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

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

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

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

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

 

Lifestyle Equities: Facts and Majority Opinion

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

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

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

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

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

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

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

 

Dissenting Opinion

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

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

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

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

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

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

 

Clarification Needed

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

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

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

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

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

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

 

Features of the Agreement

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

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

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

 

Commercial Context of the Agreement

The Macanese government officials highlighted in a recent announcement that not only does this Agreement contribute to an improved and increasingly comprehensive judicial cooperation in civil and commercial matters between Mainland China and Macau, it also facilitates the promotion of Macau as a viable choice of seat of arbitration. This is in line with the development plans attached to the Hengqin Cooperation Zone between Guangdong and Macau, as well as the Greater Bay Area economic plan to promote regional development and cooperation in the Pearl River Delta (previously reported here), which altogether support the “One Belt, One Road” global investment initiative announced in 2013, as Macau was considered to have strategic internationalization value due to its exceptional legal environment as a civil law country with trilingual capacity, as well as its favourable infrastructure and hospitality conditions.1)Ana Coimbra Trigo, “Arbitragem e Providências Cautelares no Delta do Rio das Pérolas. Comentário ao Ac. do Tribunal de Segunda Instância da Região Administrativa Especial de Macau de 15 de março de 2018” [Arbitration and Interim Measures in the Pearl River Delta], PLMJ Arbitration Review, N. 3, 63-80, 2019. jQuery('#footnote_plugin_tooltip_41483_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41483_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

 

Legal Context of the Agreement

This Agreement comes as no surprise to regional practitioners.

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

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

Most relevantly, the Agreement mirrors in structure and content (with adaptations to Macanese legal particularities), the 2019 Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“PRC-Hong Kong Arrangement”) (reported here in a previous post). The experience already accumulated by Hong Kong and Chinese arbitration institutions and courts under the PRC-Hong Kong Arrangement is relevant,2)Statistics available from the HKIAC show that as of 22 March 2022, there were 67 HKIAC applications related to pending arbitral proceedings and show that 38 out of the reported 41 decisions issued by Chinese courts on requests for interim measures were granted. jQuery('#footnote_plugin_tooltip_41483_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_41483_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and may guide Macanese institutions and courts which appear to have limited track-record in this regard. It is noted that the SPC has issued a Note regarding the interpretation and application of the PRC-Hong Kong Arrangement, as well as template documents to be used in the process (English translation available here and here). Similar guidance and templates will be useful under this Agreement.

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

 

The Future

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

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

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

References[+]

References ↑1 Ana Coimbra Trigo, “Arbitragem e Providências Cautelares no Delta do Rio das Pérolas. Comentário ao Ac. do Tribunal de Segunda Instância da Região Administrativa Especial de Macau de 15 de março de 2018” [Arbitration and Interim Measures in the Pearl River Delta], PLMJ Arbitration Review, N. 3, 63-80, 2019. ↑2 Statistics available from the HKIAC show that as of 22 March 2022, there were 67 HKIAC applications related to pending arbitral proceedings and show that 38 out of the reported 41 decisions issued by Chinese courts on requests for interim measures were granted. function footnote_expand_reference_container_41483_27() { jQuery('#footnote_references_container_41483_27').show(); jQuery('#footnote_reference_container_collapse_button_41483_27').text('−'); } function footnote_collapse_reference_container_41483_27() { jQuery('#footnote_references_container_41483_27').hide(); jQuery('#footnote_reference_container_collapse_button_41483_27').text('+'); } function footnote_expand_collapse_reference_container_41483_27() { if (jQuery('#footnote_references_container_41483_27').is(':hidden')) { footnote_expand_reference_container_41483_27(); } else { footnote_collapse_reference_container_41483_27(); } } function footnote_moveToReference_41483_27(p_str_TargetID) { footnote_expand_reference_container_41483_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_41483_27(p_str_TargetID) { footnote_expand_reference_container_41483_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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Behind Closed Doors: Confidentiality and Arbitration

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

 

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

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

 

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

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

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

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

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

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

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

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

 

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Africa Arbitration Academy: Survey on Costs and Disputes Funding in Africa

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

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

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

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

 

Purpose of the Survey

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

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

 

Key Findings of the Survey

Cost of Resolving Disputes in Africa

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

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

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

 

Dispute Resolution Funding Options 

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

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

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

 

Driving Efficiency in African Disputes

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

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

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

 

Conclusion

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

 

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

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

 

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

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

 

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

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

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

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

 

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

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

 

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

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

 

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

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

 

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

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

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

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

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

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

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

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

 

The 2022 Vis Moot

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

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

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

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

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

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

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

 

The Prevailing Team

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

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

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

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

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

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

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

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

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

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Paris Arbitration Week Recap: Blockchain, NFTs and the Metaverse

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

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

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

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

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

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

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

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

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

Disputes Relating to Blockchain, NFTs, and the Metaverse

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

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

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

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

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

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

Conclusion

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

London – Costly but Worth It?

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

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

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

 

London – The Flexibility of Precedence

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

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

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

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

 

Conclusion

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

 

More coverage from LIDW is available here.

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

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

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

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

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

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

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

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

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

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

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

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

 

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LIDW 2022: The Green LIDW: Keynote Address and Conference on Climate Change as a New Disputes Landscape

Kluwer Arbitration Blog - Thu, 2022-05-12 00:30

On the second day of the 2022 LIDW, LIDW members gathered in the Westminster Hall Center to discuss this year’s topics: Dispute Resolution – Global, Sustainable, Ethical?

 

The Keynote Address

The keynote address was given by Lucy Greenwood, (Greenwood Arbitration, Campaign for Greener Arbitration), Jenny Hindley, (Mishcon de Reya, Greener Litigation) and John Sturrock QC, (Core Solutions, World Mediators Alliance on Climate Change). The speakers represented dispute resolution in all its modern forms – arbitration, litigation, and mediation.

The speakers boldly addressed the hot topic of climate change and the sustainability of the arbitration practice.

Lucy Greenwood started by citing John Fitzgerald Kennedy: “For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future”. She called for an essential rethinking of the arbitration practice and its impact on climate change. To her, the arbitration community is part of the global problem and has not sufficiently changed how it runs its practices since the 1990s. While the average carbon footprint of citizens in the UK is 12 tons of CO2 per year, one return flight to New York in business class is equivalent to 7 tons of CO2.

When unnecessary to resolve the dispute, one should avoid travelling, printing, taxis, or even disposable coffee cups. While the pandemic has been a major temporary change, climate change is here to stay. To avoid the catastrophe, we do not have any other alternative than adapting and reducing our carbon footprint. Whatever the reason to change, whether to be more relevant, modern, attract new clients, or be more efficient, making the change is essential.

Jenny Hindley gave striking examples of simple steps to reduce the impact of the litigation practice significantly. For instance, she mentioned a study that showed that a medium-sized arbitration would need to plant 20 000 trees to cover the CO2 emissions it produces. One of the major factors is hearings. According to the speaker, international physical hearings produce 19 times higher emissions than virtual ones. Another example was that one single arbitration wasted, on average, 3000 disposable cups of coffee, equivalent to one ton of CO2. She called the audience to take a step back and consider how we work. Signing the Green Pledge and committing to producing less CO2 emissions is a good way to start, while remaining flexible enough to tailor the lawyer’s service to the clients’ needs.

John Sturrock asked the audience how they felt when called to change their habits. He wondered whether the keynote made the audience uncomfortable and whether “we should bother at all?” Reminding the audience of the facts of climate change and the now very clear science, he asked where it would leave us and others on the planet if we did not change. “If not us, then who?” he asked. After all, “people like us” need to change; and think beyond reusable bottles, towards a complete redesign of the legal practice. He mentioned that World Mediators Alliance on Climate Change had attracted 600 signatories from 50 countries. To him, mediation could be a greener forum in the net-zero transition. It is quick, less resource intensive, worked online during the pandemic, and provides a useful route to explore commercial and non-legal options.

 

Conference on Climate Change as a New Disputes Landscape

In the afternoon, the LIDW turned to disputes arising out of the energy transition and climate change or environmental-related measures. The panel was composed of Luiz Aboim (Mayer Brown), Annette Magnusson (Consultant and Co-Founder, Climate Change Counsel), Piers Rake (FTI Consulting), Thanasi Trantas (HSBC – Litigation and Regulatory Enforcement).

The panel focused on disputes that may arise from climate change and energy transition challenges, including:

  • Investor-State Disputes on climate issues, including those arising from “green” measures affecting investments in fossil fuels;
  • Climate change and the board: corporates managing ‘greenwashing’, directors’ duties, and challenging environmental policies.

First, Annette Magnusson addressed the relationship between international investment law and climate change measures.

It was argued that the most critical goal for states in fighting climate change is to reduce emissions to the lowest level possible, which requires a major energy transformation. States have one carrot and a stick to achieve the objective: incentivising low emissions energy industries is the carrot, restricting and phasing out high emission industries is the stick.

The question was whether it allows states to enact the green transition without being penalised under international investment law.

Under the current international investment law, investors in the energy sector are equally protected whether fossil-fuel based or renewable-energy based. Indeed, the goal of Bilateral Investment Treaties (BITs) is to protect foreign investors and ensure they will economically thrive in the host state. BITs thus raise the question of whether they limit or chill regulatory changes, preventing governments from undertaking the necessary action towards the energy transition.

The two recent claims against the Netherlands for its phasing-out policy demonstrate that ambitious climate regulations adopted by states can be subject to international review. This may reinforce the idea of regulatory chill.

Nevertheless, she argued that the main reason the energy transition is slow is not primarily because of BITs but because the energy transition is uncomfortable and requires immense work and efforts.

Despite potential damages under BITs, not taking regulatory action to curb climate change will be more expensive for everyone. In that regard, it was advocated that while adopting new treaties and amending others is a necessary task, it requires time, which we do not have under the current climate circumstances.

Magnusson was concerned that the Energy Charter Treaty protects all sources of energy equally, a “clear misalignment between legal systems”. In the Climate Change Counsel’s report on climate change and the ECT, the striking finding was that no arbitral award had included climate change law and objectives (Paris Agreement, Tokyo Protocol) in its legal reasoning. However, she noted that those tackling climate change must use imperfect tools as best they can.

The panel then moved to the corporate perspective on environmental regulations.

Thanasi Trantas argued that companies are increasingly being required to disclose key information on their carbon footprint and sustainability level. This information can be crucial to stakeholders, showcasing the impact of climate change concerns on business.

He argued that the increase in environmental disclosures is driven by several factors, including:

  1. Climate change is now recognised as an existential threat and, thus, a material risk for companies, particularly the ones with long-term business structures.
  2. Private companies play a crucial role in the energy transition, with key financial means, expertise, and investment-capacity.
  3. Environmental disclosures are shifting from a voluntary regime to a mandatory one. It is becoming necessary to disclose how climate change impacts the company and what steps are being taken by the company to prevent climate change.

It was argued that accurate disclosures are of the essence to avoid risks. Otherwise, they might lead to litigations related to misinformation or misrepresentations. For example, in some jurisdictions, such as the US, the accuracy of environmental disclosures can be subject to class action litigation.

Additionally, the importance of avoiding greenwashing was underscored. Greenwashing can be understood as the practice of misrepresenting green credentials. As public society is increasingly interested in greener and more sustainable products and services, businesses risk litigation for misleading representations to customers regarding the sustainability of specific services or products. Nevertheless, this area is still developing because the taxonomies of what is a “sustainable” product or service are not yet finalised.

Thanasi Trantas emphasised that corporate directors may also face risks from climate litigation. Climate cases against directors could be filed in connection with their fiduciary duties. Shareholders are increasingly threatening claims against company directors for failing to address climate change. Therefore, litigation could be used by shareholders to force directors to undertake further environmental actions.

Piers Rake reminded the audience that the present circumstances presented features of “a perfect storm”. It is difficult to imagine governments focusing sufficiently on the Net-zero strategy with global economic stress, striking inflation, governmental debt, drop in economic growth, food crisis, or Covid-19 lockdowns. In that context, it was emphasized that trust is an essential element of the energy transition. The public must have confidence in the actions and investments undertaken by states and companies to curb climate change.

At the end of the session, the panel was divided as to whether arbitration could offer an appropriate forum for climate change disputes. While arbitration generally provides the possibility of having the expertise and – arguably – the speed necessary to address these types of disputes, it is important to note that climate change disputes have been historically driven by public litigation and public pressure. Thus, confidentiality in arbitration might not yield good results in bringing about a change to the general protection of the environment by states and private companies.

 

Conclusion

The keynote speech was all about sustainability. The thought-provoking discussion underscored that every little change in the legal practice could help curb climate change. The following discussion on climate change-related disputes showed the array of complex litigations that may arise from environmental regulations. Both panels agreed that the legal practice had to adapt to combat climate change. In John Sturrock’s words, “we have no other choice.”

 

More coverage from LIDW is available here.

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Meet your friendly neighbourhood arbitration practitioners: key takeaways from YCAP’s 2022 Spring Symposium

International Arbitration Blog - Wed, 2022-05-11 17:23

On May 2, 2022, the Young Canadian Arbitration Practitioners (“YCAP”) hosted its 2022 Spring Symposium in Calgary, Alberta. YCAP is an organization with an interest in promoting international arbitration in Canada and around the world.

LIDW 2022: Key Global Trends: The New Frontiers of Business Ethics and Corporate Accountability

Kluwer Arbitration Blog - Wed, 2022-05-11 09:29

London International Disputes Week continued on 11 May 2022, with a session focused on ESG – regulatory, practice, and risks.

 

First Panel Discussion:  Key global trends: The new frontiers of business ethics and corporate accountability

The first panel, moderated by Heather Gagen, Chair, Partner, Travers Smith, focused on discussing the contours of business ethics and corporate accountability globally and underscored the key ESG risk trends. The speakers – Adam Heppinstall QC, Barrister, Henderson Chambers; Brooke Hopkins, Managing director, Alix Partners; Dan Lambeth, Partner, ESG, Brunswick – shared their insights on strategies of effective navigation in ESG risks landscape.

The chair kicked off the discussion by noting that ESG is increasingly going up the radar as it presents lots of positive opportunities for growth for companies. Though at the same time, it also brings risks to corporate organizations. She proceeded by mentioning litigation, regulatory, interventions, and reputational communications as examples of what can happen when ESG regulations are not satisfied. Hence, this panel discussed what ESG looks like, what drives it, and whether it is proven to be effective.

The panelists approached the topic by limiting the scope of their discussion to the following three sub-topics.

First, Adam Heppinstall QC elaborated on what ESG litigation risk looks like and how it will develop in the coming years by highlighting the judicial practice in several jurisdictions. In the Netherlands, for example, he mentioned the prominent case of Royal Dutch Shell as an example of how soft law, namely UN Guiding Principles on Business and Human Rights (UNGP), can lead to a potential change made to the EU derivatives. He proceeded to mention the tendencies in Germany and Norway, in particular why the parent companies may be liable for violations of ESG policies and not just their subsidiaries. Adam Heppinstall QC highlighted that it is mostly due to the legislative innovations in the named jurisdictions. Dan Lambeth picked up on that point and mentioned that the reputational aspect can outstrip the litigation timetable process. He noted that it is important to take the materiality analysis first. He emphasized that under the categories of “E”, “S”, and “G”, there is a wide range of issues which might be relevant for a certain company depending on the sector. He continued that for most companies, it is not enough to simply produce a report, they have to tell the story around it and set the narrative. He jokingly noted that if a client talks about its aspiration to invest in education in sub-Saharan Africa and in the meantime is involved in oil exploration in the Northern hemisphere, that is what the conversation about the narrative truly is about for that company. Brooke Hopkins weighed in on the role of ESG in the US, which has been highly politicized. She noted that the Department of Justice has introduced proposals around regulation with ESG, which, as she noted, will probably not be implemented in the nearest time; though, even with it, the US takes a principle-based approach. Brooke Hopkins underscored that most of the aspiration to implement better ESG practices comes from investors and consumers. She concluded this thought by stating that clients worrying about litigation or wanting to create ESG values comes not so much from the regulatory but more from the investors saying “If you want to continue to have funding – you must show us how you are moving in that direction of sustainability”. And, she continued, in the US there is currently a wide practice of companies taking advantage of publishing sustainability reports, which are visually pleasing, but nothing more as usually lack the data to back up the reports.

Second, the panel addressed the correlation between business ethics and human rights. Dan Lambeth mentioned that there are three triggers of ESG, being legal and regulatory disclosures; expectations from the financial community; and NGOs who are increasingly partnering with the private sector. As an example, Dan Lambeth noted that some NGOs are questioning companies’ presence in Russia, their assets, and contributions to humanitarian aid, as Ukraine has a strong impact on ESG and human rights. Brooke Hopkins emphasized that in the US one of the things they are attempting to transition from is that the purpose of a corporation is to create a shareholder value, which, as she noted, is very short-term; while ESG plays in it to create a stakeholder value, which is a much longer-term.

Third, the panelists elaborated on ESG activist litigations and the role of the courts in enforcing business ethics. Brooke Hopkins mentioned that when it comes to activism in the US, the consumers are using it in a way to demonstrate their power, while some companies are using it to simply show that they are “green”. As per the role of the courts, Adam Heppinstall QC referred to the Dutch and New Zealand judiciary as examples of societal pressure and the need to take some action. Even more, when the Human Rights Act has been ratified in New Zealand, the society put pressure on the judiciary to create a tort through Article 8. He proceeded by mentioning that NGOs have a new place in this litigation landscape, and there is now a “triangle” between NGOs, lawyers, and funders. He commented on an interesting case before the French courts where the Casino supermarket chain is litigating with the assistance of an NGO which found a way to monetize the claim to the actual loss. Adam Heppinstall QC then summed up that currently, lawyers are trying to catch up with the developments in ESG regulations.

The panelists concluded by stating that there are a variety of directions to follow in terms of being sustainable, and it is important and needed to build a harmonized framework of policies. Brook Hopkins emphasized that ESG shall be tailored for the company, as it is not useful to build a “cookie-cutter” in the long run. While a “cookie-cutter” will give a direction of development, it will not necessarily be the best option as a long-lasting policy for the company.

 

Second Panel Discussion: The growth of ESG: the future for in-house and private practice litigators

In the second panel, Michael Fletcher, Pinsent Masons, chaired a discussion between Holly Gavaghan, Head of Arbitration, BD, Opus 2; Kay Majid, Group Legal Services Director, Tesco; Melissa Strong, Head of Insurance & Wealth Litigation, Lloyds Banking Group; James Thorne, Associate General Counsel, Associated British Foods.

The chair started by asking the speakers what are the big ESG issues that are keeping them awake at night.

James Thorne commenced by noting that ESG is a very broad concept and the short answer to the question would be – supply-chain is a big issue. While a longer answer would be some issues related to social and human rights matters, what is the scope of the carbon footprint, and how climate change can impact the suppliers in the future. He noted that on the one hand, it is ESG issues that are connected to the changing regulatory framework, and on the other hand, the practice. Melissa Strong proceeded by stating that greenwashing is a major issue. She further mentioned Sections 90 and 172 of the Companies Act which are very “uncomfortable” types of claims. Holly Gavaghan thereafter emphasized that the carbon footprint is very relevant within the ESG policies. From OPUS2 perspective, data security is the key risk in this context as it is sometimes included in the “G”. Notably, OPUS2 has recently launched an investigations platform with Linklaters and data security is enshrined in their policies. She further mentioned the Greener Litigation Pledge and the Arbitration Pledge as very relevant to the “S” of ESG. Holly Gavaghan emphasized that these pledges not only raised awareness about the issues but also addressed them. As per the Greener Litigation Pledge, virtual hearings and electronic bundles are some examples of how the carbon footprint can be minimized. And as per the Arbitration Pledge, she noted that in 2015 female arbitral appointments were at 12.2% while in 2019 they increased to 21.3%.

The panelists concluded by stating that in terms of innovation and aspiring practitioners, it is important not to go backwards. Melissa Strong noted that although there is environmental diversity at the moment, it is not necessarily compatible with a lawyer’s private life. In particular, it may not always be the easiest to travel to attend a hearing when it otherwise can be held remotely. She proceeded by noting that it has not been easy to adapt to the innovations as there is a whole training process to cope before it becomes a natural environment. Kay Majid noted that it would be refreshing to have new ideas and approaches toward ESG. James Thorne highlighted that the skillset of the users is also important; lawyers must be more contentious, and the junior lawyers should be getting such training as well. Holly Gavaghan concluded that we all are on a journey and there are certainly positive changes.

 

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LIDW 2022: Latin America – Delivering Sustainable and Ethical Infrastructure Across Key Sectors – A Disputes Perspective

Kluwer Arbitration Blog - Wed, 2022-05-11 01:35

On the first day of the 2022 London International Disputes Week, Herbert Smith Freehills, HFW, HKA, King & Spalding, and Twenty Essex organised a panel on “Latin America: delivering sustainable and ethical infrastructure across key sectors – a disputes perspective”. The panel was composed of Richard Caldwell (Brattle), Dr Francisco González De Cossío (Gonzales de Cossio Abogados, S.C), Manuel Casas (Twenty Essex), Jose Ricardo Feris (Squire Patton Boggs), Cristina Ferraro (Miranda & Amado), Erica Franzetti (King & Spalding), Felipe Ossa (Claro & Cia), Daniela Paez, (Herbert Smith Freehills). The moderators were Chris Cardona (HFW) and Michael Laming (HKA).

 

The winds of change in Latin America: has the region become riskier for foreign investments?

The first part of the conference focused on the recent political instability in Latin America. Felipe Ossa highlighted the uncertainties raised by the Chilean Constitutional Convention, which is currently drafting a new constitution. The Constitutional Convention has approved a number of provisions that may pose significant risks to foreign investment, including amendments to the mining regulatory framework and natural resources concessions. However, some polls suggest that the new constitution will not be ratified in the referendum scheduled for next September. This could prompt further political unrest and cast doubts over the country’s future stability.

Cristina Ferraro expressed concerns over the institutional stability in Peru and how it has disrupted several important investment projects in the country, particularly in the energy sector. Likewise, Francisco González discussed the reforms to energy regulations that the government of Andrés Manuel López Obrador has tried to implement in México. According to him, the new measures have had negative impacts on the country’s clean energy market and have discouraged investments in the industry.

Richard Caldwell addressed the economic implications of the changes in the various Latin American jurisdictions. From the perspective of damages calculation, this regional uncertainty produces valuation discounts because the risks are higher. However, he insisted that the actual impact may vary between economic sectors since some markets, such as exports, might be able to navigate in a better way the current political landscape.
In general, the panel agreed that Latin America is currently undergoing turbulent times and political instability. From an investor’s perspective, the region has become riskier as there are newly elected governments vowing to amend the constitutional framework.

 

How could London be more attractive for Latin American disputes?

The second part of the conference focused on the question of whether London is the next Latin American dispute hotspot.

The panel discussed how London is perceived internationally and whether there is room for improvement when looking at attracting Latin American disputes.

Daniela Paez and Erica Franzetti acknowledged that London is perceived as a very strong arbitration hub, with a sophisticated arbitration framework, competent practitioners, and a solid judiciary well-versed in international arbitration.

Be that as it may, Jose Ricardo Feris argued that London is not regarded as the leading jurisdiction for Latin American disputes. He claimed that Paris had done better work in attracting disputes from the region thanks to the efforts of the ICC, which has established a presence in Latin America over the last years. In that regard, arbitration institutions such as the LCIA could benefit from engaging in the region.

Manuel Casas agreed that London needs to promote itself in order to be closer to Latin America. However, it underscored that some steps had been taken in that direction. For instance, the Law Society has been marketing English law in the region, and a number of London-based law firms have been establishing offices or partnerships in Latin America.

Erica Franzetti considered that even though London continues to be a big arbitration hub worldwide, Miami and Sao Paulo remain more natural forums to resolve Latin American disputes due to their proximity to the region and their common background between them. This idea is in line with the 2021 International Arbitration Survey, which found that London was not a top pick for survey respondents based in the Caribbean/Latin America.

The panel concluded that London, as a potential hub for disputes, offers sophistication, predictability, and expertise in international arbitration. However, London faces strong competition from very strong seats in the US and Paris regarding Latin American disputes. Therefore, London arbitration institutions require a more aggressive campaign to promote the seat and English law if they want to grow in the Latin American market.

 

More coverage from LIDW is available here.

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LIDW 2022: What is the Role of London for North American Disputes? A North American Perspective on London as an International Dispute Hub

Kluwer Arbitration Blog - Wed, 2022-05-11 00:48

As part of the 2022 London International Disputes Week, McCarthy Tetrault, Queen Mary University London, Clyde & Co, Hughes Hubbard, and Fountain Court Chambers organized a conference on “What is the role of London for North American disputes? A North American perspective on London as an international dispute hub.”

The panel was composed of Remy Gerbay (QMUL, Hughes Hubbard), Domenico Di Pietro (GST), Miranda Lam (Acuitas Therapeutics), Robin Lööf (Fountain Court), Junior Sirivar (McCarthy Tetrault), and Jamie Spotswood (Clyde & Co).

The panellists discussed London’s role in arbitral disputes from the US and Canadian perspectives. The session focused on a few key topics particularly relevant to North American disputes, especially: (1) the choice of US and Canadian parties of London as a seat of arbitration; and (2) London as a sustainable, ethical and global spot for North American disputes.

 

London as an arbitration hub for North American disputes

Remy Gerbay kick-started the event by asking the panel whether it was common for North American parties to resolve disputes in foreign seated arbitrations and whether London was a preferred choice.

The panelists agreed that dispute resolution regularly takes place outside North America, and English courts and arbitral institutions as forums provide the best choice for international disputes. According to the panellists, London is a very reliable spot for three main reasons:

  1. Traditionally, the UK courts are widely considered reliable and a predictable place to settle disputes. Historically, the UK is one of the first jurisdictions to embrace alternative dispute resolution.
  2. London provides an extremely varied pool of professional expertise in the world, as shown by the composition of the panel.
  3. The English courts are naturally international, as 70% of commercial cases before them had an international nexus, with over 70 countries worldwide using London as a seat. A panellist described London as a commercial “World Court” and a major arbitration hub.

Moving to substantive law, the panellists emphasized the close ties between North American and the English & Welsh legal systems, as they are built upon common law principles. One member said that parties would refer to commercial decisions adopted in English courts even in Canadian-based litigations. London also appears as a “fairly easy and neutral ground” for Canadian parties who do not wish to opt for Canadian courts. Similarly, the members emphasized the culture of cooperation between Canadian and UK courts on topics ranging from freezing orders to enforcement of arbitral awards. A panellist expressed that the recent wave of sanctions against Russia – which was much more coordinated among G7 leaders – might also result in a rise in US sanctions enforcement, driving in turn greater UK sanctions enforcement.

Moving to the advantages of London as an arbitration seat, the panel praised the culture of procedural efficiency the city had to offer compared to prospective venues in Canada or the US. As one of the panellists underlined, the “English Arbitration Act is old but aging very well.” According to the experience of the panel members, the LCIA “came out 9 times out of 10” as the preferred arbitration center when there is an international component to a contract. It was the panel’s view that when London is chosen as a seat, the parties tend to adopt English law as governing law.

Finally, the panellists pondered whether London was a competitor to American or Canadian arbitration forums. New York and Singapore are given as other popular destinations for both litigants and arbitrators from the region. One member expressed the view that Canada is quickly developing a high-standard system able to welcome arbitral activities founded on a well-established judiciary. Others recognized that London presented competitive advantages, particularly for certain types of disputes, such as banking, maritime, shipping, and new types of technological disputes. This ascendency seems not to be undermined by Brexit, as US companies are planning to increase their presence in England. London remains a very attractive place for business – anecdotal evidence for this is that (most) major international law firms have an office in London.

 

London: global, sustainable and ethical?

The panel also addressed the theme of this year’s LIDW, namely “Dispute Resolution – Global, Sustainable, Ethical?”

On sustainability, a panellist admitted that he had to look up the notion in the dictionary before the session, expressing a favourable opinion on developing best practices that reduce our environmental impact. The panel showed consensus that efforts could be made to better allocate budgets and resources for environmental benefits – i.e., reducing the amount of paper and the amount of travel to prepare for hearings and arbitration proceedings. However, it seemed that, in practice, the driving factor for change was not environmental protection but cost-savings, convenience, and efficiency – even though the benefits were intertwined. . The panellists agreed that virtual hearings could dramatically increase efficiency compared to physical venues.

Diversity was considered a topic related to sustainability that is becoming increasingly significant. According to a panellist, external counsel is increasingly chosen according to values, with the team’s diversity being one of the major elements when in-house counsel chooses an outside law firm.

On the global importance of London, the perception was that England provided excellent legal education, deriving great value from training in England, with well-established foundations to practice. This might be reflected in the appointment of arbitrators. A member of the audience raised a question on the cooperation between the US and UK, mentioning that English arbitrators are particularly appreciated in the US and Canada, while US and Canadian arbitrators are often appointed in the UK.

Finally, the panel addressed the topic of ethics and whether the high ethical standard could be an impediment to London as an arbitration seat. The panel was divided on the issue of witness preparation and coaching. Some expressed the view that while Canadian lawyers are subject to high ethical standards, it would be considered negligence not to coach the witness in Canada. What is considered appropriate is to prepare the witness in the best possible way without misleading the court. On the contrary, in England, the line between preparation and coaching – the latter being prohibited – is blurred. This may raise concerns in international disputes. However, the panel agreed that high ethical standards were a long-term asset rather than an obstacle.

 

Conclusion

The panel’s main subject turned out to be the quality of service London may offer to North American parties. Overall, the panellists agreed that the excellence of the legal system, education, and arbitration institutions in England constituted vital reasons why a London seat was preferred over some continental seats. Reflecting on the last 20 to 30 years, the panel agreed on the exponential development of London as an international arbitration hub, rising as a result of resourcefulness, to one of the top three arbitration spots in the world, if not the first.

 

More coverage from LIDW is available here.

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Stacie Strong Receives ABA Dispute Resolution Section Scholarship Award

ADR Prof Blog - Tue, 2022-05-10 12:05
This is a belated announcement of this year’s ABA Dispute Resolution Award for Outstanding Scholarly Work given to Stacie Strong.  She now teaches at the University of Sydney Law School, where she is the co-director of the Sydney Centre for International Law.  In her remarks accepting the award, she generously credited help from colleagues at … Continue reading Stacie Strong Receives ABA Dispute Resolution Section Scholarship Award →

LIDW 2022: “If You’re Going through Hell, Keep on Going”

Kluwer Arbitration Blog - Tue, 2022-05-10 10:03

The first day of the LIDW main conference began with a short introduction by Richard Bamforth, Chair of the LIDW Strategy Group, and partner at CMS. Bamforth reiterated the theme of LIDW 2022 reminding those in attendance that there is a question mark at the end of theme: “Dispute Resolution-Global, Sustainable, Ethical?This means, as explained by Bamforth, that it is essential that we ask questions: Is dispute resolution indeed global, sustainable and ethical? If it is, why? And, how are these goals achieved in practice?

 

First Panel Discussion:  Examining the Lives of Dispute Resolution Professionals 

Along these lines, the first panel discussion, “If you’re going through hell, keep on going” – a motivational statement for its time from Winston Churchill, but how sustainable is that approach for the modern-day disputes professional?, examined the life of a commercial disputes lawyer and of those practising in litigation and arbitration, asking whether “winning at all costs” is sustainable in the long term, given our enhanced awareness of the toll that being a dispute resolution professional may take on those involved in our profession.

The panel was moderated by Ed Crosse, Partner, Simmons & Simmons, and included distinguished speakers, each representing different aspects of the industry.: The Rt. Hon. Lady Justice Carr DBE; Simon Davis, Past President, the Law Society of England & Wales; Anya George, Partner, Schellenberg Witmer; Maryann McMahon, Head of Litigation, EMEA, Morgan Stanley; Stuart Ritchie QC, Fountain Court.

As explained by Ed Crosse, in 2021, LawCare published its “Life in the Law Survey”, which showed that 42% of lawyers in the UK identified as being at a high risk of burn out, with 69% reporting that they had experienced mental ill-health in the previous 12 months. While our raison d’etre is the resolution of disputes, are the practices and procedures we use and deploy fit for purpose in today’s environment? Also it is important to note that the panel highlighted that only 24% of the survey respondents were men, which, in itself is an important aspect of the survey.

The panel first focused on the reasons why one makes the choice to practice in dispute resolution, for solicitors, barrister, judges, and arbitrators, invariably, the answer lies in the variety of matters that one comes across. At the same time the speakers confirmed that there is some awareness that this work comes with stress and challenges. Speaking of challenges, Maryann McMahon emphasized that, as disputes are emerging, they already come to lawyers with a ‘domino’ of stress, given the complexity of the relations, negotiations, performance of contracts etc., and as such, practitioners should be careful not to become a conduit of stress, meaning that practitioners must absorb a lot of stress without passing it on. Simon Davis pointed out that great challenges might come from the lawyers themselves: many talented lawyers are highly sensitive to any criticism, while some are so immersed in the matter that the clients’ problems become their burden. Stuart Ritchie QC emphasized that, for barristers, another challenge is that of the solitary profession and, as such, one must realize when help is needed.

Anya George concluded that the challenges for arbitration practitioners come from the fact that there are no common standards in arbitration proceedings and conducts, which can affect the schedule of a case and burden the work-life balance of arbitrators and arbitration practitioners. Lady Justice Carr emphasized that the court sees the complexity of the profession and the challenges faced by practitioners. In particular, these aspects are visible at the end of a trial when responsibility shifts from the parties’ counsel to the judge so that the decision may be rendered.

The panel discussion concluded with top tips for dispute resolution practitioners, highlighting that it is time to address this topic more often and in a proper manner. The main recommendation was to speak up about the challenges as a dispute resolution lawyer, judge or arbitrator, and also ask for help when that is necessary.

 

Second Panel Discussion: The In-house Counsel Perspective on Dispute Resolution

The second panel of the first day of the main LIDW 2022 conference focused on the in-house counsel experience in settlement and the resolution of disputes: Settlement and risk management for businesses: an in-house counsel roundtable. The panel asked various questions: Do business use mediation, or arbitration (or something else?). Do they also seek settlement after they have obtained an award rather than seek enforcement before courts? How do they gain stakeholder engagement for a different course of action? And once decided, how do they prepare?

The panel was moderated by Artem Doudko, Partner, Osborne Clarke, and Rebecca Clark, IPOS Mediation, and included as speakers: Kai-Uwe Karl, Global Chief Litigation Counsel, GE Renewable Energy; Fiona Meany, Head of Litigation, JLL; and Abhijit Mukhopadhyay, President (Legal) and General Counsel, Hinduja Group. The speakers were unanimous in emphasizing that one has to look at the business interests of users in choosing the adequate dispute resolution mechanism. Kai-Uwe Karl noted that in the case of GE, the vast majority of disputes settle, while a minority, not necessarily represented by high value claims, proceed with litigation or arbitration. Furthermore, the speakers mentioned that for in-house counsel, the primary focus is to first negotiate and try to settle disputes. And in doing so, while legal arguments play an important role, the focus should be on the business driven factors. For this, as Fiona Meany emphasized, in a negotiation, one must have the right persons at the table: not only those with the power to decide and commit the parties, but also the in-house counsel who is familiar with the business. In speaking about settlement, Abhijit Mukhopadhyay stressed the importance of the drafting of the contracts: most disputes arise out from poorly drafted contracts, and for this reason the collaboration between internal and external counsel is of utmost importance: the external counsel must be the extended arm of the legal department of the client.

 

More coverage from LIDW is available here.

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LIDW 2022: London as an International Disputes Hub for East Asia Disputes – the Challenges and Opportunities of East Asia’s Evolving Dispute Resolution Ecosystem

Kluwer Arbitration Blog - Mon, 2022-05-09 20:30

London International Disputes Week 2022 (LIDW) 2022 kicked off yesterday with outstanding sessions and panellists in a hybrid format all around the city, centred around this year’s theme: Dispute Resolution: Global, Sustainable, Ethical?. Each year, the LIDW concentrates on several hot topics and controversial issues in international dispute resolution from all over the world. Yesterday’s conference addressed key developments for the arbitration market in East Asia, covering the legal and practical consequences of Covid-19 policies to new trends of disputes and the parties’ favourite seats for arbitration.

One of the first sessions of LIDW 2022, “London as an international disputes hub for East Asia disputes: the challenges and opportunities of East Asia’s evolving dispute resolution ecosystem” took place at Herbert Smith Freehills’ London office and focused on a range of topics including navigating Belt and Road disputes; the introduction of adjudication in Hong Kong; and the potential cost of meeting zero-carbon commitments in Asia – with a specific focus on London’s role as an arbitral seat and English law as governing law.

The organisers of the member-hosted event were Herbert Smith Freehills, Morrison Foerster, Penningtons Manches Cooper LLP and Twenty Essex Chambers. The panel was composed of Mathias Cheung (Barrister, Atkin Chambers), Simon C. Milnes QC (Barrister, Twenty Essex); Mark Sachs (Partner, Penningtons Manches Cooper LLP); Sarah Thomas (Partner, Morrison Foerster) and Helen Tang (Partner, Herbert Smith Freehills).

The panel was chaired by Mathias Cheung, who raised questions on emerging trends in the arbitration market, current dispute types and client demands within the dispute resolution realm in the East Asia market – mainly in Hong Kong and Mainland China. Helen Tang stressed that the vast majority of disputes in Mainland China relate to joint venture and trade matters. She observed that a specific trend in the East Asian arbitration market was the growing number of arbitrations arising from bail-out projects in mega construction projects. She argued that the effects of the Chinese Government’s Covid-19 policies would cause several disputes in the region as they affect the global supply chain. In line with these statements, a panel member highlighted that disputes stemming from private equity and merger & acquisitions transactions are highly trendy in Mainland China, as are licencing disputes where arbitration is preferred as a dispute resolution method.

Asked about the most preferred dispute resolution methods for disputes in the East Asia market, Sarah Thomas stressed that Chinese parties often prefer multi-tiered dispute resolution while their counterparties would favour arbitration outright. She also added that despite the controversial jurisdictional problems in Hong Kong on set-aside and enforcement proceedings, arbitration remains the most preferred mechanism as a dispute resolution method in the East Asia ecosystem.

Helen Tang analysed the pros and cons of Hong Kong, Singapore and Mainland China as arbitration seats. Ms. Tang emphasized that Technology, Media, and Telecommunication companies strongly prefer Hong Kong as a seat, whereas Mainland China is becoming a more popular seat for International Investment Banks. Ms. Tang concluded her remarks by stating that Chinese parties insist on selecting mainland China as a seat and China International Economic and Trade Arbitration Commission (CIETAC) as an institution.

Sarah Thomas argued that Hong Kong remains the most preferred seat for “sensitive contracts”, while closely tied as preferred seat with Singapore – according to the Queen Mary University Survey. The tendency to see Singapore as a top spot seems to grow. Given the extremely strict pandemic restrictions, she shared her practical concerns about Hong Kong. She expressed concerns that entire court proceedings, including in-person hearings, are negatively affected. The panellists agreed that Hong Kong remained the preferred seat, given its arbitration friendly ecosystem and ease in granting enforceable interim measures in Mainland China – as Chinese courts are very inclined to enforce those provisional measures.

On the enforceability of arbitral awards, the panellists discussed China’s enforcement system and problematic supervisory authority’s decisions, with focus on anti-suit injunctions. For example, Simon C. Milnes QC advised that granting an antisuit injunction from UK Courts requires initiating the proceedings before them as soon as possible. Otherwise, the “delay” for application itself would probably be a countervailing issue in the UK courts’ eyes. After highlighting English law’s importance as governing law and London’s dominance as a seat, Mr. Milnes argued that establishing an institutional body for commodities arbitration in London would expand London’s role in international arbitration and reinforce its position as a powerful seat.

 

Conclusion

The panellists concluded their valuable and stimulating remarks by arguing that English law as governing law and London as a seat of arbitration are “safe ports” in resolving East Asia disputes. London retains vital assets, with its ad-hoc and institutional arbitration at the London Court of International Arbitration (LCIA) and sector-specific specialised counsel, judges and the entire legal community.

 

More coverage from LIDW is available here.

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LIDW 2022: London as a Dispute Resolution Hub for Disputes Involving Parties from Ukraine and Kazakhstan – Disputes in Turbulent Times

Kluwer Arbitration Blog - Mon, 2022-05-09 09:00

Since the first edition in 2019, Kluwer Arbitration Blog has partnered with London International Disputes Week (LIDW) for the live coverage of an exceptional week addressing topical issues related to the resolution of commercial disputes.

The first panel on 9 May 2022, on London as a dispute resolution hub for disputes involving parties from Ukraine and Kazakhstan: disputes in turbulent times, was also the one to open the first edition of the International Day at the London International Disputes Week. It was hosted by LK Law, QMUL, Quadrant Chambers, Quinn Emanuel Urquhart & Sullivan LLP, RPC, and in person attended at RPC’s beautiful office opposite the Tower of London. The panel was moderated by Prof. Loukas Mistelis, QMUL and Clyde and Co., and with panellists representing both the jurisdictions discussed, as well as London and the London based law firms advising clients from these jurisdictions: Adam Greaves, LK Law; Askar Konysbayev, GRATA international; Tatiana Minaeva, RPC; Olena Perepelynska, Integrites; Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan LLP; and Alexander Uff, Quadrant Chambers.

This session addressed disputes involving parties from Ukraine and Kazakhstan in the current turbulent environment and it broadly considered the role of London arbitration and London courts, the role of English law and how lawyers have been adapting their work in these challenging times.

Loukas Mistelis introduced the panel by framing the discussion being focused on the post-pandemic developments in the face of the ongoing war in Ukraine and the turbulent times in Kazakhstan in January 2022. The discussion comes naturally, as Mistelis explained, as Ukraine and Kazakhstan are frequent litigants before the English courts and the arbitrations seated in London frequently have parties from both jurisdictions. The panellists addressed the effects of the sanctions in connection with the war in Ukraine on the conduct of arbitration proceedings, the recognition and enforcement of arbitral awards in Ukraine and Kazakhstan, respectively, and lastly on the possible proliferation of Crimea-like arbitration cases in the face of the new developments in Ukraine.

Alexander Uff addressed the impact of the economic sanctions imposed by the EU, US, UK, and Switzerland and other countries, on Russia in light of the war in Ukraine, by focusing the discussion from the perspective of arbitrators and counsel. First, Uff mentioned the consequences on the independence and impartially of arbitrators, highlighting that the standard under English law is the absence of appearance of bias, which implies, in light of the sanctions regime, the disclosure of any situations likely to affect the arbitrator’s independence and impartiality. This resulted, Uff added, in some arbitrators having to resign during the arbitration proceedings, while others were prevented from accepting appointments. Further, the imposition of sanctions also raised the concern of eventual conflicts between arbitrators and counsel of parties. Uff clarified that while this situation is covered by the IBA Guidelines on Conflicts of Interest in International Arbitration 2014 when there is enmity between arbitrators and counsel, in practice this mainly concerned situations of conflicts arising because of previous arbitrations involving the same counsel and arbitrators, and not as a result of economic sanctions. Of course, Uff added, arbitrators also have the possibility to exercise their powers to exclude counsel from the proceedings if that affects the constitution of the arbitral tribunal, under the IBA Guidelines on Party Representation in International Arbitration. Uff also mentioned other implications of the war more broadly and the economic sanctions in particular. For example, the smaller pool of arbitrators, less availability of arbitrators and counsel from Ukraine, inability of arbitrators and counsel from Ukraine to travel and for arbitrators to sign their awards etc. Adam Greaves added to Uff’s insightful comments that, from the perspective of counsel, the war in Ukraine put a lot of pressure on law firms in making a choice on whether to continue representing Russian clients or even to continue to take more work involving Ukrainian clients given the screening requirements currently in place. In Greaves’ view, there will be a shift in how law firms will approach these disputes, a specialisation of counsel in these matters involving Russian and Ukrainian clients, and even an increase in the number of smaller law firms which would accept these matters. In any case, in Greaves’ opinion, matters involving Russian and Ukrainian clients will continue to come to London. Tatiana Minaeva explained that law firms are increasingly making their risk compliance processes more thorough and complex, given the implications of the economic sanctions. As such, Minaeva, added, it is not only for potential Russian involvement, but also equally applicable to potential Ukrainian clients. Because these processes are elaborate, they are taking longer than in normal circumstances; this, in turn, has an impact on the appetite of law firms to accept these clients. Epaminontas Triantafilou raised the question whether all these concerns raised are justified. In his opinion, there has been significant market pressure on counsel which ultimately is multifaceted. For example, for large law firms there can also be internal pressure to not accept certain clients because of the position of existing clients towards the war in Ukraine. To this, Loukas Mistelis asked the question – which is the theme of this year’s LIDW – whether London is becoming ‘Global, Sustainable, Ethical?’, and rather ethical in this sense.

Moving to the jurisdiction-specific discussion, Olena Perepelynska, connected remotely from Ukraine, has highlighted the significance of keeping the work flowing for Ukrainian arbitrators and counsel, also mentioning that ICAC Ukraine is currently operational and hearings are taking place, albeit remotely. On the recognition and enforcement of arbitral awards in Ukraine, Perepelynska highlighted the excellent track record of the Ukrainian courts, with a pro-arbitration stance and 90% enforcement rate of foreign arbitral awards. At the same time, Perepelynska emphasized that for arbitrations seated in Ukraine, only 1% of the ICAC awards are set aside by the Ukrainian courts. Askar Konysbayev addressed the recognition and enforcement of arbitral awards in Kazakhstan. While Kazakhstan is a contracting state to the New York Convention 1958, it is only recently that courts have become more familiar with the Convention and its application. The procedure is fairly straightforward and the Kazakh courts routinely enforce foreign arbitral awards. However, as mentioned by Konysbayev, Kazakh courts are still prone to influence and put administrative pressure on the judiciary. As to recognition and enforcement of court judgments, Konysbayev highlighted that this is not that straightforward, as Kazakh courts are not familiar yet with the reciprocity principle, which is not tested in Kazakh courts and, thus, the question remains open.

To conclude the panel discussion, Loukas Mistelis inquired whether we will witness a boom of Crimea-like cases in the near future. Epaminontas Triantafilou mentioned that, indeed the cases based on the 2014 invasion of Crimea may offer hope for future like disputes. However, one must be careful and observe how the situation is evolving, as the current situation is a dynamic one. The war is still ongoing and the effective control, which was upheld in the Crimea cases, is fluid in the present circumstances.

The panel concluded that, indeed, we live in interesting times for the legal profession, dynamic and with significant consequences.

 

More coverage from LIDW is available here.

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LIDW 2022: London as an International Disputes Hub for Dubai, UAE and Region Disputes: is it Still Safe to Arbitrate in Dubai, and Other Hot Topics

Kluwer Arbitration Blog - Mon, 2022-05-09 07:57

As part of the 2022 London International Disputes Week, Arbitration Chambers, Clyde & Co, Hausfeld, Jones Day and LexisNexis organized a conference on “London as an international disputes hub for Dubai, UAE and region disputes: arbitration and the courts – is it still safe to arbitrate in Dubai, and other hot topics”.

The panel was composed of Hussain Hadi (LexisNexis), Ned Beale (Hausfeld), Philip Devenish (Jones Day), Sara Koleilat-Aranjo (Al Tamimi & Co), Alexandra Lester (Clyde & Co) and Niels Schiersing (Arbitration Chambers).

The session focused on key topics from the world of dispute resolution that are particularly relevant to Dubai, UAE and Middle East region disputes. In particular, the panel engaged in a fruitful conversation on: (1) the attractiveness of Dubai since Decree No. 34 of 2021 from the perspective of international arbitration users – either counsel, arbitrators, or parties; and (2) the development of commercial and investment arbitration in the Middle East region.

 

Dubai’s Decree No. 34 – One bump in a long road?

The panel expressed mixed views on the most significant transformation in the region in 2021, namely Dubai’s 2021 Decree No. 34 Concerning the Dubai International Arbitration Centre (“Decree”, previously discussed on the Blog here and here).

To recall, the Decree came into force on 20 September 2021 and essentially reformed the arbitration framework in the UAE. The Decree abolished the Dubai International Finance Centre’s Arbitration Institution (i.e., the DIFC-LCIA Arbitration Centre) and the Emirates Maritime Arbitration Centre.  It transferred the responsibility of other institutions, including all of their assets, employees, financial allocations, and lists of arbitrators to the Dubai International Arbitration Centre (“DIAC”).

Some members of the panel expressed concerns over the Decree. They criticized the way it came into force, without prior consultation with the arbitration community, a certain lack of transparency concerning its promulgation, and its impact on ongoing arbitration cases, including challenges those related to arbitral costs.

Other members adopted a long-term approach to the Decree, emphasizing the much-needed clarity it brings to the UAE jurisdiction. They view the unification of Dubai’s different arbitral institutions under the umbrella of an improved DIAC with a revised set of arbitral rules and the clarity on the supervisory court as essential developments in the long run for the attractiveness of the seat.

Regarding whether Dubai could retain its top-10 position as an international arbitration hub (as ranked according to the 2021 Arbitration Survey by the School of International Arbitration at Queen Mary University), the panel members were cautiously optimistic.

Dubai is a unique jurisdiction, with its confluence of common and civil law and its position in a thriving region with strong arbitral development – all natural reasons which suggest Dubai remains an attractive seat. The panel members nevertheless emphasized the need for greater transparency, outstanding level of case management and service to the parties, and a strong autonomy for the arbitral tribunals as conditions for the attractiveness of the seat, particularly for foreign nationals or entities that are not registered in the seat of the arbitration.

From a historical perspective, the Decree was seen as a “hiccup” on the long road of UAE and the Middle East region in their relationship with arbitration. A member of the panel reminded the audience those 75 to 80 years back, UAE was not a welcoming arbitration environment, especially for disputes concerning the oil & gas industry. In hindsight, the 21st century has seen a spectacular effort from an institutional perspective, with significant investments put in place to support arbitration in the region.

Nevertheless, for users of international arbitration in Dubai, the Decree came as a surprise, if not a shock. The agreement between LCIA and DIAC on ongoing cases provides that the LCIA will continue to administer all existing cases under DIFC-LCIA rules from its London offices. However, the main issue remains the interpretation of arbitration clauses that mention the DFILC-LCIA rules and the present circumstance’s challenge to party autonomy. Similarly, some considered that the Decree might create windows of opportunity for other arbitral seats, either in the region or in globally well-established arbitration jurisdictions. For example, London would be a natural choice for users of international arbitration that seek as a stable and transparent seat.

 

The Middle East – An Arab Spring for commercial arbitration and investor-state arbitration?

The panel agreed that the Middle East region saw a spectacular increase in arbitral institutions and laws across the last decade, if not in the last five years – for instance, the addition in 2018 of the Oman Commercial Arbitration Centre.

In the investor-state arbitration space, there has been a spectacular growth in investment arbitration in the Middle East, with increasing opportunities for the seat of Dubai. The data shows a growth in the number of investment treaties and cases across the region. While 500 investment treaties are in force across the Middle East, one third have been ratified in the last decade only. Similarly, it was put forward that over 50% of the known arbitration proceedings have been launched in the last five years – reflecting that there has been no backlash for investment arbitration in the Middle East, which is alive and well.

One panel member mentioned the recent Israel-UAE BIT and referred to it as a token of appeased relationships, reflecting developments in the region more broadly. This growth in investment arbitration was comparable to a sort of Arab spring, i.e. a response to corruption and economic stagnation – two ills that investment treaties seek to cure by securing the rule of law.

In the region, most ad hoc cases are pursued under UNCITRAL rules, suggesting that the DIAC could be a neutral institution for administration, and one that could be more popular than other options, particularly for Russian parties.

 

Conclusion

The Middle East region is a space to watch with its significant developments both in commercial and investment arbitration. Some panel members expressed concerns about the immediate and middle term outcome of the latest Decree, particularly regarding the transparency and stability of the arbitration framework in the UAE – making London perhaps appealing to some users. They were nevertheless cautiously optimistic about the long-term potential of the region and UAE for arbitration.

 

More coverage from LIDW is available here.

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