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What would *you* have done?

ADR Prof Blog - Sun, 2021-10-03 07:13
“What would *you* have done?”   An article last week in the Wall Street Journal offered the headline, “Political Divisions in Cortez, Colorado, Got So Bitter the Mayor Needed a Mediator.”  It went on to profile a town in which there were weekly marches on both the right and the left … “freedom rides” and … Continue reading What would *you* have done? →

Rekindling the Debate on Enforcement of Foreign Seated Emergency Awards in India

Kluwer Arbitration Blog - Sun, 2021-10-03 00:33

Recently the Supreme Court of India in Amazon.com NV Investment Holdings Inc. v. Future Retail Ltd, (“Amazon v. Future”) took a progressive step by enforcing an emergency order/award rendered by an emergency arbitral tribunal appointed by Singapore International Arbitration Centre (“SIAC”). The Court held that the term ‘arbitral tribunal’ contained in section 17 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) includes an ‘emergency arbitrator’ within its fold. Therefore, the Court held that its order/award is enforceable in India.

However, this case is hardly an authority for the proposition that foreign-seated emergency awards are enforceable in India. This is because Amazon sought to enforce a Delhi-seated emergency award, i.e. though the administering institution was SIAC, the tribunal itself was not foreign-seated.

Provisions enabling enforcement of emergency awards

Section 17(2) of the Arbitration Act, inserted vide the Arbitration and Conciliation Amendment Act, 2015 (“2015 Amendment”), provides by a deeming fiction that any order issued by an arbitral tribunal (seated in India) shall be deemed to be an order of the court and shall be enforceable as such. Therefore, since the arbitral tribunal in Amazon v. Future was domestically seated, it was able to enforce the award under this provision.

However, had the award been rendered by a foreign seated arbitral tribunal, the court could not have relied upon section 17(2) to enforce the emergency award since Part-I of the Arbitration Act does not apply to a foreign seated arbitration (see Bharat Aluminium Company v. Kaiser Aluminium Technical Services; read here for a detailed discussion on the applicability of Part-I to foreign seated arbitrations).

While Amazon v. Future is a shot in the arm for enforcing domestically seated emergency awards, it has rekindled the debate on the enforceability of foreign seated emergency awards in India.

Previous decisions on enforcement of foreign seated emergency awards in India

In 2016, the Delhi High Court in the case of Raffles Design v. Educomp Professional Education (“Raffles v. Educomp”) held that an emergency award by a foreign seated arbitral tribunal was not enforceable under the Arbitration Act and it could only be enforced by filing a suit (¶99). The court held that in the alternative, the party which had obtained a foreign seated emergency award would have to de novo seek interim orders from the domestic court in terms of the emergency award.

This approach goes against the entire basis of lending credibility to awards/orders of emergency arbitral tribunals. The Supreme Court of India in Amazon v. Future (¶32, 35) has recognized the reasons underlying the setting up of emergency arbitral tribunals, which are:

  1. to de-congest an already clogged court system; and
  2. to grant timely and efficacious interim relief to a party.

Thus, there are sufficient policy considerations to recognize emergency awards.

Enforcing foreign seated emergency awards in India: Examining the provisions of the Arbitration Act

The award/order of a foreign seated emergency arbitral tribunal may be enforced in India with the support of certain existing provisions under the Arbitration Act.

  1. Section 27(5)

As originally introduced, Section 17 of the Arbitration Act empowered arbitrators to pass interim orders but did not provide for any mechanism to enforce such orders. (see Sundaram Finance Ltd v. NEPC  India  Ltd.) Against this backdrop, the Delhi High Court in Sri Krishan v. Anand held that under section 27(5) the court had the power to punish a party for contempt at the instance of the arbitral tribunal if the party is in breach of the interim orders passed by the arbitral tribunal.  This interpretation received the imprimatur of the Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan where the court held that the orders of the arbitral tribunal cannot be rendered a dead letter.

Section 27(5) is a salutary provision that does not trace its source to the UNCITRAL Model law but has been incorporated on the lines of section 43(2) of the now-repealed Arbitration Act, 1940. Section 43(2) empowered the court to subject persons guilty of contempt to the arbitrator to the same disadvantages, penalties, and punishments like offences in suits tried before the court. The same provision has now been incorporated legislatively in section 27(5) of the Arbitration Act.

After the 2015 Amendment applied section 27 to foreign seated arbitrations (vide the amendment to proviso to section 2(2)), section 27(5) can a fortiori be used to enforce emergency awards of foreign seated arbitral tribunals, just as it had been pressed into service for enforcing interim orders by domestic tribunals. Not doing so would render the application of section 27 to foreign seated arbitrations otiose.

Even the 246th Report of the Law Commission of India, which formed the basis of the 2015 Amendment, specifically observed that the purpose of the amendment to section 2(2) was to empower Indian courts to exercise jurisdiction under section 27 even to foreign seated arbitrations. Further, in applying section 27 to foreign seated arbitrations, the Arbitration Act has knowingly deviated from the UNCITRAL Model Law, which only intended to apply this provision to domestically seated arbitrations.

It appears from Raffles v. Educomp (supra) that this argument was advanced by the respondent, but was rejected without undertaking a proper examination (¶102). The court reasoned that a person guilty of not following interim orders of a foreign seated arbitral tribunal could not be punished in India.

The court, however, failed to consider that the party breaching the order would be located within the jurisdiction of the court in India where the court can exercise its jurisdiction in personam. Section 27 is a provision to aid the arbitral tribunal where a party or witness is located within the jurisdiction of the court and the court would exercise this power even at the instance of a foreign seated arbitral tribunal. As such, this provision may be resorted to for enforcing orders of a foreign seated arbitral tribunal rendered during the conduct of the arbitral proceedings.

  1. Enforcement as a foreign award

In appropriate cases, an emergency award may even be enforced as a foreign award under Part-II of the Arbitration Act. Under rule Rule 1.3 of the SIAC Rules, 2016 an ‘Award’ is defined to include an award of an Emergency Arbitrator. Similarly, Rule 9.9 of the DIFC-LCIA Arbitration Centre Arbitration Rules, 2021 prescribes that an emergency award shall take effect as an award.

Arguably, the term ‘arbitral awards’ under Article I section 2 of the New York Convention on the recognition and enforcement of foreign arbitral awards (“New York Convention”) is wide enough to encompass an ‘emergency award’ within its fold.

Thus, depending on the nature of the relief granted by the emergency tribunal, a foreign seated ‘emergency award’ may fall within the wide definition of a ‘foreign award’ under section 44 of the Arbitration Act.

An equitable relief granted by the emergency arbitrator may fall within the meaning of an ‘interim award’ and even if an interim award is intended to have effect only so long as the final award is not delivered, such an award may also qualify to be an ‘interim award’, depending on its form (Satwant Singh Sodhi v. State of Punjab ¶6).

In case an equitable emergency award is granted by the arbitral tribunal to prevent an irreparable injury to the applicant, such an order may have the trappings of finality and thus, enforceable as an award. The New York District Court in Yahoo! Inc. v. Microsoft Corp. applied these tests to confirm an emergency award and enforced it. While there have been other cases in the United States refusing to enforce an emergency award, a case-to-case evaluation may be considered by the court and lean towards a pro-enforcement approach so as not to render the emergency award meaningless.

Concluding remarks

It is desirable that Article 17H and 17I of the UNCITRAL Model Law recognizing and enforcing interim orders passed by foreign seated arbitral tribunals be legislatively inserted in the Arbitration Act, akin to the Singapore and Hong Kong legislations, for complete clarity on this subject.

However, until such time that legislators catch up to the international trend, these arguments will aid the enforcement of foreign seated emergency awards so that the orders passed by these tribunals are not rendered unenforceable in India. These interpretations would otherwise be in line with the New York Convention, which binds parties to enforce foreign arbitral awards unless they fall within the limited grounds enumerated under Article V of the Convention.

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The Contents of Journal of International Arbitration, Volume 38, Issue 5 (October 2021)

Kluwer Arbitration Blog - Sat, 2021-10-02 00:00

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

 

Michael Hwang S.C. & Kevin Tan, The Time Limit to Set Aside an Award under Article 34(3) of the Model Law: A Comparative Study

The time limit to set aside an award under the United Nations Commission on International Trade Law (UNCITRAL) Model Law is three months. Although Article 34(3) of the Model Law does not appear to confer upon domestic courts discretion to extend this time limit, some exceptional decisions from Asian Model Law jurisdictions suggest that such discretion exists. This article argues that, notwithstanding these decisions, domestic courts do not have any discretion to extend the time limit to apply to set an award aside. This article also highlights certain recurring fact patterns commonly seen when parties try to argue in favour of such a discretion, and studies how the courts in various jurisdictions have treated these similar situations.

 

Nathalie Allen, Leonor Díaz Córdova & Natalie Hall, ‘If Everyone Is Thinking Alike, Then No One Is Thinking’: The Importance of Cognitive Diversity in Arbitral Tribunals to Enhance the Quality of Arbitral Decision Making

The popularity and longevity of international arbitration depends heavily on the quality of arbitral awards, the arbitral process, and the tribunals appointed by practitioners and institutions. In this article, the authors argue that practitioners and institutions need to consider a more diverse range of candidates for arbitrator appointments, to enlarge and diversify the pool of arbitrators. Not only does diversity make sense from an ethical standpoint, but research has also shown that increased cognitive diversity is required to reduce the risk of biased decision making and improve the quality of awards. More cognitively diverse arbitral tribunals are therefore necessary to preserve the continued legitimacy and success of international arbitration.

 

Morten Broberg & Niels Fenger, Preliminary References to the European Court of Justice by Arbitration Tribunals

When a court or tribunal of an EU Member State is faced with a dispute which gives rise to questions concerning the interpretation or validity of an EU legal measure that must be answered in order for the national court to render its decision, Article 267 of the Treaty on the Functioning of the European Union lays down that, prior to delivering its judgment, this court or tribunal may seek a preliminary ruling from the European Court of Justice. With the increased importance of EU law within those legal fields where arbitration is often used and with the growing number of arbitration proceedings, the preliminary ruling procedure may also be valuable to arbitration tribunals. However, the European Court of Justice has shown a pronounced reluctance when it comes to allowing arbitration tribunals access to use the preliminary reference procedure. This article provides an up-to-date examination of the Court of Justice’s approach to preliminary references from arbitration tribunals, and it considers the pros and cons of opening more up for such tribunals using the preliminary reference procedure.

 

Felix Krumbiegel, The Applicability of the Russia-Ukraine Bilateral Investment Treaty to Crimea in the Light of the Duty of Non-recognition in International Law

According to international law, Russia’s territorial claim over Crimea shall not be recognized as it was brought about by a violation of the prohibition of violence. Despite this obligation, several arbitral tribunals have recently accepted jurisdiction in claims brought by Ukrainian investors under the Russia-Ukraine BIT and declared the Russia-Ukraine BIT applicable. I consider the arbitral tribunals’ reasoning to be inconsistent with the duty of non-recognition. Therefore, I analyze possible alternative ways in which Ukrainian and non-Ukrainian investors can obtain protection for their investments in Crimea under the Russia-Ukraine BIT without implicitly recognizing Russia’s territorial claim over Crimea.

 

Mikhail Batsura, Limits to Party Autonomy in Appointing Counsel in International Commercial Arbitration

The right of a party to appoint its own counsel is an integral aspect of party autonomy and one of the fundamental rights enjoyed by the parties in international arbitration. However, party autonomy is not absolute and has its limitations. This article discusses whether the parties are free to appoint their legal counsel or face any applicable restrictions when making such appointment. The article invites a discussion on an existence of the immutability principle in international commercial arbitration and its tension with party autonomy in the selection of legal counsel (if any). Finally, the article proposes possible solutions for regulation of a party’s right to appoint a counsel of choice.

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ARBinBRIEF: New Initiative Kicking Off With A Group Of Trailblazers

Kluwer Arbitration Blog - Sat, 2021-10-02 00:00

This week has seen the launch of a new initiative – ARBinBRIEF. ARBinBRIEF is a practical video guide on handpicked arbitration issues. ARBinBRIEF aims to provide a concise, yet very informative insight into arbitration-related topics to all members of the arbitration community. The ARBinBRIEF series is divided into seasons consisting of 10 episodes each. Each episode will be recorded during a 15-minute live conversation between two stellar arbitrators and will be made available on the ARBinBRIEF YouTube channel. The episodes will air every fortnight. Attendees of the live event will be able to participate in a (non-recorded) Q&A and networking session thereafter.

 

The kick-off

ARBinBRIEF is a practical video guide that aims to deal with handpicked issues in arbitration. For the kick off event though, the founders of the series decided to take a different approach and learn from those who opted to pursue paths less taken. There is no recipe for success, but success definitely leaves clues. And the panellists left plenty of them. The discussion focused on highlighting the diverse career paths of the speakers, their dedication to initiatives that benefit the entire arbitration community and aim to challenge the status quo, as well as provide for a fulfilling and meaningful professional path.

The kick off took place on 29 September 2021, with a panel titled “Trailblazers: Ambition Meets Extraordinary” featuring a group of extraordinary individuals who have opted for different paths in pursuing their careers and have sought to achieve a purpose that goes beyond themselves:

Olga Hamama (Co-Founder and Partner of V29 Legal) moderated the panel.

 

Surround yourself with role models

Olga started off by remarking that success does not have a fixed recipe. Each path is distinct and extraordinary in its own way. Nadja, as the founder of breaking.through, is one of the people making such diversity visible with her platform.

When Nadja first entered the world of big law fresh out of law school, she noticed that there was a disparity between the number of men and women at the top. Many women would give up on the career of their dreams because they did not see enough role models at the top – someone they could learn from and go to for advice and guidance. That is when the idea for Nadja’s initiative was born. breaking.through publishes portraits of such role models, providing their insights on career-related questions. Within just three years, the platform has become the biggest career platform for women in the field of law in Germany and Switzerland. Because of this success, the team has now grown to 30 members working on additional services offered by breaking.through – events and workshops targeted at developing soft skills as well as mentoring opportunities.

 

Dedicate yourself over time and apply yourself

Amani did not start off her career as a lawyer. Law was her “Plan B” while she pursued her passion as a professional tennis player.

Having been confronted with poor remuneration and a short “shelf-life” as a tennis player, Amani decided to go back to her “Plan B” and pursue law.  A lot of what she learned through tennis formed her into the successful lawyer she is today. Two aspects from those days as a tennis player have particularly influenced her career:

  • the repetitive nature of training where you do not see the results right away and only years later looking back do you realize that you have the tools to achieve what you want if you chisel away at something long enough; and
  • time management skills by learning how to organise her time as an athlete while at the same time continuing her schoolwork.

Amani has now found her way back to sports by acting as an arbitrator on the Basketball Arbitral Tribunal (BAT) and as an anti-corruption hearing officer of the Tennis Integrity Unit. In this context, she spoke about serendipity because the opportunity to come back to sports came only by chance –while substituting a speaker at a DIS40 event and meeting a colleague who ultimately paved the way to her appointment as an arbitrator at BAT.

 

Fight for the things that you care about, but do it in a way that will lead others to join you

Rekha spoke about her experience with building something new – the New York International Arbitration Center. As a non-profit organization, NYIAC promotes and enhances the conduct of international arbitration in New York, offers educational programming, and operates arbitration hearing facilities. When Rekha was offered the role of an Executive Director, she did not know what it meant to work for NYIAC but knew that it offered an opportunity to build something up and grow while doing it. She did not hesitate to jump and take on the challenge.

In 2021, Rekha co-founded the Racial Equality for Arbitration Lawyers (R.E.A.L.) initiative along with other prominent practitioners and diversity advocates. In her words, “it is time to talk about race in the international arbitration community”. By co-founding the R.E.A.L. initiative, Rekha started by simply building a community that would talk about racial issues in arbitration  and would slowly build itself and spread the word around. The R.E.A.L. initiative has now grown to a network of committees and ambassadors promoting its goals around the globe. It also offers scholarships that can be used for a variety of things from courses and workshops to just event attendance – providing opportunities to professionals that would otherwise be beyond reach.

 

Remain resilient and adapt to change

Madeline shared her passion for technology – she always wanted to work in a technology-driven environment. Having started her career in-house working in banking and seeing the need to provide solutions for resolution of disputes, she embraced the opportunity and set up one of the very first online dispute resolution platforms in Tanzania – iResolve.

Madeline shared how working in banking exposed her to the rapid pace of technology and a world where regulation was always lagging behind technological progress. When setting up her own law firm, that gap between regulation and progress made her think about how she could add value to her clients – and that is when iResolve was born. Initially a case management solution, it has now developed into a platform that facilitates mediation, arbitration, and adjudication processes.

Although initially there were challenges in convincing clients to use the platform to manage disputes, in the meantime virtual platforms have been embraced following the pandemic. Madeline’s resilience – the ability to adapt to changes in the face of market and consumer demands, constantly challenging the status quo – was key to her success.

The same virtues contributed to a successful development of the Tanzania Institute of Arbitrators (TIA). In her position as President, Madeline fuelled the developed TIA and arbitration in Tanzania by working with the government and the parliament for the (now adopted) new Tanzanian arbitration law.

 

Have a beginner’s mindset

According to her own description, a “Harvard Lawyer, Oxford Economist turned Founder of ArbiLex passionate about ‘predicting’ law “, Isabel, provided insights into her founder’s journey.

Isabel came up with the idea for ArbiLex after observing how decisions were made at the outset of investor-State cases. These crucial decision-making moments typically revolve around risk assessment. Having a degree in both law and economics allowed Isabel to see that risk differently and spot a business opportunity.

According to Isabel, the structure of ISDS case law lends itself to probabilistic modelling. The idea was therefore to quantify the risks unique the case in such a way that would be understood by financiers. ArbiLex therefore offers prediction services quantifying case risks using machine learning and game theory-inspired models. The venture has now grown further from its inception and offers arbitration finance in addition to the tech-enabled intelligence.

Isabel also noted that law is one of the areas that is slow to adopt new technologies, but the job of an innovator is to understand which groups within the larger sector are the early adopters, the followers, and those that will never adopt the technology. One would only need to find allies among the early adopters and people who share your vision to start.

 

In a very limited time, the speakers provided a lot of insights and useful guidance for any person pursuing a career in international arbitration and beyond. A combination of personal qualities, expertise, and ability to respond to the challenges and everchanging circumstances were just some of the qualities these extraordinary professionals share. As envisaged, the kick-off event captured the spirit of ARBinBRIEF – an attempt to challenge the status quo and develop a practical offering for the arbitration community while carefully listening and responding to the feedback of the users.

For all who missed the event, the recording will be available on the ARBinBRIEF YouTube channel.

The recording of the first episode of Season 1, featuring Wendy Miles and Jennifer Bryant discussing arbitrator appointments will take place on Wednesday 13 October at 3pm CEST.

If you want to keep up to date on the upcoming ARBinBRIEF episode recordings, you can follow ARBinBRIEF on LinkedIn, subscribe to the ARBinBRIEF YouTube channel, or get in touch via email. The ARBinBRIEF team – Elizabeth Chan, Nata Ghibradze, Nadja Harraschain, Olga Hamama, Emily Hay, Iuliana Iancu, Dara Sahab, Olga Sendetska, Mrinalini Singh, Vanessa Zimmermann de Meireles – would be grateful for the support of our community and any feedback along the way.

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Paris Arbitration Week: Arbitration and Trade Secrets

Kluwer Arbitration Blog - Fri, 2021-10-01 00:00

The Silicon Valley Arbitration & Mediation Center (SVAMC) held a virtual panel discussion on Arbitration and Trade Secrets during the Paris Arbitration Week. SVAMC’s CEO, Les Schiefelbein, opened the event and Stan Putter (Partner, Smallegange Lawyers) moderated the panel discussion. The panel included Sana Belaïd (Senior Counsel, Cisco Systems), Ignacio de Castro (Director, World Intellectual Property Organization (WIPO)), Sarah Reynolds (Managing Partner, Goldman Ismail Tomaselli Brennan & Baum LLP), Dr Patricia Shaughnessy (Professor, Stockholm University), and Claire Morel de Westgaver (Partner, Brian Cave Leighton Paisner).

The panellists shared practical perspectives on trade secrets and provided the participants with tools to optimise protection thereof in arbitration.

 

What is a trade secret?

Sana Belaïd opened the discussion by defining a trade secret – it is information, which has an actual or potential economic value and whose secrecy is protected by its owner. In practice, it is information that gives its owner an “edge”. Commercial edge is information based on years of market practice, experience, knowledge of what works in a specific industry, or learning from past mistakes. Technical edge is plans, designs, processes, cost and pricing methods, or formulas.

Ms Belaïd gave a few other examples of the type of information that can constitute trade secrets, such as customer lists, cost and pricing information on production goods, personal information, etc.

She noted that trade secrets may be more valuable than physical assets, as the former guide a company’s commercial efforts on the market.

 

Preservation of trade secrets in arbitration

Claire Morel de Westgaver explained that there are two areas where arbitration and trade secrets intersect: (i) protecting trade secrets during arbitration and (ii) the developing area of trade secret disputes.

On the first point, she explained that there are two relevant aspects: confidentially between the parties and towards third parties. During arbitration, there are three points where confidentiality may be at risk:

  • when trade secrets are at the heart of the dispute there is tension between protecting them and winning the case for their owner;
  • during document production parties might request information constituting trade secrets; and
  • during the pleadings a party may argue that it is unable to present its case without disclosing its trade secrets.

Ms Morel de Westgaver reminded the participants that it is a mistake to assume all arbitrations are confidential. If the applicable law does not provide for confidentiality, it is crucial to put processes in place to make the arbitration as “leak-proof” as possible. This could also concern orders and awards, which can contain confidential information that could be disclosed, for example, in enforcement proceedings. Special attention must also be paid to cybersecurity, to ensure the arbitration is, in fact, secure.

On the second point, Ms Morel de Westgaver noted that trade secret disputes typically relate to alleged misappropriation of trade secrets or improper use of confidential information. Parties may raise different types of claims including breach of contract, e.g. license agreements, non-disclosure agreements, development agreements, manufacturing agreements, consultancy agreements, or even joint-venture agreements. These disputes usually revolve around contract interpretation. A common defence is arguing the claimant and owner of the trade secret had not taken adequate steps to protect its rights.

 

Trade secrets & WIPO

Ignacio de Castro introduced the WIPO arbitration centre, whose work focuses on trade secrets within patent disputes. He noted that he often sees pharmaceutical cases with issues relating to know-how concerning specific manufacturing processes, or IT-related disputes in relation to software licenses or telecoms-matters. WIPO also deals with other commercial disputes, e.g. franchising or distribution disputes.

Mr de Castro explained that he often sees disputes concerning breach of confidentiality obligations. Former employees joining a competitor can also be an important source of disputes, for example in IT disputes regarding source codes or client lists.

Mr de Castro provided some examples of the protective measures that can be adopted regarding trade secrets, e.g. issuing a redacted and unredacted versions of an award, and stated that he regularly comes across protective orders or provisions on confidentiality. Confidentiality advisors have, however, rarely been used although provided for by the WIPO rules.

 

Confidentiality advisors

As a confidentiality advisor, Dr Patricia Shaughnessy explained the importance of this third-party/neutral role. At times called “experts” or “document production managers”, confidentiality advisors are not new and have been around in the United States for well over 40 years.

But why go to an advisor? Arbitrators should maintain their independence and impartiality and protect the right to be heard and equal treatment. They must be careful that they do not receive information that may affect their attitude when the other party is not aware of what that information is. Indeed, a party may not feel comfortable with information being provided to the arbitrators, even if the latter determine that such information is confidential and should not be considered in the adjudication of the dispute. The party’s issue is usually that their opponent’s claim of confidentiality is overly broad or that the information sought to be protected is exactly the information needed for a fair adjudication of the case.

This is when a confidentiality advisor becomes necessary. They assess whether information should be protected as a neutral third party and can provide assistance to the parties and the tribunal without participating in the adjudication of the dispute. Parties would typically agree that the confidentiality advisor should express an opinion on which document protective measures seem justified and which overly broad.

She concluded by pointing out that, of course, advisors must sign a confidentiality agreement, which can be very detailed and perhaps include provisions relating to the destruction of all information within a certain period.

 

The tribunal’s perspective

Sarah Reynolds shared the tribunal’s perspective. She reminded participants that even though arbitration is not public, confidentiality is not necessarily applicable in arbitration proceedings. For example, the Uniform Arbitration Act adopted in most of the US states does not impose confidentiality.

If trade secrets are involved, it is important to have clear procedures in place. First, the tribunal should examine the arbitration clause to see whether it includes terms for protection of confidential information or incorporates any relevant rules. If it does not provide sufficient guidance, the tribunal can issue a protective order detailing such procedures. These orders can be drafted by the tribunal or negotiated by the parties. Ms Reynolds stated that it is better from a procedural fairness and efficiency perspective if guidance is laid out early in the proceedings.

Ms Reynolds also underlined that the tribunal has a range of approaches that it can employ, depending on the party’s priorities and on the degree of sensitivity of the information. For example, she has experienced tribunals require prima facie showing that a breach occurred before requiring disclosure of sensitive information. It is a method that prevents the parties from using arbitration as a way of conducting a fishing expedition. Confidentiality advisors can also be useful. Using an attorneys’ eyes only approach can also be a good solution: the lawyers can bring a claim to the tribunal, without their clients accessing any information. However, it can be cumbersome to manage the redacted versions of the submissions and hearings organization.

Ms Reynolds insisted that good terms of reference and protective orders should guard against external disclosure of the trade secrets; and concluded by saying that the parties can also chose the tribunal based in their previous experience and methods of protecting confidential information.

 

What are the main issues?

The panellists wrapped up their discussion by summing up their conclusions on the main issues related to trade secrets and arbitration.

Ms Belaïd noted that in-house counsel should not assume arbitration is confidential. Furthermore, a trade secret can also be any piece of information: a photocopy, a scribbled note. This information can be monetized especially in today’s knowledge-based economy.

Ms Morel de Westgaver noted the difficulty in balancing winning a case while preserving trade secrets. One party may be trying to preserve a secret while the other party’s main concern may be that the claim is brought in bad faith. Parties may also assert that information contains trade secrets to shield it if it is harmful to their case.

Ms Reynolds said that the main issue is to find the right balance between protecting confidential information and maintaining an efficient process. The more sensitive the information, the more appropriate it is to include layers of protection.

Mr de Castro noted that where trade secret is disclosed, damages are irreversible. Arbitration does not provide a full answer to the situation and even a company with a lot of protection in place may find itself in a difficult situation.

Dr Shaughnessy summed up that it is sometimes difficult to be a confidentiality advisor, e.g. due to not having access to the submissions of the parties, or the need to have a technical expertise in some sectors.

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What I’m Reading

ADR Prof Blog - Thu, 2021-09-30 19:24
Being retired from teaching and faculty meetings leaves time to do other things.  (Have you noticed that teaching and faculty meetings take a lot of time?) In recent years, I have been reading books for pleasure, something I rarely did when I was employed.  I particularly like to read histories and biographies, though I read … Continue reading What I’m Reading →

Colombia Prevailed in Two Arbitrations Related to the Financial Sector under the Colombia-US TPA

Kluwer Arbitration Blog - Thu, 2021-09-30 00:53

Earlier this year, Colombia prevailed in two arbitrations under the Colombia-US Trade Promotion Agreement (“TPA”). The claims were filed by Alberto Carrizosa Gelzis, Felipe Carrizosa Gelzis and Enrique Carrizosa Gelzis (“Carrizosa brothers”) under the UNCITRAL Arbitration Rules, and by Astrida Benita Carrizosa (“Ms. Carrizosa”) under the ICSID Convention.

In both arbitrations Ms. Carrizosa and the Carrizosa brothers alleged that Colombia breached the fair and equitable treatment and national treatment standards, among other provisions of the TPA by undertaking a series of regulatory measures in 1998, and a series of judicial decisions between 2005 and 2014, that affected its investment in Granahorrar, a financial institution in which the claimants were shareholders.

The United States filed a Non-Disputing Party submission in both arbitrations on its interpretation of the relevant provisions of the US-Colombia TPA.

On April 19, 2021, the tribunal constituted under the ICSID Convention decided that it did not have ratione temporis jurisdiction over Mr. Carrizosa’s claims. On May 7, 2021, the tribunal constituted under the UNCITRAL Arbitration Rules rejected the claims presented by the Carrizosa brothers as it alsofound that it did not have ratione personae jurisdiction over their claims.

In both cases, the tribunals ordered the claimants to bear the entirety of the arbitration costs and 50% or more of Colombia’s legal costs and expenses.

 

Facts

Granahorrar was incorporated in 1972 as a subsidiary of Banco de Colombia. Granahorrar was a a financial institution authorized to obtain capital via private savings and to finance the construction industry through loans and mortgages. In 1986, the Carrizosa brothers and their parents, Ms. Astrida Bentia Carrizosa and Mr. Julio Carrizosa Mutis (the “Carrizosa Family”), acquired shares in Granahorrar. Within the following two years, the Carrizosa Family became a majority shareholder in Granahorrar. They indirectly owned 58.76% of Granahorrar. As of October 1998, the Carrizosa Brothers’ stake in Granahorrar amounted to 40.2570%. Ms. Carrizosa, in turn, owned 2.3307% of Granahorrar.

In the late 1990s Colombia suffered an economic crisis. In this context, the Colombian government adopted measures to subject financial institutions to strict supervision. In 1998, Granahorrar suffered a severe liquidity crisis, and thereby sought support from Colombian authorities. In response, the Central Bank provided funds as “temporary liquidity support” (TLS), equivalent to approximately US$194 million at the time. In turn, Fogafín (a Government entity created to protect savings) undertook to guarantee up to approximately US$222 million of Granahorrar’s interbank financing. In exchange, Granahorrar agreed to issue promisory notes to Fogafín valued at 134% of the guaranteed amount.

In the following months, Granahorrar’s financial standing continued to deteriorate. On October 2, 1998, the Superintendency of Finance ordered Granahorrar to raise approximately US$ 99.8 million in new capital to offset its insolvency. Granahorrar, however, did not raise the additional capital. On the next day, October 3, 1998, the Superintendency issued a report to Fogafín concluding that Granahorrar was insolvent and illiquid. On the same date, Fogafín’s board decided that the Government would take over Granahorrar, and ordered the company to reduce the nominal value of its shares to COP 0.01.

Fogafín capitalized Granahorrar and became the majority shareholder in the bank. The financial situation of Granahorrar improved andFogafín sold Granahorrar to the Spanish bank Bilbao Vizcaya Argentaria in 2005.

Following the measures adopted by Colombian authorities, the Carrizosa Family initiated a number of administrative judicial proceedings that culminated in a judgment in 2005,  rejecting the claims on the merits. The Carrizosa Family appealed this decision. Colombia’s Council of State upheld the appeal and ordered the Superintendency and Fogafín to compensate the Carrizosa Family in an amount up to US$ 114 million (the “2007 Judgment”).

On March 5, 2008, the Superintendency and Fogafín filed constitutional injunctions (tutelas) against the 2007 Judgment. On May 26,  2011, the Constitutional Court issued a unanimous judgment, whereby it reversed the 2007 (the “2011 Judgment”). Although the Carrizosa Family requested the annulment of the 2011 Judgment, the Constitutional Court dismissed this request in 2014 (the “2014 Order”).

 

International Claims against Colombia

 The UNCITRAL Arbitration

In the UNCITRAL arbitration proceedings, the Carrizosa brothers requested compensation in the amount of US$ 323 million for the alleged breach of the TPA.

The UNCITRAL Tribunal addressed and upheld the respondent’s ratione personae objection, pursuant to which Colombia alleged that Article 12.20 of the Colombia-US TPA only covered claims filed by U.S nationals, or dual nationals with US dominant and effective nationality.

The UNCITRAL Tribunal analyzed the “dominant and effective nationality” of the Carrizosa Brothers, concluding that the claimants had the burden of proving their dominant and effective nationality. The tribunal decided not only to analyze the critical dates of the arbitration (the date of the alleged breach, and the date of the submission of the Notice of Arbitration), but also the entire life of the Carrizosa brothers. For this purpose, the tribunal undertook an objective factual enquiry rather than considering the subjective appreciations of the Carrizosa Brothers on what they considered their “dominant and effective” nationality to be.

The tribunal analyzed, among other criteria: the habitual residence, place of birth, property, assets, passives, economic center of their business, social life, where have they voted, tax payments, and social security, health and pension payments.

After examining the evidence in the record, the UNCITRAL Tribunal concluded that it was clear that the Carrizosa brothers were not predominantly U.S nationals but Colombian nationals.Thus, the Tribunal held that the Carrizosa brothers were not covered by the TPA.

Accordingly, the UNCITRAL Tribunal decided that it had no jurisdiction ratione personae under Article 12.20 of the TPA and dismissed claimants’ claims. The tribunal further decided that claimants should bear the entirety of the fees and expenses of the PCA, and pay all of the legal costs and expenses of Colombia (save for a US$ 30,000 adjustment).

 

The ICSID Arbitration

On January 25, 2018, Ms. Carrizosa filed a Request for Arbitration with ICSID against Colombia under the US-Colombia TPA, the Colombia-India BIT, and the Colombia-Switzerland BIT, seeking compensation of US$ 40 million for the alleged breach of the TPA.

The tribunal upheld Colombia’s ratione temporis objection. This was based on the fact that the measures that allegedly breached the TPA took place before the TPA entered into force on May 15, 2012. The tribunal concluded that the TPA did not cover the administrative measures adopted by Colombian authorities in 1998, and the 2011 Judgment issued by the Constitutional Court.

The ICSID Tribunal clarified that although the 2014 Order was issued after the TPA entered into force, the claims related to the 2014 Order were not independently actionable The 2014 Order merely rejected the Carrizosa’s Family request to annul the 2011 Decision and therefore left unaltered the outcome of the 2011 Decision. Accordingly, the tribunal concluded that the measures giving rise to the arbitration predated the entry into force of the TPA and were outside of the temporal scope of the tribunal’s jurisdiction.

The tribunal further analyzed Colombia’s objection regarding the three-year limitation period provided in Article 10.18.1 of the TPA. Under Article 10.18.1 of the TPA, no claim may be submitted to arbitration if more than three years have elapsed as from the date on which the claimant first acquired, or should have acquired knowledge of the breach.  Ms. Carrizosa acquired knowledge of the 2014 Order shortly after the Constitutional Court issued said decision on June 25, 2014. Yet, she commenced the arbitration on January 24, 2018, which is more than three years after she acquired knowledge of the alleged breach of the TPA. Consequently, the tribunal concluded that her action was outside the temporary scope of jurisdiction of the tribunal.

To overcome this hurdle, Ms. Carrizosa tried to invoke the TPA’s most-favoured nation (MFN) clause to substitute the three-year period contained in the TPA with the allegedly more favorable five-year period set out in Article 1.5 of the Colombia-Switzerland BIT. The tribunal, however, concluded that it was not within its jurisdiction to apply the MFN clause given that Article 12.1.2(b) of the TPA provides that the subject-matter scope of the tribunal’s jurisdiction on disputes under Chapter 12 (Financial Services) is limited to four substantive provisions of the TPA that do not include the MFN clause.

The tribunal further noted that even if it were to apply the five-year period of the Colombia-Switzerland BIT, the claim would still be time barred given that the events that gave rise to the dispute took place in 1998 and 2011, which is more than five years prior to the Request for Arbitration.

In sum, the ICSID Tribunal dismissed Ms. Carrizosa’s claims and ordered her to bear the entirety of the arbitration costs and expenses, and bear 50% of Colombia’s legal fees and other costs.

 

Final remarks

After prevailing in both arbitrations, Colombia will pursue the recovery of 100% of the arbitrations’ costs and expenses, 100% of the legal fees spent in the UNCITRAL Arbitration, and 50% of the legal fees spent in the ICSID Arbitration. The total sum of the money that Colombia would recover amounts to approximately US$ 2,9 million.

However, the dispute between the Carrizosa Family and Colombia has not concluded. On June 6, 2012, the Carrizosa Family et. al filed a petition with the Inter-American Commission of Human Rights (“IACHR”), alleging that Colombia had breached their due process and property rights in the context of the measures adopted over Granahorrar. They requested, inter alia, that the Constitutional Court Judgment be overruled. In 2016, the Registry of the ICHR rejected the petition given that one of the victims was a legal corporation and thereby the claim fell outside the jurisdiction of the IACHR. The Carrizosa Family  submitted two additional revision petitions on October 4, 2017 and on July 4, 2018, which are pending resolution.

 

 

 

 

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UC Hastings seeks Professor and Director of the Center for Negotiation and Dispute Resolution

ADR Prof Blog - Wed, 2021-09-29 14:00
All-around good person Sheila Purcell announced via the listserv her retirement and another great ADR job opportunity. The University of California Hastings College of the Law in San Francisco is conducting an open-rank search to hire one lateral tenured or tenure-track faculty member to begin July 1, 2022. The ideal candidate will be a productive … Continue reading UC Hastings seeks Professor and Director of the Center for Negotiation and Dispute Resolution →

Interviews with Our Editors: Illuminating Investment Treaty Arbitration and Institutional Services with Antonio R. Parra, Former Deputy Secretary-General of the ICSID

Kluwer Arbitration Blog - Wed, 2021-09-29 00:00

Antonio R. Parra led a lengthy and luminous career of international public service, having held various roles in the OPEC Fund and the World Bank. Of special interest to our readers is that from 1990 to 1999 Mr. Parra was Legal Adviser at the International Centre for Settlement of Investment Disputes (ICSID), and then from 1999 to 2005 (when he retired), he was ICSID’s first Deputy Secretary-General. During his service at ICSID, the institution grew in prominence and scale to become the premier institution for investor-State dispute settlement (ISDS). Even still, many working at the ICSID Secretariat speak of the lasting legacy of Mr. Parra’s contribution. It’s an honor and a privilege to have him share his perspective with our readers.

 

  1. Mr. Parra, your vision and leadership have been instrumental to shaping the practice of ISDS. Yet, you have also made significant contributions to academia, having published several books and served ICSID Review – Foreign Investment Law Journal as Managing Editor, and then Editor-in-Chief. In your view, how does academic input influence ISDS practice?

 

The influence of scholarly writings on ISDS practice is clear from a glance at written pleadings and arbitral decisions in the field. Contributions of scholars are frequently cited by parties and arbitrators on the myriad procedural and substantive legal issues that arise in the cases.

In launching the ICSID Review—Foreign Investment Law Journal, Ibrahim Shihata, General Counsel of the World Bank and Secretary-General of ICSID during most of the 1980s and 1990s, observed that such contributions could help to clarify the law applicable to foreign investments and assist in its balanced and progressive development.

The article that Shihata published in that first issue of the ICSID Review, had a large impact on the practice, and in particular growing acceptance, of ISDS at ICSID. Entitled “Towards a Greater Depoliticization of Investment Disputes: the Roles of ICSID and MIGA,” the article was based on a paper that Shihata had presented at a 1985 international arbitration conference in Rio de Janeiro. In the paper, Shihata showed how the ICSID system respected considerations underlying the Calvo Doctrine followed in Latin America, notably by precluding the home State of an investor from espousing its national’s claim if the matter was being or could be dealt with by an ICSID arbitral tribunal.

On re-publication of the article in 1991, Shihata observed that, when he presented the paper six years earlier, only four Latin American countries had signed the ICSID Convention but that the number of Latin American signatories had since doubled (and now encompasses almost all countries of the region).

 

 

  1. Do you believe that the ICSID Convention facilitates and promotes Foreign Direct Investment (FDI) by protecting investments and investors? From your perspective, what are the greatest threats facing the ICSID system and how can they be addressed?

 

Encouraging increased foreign investment certainly was regarded by ICSID’s founders as the basic objective of the ICSID Convention. They did not, however, see ICSID as serving this objective merely by protecting investments. Rather, they considered that the availability of balanced international facilities for the settlement of investment disputes could help to foster an atmosphere of mutual confidence conducive to stimulating greater investment flows. (I am paraphrasing the 1965 Report on the ICSID Convention of the Executive Directors of the World Bank, who had formal responsibility for drawing up the Convention.) The founders were clear-eyed about the impact of the Convention. They foresaw that countries with good investment climates would continue to attract  investments even if they did not become parties to the Convention or use ICSID’s dispute settlement facilities. However, adherence to the Convention could, the founders expected, enable countries seeking more investment to “provide additional inducement” for investment (in the words of the Report of the Executive Directors). The Convention obviously can be counted a success in this respect. The extent to which it may be credited with actual rises in investment flows, a much larger question, is probably impossible to measure, if only because the factors determining investment decisions are so varied and subjective. But given the central role that ICSID plays under most bilateral investment treaties, reference might be made in this connection to studies finding a positive correlation between such treaties and investment flows.

As dangers for ICSID, now approaching its 60th anniversary, I think that many would highlight recent moves, ironically of advanced economy countries, to narrow or even eliminate the scope for recourse to ISDS under their investment treaty arrangements—keeping ISDS only for disputes arising out of Mexico-U.S. investments under the new USMCA; the termination, in view of their ISDS clauses, of intra-E.U. bilateral investment treaties; and the proposal championed by the E.U. to replace ISDS mechanisms with a permanent multilateral investment court (MIC).

For ICSID, these might best be considered opportunities instead of dangers. Retreat from ISDS, in the sense of investment treaty arbitration, may enlarge possibilities for resort to contract-based arbitration, which still represents a significant proportion of ICSID’s caseload. ICSID conciliation and fact-finding facilities may at last find users. If a MIC materializes, it may only be after a long time, given the complexity of the project. But ICSID’s superb infrastructure and skilled Secretariat might make it an ideal host for the MIC. In all these ways, as well as by still administering investment treaty arbitrations, ICSID would be continuing to serve its objective of promoting international investment.

 

  1. In recent years, ISDS has seen backlash from external stakeholders, including NGO activists and journalists, which perhaps has led to a legitimacy crisis and demands for radical reforms. From your perspective, what could be one or two reforms to the ISDS system that would meaningfully address legitimacy-based concerns?

 

It may be useful, when we think about the legitimacy crisis of ISDS, to keep in mind what we mean by legitimacy in this context. In several  of its very good notes on IIA Issues, UNCTAD has referred to the legitimacy of ISDS as its authority, in the eyes of the public at large, to assess the validity of a State’s acts. Because of the structure of investment treaty arbitration, we can only look for that authority in the arbitration and substantive treatment provisions of the underlying treaty. Consternation about the outcome of a case may often best be directed at these provisions as permitting or indeed demanding the outcome. Makers of investment treaties and other stakeholders increasingly recognize the need for greater care in the elaboration of the provisions, especially those on indirect expropriation. Investment treaties however remain a patchwork of varying norms, probably becoming even more diverse as newer treaties slowly replace older ones. A solution might consist in the conclusion of a global investment treaty, though countries may be discouraged from attempting this difficult task again, after the repeated failures to finalize such a treaty at the OECD. A set of non-binding guidelines on the treatment of foreign investment was issued under World Bank auspices in the early 1990s. Reissuance by such a universal organization of widely accepted updated guidelines, for countries to emulate in their investment treaties and laws, might well help to address legitimacy-based concerns about ISDS.

 

  1. Relatedly, recent years have seen significant ISDS reform efforts, including the ICSID rule amendment project and UNCITRAL Working Group III, with significant input from various stakeholders, including the States and investors themselves. From your perspective, what are the top three issues to be addressed?

 

From such ambitious and wide-ranging reform processes, it is difficult to choose just three topics to discuss. Among the many overlapping issues being addressed in the UNCITRAL and ICSID processes, three of particular interest to me are issues relating to challenges of arbitrators, security for costs, and frivolous claims. In these and other respects, the ICSID process is more advanced and focused, dealing just with the institution’s own rules.

In accordance with the ICSID Convention, challenges of an arbitrator for lack of independence, or for ineligibility to serve on the arbitral tribunal, have been decided by the other arbitrators, unless they are equally divided, in which case the challenge has been decided by the Chair of the Administrative Council of ICSID (the President of the World Bank). Having unchallenged arbitrators, at least in the first instance, decide the challenge of their fellow arbitrator has rightly been termed unsatisfactory by the annulment committee in a recent ICSID case.

Requests for a tribunal to direct a party to provide security for costs have been handled within the framework of the article of the ICSID Convention on provisional measures, under which an arbitral tribunal may grant provisional measures to preserve the respective rights of either party. The requests made on this basis for security for costs have seldom been granted. In several instances, the tribunals considered that they could not issue provisional measures in respect of rights that were hypothetical or to be created only in the event of the requesting party prevailing in the proceeding.

By a provision added to its Arbitration Rules in 2006, ICSID introduced a procedure for the early dismissal of claims manifestly lacking legal merit. In subsequent proceedings, the provision has been interpreted as covering claims that are unsustainable from the jurisdictional as well as substantive viewpoints, although this was not clear from the provision (which I feel free to criticize because I was its initial drafter).

These shortcomings, and many others, are addressed in the outstanding package of new amendments prepared by ICSID. Thus, under the new amendments, if unchallenged arbitrators find themselves unable for any reason to rule on the challenge of their colleague, they will be deemed to be equally divided on the challenge, which will then be decided by the Chair of the Administrative Council; orders for security for costs will no longer be treated as provisional measures under the ICSID Convention; and the Arbitration Rules will put beyond doubt the possibility of early dismissal of claims that are manifestly ill-founded as to jurisdiction.

 

  1. In 2009, following unfavorable outcomes in several investment disputes, Ecuador notified the World Bank of its denunciation of the ICSID Convention. Ecuadorian leaders went as far as adding a provision (Article 422) to the Ecuadorian Constitution to prevent future governments from entering new International Investment Agreements (IIAs) that could ‘yield sovereignty’ to international arbitration. Now, a decade later, Ecuador has taken steps to rejoin the ICSID Convention. At the very least, this example illustrates that State views on IIAs and related dispute resolution can evolve over time depending on the context. From your perspective, how can ICSID best be mindful over sovereignty concerns and criticism while promoting the benefits of ISDS? Should we revisit the utility in academic discourse on “de-politicization” of investment disputes?

 

Sovereignty concerns were indeed invoked for Ecuador’s denunciation of the ICSID Convention in 2009. In my understanding, the denunciation was precipitated, not so much by experiences of Ecuador in particular cases, as by the decision in 2007 of members of the Bolivarian Alliance for the Americas—ALBA—to withdraw from the ICSID Convention, a decision acted upon, among ALBA members, by Bolivia and Venezuela as well as Ecuador. Attracting much attention around the time of Ecuador’s denunciation were government statements calling into question the neutrality of ICSID arbitration. As you suggest in your question, it is crucial for such debates to be grounded in fact. In 2010, the same year that the denunciation of Ecuador took effect, ICSID redoubled its efforts to meet this need with the inauguration of its semiannual publication, The ICSID Caseload—Statistics. ICSID has also become very active in offering courses and training on ICSID arbitration to government officials and the public at large. Such efforts have been doing much, to use your words, to promote the benefits of ISDS, particularly ICSID procedures, while remaining mindful of the concerns and criticism.

 

  1. Several times in past posts on the Blog our contributors have commented on whether India should join the ICSID Convention. On this debate, India has emphasized the perception of ICSID being “pro-developed countries” and also underscored the lack of review as a major disadvantage (i.e. the self-contained, detached structure). On the other hand, it has been argued that the Indian economy would benefit from a transparent, reliable, and predictable legal framework for investor/investment protection, and therefore that joining the Convention would “enhance investor confidence and promote incoming investments”. In your view, which of the two better reflects reality and why?

 

On the first side of this debate, I would disagree with the contention that ICSID is “pro-developed country.” Its governing body, the Administrative Council, comprising one representative of each member, each with one vote, is overwhelmingly composed of representatives of developing countries. Moreover, the respondents in ICSID cases, most of them governments of developing countries, have prevailed in more than half of the cases decided by tribunals. It is interesting that, on this side of the debate, the exclusion of review by national courts of ICSID arbitral awards is cited as “a major disadvantage.” The exclusion was put in the ICSID Convention precisely to help governments of developing countries obtain enforcement of awards rendered in their favor without being subject to undue delays or defenses based on local laws. (For compliance with awards rendered against governmental parties, it was considered sufficient that such compliance would, under another provision of the Convention, represent an international law obligation of the government concerned.)

On the other side of the debate, adherence to the ICSID Convention might facilitate increased investment in India but the first of the quoted posts on your Blog considers adherence by India to be “highly unlikely.” It seems from that and the second quoted Blog post that much of the reluctance about joining the ICSID Convention stems from the potential of ICSID claims being brought against India. But adherence to the ICSID Convention does not in and of itself obligate a country to submit all or indeed any of its investment disputes to ICSID. Importantly for an investment exporter such as India, adherence will make its nationals eligible to use ICSID’s dispute resolution facilities for disputes with host countries of their investments abroad. To the extent it is not already doing so, it might be useful for India, in its further consideration about the possibility of joining the ICSID Convention, to keep in view its position as a home country, as well as a host country, for foreign investments.

 

  1. Could you please share with our audience two negative trends and two positive trends you have observed with ISDS the last five years?

 

Two aspects of ISDS nowadays that I would single out for criticism are a continued lack of diversity among members of arbitral tribunals and the continued lack of an international appeals facility such as the one proposed at ICSID in 2004 (in a report written by me). According to my last count, only about 20 percent of the individuals appointed as ICSID arbitrators have been nationals of emerging or developing countries and only about 10 percent women. Responsibility for this rests, of course, mainly with parties to proceedings, who make most of the appointments. In suitable contexts, where parties to investment treaties agreed to incorporate the envisaged appeals facility rules by reference into their treaties (and took steps to make the necessary modification of the ICSID Convention as between themselves), the mechanism might have enhanced the credibility and consistency of ISDS, if only under the particular investment treaty or treaties concerned.

Two positive developments that I would highlight are the growing popularity of investor-State mediation and the intensified attention being paid to ways of cutting the duration of arbitration proceedings. On mediation, I refer especially to the mediation rules that ICSID has included in its proposed rule amendments. On duration, I particularly have in mind the proposed ICSID amendments more extensively stating time limits, counting them more strictly, and offering parties the option of agreeing to expedited arbitration proceedings with shortened timeframes.

 

Thank you, Mr. Parra, for sharing these insightful views.  We appreciate your time and continue to wish you the best!

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

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ABA SDR Conference Proposal Deadline – Wednesday, September 29

ADR Prof Blog - Tue, 2021-09-28 13:04
From Jen Michel on behalf of the ABA Dispute Resolution Spring Conference Planning Committee: Hello colleagues, Just a friendly reminder to those interested in submitting a program proposal for the upcoming ABA Dispute Resolution Spring Conference to be held in Los Angeles, CA April 27-30, 2022: Jointly sponsored by the ABA Section of Dispute Resolution … Continue reading ABA SDR Conference Proposal Deadline – Wednesday, September 29 →

Growing Gender Diversity in International Arbitration: A Half Truth?

Kluwer Arbitration Blog - Tue, 2021-09-28 00:00

Introduction

In the past few years, there has been a visible focus on ensuring diversity, especially in terms of gender, in international arbitration (IA). This engagement has, arguably, assumed the most prominent or tangible form in respect of arbitrator appointments, which has been previously discussed here and here. One of the most significant steps taken for achieving this goal is the Equal Representation in Arbitration Pledge (ERA Pledge), which was adopted in 2016 and currently has more than 4,700 signatories. However, despite these efforts, commentators have identified a diversity paradox, which is the “apparent inability to translate [the concerns with respect to lack of diversity in IA] into actual appointments in individual cases”.

In this context, this post analyses whether the recent statistics published by various arbitral institutions on arbitrator appointments actually narrate a success story for gender diversity in IA. Specifically, this post analyses gender diversity in IA from an intersectional lens, accounting for geographic and ethnic diversity, along with making a case for sustainable participation at all levels of seniority.

 

2020 statistics

The International Chamber of Commerce (ICC) published its dispute resolution statistics for 2020 in August 2021. While commemorating the five year mark of the ERA Pledge, ICC highlighted that “the number of confirmations and appointments of women arbitrators in ICC case continues to steadily rise – increasing from 312 in 2019 to 355 in 2020, representing today over 23% of all confirmations or appointments up from 21.1% in 2019”. While commenting on geographical and gender diversity, the ICC statistics state that 2020 saw “1,520 appointments and confirmations…with arbitrators coming from 92 countries and comprising 23.4% women arbitrators appointed or confirmed”. In terms of nationalities, the highest percentage of arbitrators came from the UK (14.5%), followed by the US (10%), Switzerland (8.9%), and France (6.6%). More than half of the arbitrators on ICC tribunals in 2020 (52.3%) were from North and West Europe.

The London Court of International Arbitration’s (LCIA) casework report for 2020 also notes that “the overall percentage of female arbitrators appointments reach[ed] a high of 33% in arbitrations pursuant to the LCIA Rules, a growth from 29% in 2019”. In terms of nationalities, the report stated that, “37% of appointments comprised appointments of arbitrators from 40 different countries, with the next highest numbers of arbitrators [after British arbitrators] being from Canada, the United States, Ireland, Germany, and Mexico”.

The caseload statistics for 2020 published by the Singapore International Arbitration Centre (SIAC) notes that “[o]f the 143 arbitrators appointed by SIAC, 46 (or 32.2%) were female”.

The annual report published by the Hong Kong International Arbitration Centre (HKIAC) in 2021 states that “[o]f the 149 appointments made by HKIAC in 2020, 34 (22.8%) were of female arbitrators”. The percentage of female arbitrators appointed by parties in HKIAC arbitrations was much lower at 11.1%.

At the outset, while these statistics indicate a gradual rise in gender diversity in arbitrator appointments, the absolute numbers of women arbitrators are still substantially lower than their male counterparts. Further, geographic diversity amongst arbitrators still seems to be relatively limited, with European (especially English) arbitrators being appointed most frequently in IA tribunals. This is also consistent with the findings of the recent survey by White & Case and Queen Mary (a different aspect of this survey is discussed here) which found that “[m]ore than half of respondents agree that progress has been made in terms of gender diversity on arbitral tribunals over the past three years. However, less than a third of respondents believe there has been progress in respect of geographic, age, cultural and, particularly, ethnic diversity”.

The picture only becomes grimmer when one considers the possibility of repeat appointments for a set pool of experienced arbitrators – an issue which has been identified as one of the challenges to diversity in arbitral tribunals in past studies. Worse even, when viewed from the perspective of intersectional identities or that of sustainable participation at all levels, the existing data appears inadequate to reflect the nuanced realities of diversity in IA, i.e., the intersectional lens of diversity, which is explored in detail below.

 

Intersectional identities  

The intersectional lens, which is “a prism for seeing the way in which various forms of inequality often operate together and exacerbate each other”, can be particularly relevant for understanding diversity in IA. For instance, when considered in isolation, there might be an increase in both gender and geographical diversities internationally. However, when taken as a whole, the proportion of women arbitrators from Asian or African countries in IAs is likely to be significantly lower than those from Europe or America.

Taking the example of India, out of the 30 Indian arbitrators who have been appointed in various ICC tribunals (based on the publicly available data on ICC’s website, which includes information for ICC cases registered as of 1 January 2016), only one (3.33%) is a woman. In the ICC India Arbitration Group, which includes the selection committee for arbitrators (responsible for nominating arbitrators upon the request of the ICC Court), there is only one woman (out of 25 members in total). Similarly, out of the 36 Indian arbitrators who are included on SIAC’s panel of arbitrators, only three (8.33%) are women, and out of the 11 Indian arbitrators on HKIAC’s panel, only one (9.09%) is a woman (who is also a part of SIAC’s panel). Therefore, as far as these three institutions are concerned, in total, names of only four women Indian arbitrators are publicly available, as opposed to the names of about 90 odd Indian men. This is despite the fact that these institutions administer a significant volume of arbitrations involving Indian parties. This situation may not be peculiar to India and may hold true for many other countries.

Such intersectional analysis becomes relevant for understanding actual diversity because in many countries with a nascent IA practice, the real opportunities available to women practitioners can only be fully appreciated by accounting for their identities as women from their countries of origin. This is because, more often than not, practitioners from these countries are only appointed as arbitrators in arbitrations where at least one of the parties is from that country. Again, taking the example of India, as per the ICC 2020 statistics, 79 (3.15%) Indian parties participated in ICC arbitrations. On the other hand, only 20 (1.32%) Indian arbitrators were appointed to ICC tribunals. Tellingly, as per the SIAC 2020 statistics, while 690 (63.89%) Indian parties participated in SIAC arbitrations, only 14 (4.86%) Indian arbitrators were appointed to SIAC tribunals. The relatively higher number/percentage of Indian arbitrating parties as compared to the number/percentage of Indian arbitrators, coupled with the general preference for arbitrators from western countries, suggests that Indian arbitrators on ICC or SIAC tribunals were probably only appointed in arbitrations involving Indian parties. Therefore, in turn, the near absence of Indian women arbitrators in IAs is on account of issues linked to both, gender diversity and geographical diversity.

 

Sustainable participation at all levels

As discussed in an earlier post, to appreciate the issue of diversity in IA, along with addressing the lack of women’s representation in leadership roles (such as arbitrator appointments), it is crucial to address issues relating to sustainable participation at all levels. This is because sustainable participation, which involves issues relating to opportunities available to young women to practice and gain experience, and the availability of means to stay in such opportunities, is bound to impact leadership in the long run.

Pertinently, the 2020 Report of the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings identified the unavailability of sufficiently qualified and well-known practitioners from diverse backgrounds as one major barrier to achieving greater diversity in IA. This was also confirmed in the White & Case survey, wherein participants indicated that at the end it is “always the demands of the case that determine choice of arbitrators”. Therefore, in order to ensure diversity in arbitrator appointments (and in IA generally), it is crucial to create sufficient opportunities for women from diverse backgrounds to gain relevant experience and visibility.

In recent years, while there has been a consistent push to ensure diversity in leadership in IA, issues linked to sustainable participation of women have probably attracted less traction. In our view, trying to address the lack of diversity solely through interventions with respect to leadership roles is more likely to aggravate the diversity paradox as opposed to solving it. Therefore, while proposals for setting a new norm/standard that “all panels should include at least one woman or other diverse practitioner and panels that do not are Defective Panels”, or efforts solely directed towards leadership issues, would have some immediate impact, in the long run, they have to be coupled with efforts for ensuring sustainable participation to guarantee a holistic improvement in diversity. In the absence of inclusion and capacity-building initiatives catering to women at all levels and across all geographies, the leadership pool is likely to be limited to a small number of established practitioners (even if women).

Currently, in absence of much data (especially country-specific data) on practitioners at all levels of seniority, it would be difficult to comment on the state of diversity in IA generally.  Having said this, it is probably safe to conclude that issues with respect to gender diversity are only half understood when solely viewed from the perspective of leadership.

 

Possible ways forward?

Ways to improve intersectional diversity and sustainable participation in IA, which could, in turn, improve diversity as a whole, could include the following active efforts from all actors in IA, such as arbitral institutions, law firms, chambers, etc.:

  1. Publishing detailed data regarding diversity (gender, geographical and ethnic) in IA across different levels of seniority.
  2. Viewing diversity from a more intersectional lens that accounts for overlapping identities and therefore, publishing diversity data accounting for such identities.
  3. Including more women from various races, seniorities, nationalities, ethnicities etc., as speakers in panel discussions, conferences etc., which could improve the visibility of women practitioners.
  4. Initiating conversations with industry bodies and other potential clientele on the need for diversity and the problems with homogeneity in the lawyers advising them.

These are undoubtedly broad suggestions that require a much more nuanced analysis of different legal systems, existing wage gaps, and the potential roles of the various actors involved in IA. Having said this, it is undeniable that it is high time that all stakeholders of IA understand and discuss diversity holistically and address various inequalities collectively, as opposed to addressing them in a piece-meal manner. Further, it is a collective responsibility to sustain the conversation and debate on this topic until IA truly becomes non -“pale, stale and male”.

 

We thank Mr. Rishab Gupta (Shardul Amarchand Mangaldas & Co) for his inputs.

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Nonsignatories Unmasked – The Sequel

Some people just won’t admit that they read this Blog. The judges of the Ninth Circuit, for example. When last read by many of you, in February 2021 (sorry for the long silence; I’ve had to work), your Commentator reported on a decision in the US Ninth Circuit Court of Appeals in which the panel majority, despite a persuasive dissent, held that the law governing the arbitrability of US federal trademark claims, when contested in a US court whose jurisdiction is based on those federal claims, and contested between a non-signatory and signatory, each of Indian nationality, of an arbitration...
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The post Nonsignatories Unmasked – The Sequel appeared first on Marc J. Goldstein - Arbitration & Mediation.

Mediate.com Expands into Arbitration

Business Conflict Blog - Mon, 2021-03-01 10:15

With a new CEO at the helm of Mediate.com, after a generation of loyal and visionary service by co-founder Jim Melamed, the pre-eminent online resource for mediation has now launched an initiative to offer the pre-eminent online resource for arbitration. Launched last week, Arbitrate.com looks to be a winner.

The site’s subtitle is “Everything Arbitration.” While that’s a hefty claim, you can see already that Colin Rule, Melamed’s successor, is ready to take a stab at it. Like its mediation-oriented predecessor, Arbitrate.com hosts lists of practitioners with easy links to their websites and contact information. It also maintains a home for informed threads of discussion, called “Arbitration Conversations,” and a separate group of threads called “Arbitration TNT” — shorth for “tips-and-tricks,” a place to share experiences and administrative suggestions.

Across the top banner of the home page are links to topic-specific arbitration practices: commercial, government, intellectrual property, international arbitration, and labor and employment. There is also a section for Colin’s favorite topic, “O-Arb.”

The site is intended to attract informed content contributors and one assumes that, with the passage of time, Arbitrate.com will be a repository of insights in both theory and practice as robust as its mediation sibling. Let’s welcome a new and, one expects, uniquely valuable resource for arbitration students, practitioners and end-users.

The post Mediate.com Expands into Arbitration first appeared on Business Conflict Blog.

Mediation Confidentiality in Federal Court

Business Conflict Blog - Tue, 2020-12-29 11:13

As a consequence of the absence of uniform adoption of the Uniform Mediation Act, the confidentiality of mediation communications in various jurisdictions often cannot be assured. Thanks to Alan Waxman, President and CEO of the International Institute for Conflict Prevention and Resolution (CPR), for bringing to our attention the most recent contributions to this confusion.

In Accent Delight International Ltd v Sotheby’s, 18-cv-9011 (S.D.N.Y. Dec 8, 2020), Judge Jesse Furman ruled on a motion seeking discovery of materials relating to a private (as opposed to court-ordered) confidential mediation that took place in an effort to settle a separate dispute between Sotheby’s and certain sellers of an artwork. In that prior mediation, Sotheby’s and the sellers entered into an agreement with the mediator that the mediation “was a settlement negotiation deemed private and confidential.” Plaintiff Accent Delight sought production in this action of the confidential settlement agreement reached in the prior litigation, as well as approximately 250 other documents related thereto, including communications between Sotheby’s counsel and the sellers’ counsel, and communications with the mediator.

The problem in the Second Circuit is the holding in In re Teligent, 640 F.3d 53 (2d Cir. 2011). There, the court affirmed the denial of a motion to compel disclosure of documents relating to a mediation, holding that a party seeking such disclosure “must demonstrate (1) a special need for the confidential material, (2) resulting unfairness from a lack of discovery, and (3) that the need for the evidence outweighs the interest in maintaining confidentiality.” One might have hoped for a more categorial assurance that confidential means confidential, but it was a welcome holding nonetheless.

The problem was that the mediation at issue in Teligent was court-ordered. One would assume that such a fact mattered as much as whether it was held on a Tuesday, but unfortunately no. In 2019, the Southern District held in Rocky Aspen Mgmt. 204 LLC v. Hanford Holdings LLC that the heightened showing required in Teligent applied only with respect to mediations that — like the one in Teligent itself — were conducted pursuant to court order. The court there reasoned that the promise of confidentiality had been extended by a government agency — the court — and not by private parties engaged in private discussions. Rather, the mere “good cause” standard of FRCP 26(c) applies to the discovery of information exchanged during mediation where there is no promise of confidentiality by a court.

In Accent Delight, by contrast, Judge Furman held that the heightened standard articulated in Teligent applied to mediation communications irrespective of whether they are court-ordered. The rationale of the confidentiality of settlement discussions — that they lead to resolution of disputes — applies equally whether the discussions take place voluntarily or by order. Making such a distinction would act as a disincentive to parties considering entering into private mediation. And such a ruling conforms to the conclusion of courts outside the Second Circuit. Some of those other rulings expressly link a “heightened standard” to FRE 408, which shields statements made during settlement negotiation for precisely the same reasons.

Things remain, as noted, un-uniform. In the Southern District a court has compelled mediator testimony to establish whether the mediator gave permission to a party and counsel to be excused from in-person attendance at a court-ordered mediation. Usherson v Bandshell Artist Management (S.D.N.Y. Dec. 9, 2019). On the other hand, the Fifth Circuit recently held that allegedly threatening statements made during mediation were inadmissible in an action to set aside a mediated settlement on the ground that the plaintiff had been coerced. Areizaga v. ADW Corp., 796 Fed. Appx. 205 (5th Cir. 2020).

Where does this leave the practicing mediator? We include in our agreements a promise of confidentiality. The parties agree that statements and other communications will be held both confidential and inadmissible. We require that they agree not to subpoena documents or testimony from the mediator, and to indemnify the mediator for any costs related to such an effort. Then, I suppose, having done all we can, we let the participants do as they deem fit.

They will anyway….

The post Mediation Confidentiality in Federal Court first appeared on Business Conflict Blog.

Japanese distributor liable over diabetes products

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