to eventually “get it right” and correct any errors in an award.

Mr. Silva Romero explained that a party’s preference regarding a tribunal’s ability to change an award after it is issued may depend on whether the party is more accustomed to a civil or common law approach.  In civil law jurisdictions, there is more flexibility in devising solutions, while in common law jurisdictions, parties are disposed to adhering to stricter rules.  In France, for example, the law codified an arbitrator’s ability to correct an award, subject to “classic limitations” as well as the unique instruction for potential revision when fraud is discovered after the final award is rendered.

Speaking from his experience in Germany, Mr. Gusy concurred that civil law jurisdictions may approach the rule of functus officio on a more issue-by-issue level, drawing comparisons to the UNCITRAL Model Law which provides for some limited corrections of an award.

Professor Walker noted that functus officio comes with additional considerations, including whether a court or a tribunal may be tasked with determining an arbitrator’s ability to modify an arbitration award.  The application of functus officio is potentially rife with difficulty, particularly where provisional awards may be subject to revision, or the tribunal that issued the award cannot be re-constituted.

  1. New York City Bar Proposal to Expand the Ground for Revising Awards

In conclusion, Mr. Ziegler prompted panelists to consider a New York City Bar Association’s Arbitration Committee Report of 2021, which proposed to expand the grounds on which an award can be revised, subject to four characteristics that (1) provide an opt-in to these expanded grounds at the beginning of the proceeding; (2) allow for an award to be corrected when there is an error or misapplication of fact or law; (3) impose time limitations to seek revisions; and (4) require fee-shifting, so that the moving party cannot apply for its adversary to pay for fees if it succeeds in an application for revision, but if the moving party loses it compensates the other party for costs associated with the application.

Professor Whitesell discouraged adopting the proposal, arguing that the opt-in is unnecessary, because parties already have the autonomy to choose rules governing their disputes, and can select rules that already permit some form of limited appellate arbitral review.  Professor Whitesell cautioned that there could be serious due process concerns if arbitrators implement a correction to an award that goes beyond mere clerical correction, such as a substantive change, because due process would likely afford both parties the right to be heard on the merits of the revision.  Imposing time limits to correction of an award could also pose practical problems, and the cost-shifting scheme does not align with the notion that a party should not bear the financial burden of insisting that a tribunal remedy a mistake.

 

Concluding Remarks

In conclusion, although the panelists tackled a variety of proposals and issues, the robust debates demonstrated that while there are creative solutions and innovative reforms that can be implemented into the arbitration process, it may be difficult to gain widespread acceptance of such changes, particularly because there can be diverging views as to how to “get it right” when it comes to case management and determinations in arbitration.

 

*The opinions expressed are those of the author(s) and do not necessarily reflect the views of their firms, clients, or any respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

 

A recording of the program is available here and Kluwer Arbitration Blog’s full coverage of New York Arbitration Week is available here

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
by Arif H. Ali & David L. Attanasio
€ 202
Arbitration in Egypt: A Practitioner\'s Guide
by Ibrahim Shehata
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