Feed aggregator

Young Scholars Reports on ABA Conference Programs

ADR Prof Blog - Wed, 2019-05-22 17:53
Don’t you hate it when you want to go to two or three conference programs scheduled at the same time?  Or if you miss a great program because you can’t go to the conference at all?  Or, after you get home from a conference, you can’t remember some great insights you had there? The ABA … Continue reading Young Scholars Reports on ABA Conference Programs →

Amendments to New Zealand’s Arbitration Law: Trust Disputes Are Out (For Now)

Kluwer Arbitration Blog - Wed, 2019-05-22 17:39

Lauren Lindsay


On 8 May 2019, the Arbitration Amendment Act 2019 (the Amendment Act) came into force.  It amends the Arbitration Act 1996 and is a much watered-down version of the original proposal.  The Amendment Act makes three changes: (i) the insertion of a new waiver sub-clause in Article 16 of Schedule 1 of the Arbitration Act (which mirrors Article 16 of the UNCITRAL Model Law); (ii) the narrowing of the grounds for setting aside an arbitral award; and (iii) the removal of the so-called  “quick-draw” mechanism.  These technical changes have been examined in a separate post and will not be re-examined here (see Arbitration Law Reform in New Zealand: A Lesson in Competing Values).

The Arbitration Amendment Bill initially contained two substantive proposals.  The first sought to enable the arbitration of “internal” trust disputes.  The second sought to further entrench the privacy of arbitration by reversing the presumption of open hearings in related court proceedings.  Neither of these proposals made it into the enacted legislation.  This post focuses on the potential arbitration of trust disputes in New Zealand.  The rationale for seeking to amend the Arbitration Act’s confidentiality regime (primarily to follow the approach in Singapore and Hong Kong) and the reasons for its rejection is not discussed here (see for example, Tidying up the Arbitration Act).

Arbitrating trust disputes: the perceived problem

In New Zealand, a country with a population of approximately 5 million people, the Law Commission estimates that there are somewhere between 300,000 to 500,000 trusts in existence.  Trust disputes are not only inevitable, they present a potentially significant source of business for arbitration lawyers.  The ability to arbitrate “internal” trust disputes, namely disputes arising under the four corners of the trust deed (between, for example, settlors, appointers, trustees and beneficiaries), has been debated in a number of jurisdictions.  The ICC has recently updated its Model Clause for Trust Disputes.  The debate continues here in New Zealand.

Many consider the arbitration of trust disputes to be contrary to public policy.  Two sticking points are frequently cited.

First, a trust deed is, by definition, not a contract but a “unilateral act of disposition” (see Explanatory Note to ICC Model Clause).  An arbitration agreement in a trust deed would usually be agreed between the original parties to the trust, the settlor and trustees (and in some circumstances, unilaterally by the settlor only).  However, beneficiaries of the trust are not parties to that agreement.  The lack of consent by those non-parties to the deed affects the arbitration agreement’s validity.

Second, all persons potentially affected by an award, such as unborn, unascertained or legally incompetent beneficiaries, may not be able to take part in the arbitration.  An award cannot be enforced against them unless they are adequately represented.  This problem stems from the nature of the underlying dispute and arises regardless of the particular dispute resolution method adopted.  Procedural rules applicable to court proceedings have long provided for a court’s ability to protect such persons through the appointment of an independent legal representative.

Possible solutions

In light of these identified sticking points, the proper arbitration of trust disputes requires statutory reform in two areas.  First, statute needs to provide that the arbitration agreement is valid and binding on non-parties to the trust deed.  Secondly, specific mechanisms must be put in place to allow for the legal representation of those unable to take part in the arbitration (which for trust disputes will usually be unborn, unascertained or legally incompetent beneficiaries).

The arbitration of internal trust disputes has already been considered in a number of jurisdictions.  By way of example:

  • Since 2007, an agreement to arbitrate a dispute under a will or a trust, save for a dispute concerning the validity of that will or trust, is enforceable in Florida (Florida Probate Code: General Provisions ).
  • In 2011, amendments to The Bahamas Trustee Act (i) deemed an arbitration clause in a trust deed to be a valid arbitration agreement between all parties (including beneficiaries of the trust) under the Arbitration Act 2009 (The Bahamas Arbitration Act); and (ii) granted an arbitral tribunal the power to appoint an independent person to represent unborn or legally incompetent beneficiaries.
  • England has considered the merits of and mechanism for, arbitrating trust disputes. The Trust Law Committee, having examined legislative changes made in Florida, Guernsey and elsewhere, concluded that arbitration was both suitable and attractive for disputes arising under wills, settlements and charitable trusts.  Their 2011 report recommended that the Arbitration Act 1996 (UK) be amended to allow the arbitration of internal trust disputes.  Those recommendations are yet to be adopted.

The New Zealand approach     

The proposed amendment to the Arbitration Act

The Arbitration Amendment Bill contained a clause entitled “Validity of Arbitration Clauses in Trust Deeds”.  The bill sought to deem arbitration agreements in trust deeds as valid and binding on all trustees, guardians and any beneficiaries for the purposes of the Arbitration Act.  It also gave a tribunal the same powers as the High Court to appoint representatives for minors, unborn or unascertained beneficiaries.  Any award issued would then be subject to the same curial safeguards provided for in the Arbitration Act, such as the ability to apply to set aside the award.

These proposals generated criticism.  For example, the Arbitration Amendment Bill was perceived as undermining the High Court’s supervisory jurisdiction over trusts.  It was suggested that adequate safeguards would be needed for unascertained and legally incompetent beneficiaries, including that the court “scrutinise any award before making an order recognising or enforcing it” (2018 Supplementary Report).

The amendments were being debated in tandem with a major overhaul to New Zealand’s trust laws.  Ultimately, the Ministry of Justice recommended removing the trust arbitration proposals from the Arbitration Amendment Bill given the parallel debate on the Trusts Bill.  This was a decision based on expediency not policy.  That decision has been, in this author’s view, rightly criticised for assuming incorrectly that the Trusts Bill contains the same proposals that were removed from the Arbitration Amendment Bill (see below and also Arbitration Amendment Bill: Is Trust Arbitration on its Way).  Although it is not unreasonable for the relevant changes to form part of a new Trusts Act, those changes must nevertheless be “fit for purpose”.  In their current form, the proposed amendments potentially complicate rather than facilitate the arbitration of trust disputes.

The Trusts Bill

The Trusts Bill was first tabled on 1 August 2017.  The Justice Committee issued its Final Report on the bill in October 2018 and on 9 May 2019 the bill passed its second reading.  It is expected to pass into law sometime this year.  The bill seeks to enable greater use of alternative dispute resolution methods (including arbitration and mediation) for trust disputes, save for disputes regarding the trust’s validity.

As presently drafted, the Trusts Bill is inadequate for a number of reasons (see also The Arbitration of Trust Disputes: are we there yet?).  For example:

  • The bill does not expressly deem an arbitration agreement in a trust deed to be valid. Rather, it focuses on deeming an award issued in a trust dispute an “arbitral award” under the Arbitration Act (see clauses 137 and 142 of the bill).  This does not address the absence of agreement which renders the enforcement of the award vulnerable to challenge.
  • Although a party can now apparently commence arbitral proceedings without permission (that was not the case in the original draft), clause 140(1) of the Trusts Bill provides that a court “may at the request of a trustee or a beneficiary or on its own motion” enforce an arbitration agreement. It is unclear when or on what basis a court may “on its own motion” decide (or refuse) to enforce an arbitration agreement.
  • The High Court retains the power to appoint representatives for unascertained or incapacitated beneficiaries, to the exclusion of the arbitrator. The retention of court involvement potentially dilutes the benefits of a standalone arbitral process and may result in the under-utilisation of arbitration because of the potential cost of requiring a court order to appoint a representative.

Contrary to the recommendations made with respect to the Arbitration Amendment Bill, there is no provision for court approval (or scrutiny) of an arbitral award.  That proposal may deserve further consideration.


In its current form, the Trusts Bill falls short of facilitating the effective arbitration of trust disputes.  It is hoped that the issues identified above (and elsewhere) are fixed before the bill’s third reading later this year.  The potential arbitration of trust disputes remains a live issue in New Zealand.  Should the arbitration of trust disputes be permitted (even if subject to some judicial oversight), it could pave the way for the arbitration of other disputes that have traditionally been considered non-arbitrable, such as insolvency disputes.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Job Announcements for Two Dispute Resolution Positions

ADR Prof Blog - Wed, 2019-05-22 17:33
Lara Fowler (Penn State) sent the following announcement: The Environmental Dispute Resolution (EDR) Program is hiring a Mediator who will be responsible for supporting existing program activities and developing new projects. We seek someone with significant experience in conflict resolution and consensus building, as well as expertise in training and capacity building.  Ideally, the new … Continue reading Job Announcements for Two Dispute Resolution Positions →

Environmental Considerations in Investment Arbitration: A Report of a ‘Topical Issues in ISDS’ Seminar

Kluwer Arbitration Blog - Wed, 2019-05-22 03:00

Maria Fanou

The CERSA (CNRS, University Paris II Panthéon-Assas) organized its fourth event in a series of seminars on selected topics in international investment law and ISDS. On 28 March 2019, a distinguished panel of practitioners and academics gathered in Paris to exchange views on ‘Environmental Considerations in Investment Arbitration’. The discussion was moderated by Catharine Titi (CERSA) and brought together as panelists Attila M. Tanzi (University of Bologna, 3VB Chambers), Aniruddha Rajput (ILC), Gloria Alvarez (University of Aberdeen), Raymundo Tullio Treves (IMPRS-SDR) and Amelia Keene (Three Crowns). This note offers a brief account of the main topics discussed.

General Introduction

The discussion kicked off with an introduction by Attila Tanzi who painted a broad-brush picture of the background pertaining to environmental concerns in ISDS. Environmental concerns bear directly on the current debate over the balancing between the protection of investors’ rights and the regulatory power of host States, as well as on investment in different respects, including energy-related investment. The latter appears more susceptible to encroach on environmental protection and on the so-called greened human rights (e.g. right of access to food/water). For the identification of the contents of such environment-related human rights, a reference to sources of law that previously one would not think of (e.g. ESCR Committee’s General Comments, the landmark IACHR Advisory Opinion on the Environment and Human Rights) may be necessary.

Tanzi further provided a summary overview of three inter-related developments: jurisprudential, normative and institutional (e.g. the admissibility of amici curiae briefs and counterclaims). With regard to jurisprudential developments, he discussed whether environmental protection as a justification for State measures differs from other public purposes. He noted that FET and FPS are key in addressing environmental concerns in ISDS. A significant number of awards find for the State on expropriation and for the applicant on FET and/or FPS seemingly in a balancing attempt. Although an investor might invoke State negligence in protecting the environment (e.g. Allard v. Barbados), typically, an investor claims that the host State has breached a number of treaty obligations and the State, in its defense, justifies the measures it took as a means to accommodate environmental concerns. In that context, the dismissive approach adopted in Santa Elena v. Costa Rica and the emphatic attention to environmental concerns in Aven v. Costa Rica were juxtaposed. Although the Aven tribunal applied a treaty (DR-CAFTA) expressly attentive to regulatory powers for environmental protection, the juxtaposition reveals the formidable developments that have taken place in international investment arbitration. Considering that the different approaches by tribunals also result from the differences in the applicable investment treaty, Tanzi pondered on how environmental considerations can be integrated into older treaties silent on the matter. In response, he referred to Art. 31 VCLT as a legal technique.

Lessons from the Indian Model BIT

Aniruddha Rajput discussed lessons from the Indian Model BIT (2015), which is a representative example of the shift of treaty practice. As compared to other model BITs which contained no reference to the environment, the latter is now expressly included and needs to be taken into account when deciding investment disputes. Rajput highlighted that the Indian Model BIT is only a model, we do not know what will come out when it is taken out to be negotiated with India’s trade partners. However, he anticipated that India is unlikely to completely depart from it, since it represents a solid policy consideration. The new Indian Model BIT includes for the first time a reference to “sustainable” development. An effort to protect the State’s regulatory power is also clear. Indicatively, there is no reference to FET but there is a definition of expropriation (Art. 5.3) followed by a clarification that a non-discriminatory regulation cannot be deemed as expropriation (Art. 5.5). These provisions allow extensive regulatory space for India to undertake regulations for environment protection. Since domestic law is one of the applicable laws in investment arbitration, the domestic legal framework on environment protection is relevant. There is a large body of jurisprudence developed by the Indian courts and particularly the Supreme Court. The recently created Green Tribunal is dedicated to decide environmental matters and is quite active. Although the decisions rendered by these judicial bodies may become the subject matter of challenges, they are contributing towards the applicable law, since India has a common law legal system. India has already concluded a BIT with Cambodia on the basis of the Model BIT and is using it as a basis for its negotiations with the EU.

Is Investment Arbitration a Place for Energy Justice? The Latin American Experience

Gloria Alvarez expressed her concerns about climate change, a topic that becomes more and more recurring in the context of investment arbitration. She highlighted the evidentiary challenges that the issue presents and argued that we are facing an energy revolution with technological, economic, and industrial challenges to overcome. This energy revolution is differently manifested; while Latin America is liberalizing their energy markets by welcoming more FDI, it is also creating more clarity on environmental protection. In contrast, Europe has already passed this liberalization process (e.g. AES Summit v Hungary) and more recently has witnessed dramatic changes in the financial schemes supporting various renewable energy sources. This energy revolution also comprises an energy transition which requires long-term structural changes in current energy systems. An emerging problem in international investment law (IIL) is the absence of normative inclusion of obligations relating to the protection of third-party rights (including environmental rights) and quantitative obligations concerning greenhouse emissions. More concretely, Alvarez advocated that IIL needs to integrate the climate change regime into current economic models in a clearer way. There is, of course, no easy or quick way to achieve such integration. In this respect, some initiatives were discussed, such as the IBA Presidential Task Force on Climate Change Justice and Human Rights, as the first awakening point, as well as UN Guiding Principles on Business and Human Rights.

Lessons Learnt from Selected Case-Law

 Raymundo Tullio Treves drew lessons from recent case law. As stressed at the outset, investment protection is what the name says; protection of investment. Hence, enforcement of environmental laws was not part of the original purposes. However, States are taking measures to enforce environmental obligations. Inevitably, such actions impact investments, and investors see environmental measures as triggering BIT claims. In parallel, environmental considerations are also being increasingly used by States as defenses. Depending on the applicable BIT, non-compliance with environmental regulations may deprive the investment of protection. In other cases, there might be a general exception for environmental regulation similar to the one found in CAFTA. Treves raised several points on the complex issue of counterclaims. Allowing counterclaims entails a balancing exercise, whereby the tribunal has to take into consideration the efficiency of the proceeding and judicial economy. ‘Old-generation’ BITs do not explicitly address counterclaims. However, both UNCITRAL Rules (Art. 21) and the ICSID Convention (Art. 46) explicitly refer to counterclaims. Two requirements arise therefrom: first, the tribunal must have jurisdiction on the counterclaim; and second, the counterclaim should be closely connected to the claim.

The “close connection” has been viewed not only as a factual connection but also as a requirement for the claim and the counterclaim to arise from the same legal framework. This complicates the possibility of a counterclaim. With regard to jurisdiction, various tribunals have moved from a textual analysis of the treaty. An example is the decision by the majority of the tribunal in Roussalis v. Romania, interpreting the Greece-Romania BIT (Art. 9). The tribunal found no jurisdiction over counterclaims on the basis of the BIT, which referred exclusively to disputes regarding obligations of the host-state. Professor Reisman issued a declaration in that case drawing consequences from the choice of ICSID in the arbitration clause: the fact that the parties agreed to use ICSID means that they also agreed to bringing counterclaims. Another example discussed was the Spain-Argentina BIT (Art. 10(1)). The tribunal in Urbaser v Argentina interpreted this provision “in good faith” to conclude that it covers all disputes concerning the investment, including State counterclaims and investors’ obligations towards the State. Such obligations are to be found in international law, including human rights law. Aven v. Costa Rica was also discussed.

Overall, it is doubtful whether counterclaims are viable options for States to obtain damages for environmental harm. There are three possible ways forward: 1) obtaining the agreement of the investors/claimants (e.g. Perenco v. Ecuador, Burlington Resources v. Ecuador); 2) finding a norm of international environmental law which is directly actionable against the investor; or 3) having language in the BIT which directly imposes such an obligation on investors.

Time for a (Climate) Change in Investment Arbitration?

Amelia Keene observed that it is extremely rare to find any reference to climate change in investment awards. This observation motivated Keene to ponder on why this is the case and whether we should expect more references. She found it striking that despite the number of cases we see in the renewable energy sector, no award makes reference to State obligations under the Paris Agreement or other climate change obligations as a part of its reasoning. Keene then discussed national treatment. One factor to be taken into account under national treatment is the legal and regulatory regime. She suggested that the relevant international law regime might also need to be taken into account in determining whether or not there is a comparator. In a different context, in the UPS v Canada, UPS (a Korean company) argued that Canada Post is a comparator in like circumstances, because both provide post services, but Canada Posts were given more favourable treatment. The tribunal rejected this argument and, interestingly, referred to the ‘international postal regime’ which makes a distinction between domestic postal services and courier companies. Such reasoning could be transposed into environmental cases, and arguably lead to taking cognizance of a State’s international climate change obligations.

Concluding Remarks

Overall, the insightful presentations made it an animated and highly informative seminar. As a takeaway, it is nowadays clear that an investment dispute touches upon interests beyond those of the parties involved. Hence, environmental considerations, along with human rights, once viewed as extraneous factors, have recently become increasingly relevant in investment arbitration cases, being invoked by both States and investors.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Compatibility, Novelty, Practical Corollary? A Collective Analysis of the Prague Rules

Kluwer Arbitration Blog - Tue, 2019-05-21 22:43

Vladimir Khvalei, Maria Teder, Andreea Nica, Laurence Ponty and Juan Pablo Valdivia Pizarro

The following article is the result of a collective project, carried out by one of the groups of the Young ICCA Mentoring Programme, comprised of Juan Pablo Valdivia Pizarro, Andreea I. Nica and Maria Teder, as Mentees, Vladimir Khvalei, as Mentor, and Laurence Ponty, as Buddy.

With the benefit of Vladimir Khvalei being one of the drafters of the Prague Rules (or the “Rules”), the group chose to address this hot topic to contribute to the lively (and sometimes passionate) debates, which the Rules have triggered even way before their launch in December 2018. Further, given the concentration of the discussion on the legal background underlying the Rules (the civil law and more inquisitorial approach) and the potential tensions with the common law culture approach, the analysis of the Prague Rules by a group representing a large variety of nationalities and jurisdictions,1) As well as various generations of practitioners! jQuery("#footnote_plugin_tooltip_5854_1").tooltip({ tip: "#footnote_plugin_tooltip_text_5854_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); sounded particularly relevant.

As the Prague Rules are a new tool available to users, aiming at enhancing efficiency in the conduct of international arbitration proceedings, the group endeavoured to approach the topic essentially from a pragmatical angle. For this purpose, it identified three main issues, which were respectively dealt with by each of the Mentees under the supervision of the Mentor and the Buddy, namely:

  1. Whether the Prague Rules are compatible with the major international arbitration rules (this section was dealt with by Juan Pablo Valdivia Pizarro);
  2. To which extent the Rules innovate or duplicate existing rules and guidelines, such as the IBA Rules on the Taking of Evidence in International Arbitration (the “IBA Rules”) (this section was dealt with by Andreea I. Nica and Maria Teder, the latter specifically analysing, with a focus on Estonian law, the Iura Novit Curia principle introduced by the Rules); and
  3. What the potential consequences of the Rules on the conduct of the proceedings from the arbitrator’s perspective are (this section was dealt with by Maria Teder).

The article can be accessed here.

References   [ + ]

1. ↑ As well as various generations of practitioners! function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Negotiation and Team Resources Available

ADR Prof Blog - Tue, 2019-05-21 12:17
Steve Goldberg (Northwestern) has asked me to let you know that he, together with Profs. Jeanne Brett (Kellogg School of Management) and Holly Schroth (Haas School of Business, UC Berkeley) have, set up a not-for-profit corporation – Negotiation and Team Resources (NTR) – for the purpose of developing and distributing negotiation and dispute resolution exercises. … Continue reading Negotiation and Team Resources Available →

Websites relating to Communication and Conflict

Communication and Conflict Blog - Tue, 2019-05-21 03:45
This page gives links to websites that promote a similar approach to communication and conflict resolution to that described on this site.

Arbitration Law Reform in New Zealand: A Lesson in Competing Values

Kluwer Arbitration Blog - Mon, 2019-05-20 21:43

Jack Wass

Introduction: the Arbitration Amendment Act 2019

Arbitration law reform is often portrayed in terms of relentless progress towards enlightenment: towards greater party autonomy, increased efficiency, reduced judicial interference, and more certain enforcement. In important areas of arbitral law and practice, that is an accurate narrative: the acceptance of the principles of Kompetenz-Kompetenz and separability, for example, or the adoption of the New York Convention and the resulting robust obligation to recognise and enforce foreign arbitral awards, have done much to contribute to the vitality and effectiveness of arbitration as a method for dispute resolution.

But relentless attempts to bolster and entrench the role of arbitration can conceal competing values and perspectives, particularly when law reform is conceived and pursued from the viewpoint of arbitration practice. New Zealand’s latest attempt in the Arbitration Amendment Act 2019, which came into force on 8 May 2019, demonstrates both the potential and the limitations of arbitral law reform.

The Proposed Reforms in the Arbitration Amendment Bill

The Amendment Act was introduced as a Member’s Bill in 2017 to amend four aspects of arbitration law in New Zealand: (1) to give effect to arbitration clauses in trust deeds, (2) to extend the confidentiality that applies in arbitral proceedings to a rebuttable presumption that any court proceedings arising out of the arbitration will also be confidential, (3) to correct what was seen as a troublesome precedent from the New Zealand Supreme Court on the setting-aside provisions of the Act, and (4) to require that challenges to a tribunal’s decision on jurisdiction must be brought immediately (and not at the end of the proceedings), to forestall the adoption in New Zealand of the Singapore Court of Appeal decision in PT First Media TBK v Astro Nusantara International BV [2013] SGCA 57.

A stated purpose of the reforms was to make New Zealand a more attractive venue for international arbitration.

Majority of the Bill Rejected

The Amendment Act had a rocky journey through the House. Despite a number of submissions in support of the Bill, the Ministry of Justice Report to the Select Committee was overwhelmingly negative and recommended that the Select Committee reject all of the proposed amendments.

After taking the unusual step of seeking further submissions on the Departmental Report, and seeking specialist advice from a former High Court Judge, the Select Committee agreed with the Ministry of Justice on major elements of the Bill. It found that provision for arbitration of trust disputes should be left out of the Bill (to be addressed in the Trusts Bill currently before Parliament) and that the current presumption in favour of open justice in cases arising out of arbitration should remain.

What was left were more modest reforms to the setting-aside rules and the waiver provision.

The Challenges of Law Reform

The confidentiality issue is a classic example of a contest in policy values. The explanatory note to the Bill, as introduced, recorded that other jurisdictions had struck the balance between confidentiality and open justice by requiring confidentiality by default; the Bill intended that by following this approach New Zealand would become a more attractive venue for international arbitration.

The Select Committee noted1)At page 2 of its report. jQuery("#footnote_plugin_tooltip_9570_1").tooltip({ tip: "#footnote_plugin_tooltip_text_9570_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); that open justice was a ‘fundamental part of New Zealand’s justice system as it facilitates public scrutiny of the courts and acts as a safeguard for the proper administration of justice.’ Although the Select Committee considered a more modest compromise, it was not satisfied that abrogating this principle could be justified in the hope of attracting more parties to arbitrate in New Zealand.

This proposed amendment demonstrates the challenges and tensions produced by regulatory competition between countries that wish to develop a reputation as a place to host international arbitrations. It is assumed – with some justification – that any attempt to challenge the pre-eminence of Singapore and Hong Kong in this part of the world must include giving the users what they want, and what they want is said to include confidentiality.

While concerns about provision for investor-state dispute resolution provisions in the (now) Comprehensive and Progressive Agreement for Trans-Pacific Partnership did not prevent its adoption, there remains anxiety in many quarters about the relationship between international arbitration and democratic values which is likely to have weighed on the Select Committee in considering how to balance the policy considerations raised by the Bill.

Postscript – the Process for Appointing Arbitrators

The reform process did allow Parliament to reform one particularly unfortunate provision of New Zealand’s former arbitration law.

As enacted, the Arbitration Act 1996 supplemented Article 11 of the UNCITRAL Model Law with a special procedure for appointing arbitrators in cases where the parties could not agree. (This provision applied on an opt-out basis for domestic arbitrations and an opt-in basis for international arbitrations).

This clause provided that where one party was in default (for example, by refusing to nominate an arbitrator) the other party could give a notice to remedy the default within 7 days failing which the arbitrator nominated by the notifying party would be appointed by default. That procedure was adopted from the Australian Uniform Commercial Arbitration Acts.

However the New Zealand Parliament extended the application of that procedure beyond cases of true default to cases where the parties simply could not agree. This meant that a party who was discussing a choice of arbitrator in good faith could be gazumped by the other party. This ‘quick draw’ process was universally condemned and described by one judge as ‘bordering on repugnant’.2)Body Corporate 200012 v Naylor Love Construction Ltd, unreported, 26 April 2017. jQuery("#footnote_plugin_tooltip_9570_2").tooltip({ tip: "#footnote_plugin_tooltip_text_9570_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Although the Bill as introduced did not address this issue, the Select Committee was convinced by submissions that it needed to be confronted and a new clause was introduced late in the Parliamentary process to repeal it. The position is now that where the parties cannot agree on the appointment of an arbitrator, either can request that an independent body choose the arbitrator according to published criteria.

References   [ + ]

1. ↑ At page 2 of its report. 2. ↑ Body Corporate 200012 v Naylor Love Construction Ltd, unreported, 26 April 2017. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

The Mareva Injunction and its Story of Expanding Horizons

Kluwer Arbitration Blog - Sun, 2019-05-19 22:41

Mahasweta Muthusubbarayan

A Mareva injunction or a freezing injunction is a form of ad personam interim relief, which is usually sought during the pendency of court or arbitration proceedings or once the proceedings are completed and a verdict is rendered, but before the judgement/award is enforced and executed. This form of injunction is essentially sought by a claimant or judgement/award creditor against a respondent or judgement/award debtor, to prevent the latter from dispersing his assets otherwise than in the ordinary course of business, so as to ensure that the enforcement of a judgement or arbitral award is not defeated. Unlike a regular injunction, a freezing injunction covers even those assets which are not necessarily a part of the subject-matter in dispute or those in which the claimant does not claim any direct right.

Though originally conceived as an aid to commercial litigation, English Courts have been quite liberal in granting freezing orders to aid enforcement of arbitral awards, especially arbitral awards arising out of international commercial arbitration. Since ease of enforcing awards and effectiveness of interim reliefs lend strength to the arbitral award and also play a crucial role in influencing the decision of parties when choosing a seat, it is important to understand the entire legal framework governing the grant of freezing injunctions in England, should a party opt for England as the seat. The purpose of this article is to provide the reader with an overview of the applicable legal provisions, the criteria expounded by the judiciary for the grant of such injunctions; explain the effect, if any, of the choice of seat by the parties on the power of the English Courts to grant freezing orders and the scope of such orders; and examine whether freezing injunctions can be granted against a non-party to the arbitration agreement and proceedings.

Section 44 of the 1996 English Arbitration Act prescribes the ambit of the interim reliefs which can be granted by the Courts to preserve assets. Certain conditions have been prescribed which must be taken into consideration by the Courts in deciding whether a particular case, with its unique facts and circumstances, merits the grant of freezing orders. The primary diktat of Section 44 is that the Court can grant the requisite interim relief only when the Arbitral Tribunal is unable to do so effectively. Thus, the Court’s power to grant freezing injunctions may be affected in certain cases by the agreement of the parties concerning the powers of the Arbitral Tribunal or the provisions of the relevant institutional rules. This is in keeping with the principle of judicial non-intervention in arbitral proceedings unless absolutely necessary.

An Arbitral Tribunal by itself can grant freezing injunctions, if empowered to do so by the agreement of the parties. In such cases, the Tribunal would be the primary forum from which the injunction is to be sought. However, there is a bit of a controversy on the scope of the powers of the Tribunal, whether its powers are equivalent to that of the Court and whether it can grant such a remedy without the prior agreement of the parties. While an argument can be advanced that an Arbitral Tribunal should ideally be empowered to grant a freezing injunction just like the Courts and without the prior agreement of the parties; it is to be noted that a freezing injunction is a remedy which would require, at times, extra-territorial enforcement or adjudication of rights of third parties. Therefore, at least in international arbitrations, the Court would be a better forum to grant such remedy than the Tribunal, as both adjudication and enforcement would be easier.

The Judiciary has formulated three tests which are to be applied in deciding whether a Mareva injunction should be granted- the ‘good arguable case’ test, the ‘real risk of dissipation’ test and the ‘just and convenient’ test. Of these, the requirements of good arguable case and real risk of dissipation are subject to the ‘just and convenient’ test, so as to ensure that the legitimate business interests of the losing party are not compromised. The choice of seat as England or otherwise does not affect the grant of freezing injunctions by the English Courts, provided that there is a ‘sufficient connection’ of the assets or either party to England, thereby enabling the English Courts to exercise jurisdiction. English Courts can also exercise concurrent and simultaneous jurisdiction with the Courts of foreign countries, when granting freezing orders to enforce awards of arbitrations seated in England and Wales or Northern Ireland. World-wide freezing orders can also be granted. Guidelines have been issued for the enforcement abroad of a world-wide freezing order granted by an English Court. Prior approval of the English Court is necessary in such cases.

Freezing of assets of third parties who are non-parties to the arbitration agreement and proceedings, is generally not permissible, in line with the principle of ‘privity of contract’. An exception has been carved out for cases where the respondent or the award debtor is de facto beneficial owner of the assets held by the third party or has some other sufficient interest or control over the third-party assets. This sort of relief constitutes a special category termed as “Chabra relief”. However, the recent case of Cruz City Mauritius Holdings v. Unitech Ltd. et al. ([2014] E.W.H.C. 3704 (Comm.)) has held that for Chabra jurisdiction to be exercised, the primary dispute should also be adjudicated before the Court, thereby creating uncertainty whether Chabra relief can in fact be granted in support of arbitration proceedings, since the primary adjudication in such cases is done by the Arbitral Tribunal. A mere application for interim relief before the Courts does not entail any substantive adjudication.

Considering the evolution of the Mareva injunction as an interim remedy over the years, it can be seen that most of the evolution has happened at the hands of the judiciary. This is a prime example of going beyond what is provided in the black and white letter of the legislation and evolving remedies which are better suited to provide justice, as per the exigencies of the situation. The way in which the scope of the remedy has been interpreted and expanded shows tremendous application of judicial mind and attention to detail. An exhaustive study of the jurisprudence relating to the freezing injunction would make it obvious that while the English Courts have always tried to adapt the remedy to suit the circumstances, they have never deviated from the general, internationally-accepted principles in relation to interim injunctions and arbitration. For example, the tests of ‘good arguable case’, ‘real risk of dissipation’ and ‘just and convenient’ are all adaptations of the principles applicable to regular interim injunctions i.e. a prima facie case, balance of convenience and risk of irreparable loss or injury. Similarly, general principles of arbitration dictate that any interim or final relief granted should not affect the rights of third parties who are unrelated to the arbitration and cannot appear before the Tribunal or the Court. Hence, some criteria have been laid down which are required to be fulfilled before assets of third parties can be frozen. Thus, when in doubt, parties simply have to go back to the basics to understand and build their case.

Mareva injunction can thus be considered an excellent outcome of the judicial creative process and is a very potent weapon in disputes where there are huge monetary stakes or questions of fraud involved. The Courts, in expanding and refining the Mareva injunction, have recognized the truly commercial nature of majority of the disputes which are arbitrated. Yet, because of the largely liberal scope of this interim relief and the draconian effect which it has on the rights of the party against whom it is imposed, the grant of the injunction is also to be strictly regulated. English jurisprudence has furnished a rich body of cases which have dealt with, explained and expanded the ambit of freezing injunctions, while at the same time prescribing copious safeguards and limitations. England is a very mature jurisdiction in relation to freezing injunctions in the sense that it has furnished jurisprudence dealing with almost every question of law which could come up in proceedings involving this injunction, and exhaustive guidelines have been provided on every aspect and facet of the remedy, thereby providing abundant guidance to parties. England is also the country which gave birth to the Mareva injunction and the common law jurisprudence with regard to the same makes for an excellent study on the art of balancing commercial interests, jurisdictional limitations and practical considerations. A prudent, progressive remedy is all that any commercial litigant can ask for, and the Mareva injunction of the common law system certainly fits the bill.


More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

The Revised Swedish Arbitration Act: Some Noteworthy Developments

Kluwer Arbitration Blog - Sun, 2019-05-19 00:52

Aren Goldsmith and Harry Nettlau


Nearly 20 years after the enactment of the Swedish Arbitration Act of 1999, a revised version of the Swedish Arbitration Act entered into force on March 1st, 2019.1) See also here (reporting on the background and process of revising the Swedish Arbitration Act). jQuery("#footnote_plugin_tooltip_1826_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1826_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); As addressed below, this update enacts improvements to Sweden’s former arbitration law, which contained certain features that were less than ideal. The revised Act makes a positive contribution to the attractiveness of one of Europe’s leading jurisdictions for international arbitration.

1. The Previous Swedish Arbitration Act 1999

The previous Swedish Arbitration Act of 1999 (“SAA 1999”) entered into force on April 1, 1999, as the result of Sweden’s endeavor to modernize its arbitration law taking inspiration from the UNCITRAL Model Law on International Commercial Arbitration of 1985.2) See Nilsson/Andersson in: Franke/Magnusson/Ragnwaldh/Wallin, International Arbitration in Sweden, 2013, chapter 1, paras. 20-21, 39. jQuery("#footnote_plugin_tooltip_1826_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1826_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The SAA 1999 remains applicable to arbitration proceedings that were commenced before the revised Swedish Arbitration Act of 2019 (“SAA 2019”) entered in force. An unofficial English translation of the SAA 2019, which was prepared on behalf of the Arbitration Institute of the Stockholm Chamber of Commerce, is available here.

2. Application of the Revised Swedish Arbitration Act 2019

The SAA 2019 applies to arbitration proceedings that were commenced after the SAA 2019 entered into force on March 1, 2019 and that have a seat in Sweden. As an exception, a limited number of provisions of the SAA 2019 apply to certain types of court proceedings commenced after the SAA 2019 entered into force, irrespective of whether the underlying arbitration commenced prior to the entry into force of the SAA 2019. The relevant provisions are:

  • Section 41 SAA 2019, regarding court actions relating to the award of compensation to arbitrators;
  • Section 43 para. 2 SAA 2019, regarding the requirement to secure leave to appeal certain decisions related to arbitral awards; and
  • Section 45a SAA 2019, regarding the possibility of presenting oral evidence in the English language in certain court proceedings related to arbitration.

It is important to note that the provisions of the SAA 2019 apply to the extent that the parties have not derogated from them, for example, by agreeing to the application of specific institutional procedural rules. Thus, the SAA 2019 will generally be applicable in connection with ad hoc arbitration proceedings with a seat in Sweden.

3.  Noteworthy Changes in the Revised Swedish Arbitration Act 2019

Through the SAA 2019, the Swedish legislator intended to adapt the Swedish Arbitration Act to recent developments in international arbitration, to fill certain gaps in the existing statutory regime, and to provide certain clarifications to that regime. Noteworthy changes and additions found in the SAA 2019 are the following:

        a) Multiple Parties or Multiple Arbitrations

Section 14 para. 3 SAA 2019 addresses arbitrator appointments in multi-party proceedings: If multiple respondents cannot agree on a joint arbitrator appointment, a respondent party may request that the district court appoint arbitrators on behalf of all parties. This may result in the excusal of any arbitrator who has already been appointed.

Furthermore, the new Section 23a SAA 2019 features a mechanism that permits the consolidation of multiple arbitrations where:

(i)The parties agree to consolidation;

(ii)The consolidation will benefit the administration of the arbitration; and

(iii)The same arbitrators have been appointed in both cases.

           (b) Replacement of Arbitrators

If an arbitrator resigns or is released due to circumstances which were known at the time of the appointment, the district court appoints the new arbitrator upon request of a party. Section 16 para. 1 SAA 2019 now requires the district court to follow the suggestion for a new arbitrator from the party that originally appointed the arbitrator who needs to be replaced, unless there are circumstances speaking against such an approach.

           (c) Judicial Review of the Arbitral Tribunal’s Jurisdiction

The SAA 2019 adopts a significant change in relation to objections to the arbitral tribunal’s jurisdiction. The SAA 1999 allowed for a declaratory decision by a district court on the arbitral tribunal’s jurisdiction over the dispute, which could be sought at any time before or during the arbitration.3) See Öhlström in: Franke/Magnusson/Ragnwaldh/Wallin, International Arbitration in Sweden, 2013, chapter 4, paras. 29‑34. jQuery("#footnote_plugin_tooltip_1826_3").tooltip({ tip: "#footnote_plugin_tooltip_text_1826_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); By contrast, the SAA 2019 limits court review of the arbitral tribunal’s jurisdiction:

First, when the arbitration proceedings are pending, a party may no longer, over another party’s objection, seek court review of the arbitral tribunal’s jurisdiction.4) See Sections 2 and 4a para. 1 SAA 2019. jQuery("#footnote_plugin_tooltip_1826_4").tooltip({ tip: "#footnote_plugin_tooltip_text_1826_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Second, if the arbitral tribunal renders an interim decision affirming its jurisdiction, a party’s request for review has to be filed with a court of appeals within a 30-day period pursuant to Section 2 para. 2 SAA 2019. The same court of appeals will also be competent to review the arbitral tribunal’s jurisdiction in the context of set-aside proceedings pursuant to Section 43 para. 1 SAA 2019.

Moreover, Section 2 para. 2 SAA 2019 provides that while judicial review of jurisdiction is pending, the arbitral tribunal may continue the arbitration and may render an award.

             (d) Determination of the Applicable Substantive Law by the Arbitral Tribunal

Section 27a SAA 2019 introduces a mechanism for determining the substantive law to be applied to the dispute. The arbitral tribunal shall apply the parties’ chosen substantive law (without regard to conflict-of-law rules). Absent such a choice, the arbitral tribunal is tasked with determining the applicable substantive law, without further guidance under the SAA 2019. The arbitral tribunal may also decide ex aequo et bono, which however requires – as is common – the consent of all parties.

            (e) Termination of Arbitration Proceedings

Whereas Section 27 para. 1 SAA 1999 stipulated that an arbitration proceeding can only be terminated by rendering an award, Section 27 paras. 1 and 3 SAA 2019 permits the arbitral tribunal to dismiss the arbitration by means of a “decision” (as opposed to an award). This revision accommodates scenarios such as a withdrawal of claim or a settlement without an accompanying request for confirmation of the settlement in the form of an award.

            (f) Setting-Aside of Arbitral Awards

Two revisions in the SAA 2019 concerning set-aside proceedings for arbitral awards rendered in Sweden should be noted in particular:

First, the ground for setting aside an arbitral award on the basis that the arbitrators exceeded their mandate is now subject to a causality requirement. In order to set aside an award, Section 34 para. 1 no. 3 SAA 2019 requires not just that the arbitrators exceeded their mandate, but also that they did so “in a manner that probably influenced the outcome” of the case.

Second, the time limit for a party to bring a set-aside action, after receipt of the award, has been reduced from three months to two months in Section 34 para. 4 SAA 2019.

In addition, oral evidence in set-aside proceedings before a Swedish court of appeals may now be taken in the English language pursuant to the new Section 45a para. 1 SAA 2019. This option is now available for all set-aside proceedings that are filed after March 1, 2019, i.e., also with regard to arbitration proceedings that were commenced before March 1, 2019. This accommodation may be helpful to foreign parties.


While the SAA 1999 will maintain its relevance for pending arbitrations, practitioners should be aware of the new features found in the SAA 2019 for future arbitration proceedings with a seat in Sweden. Overall, the revised provisions increase the efficiency of the arbitration framework created under the SAA 1999. The former regime, which permitted parallel litigation before the Swedish courts and an arbitral tribunal over arbitral jurisdiction, created a risk of duplicative proceedings resulting in increases in costs and uncertainty for disputing parties. The elimination of that regime represents a positive step for Sweden’s arbitration law. Likewise, the adoption of a clear mechanism to break impasses in connection with multi-party appointments is helpful. Finally, the possibility of taking oral evidence in court in English will be appealing to many international parties.

Sweden has long maintained a reputation as a leading seat for international arbitrations in Europe, with a particular appeal to parties from Eastern Europe. Sweden is also noteworthy for what appears to be a liberal approach to arbitrations involving disputes under EU competition law.5) See A. Goldsmith, “Arbitration and EU Antitrust Follow-on Damages Actions,” ASA Bulletin, Vol 34-1 (2016), p. 23 (discussing Swedish case law and related commentary); see also here (discussing case law in EU member state courts related to arbitration and follow-on damages actions). jQuery("#footnote_plugin_tooltip_1826_5").tooltip({ tip: "#footnote_plugin_tooltip_text_1826_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Indeed, Section 1 para. 3 SAA 2019 provides: “Arbitrators may rule on the civil law effects of competition law as between the parties.

The recent revisions to the Sweden’s arbitration regime will help to preserve Sweden’s position among Europe’s leading seats for international arbitration.


The views expressed herein are those of the authors only and should not be construed otherwise.

References   [ + ]

1. ↑ See also here (reporting on the background and process of revising the Swedish Arbitration Act). 2. ↑ See Nilsson/Andersson in: Franke/Magnusson/Ragnwaldh/Wallin, International Arbitration in Sweden, 2013, chapter 1, paras. 20-21, 39. 3. ↑ See Öhlström in: Franke/Magnusson/Ragnwaldh/Wallin, International Arbitration in Sweden, 2013, chapter 4, paras. 29‑34. 4. ↑ See Sections 2 and 4a para. 1 SAA 2019. 5. ↑ See A. Goldsmith, “Arbitration and EU Antitrust Follow-on Damages Actions,” ASA Bulletin, Vol 34-1 (2016), p. 23 (discussing Swedish case law and related commentary); see also here (discussing case law in EU member state courts related to arbitration and follow-on damages actions). function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

LIDW 2019: Energy Disputes in a Disrupted World: Leveraging Our Expertise for What Lies Ahead, 9 May 2019

Kluwer Arbitration Blog - Fri, 2019-05-17 23:00

Samuel Pape and Duncan Graves

The session on Energy Disputes of the LIDW 2019, hosted by Latham & Watkins and chaired by Sophie Lamb QC and Philip Clifford QC, took place on 9 May 2019 at Painters’ Hall.  The session was divided into two panels.

The first panel, titled ‘A commercial landscape in transition – lessons from the past as we prepare for the future’ was moderated by Philip Clifford QC and featured Sean Wilken QC (39 Essex Chambers), Veronique Buehrlen QC (Keating Chambers), John Judge (39 Essex Chambers), John McCaughran QC (One Essex Court), Barbara Benzoni (Eni S.p.A.), David Streatfeild-James QC (Atkin Chambers), Jostein Kristensen (Oxera Consulting LLP), Kieron O’Callaghan (Hogan Lovells), and Colin Johnson (Charles River Associates).

Philip Clifford opened the panel by observing that significant global trends, including the effect of climate change and campaigns for decarbonisation, in the face of increased demand for energy, were having a turbulent effect on the market, increasing the likelihood of disputes.  The panel addressed subject matters from across the energy industry, setting out key developments and how the legal market is reacting to meet these changes.

Sean Wilken addressed border issues, investment loss and sanctions as the main geo-political risks affecting the oil and gas industry, and also as key drivers of disputes.  In particular, he stressed the need for commercial parties to take potential disputes arising out geo-political risks into account when drafting their Joint Operating Agreements, to ensure that, for instance, their force majeure clause is sufficiently flexible to protect against licensing areas being held to fall outside the sovereign territory of the granting state.

Veronique Buehrlen focused on the Court of Appeal’s recent decision in Spirit Energy Resources v Marathon Oil, highlighting how it provides important guidance on the key principles underpinning Joint Operating Agreements and the interpretation of its terms, in particular the obligations between the operator and non-operators.  Further, she stressed that although the impending decommissioning of production areas in the North Sea had not yet been felt in the disputes market, this was a likely growth area in the coming decade.

John Judge summarised developments in LG pricing clauses and disputes arising from them.  He noted that clauses often gave wide discretion to tribunals and therefore there was often broad scope for parties to introduce large volumes of external evidence; one option being used to address this and encourage cost-efficient settlement is the best last offer, where each party makes an offer on pricing and the arbitrator is required to select one of them.  Barbara Benzoni, giving an important commercial perspective, noted both that the correct pricing method was often dependent on the relevant geographical market, and that although other mechanisms were increasingly being considered, she still approached them conservatively, with arbitration remaining the ‘least worst’ option for dispute resolution.  Barbara also observed that in her experience institutional arbitration was preferable as it gave clearer structure to a dispute.

John McCaughran applied the developing notion of good faith in English law to contracts central to the oil and gas industry.  Although there have been some judicial attempts to introduce a wider notion of good faith, it remains limited to relational contracts and contracts where a discretion is conferred upon one party to make a decision on behalf of another.  While it was unlikely that a duty of good faith would be found in long term gas supply contracts, it was far more likely in Joint Operating Agreements. Importantly, even where a duty of good faith was found, it should not be used a platform to imply additional specific positive obligations, but instead set a standard for the obligations identified explicitly within the contract.

Jostein Kristensen and David Streatfeild-James provided insight into the economic, legal, and geo-political trends affecting the renewables market. A key area of focus was subsidies and regulations, with both speakers encouraging authorities to consider not only competition between renewables and existing fuels, but also the effect of subsidies on future innovation and energy sources.  The panel stressed that it was important to have well-research and long-term policy which matched renewables’ long asset life in order to reduce risk and therefore increase capital expenditure.  Further, with innovations in technology, careful legal drafting was required and reliance on precedents may create significant risk.

The panel closed with a discussion on damages presented by Keiron O’Callaghan and Colin Johnson. They highlighted the need for experts, counsel, and tribunals to work harder to understand valuation methods and quantum from the outset of disputes in order to understand the core issues and focus resources accordingly.  In particular, it was important that experts presented the assumptions underpinning their calculations to tribunals and where a dashboard system was in use, educate the tribunal on how to understand and operate the model. When used effectively, this method could improve the quality of decision-making on quantum, but without such guidance there was a risk that it only contributed further to a lack of transparency in how the final value for a damages award was reached.

The second panel, titled ‘The environment and society – activism, pollution / remediation and disputes concerning climate change’, was moderated by Sophie Lamb QC and featured Mr Justice Fraser (Judge in Charge of the Technology and Construction Court), Serena Cheng QC (Atkin Chambers), Rachel Lidgate (Herbert Smith Freehills), Alice Garton (Client Earth) and Julianne Hughes-Jennett (Hogan Lovells).

Mr Justice Fraser opened the discussion with a spotlight on London as the premier venue in the world for resolving disputes.  He highlighted the international nature of the High Court’s caseload and noted the depth and breadth of the TCC’s specialisms, spanning all types of energy work including in specialist areas such as windfarm, FPSO, pipeline and environmental disputes.  He noted that the TCC is also one of only two courts empowered to hear arbitration claims under the Arbitration Act, and its judges are all Queen’s Bench Division (QBD) Judges, meaning that they also sit in criminal cases including, in some cases, terrorism trials.  He explained that the major difference between the TCC and arbitration is party autonomy: TCC judges must manage cases in accordance with the CPR’s overriding objectives, which means always trying to find the answer as cost effectively and expeditiously as possible notwithstanding that the parties’ may have other views on the appropriate procedure.

Serena Cheng and Rachel Lidgate focused on the international element of the TCC’s environmental caseload, noting that the Supreme Court’s recent decision in Lungowe v Vedanta opened the door to claims concerning foreign environmental damage by upholding Coulson J’s decision in the TCC finding jurisdiction over claims relating to environmental pollution in Zambia.  In that case, the Supreme Court held that environmental harm can properly be tried in England regardless of where the environmental damage occurs, provided the relevant jurisdictional gateway is satisfied.  The decision arguably creates a tension between applying group-wide policies and training schemes that could give rise to a duty of care for the actions of overseas subsidiaries, and the duties of listed multinationals to have global systems of controls and risk management.

Alice Garton presented on ClientEarth’s approach to fighting climate change through engagement with corporate actors, referrals to regulators and strategic litigation.  ClientEarth is Europe’s only public interest law firm, whose aim is to use the law as a strategic tool for the benefit of the environment.   Its model came out of the US Civil Rights Movement, and it is currently working to ensure that climate change is integrated into decision-making and for capital expenditure and capital application to align with the Paris Goals.  ClientEarth does so by targeting companies on both the supply and demand side as well as financial institutions and their professional advisors, and leveraging corporate and financial laws to ensure that climate change is addressed appropriately.

Julianne Hughes-Jennett discussed the challenges and opportunities of arbitration as a mechanism for resolving climate change and business and human rights related disputes.  Arbitration is a consensual process, which renders its use by certain categories of litigants (such as groups of victims alleging violations against a company) limited to instances in which all parties agree to arbitrate on an ad hoc basis.  The applicable laws in such disputes are also an issue, as the UNGPs are soft laws and, traditionally, hard laws in this area apply only as against states.  These types of disputes also inevitably give rise to issues concerning transparency, time sensitivity, funding, safeguards to protect the procedural rights of vulnerable individuals, and the need to guard against spurious claims.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

A Critique of EU’s Double Standards on Dispute Resolution Mechanisms in Bilateral Investment Treaties and Double Taxation Treaties

Kluwer Arbitration Blog - Fri, 2019-05-17 22:15

Danilo Ruggero Di Bella

This post aims at highlighting an inconsistency in the law of the European Union (“EU”) in regards to the comparison of the treatment of Bilateral Investment Treaties (“BITs”) and Double Taxation Treaties (“DTTs”) concluded between EU Member States. The inconsistency lies in the diametrically different approaches adopted by EU law and its institutions (“EU Institutions”) towards the dispute resolution mechanisms contained in these international instruments.

Relationship Between BITs and DTTs

BITs and DTTs supplement each other towards the common goal of promotion of cross-border investments. Just as it would be unthinkable to invest in a foreign country at the risk of being taxed twice on the same by both the Residence State as well as the Source State, it is equally undesirable to invest in a foreign country at the risk of bearing any political risk inherent to such operation.

The two forms of arbitration provided under the BITs and DTTs differ formally in that BITs provide for Investor-State arbitrations as well as State-to-State arbitration, whereas DTTs enable arbitration prompted by the taxpayer between the two tax authorities of the Contracting Parties laying a claim to tax the same source of profit. However, BITs and DTTs share similar traits and numbers (with approximately three thousand DTTs around the world and as many BITs). Both represent a limitation on state sovereignty and make such limitation effective by including an arbitration agreement. Traditional state regulatory rights concerning the levy of taxes and what treatment to accord to aliens and their possessions are constrained by these instruments for the greater good of fostering foreign investment and improving global economy.

While the efficacy of the impact of these instruments on increase of cross-border investments per se may be disputed, what seems settled is that without DTTs there would be more tax evasion (presumably, justified by the perception of being unfairly taxed twice) and without BITs there would be more diplomatic protection cases revamping national protectionism all over the world (by way of comparison, it suffices to look at how international trade disputes are often ineffectively handled sometime with long-term consequences on global growth). It is also uncontested that both instruments have been playing a major role in harmonizing and strengthening the rule of law by weaving a sort of international administrative law.

BITs are the products of bilateral negotiations where the Model BIT of each Party may blend with the other Party’s Model, hence, each BIT may present unique provisions. DTTs are, instead, more standardized since their starting point is always the Model provided by the Organisation for Economic Co-operation and Development (“OECD”).

The interaction between BITs and DTTs may vary considerably depending on the phrasing of their single provisions. Their reciprocal interplay may range from having an overlapping scope to a mutually exclusive area of application. In the former case, the BIT will typically be silent on any tax-measures or will not refer specifically to any parallel DTT in force between the Parties. In the latter instance, the BIT will not cover taxation either by virtue of an explicit hierarchy of sources placing the DTT higher than the BIT itself or by means of an express taxation carve-out provision.

That being said, in both instances, investment arbitration tribunals have found that where tax-measures have expropriatory effects, the provisions of the BIT can still find application, regardless of whether the relevant BIT and DTT were simultaneously applicable or not.

Relationship Between BITs and EU law

Even though externally, the EU is entering into international investment agreements with Non-Member States, after having gained this competence under the Treaty of Lisbon, 2007; internally, the EU is a firm opponent of BITs concluded between its Member States (intra-EU BITs), and especially of its dispute resolution mechanism, viz. arbitration. As manifested by the Court of Justice of the European Union (CJEU) in its preliminary ruling on Achmea on 6 March 2018, intra-EU investment arbitrations may undermine the full effectiveness of the autonomy of EU law, guaranteed by Articles 267 and 344 of the TFEU. Thus, the arbitration agreements contained in intra-EU BITs are now to be considered inapplicable. The threat of a non-uniform application of EU law stems from the fact that an arbitral tribunal constituted pursuant to an intra-EU BIT is not integrated within the judicial system of the EU. Accordingly, such a tribunal cannot refer the case to the CJEU by way of a preliminary ruling to ask for an interpretation of any EU law provision, should the dispute relate to EU law.

On 15 January 2019, several EU Member States have echoed the CJEU’s stance in a joint declaration, affirming the primacy of EU law over intra-EU BITs, the invalidity of the underlying arbitration agreements contained in those instruments, and the lack of jurisdiction of any tribunal established pursuant to those agreements.

Relationship Between DTTs and EU law

To maintain that the EU Institutions are doing everything in their power to prevent intra-EU BITs and related investment arbitrations would be as correct as affirming that EU Institutions are doing everything in their power to promote intra-EU DTTs (each EU Member State has a bilateral DTT with each EU Member State) and the related tax arbitrations.

Since 1976, the Commission of the European Communities (‘the Commission’) has been advocating for the introduction of an effective procedure to resolve double taxation disputes on transfer-pricing. Such disputes arise out of an incorrect upward recalculation by the tax-authority of one EU Member State of the profits stemming from the transaction between associated companies established in different Member States. If the tax-authority of the Member State where the other associated company is registered does not allow for the corresponding downward adjustment of the profits, then international double taxation occurs.

The Commission’s effort resulted into the adoption in 1990 of the “European Arbitration Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises”, which entered into force in 1995 and is automatically renewed every five years. The effective procedure the Commission came up with was that of a mandatory arbitration between tax-authorities upon the request of the company affected by the upward misadjustment of the transfer price. In this arbitration the affected double-taxed company can challenge the tax-measure by invoking  arbitration between the tax-authorities of the two different Member States that were unable to reach an agreement on the elimination of international double taxation.

Interestingly, the European Arbitration Convention was adopted as a multilateral Convention (and not as an EU instrument), despite the Commission’s initial intentions to propose the text as a Council Directive. Reportedly, the Member States preferred the form of an inter-governmental convention because of their collective hesitation to yield part of their fiscal sovereignty. Being a multilateral convention, the CJEU is not competent to interpret the European Arbitration Convention, nor supervise its procedure, and the Commission cannot commence infringement procedures before the CJEU against any Member State not applying the arbitration procedure or not complying with the decisions rendered thereunder.

On 10 October 2017, the EU Council adopted the Directive (EU) 2017/1852 on tax dispute resolution mechanisms in the European Union to improve the procedural framework of the European Arbitration Convention and expand its scope. By issuing a directive instead of amending the original text of the European Arbitration Convention, this “cunning” move has allowed the EU Commission to bring tax treaty disputes (today around 900 cases with a total value amounting to €10.5 billion) under the EU hat and competence. The dispute mechanism of choice still remains arbitration. The improved arbitration procedure will have clear and enforceable time-limits, cover all tax disputes (not just transfer-pricing) deriving from intra-EU DTTs, and count on the supporting role of Member State courts to supervise and unblock the arbitration (should a tax authority not comply with it).

Surprisingly (or not), the rationale used to justify (and praise) this dispute resolution mechanism (which will become operative as of 1 July 2019) are the same as of any treaty-based arbitration. It intends to ensure that nationals and companies may resolve disputes related to the interpretation of an international treaty (in this case a DTT) more swiftly and effectively in order to be accorded a fair tax treatment and avoid legal uncertainty.

EU’s Inconsistent Take on Arbitration Agreements in Intra-EU BITs in Light of Intra-EU DTTs

Arbitrations under intra-EU BITs as well as intra-EU DTTs may equally relate to the interpretation of the underlying bilateral treaty and of EU law. Indeed, every single Member State legislation on taxation is pervaded by EU tax law (one need only think of the VAT Regulation).

Both arbitral tribunals constituted under intra-EU BITs and intra-EU DTTs are not part of the judicial system of the respective member states of the EU, hence, incapable of referring the case to the CJEU for a uniform interpretation of the EU law. So, why should intra-EU BIT-based arbitration agreements be considered incompatible with EU law, while intra-EU DTT-based arbitration agreements are not only enforceable, but also encouraged by the EU Commission? The rationale expounded in the Achmea judgment is applicable to intra-EU DTT-based arbitration agreements as well; hence, aren’t both type of arbitrations capable of undermining the supremacy of EU law?

Taking into account the similar objectives of intra-EU BITs and intra-EU DTTs, i.e. the promotion of cross-border investments, their similar dispute resolution mechanism (viz. arbitration), and the potentially similar effects of this mechanism on the full effectiveness of EU law, the opposite stance in regards to the compatibility of arbitration agreements with EU law taken by the EU Institutions under those two types of treaties is difficult to understand and justify.


More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Finland Takes Important Steps to Increase its Attractiveness as a Venue for International Arbitration: Launch of the Revision Process of the Finnish Arbitration Act Announced

Kluwer Arbitration Blog - Fri, 2019-05-17 05:29

Heidi Merikalla-Teir

The Finnish Minister of Justice announced at the end of January this year that the revision process of the 1992 Finnish Arbitration Act would be launched during the current government term. Finnish business and arbitration communities greatly welcomed the statement, as it mirrors their long-time efforts towards this goal. The Ministry of Justice has begun an internal project and will appoint an external group to monitor the work of the Ministry.

It was December 2016 when the Finland Chamber of Commerce submitted a proposal to the Finnish Ministry of Justice for the reform of the Finnish Arbitration Act (“Act”). The Finland Chamber of Commerce requested an amendment of the Act’s obsolete provisions and deficiencies.  The goal of such revision is an arbitration act fully consistent with current internationally-recognized standards embedded in the UNCITRAL Model Law on International Commercial Arbitration (1985; with amendments adopted in 2006; “UNCITRAL Model Law”).

Enacted in 1992, the Act has been in force almost unchanged for over 25 years. Based on the 1985 version of the UNCITRAL Model Law, the Act, nevertheless, differs in some respects from it. The Finland Chamber of Commerce’s reform proposal, therefore, covers, amongst other things, the following divergences:

  • The Act’s strict written form requirement for a valid arbitration agreement: The Act specifies that an arbitration agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telegrams or telexes or other such documents between the parties; further, it states that an arbitration agreement is in writing if an agreement made in an aforementioned manner refers to a document containing an arbitration clause. The requirement is not only outdated in the light of modern means of communication but also problematic in practice. It excludes the formation of a valid arbitration agreement, for example, where, during negotiations, one of the parties referred to the arbitration clause contained in the general terms and conditions and the other party has accepted it only orally. To overcome these problems, the Finland Chamber of Commerce proposed to derogate from the written form requirement and to make the provision correspond to Article 7 of the UNCITRAL Model Law.
  • The possibility to have a final award declared null and void: The current provisions of the Act allow the unsuccessful party in the arbitration to bring an action for annulment of the arbitration award at any time, without any time limits. The absence of a time limit for filing an action for annulment of the arbitral award is seen as undermining the finality of arbitral awards. Therefore, the Finland Chamber of Commerce suggested deleting the provisions on annulment of awards.
  • The setting aside procedure is inefficient: The time limit for instituting setting aside proceedings based on the grounds set forth in the Act—which are not completely in line with the UNCITRAL Model Law—is three (3) months of the date on which the party filing the action received a copy of the award. The action must be brought before the District Court in whose jurisdiction the arbitral award was made. Setting aside proceedings may take a long time if the decision is appealed and goes through all court instances. The Finland Chamber of Commerce suggested that the grounds for setting aside of awards be fully aligned with the UNCITRAL Model Law, that the time limit for instituting setting aside proceedings be reduced to two months, and that there be a one-instance appeal.
  • The lack of provisions on the granting of interim measures by the arbitral tribunal: In the absence of these provisions, it is unclear whether arbitrators have the right to issue any interim measures in arbitration in Finland. For the same reason, in Finland, arbitrators have no jurisdiction to issue interim measures that are enforceable, if necessary, on the party against whom the measures are sought. The fact that Finnish courts have jurisdiction to issue interim measures also in arbitration proceedings and without prejudice to an arbitration agreement cannot be regarded as sufficient for national and international parties who, naturally, expect to obtain effective interim measures from an arbitral tribunal. While the Act does not contain provisions on arbitrator-ordered interim measures, the Arbitration Rules and the Rules for Expedited Arbitration of the Arbitration Institute of the Finland Chamber of Commerce (FAI), in force as of 1 June 2013, provide specific regulations regarding interim measures that may be ordered by the arbitral tribunal at the request of a party.

Further to the above, the Act fails to explicitly address certain principles of due process, such as the power of arbitrators to decide on their own jurisdiction; the arbitrators’ duty to treat the parties equally; and the requirement that the arbitrators give reasons for the arbitration award, although all these principles are also applicable in Finnish arbitration. Enacting statutory provisions compliant with the UNCITRAL Model Law would eliminate any such inconsistencies.

Against this background and considering that, over the lifetime of the Act, commercial and business contractual relations and needs have indeed become significantly more diversified and international, there is a need to revise the Act and ascertain that today’s international practices are fully reflected in its provisions.

To support its proposal for the reform of the Act, in January 2018, the Finland Chamber of Commerce and the FAI held a seminar and discussion on the “Need for Revisions of the Finnish Arbitration Act”. The event focused on key problems arising from the Act and addressed topics, such as why Finland should adopt the UNCITRAL Model Law and why the Swedish example cannot be applied to Finland in order to make arbitration in Finland more attractive for international cases. The seminar report and the presentations of the distinguished speakers can be accessed here.

Following the proposal and the well-attended seminar, more than 200 lawyers and business representatives signed a petition for the reform of the Act, which was handed over by the Finland Chamber of Commerce to the Minister of Justice in spring 2018.

In September 2018, the Ministry of Justice held its own seminar on the need for reform of the Act, after which it called a public hearing on the matter. During the public hearing, nearly 40 written statements were submitted to the Ministry of Justice, showing overwhelming support for the revision of the Act.

Finally, after long-time efforts of the Finnish business and arbitration communities, the Ministry of Justice has found that there is a need for a reform of the Act. The long-awaited news came at the Annual Conference of the Finnish Bar Association at the end of January, where the Finnish Minister of Justice announced that the revision process would be launched during the current government term. In his speech, the Minister pronounced the need for modern legislation, stating that

“the functioning of the justice system is one of the most important pillars of Finland’s economic success. Trust in dispute resolution and in the enforcement of rights is becoming an increasingly important factor for business and investment. Arbitration provides businesses with a competitive way to resolve disputes. We have noticed room for improvement in the current Act; hence, we will launch a reform of the arbitration legislation.”

Currently, the Ministry of Justice is setting up a Monitoring Group for the law reform whose term will end on 31 December 2020. The Finland Chamber of Commerce has nominated three members to this committee. The Finnish Bar Association and other stakeholders have been given the right to nominate members to the Committee as well.

The Finland Chamber of Commerce is confident that the reform will have a significative positive impact for Finland and hopes that, as a result of it, Finland will have an arbitration act that meets international standards reflected in the UNCITRAL Model Law. In this way, Finland will meet all the conditions to build systematically towards international recognition in the field of international dispute resolution, increasingly emerging as an important seat for dispute resolution. Finland’s geographical location, low corruption, and reputation as an impartial country, together with a well-functioning regulatory and operational environment, are factors that set a good basis to build upon.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Arbitrating in CEE & CIS: Transparency, Accountability and Choice of Arbitrators

Kluwer Arbitration Blog - Thu, 2019-05-16 03:00

Ioana Knoll-Tudor

The second edition of the Jeantet “Arbitrating in CEE and CIS” roundtable was held during the Paris Arbitration Week on Thursday 4 April 2019 at the Jeantet offices. The topic of this year’s edition was “Transparency, Accountability and Choice of Arbitrators”.

An increasing demand of international arbitration users for more transparency, predictability of decisions and diversity in the appointments of arbitrators is met by arbitral institutions with a number of initiatives aimed at meeting the expectations of the users, broadening the spectrum of available arbitrators and achieving more diversity, providing users with more available information when appointing arbitrators, offering more transparency and predictability by publishing decisions, etc. The second edition of the Jeantet “Arbitrating in CEE and CIS” roundtable thus aimed at providing the perspective of some of the most active arbitral institutions in the CEE and CIS region as well as the feedback of the Arbitrator Intelligence on its CEE Campaign. The speakers this year were: Ivana Blagojević (Deputy Counsel, ICC), Beka Injia (Secretary General, Georgian International Arbitration Centre [GIAC]), Anja Ipp (Legal Counsel, SCC), Catherine A. Rogers (Founder of Arbitrator Intelligence) and Rinaldo Sali (Vice-Director General, Milan Chamber of Arbitration [CAM]). The roundtable was once again moderated by Ioana Knoll-Tudor (Jeantet).

The issues discussed are summarized below.

  1. Appointment of arbitrators

 1.1   Arbitrators appointed by the arbitral institutions

In the absence of an agreement between the parties or when appointment by the institution is mandatory, arbitral institutions become the appointing authority. In 2018, the CAM appointed arbitrators in 42% of its cases and the GIAC in 62% of the cases. In 2017, 26% of the ICC arbitrators were appointed by the Court, whether directly or upon a proposal from National Committees.1)ICC Dispute Resolution Bulletin 2018, Issue 2, ICC Practice and Procedure, p. 56. jQuery("#footnote_plugin_tooltip_6174_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6174_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Arbitral institutions apply various formal and substantial criteria when appointing arbitrators. The criteria relate to the arbitrators themselves (such as their nationality, age and qualifications, availability and ability to conduct arbitration proceedings, previous experiences as co-arbitrators, chairman, sole arbitrator, counsel etc.)2)See Article 15(5) of the 2019 CAM Arbitration Rules, Article 17(7) of the 2017 GIAC Arbitration Rules, Article 13(1) of the 2017 ICC Arbitration Rules, and Article 17(7) of the 2017 SCC Arbitration Rules. jQuery("#footnote_plugin_tooltip_6174_2").tooltip({ tip: "#footnote_plugin_tooltip_text_6174_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); but also to the case at hand (such as the applicable law, seat and language of the arbitration, subject matter of the dispute, nature and circumstances of the dispute, procedural issues to be covered by the arbitrators, the amount in dispute). Despite the efforts of arbitral institutions to find arbitrators specialized in the industries and subject matters involved in the respective case as well as to promote arbitrators from the relevant geographic zone, the GIAC noted that there is a lack of arbitrators from the CEE and CIS region.

The availability and time-efficiency of arbitrators constitute another important criterion. The SCC Arbitration Rules, for example, impose shorter time limits than other institutions to render an award. In this sense, the SCC Board sometimes prefers to appoint less-known arbitrators, who can proceed swiftly with the case, instead of arbitrators with overburdened schedules. The ICC also keeps records of the arbitrators’ time-management through regular reports addressed to the Court by the Secretariat, and which include notes on their handling of time (e.g., to convene a Case Management Conference, to establish the Terms of Reference, to render a final award, to notify the parties throughout the procedure, etc.). The CAM, for its part, emphasized the importance of having a member of the Secretariat participating at the hearings and reporting the efficiency of each arbitrator to the CAM Arbitral Council.

The procedure of disclosure ensures that each arbitrator considered for appointment is independent and impartial. As the pool of arbitrators from the CEE and CIS region is rather limited and in some cases arbitrators with very specific qualifications are necessary (i.e., need for an arbitrator speaking a particular language), this procedure may sometimes be more flexible than in other cases.  Nevertheless, the agreement of the parties is always required prior to any appointment.

Finally, the issue of administrative secretaries has been raised by the audience, since they can be appointed by an arbitrator to assist with the administration of a case but often, neither the arbitral institutions nor the parties, have a say in such appointment. The ICC has adopted a very proactive approach in this respect. While it acknowledges that administrative secretaries may be a real added-value in large cases, in small cases, the ICC contacts the arbitrator to enquire about the exact role and time-commitment of the administrative secretary, and ensure that the costs related to such appointment are borne neither by the ICC nor by the parties.

1.2   Party-appointed arbitrators

The available information on arbitrators is scarce and parties must rely on their own network and resources to find such information. This lack of information was the starting point of the Arbitrator Intelligence (AI) project, which was launched with the aim of promoting more transparency and offering international arbitration users more information about arbitrators, prior to appointing them.

AI aims also at contributing to the appointment of more diverse arbitrators, both by the parties and by the arbitral institutions. Although arbitral institutions are actively encouraging diversity in their appointments, almost no parties from the CEE and CIS region appoint local arbitrators. Therefore, there is a reduced pool of appointed arbitrators originating from the CEE and CIS countries: only 6% of ICC arbitrators in 2017. By comparison, 54% of the ICC arbitrators are from North & Western Europe.

  1. Tools used for more transparency by arbitral institutions

 2.1   Publication of the names of the arbitrators

The approach of arbitral institutions to the publication of the names of the arbitrators is not unanimous. While the CAM, GIAC and the ICC (to some extent) publish the names of their arbitrators, the SCC chose not to.

Although it does not provide an official list of arbitrators, the CAM publishes since 2016 the names of all its arbitrators, as well as the composition of the tribunals and their appointing authorities. Consent of the parties is not required for such publications however arbitrators can opt out from having their names disclosed.

The ICC website lists arbitrators seating in ICC cases registered after 1st of January 2016. Such publication is subject to the parties’ consent and practice shows that arbitrators are very favorable to it, even asking the parties for their consent to appear on this list when in presence of a confidentiality agreement.

The SCC chose not to publish the names of its arbitrators but nevertheless holds an informal database of every person who was appointed as arbitrator or appeared as counsel in SCC proceedings.

2.2   Publication of the decisions on challenges of arbitrators

The SCC was the first major arbitral institution to publish summaries of arbitrator challenges decided by the SCC Board, beginning in 2005. It recently went a step further and, since 1 January 2018, provides reasoned decisions for all arbitrators’ challenges decided by the Board, unless the parties agree otherwise.

Upon request of any party, the ICC Court may also communicate the reasons for a decision on the challenge of an arbitrator or for a decision to initiate replacement proceedings. This possibility has been specifically mentioned in the newest version of the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration which entered into force on January 1st, 2019 (“2019 ICC Note”).  Between 2014 and 2018, the Court communicated reasons to parties in 14 cases, out of which 7 cases only in 2017.

The CAM also publishes every year on its website between 15 and 20 relevant summaries of decision for challenges, in an anonymized format.

2.3 Publication of awards

Although not provided in the ICC Arbitration Rules, the publication of awards was mentioned in the 2019 version of the 2019 ICC Note in a rather novel manner:  “[p]arties and arbitrators in ICC arbitrations accept that ICC awards made as from 1 January 2019 may be published […] no less than two years after [its notification to the parties and arbitrators by the Secretariat]”.3)ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (1 January 2019), paras. 41-42. jQuery("#footnote_plugin_tooltip_6174_3").tooltip({ tip: "#footnote_plugin_tooltip_text_6174_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Parties are free (i) to object to the publication, (ii) to require that the award is in all or in part anonymised or pseudonymised and (iii) to agree to a longer or shorter time period for publication.4)ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (1 January 2019), paras. 42-43. jQuery("#footnote_plugin_tooltip_6174_4").tooltip({ tip: "#footnote_plugin_tooltip_text_6174_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, this publication operates a major shift from an “opt-in” mechanism to an “opt out” one.

The systematic publication of awards is not on the agenda of the SCC in the near future. The SCC underlines confidentiality as one of the most important features sought by its users. The SCC however translates and publishes all Swedish courts’ decisions relating to arbitration (which often include the corresponding arbitral awards as appendices).

Finally, it shall be noted that the CAM drafted a series of Guidelines for the anonymous publication of arbitral awards.


The demand for more transparency, more predictability and more diversity in international arbitration is met by arbitral institutions with several initiatives such as publication of the names of arbitrators or of decisions and arbitral awards. It also gives rise to private initiatives such as AI.

While all these measures allow the users to have more information about arbitral proceedings and arbitrators and therefore to make more informed decisions, the respect of confidentiality must be the threshold shaping these initiatives. The different approaches of arbitral institutions towards confidentiality will certainly create various degrees of transparency depending on each institution. Parties willing to benefit from more confidentiality will have to include the appropriate clauses in their contracts or ensure that they raise the red flag at the end of their proceedings.

As the AI project is concerned, it will help users gather more information about potential candidates as arbitrators and therefore enlarge the arbitrators pool. It will also certainly enhance the performance and efficiency of the currently appointed arbitrators.


References   [ + ]

1. ↑ ICC Dispute Resolution Bulletin 2018, Issue 2, ICC Practice and Procedure, p. 56. 2. ↑ See Article 15(5) of the 2019 CAM Arbitration Rules, Article 17(7) of the 2017 GIAC Arbitration Rules, Article 13(1) of the 2017 ICC Arbitration Rules, and Article 17(7) of the 2017 SCC Arbitration Rules. 3. ↑ ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (1 January 2019), paras. 41-42. 4. ↑ ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (1 January 2019), paras. 42-43. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Choice of Law and Arbitration in International Contracts: A Roundtable with Stakeholders

Kluwer Arbitration Blog - Thu, 2019-05-16 00:41

Ana Coimbra Trigo

Whatever the nature of the transaction, in international business there is one prime question fundamental to the validity, interpretation, effectiveness and enforceability of the contract: what law governs?” – Professor Julian Lew QC, Preface, Rethinking Choice of Law in Cross-Border Sales, Gustavo Moser (Eleven International Publishing, 2018).

On 15 April 2019, a sunny Monday in Vienna, Austria, a roundtable composed of Luca Castellani, Louise Barrington, Prof. Ingeborg Schwenzer, Patricia Shaughnessy, Florian Mohs, Sabrina Strassburger, and Michael McIlwrath (by video), sat down to address the choice of governing law in international contracts. With the backdrop of Gustavo Moser’s book Rethinking Choice of Law in Cross-Border Sales, and with him acting as the moderator, the esteemed speakers addressed three issues: (i) choice of law and Brexit, (ii) the drafting of choice of law clauses, and (iii) CISG status and prospects.

Gustavo Moser started off by reminding everyone that emotions pervade our decisions and that perceptions influence our choices: human beings make around 2,000 – 10,000 decisions a day. We frequently take similar decisions from the past as a ‘proxy’ and arrive at the same decision to (what we believe to be) a similar ‘set of facts’. The trouble with this, Gustavo continued, is that there are ‘glitches’ in our thinking, of which individuals may not be fully aware of, let alone know how to quantify its effects (e.g. status quo bias). A good example of this arises in the choice of governing contract law.


Topic 1: Choice of Law and Brexit

Michael McIlwrath initiated the discussion. Having gone through ICC data prior to the Brexit years, Michael found that London had not been increasingly selected as a seat of arbitration between 2008 and 2015, whereas non-traditional seats were conversely growing, a trend compatible with the parties choosing to have disputes closer to home. Michael highlighted that London has benefited from the reliability and predictability of English courts, and the wide adoption of English law is because it is considered contract-friendly. In his perspective, the significance of English law is neither impacted by Brexit, nor from the enforceability in the EU of arbitral awards rendered in the UK, potentially perceived in the future as less advantageous. Michael concluded that Brexit might possibly affect the choice of English arbitrators, London’s convenience as a seat and the practice of international arbitration, depending on the future conditions imposed on free movement of professionals and whether certain industries go abroad. Michael proposed that parties should be asking whether any of the laws chosen is better for their contracts. Citing a recent survey that Gustavo shared (Practical Law Survey 2018 on the Impact of Brexit on dispute resolution clauses), Michael added that whereas previously approximately 25% of companies intended to conduct a review of their choice of law or jurisdiction clauses, the combined number in the revised survey was 78%.

Prof. Ingeborg Schwenzer expressed her concern that the uncertainty potentially surrounding enforcement in Europe of judgements rendered in the UK might drive parties away from London. Prof. Schwenzer and Patricia Shaughnessy discussed the impact of EU law incorporated into English law, be it consumer law or other areas of law, regulation of distribution contracts, franchise relationships, and even competition law, which would no longer be subject to any developments binding on the EU (including ECJ judgements). Louise Barrington shared her experience of a similar “frozen law” situation in Hong Kong, where English law continued in place after 1997, but not bound by subsequent developments of this jurisdiction, thus suffering a detrimental delay in legal updates and some commercial uncertainty. Louise agreed that choice of forum, more than choice of law, might be impacted by Brexit.

Florian Mohs was of the same position, and stated that both Rome I and II Regulations would be restated in English law. Regarding choice of court, he shared that, in an attempt to overcome the mentioned voluntary exclusion from the freedom of movement of judgements, the UK had acceded to the Hague Convention on Choice of Court Agreements (2005), conditioned upon exiting the EU. Moreover, Florian interestingly added that a “reverse home bias” effect could also take place, whereby potential creditors based in the UK (such as financial institutions) could select the forum of the potential debtors to litigate/arbitrate when in the EU.

Gustavo then cited the LCIA Casework Report 2018, informing that c. 78% of the new cases arose from contracts concluded between 2007 and 2016, and that in c. 75% of these, English law was chosen. Sabrina Strassburger added that no instructions were conferred to her regarding changes in choices of law contained in the contracts she supervised as in-house counsel. In this respect, Gustavo mentioned that this could be due to the status quo bias, since at the end of the day, a review of the clauses does not necessarily equate to change. Gustavo’s recent Kluwer posts on this matter are available here, here and here.

Finally, Luca Castellani argued that, from a global perspective, enforcement of judgements was more challenging than enforcement of arbitral awards, and encouraged UK lawyers to consider uniform law as an alternative for the clients’ benefit.


Topic 2: Drafting of Choice of Law Clauses

The discussion started with a comment from Michael saying that typically parties focus on their own familiarity with a certain law as the determining factor to select it. Sabrina, in response to Gustavo’s enquiry as to how scientific the drafting process is, added that, in her experience, there was no scientific approach to choice of law clauses (like a checklist approach, mentioned by Gustavo), and was dependent on variables such as the dispute resolution mechanism selected or the industry specialization of courts in a given jurisdiction (say in IP law). Furthermore, these clauses were typically addressed last, after weeks of long and demanding negotiations, and often neglected.

Louise warned that using choice of law as a bargaining tool in contract negotiations should be avoided as it could have dangerous effects and could give rise to lawyers’ professional liability. Luca added that the CISG was meant to be used when parties were not in a position to choose the applicable law, such as when one is contractually weaker or lacks legal advice.

Prof. Schwenzer added that in her experience, parties may, at times, chose laws to apply to their contracts without having an understanding of the respective consequences. Prof. Schwenzer gave the example of parties choosing Swiss law, for its perceived neutrality, when, in her opinion, challenges could arise from its conception in an archaic context, giving rise to different scholarly interpretations, rendering it unreliable. She provided another example, where UK lawyers, drafting lengthy contracts, would choose Swiss law. Consequently, there would be a discrepancy in regulation (later echoed by Patricia in regards to the common law four corner rule and Scandinavian practice of relying on the applicable legal framework), as well as problems with contract interpretation, since English terms would have to be interpreted under Swiss law. Florian replied that Swiss law conversely had other advantages, such as giving great effect to freedom of contract, with little mandatory requirements, less influenced by EU law, and predictable in its application. Patricia gave an example of parties choosing a law to a long-term contract without knowing if this law provided the possibility of limiting liability and to what extent, or if under it moral damages were compensable, rather merely considering the alleged reputability of a legal system.

Gustavo mentioned the results of two interviews conducted with multinational companies’ counsel on this issue, from which he concluded that, in general, the choice of law and choice of court clauses took into account several strategic factors. Brexit had not impacted the internal policies of these multinational companies in this regard, and CISG and the Unidroit Principles, although considered a viable alternative, were not chosen because the counterparties had no experience with it.


Topic 3: CISG Status and Prospects

All speakers argued for increased awareness, capacity building and legal training regarding the CISG. Louise gave the example of Canada, a contracting state to the CISG, where lack of awareness of this convention led to entire proceedings being conducted under Canadian contract law without the due application of the convention. Prof. Schwenzer mentioned that education or bar training should include the CISG as a mandatory subject, and gave China as an example, where students study the CISG as well as Chinese contract law in their syllabus. Louise and Luca added that there are some recent developments concerning Hong Kong and its accession to the CISG, partially also because of the Vis East, and the generated familiarity with the convention.

Florian spoke of his experience with the CISG, considering it a great tool, and shared that most choice of law clauses he had worked with did not exclude its applicability. He added that a clear choice of law would save time and costs otherwise incurred in debating this issue. Sabrina then shared her experience with contracts in the tech industry and mentioned that her counterparties typically expressly excluded the CISG for the following reasons: to avoid conflicts with domestic law; to avoid the gaps in the CISG; and due to a perceived lack of publicly available CISG case law.

Prof. Schwenzer added that interpretation costs could be avoided, as the CISG was translated into multiple languages. Pushing for the re-evaluation of the convention was also Michael, in his video, highlighting that Article 39 of the CISG conferred great legal predictability to a seller (providing for a clear 2-year warranty period for latent defects in goods), that parties could always contract around.

The roundtable also discussed the most recent accession of a state to the CISG, North Korea. Patricia and Luca discussed the process incurred in the last years for this purpose, the relevant policy reasons and the historical bridge that the CISG represented between eastern and western countries.

Luca praised the CISG in its quantitative adoption. Demystifying perceptions with numbers, Luca mentioned that the CISG from 1980, with 90 contracting states, had a rate of adoption of 2,3 states per year, when, in comparison, the New York Convention, from 1958, with 159 contracting states, had a rate of adoption of 2,5 states per year. As pertains to its qualitative adoption, the CISG had seen 4 processes of domestic adoption reach an end but deposit of the instrument of ratification was still pending. (Shortly after the roundtable, one of the four States, Liechtenstein, deposited its instrument and became the 91st State party to the CISG).

As to CISG prospects, Luca added that, given the current situation regarding multilateral treaties, negotiating the CISG today would be a challenging endeavour. Thus, from a uniform law perspective, Luca informed that no new projects were under way, but addressed hypothetically interesting developments, such as a model law on sales of goods (unexpected) or greater influence of the CISG in domestic sales law (desirable).

All in all, it became clear that both emotion and perception can cloud parties’ decisions on choices of law and forum, and that these clauses should be discussed at the first available opportunity. The Vis Moot is a starting point for worldwide dissemination of knowledge both regarding international arbitration and international sales law, and this seminar was a great chance to further acknowledge how choices of law and forum operate in the field.


The post had contributions from Gustavo Moser.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

The State of Play in Costs and Damages in International Arbitration

Kluwer Arbitration Blog - Wed, 2019-05-15 02:29

Michael McIlwrath and Crina Baltag (Acting Editor)

“Developing arbitration into a matured system of adjudication that can fully compete with litigation may create tension with its promise of providing a quick, fair, and flexible way to resolve a dispute. … Some years ago, Johnny Veeder posed the question, “whose arbitration is this anyway?”  Perhaps the time has now come for the arbitration community, as the caretakers of arbitration, to ask “what do you want to be when you grow up?” (Patricia Shaughnessy, Pre-arbitral Urgent Relief: The New SCC Emergency Arbitrator Rules’, Journal of International Arbitration, (2010), Volume 27, Issue 4), 337 – 360, p. 358)


Patricia Shaughnessy’s influence over international arbitration looms large, having pioneered the LLM program at the University of Stockholm and mentored hundreds of practitioners now working around the world.  On the occasion of her 65th birthday, colleagues and former students of Shaughnessy contributed to a liber amicorum on costs and networking in international arbitration: Finance in International Arbitration (soon to be published by Wolters Kluwer). Adding to Shaughnessy’s surprise, the organizers of the Pre-Vis Moot Conference, Bucerius Law School, University of Vienna, NYU Law, and McGill University, invited the book’s contributors to present their perspectives in Vienna on 12 April 2019, and invited Patricia Shaughnessy to moderate one of the sessions.

After a welcome by Prof. Paul Oberhammer in his capacities as dean of the Vienna University Law School and as a co-organizer of the event and by Prof. Franco Ferrari, NYU Law, as co-organizer, the panelists provided their insights ranging from arbitrator practices, the state of soft law on cost awards and allocation, and relevant trends in third party funding and awards of damages for antitrust violation and expropriation.


The costs that arbitrators generate

Prof. Anthony Daimsis of the University of Ottawa and Robin Oldenstam of Mannheimer Swartling in Stockholm presented two areas for arbitrators to improve, in the legal reasoning applied in their awards and in keeping and reporting accurate time records.

Prof. Daimsis made a compelling case that arbitrators often engage in heuristics, or intellectual short-cuts in their legal reasoning, which can lead to increased costs. For example, Prof. Daimsis explained that separability is anything but a “presumption” (at least under the Model Law) and challenged those in the community who have suggested it is to re-read Article 16 of the Model Law. Arbitrators who begin with this false presumption layer on costs by forcing needless motions and submissions for and against this false argument.

Sharing the results of a global survey of seasoned arbitration practitioners, Robin Oldenstam reported that a majority stated they had participated in at least one case where they suspected that an arbitrator had not provided an accurate time record and appeared to be seeking compensation for more work than the arbitrator had actually performed. Noting that this is an area that to date has not been addressed, and emphasizing the issue concerned mere suspicions and only appeared to arise in a minority of cases, Oldenstam nevertheless questioned whether current methods to verify arbitrator compensation are sufficiently transparent. Since the services of an arbitrator are based on the utmost confidence, trust in all aspects of the arbitration process is important for the overall trust in the system. The introduction of more transparency and structure around arbitrator time reporting would offer an opportunity to further improve trust in the arbitration process.


Recoverability & allocation of costs

Steven Finizio of WilmerHale summarized and compared the different approaches to the allocation of costs in commercial and investment treaty arbitration. Finizio observed the lack of a universally-accepted approach. The predominant approach in commercial arbitration is “adjusted costs follow the event.” Finizio (and his co-author Ross Galvin) reviewed published awards in investment treaty cases since 2014 and reported that “bear your own costs” is no longer the most common approach in those cases, with a majority of tribunals in recent cases taking an “adjusted costs follow the event” approach, but a significant number continue to require parties to bear their own costs.

Dr. Crina Baltag of the University of Bedfordshire addressed the issue of recoverability of in-house counsel (and management and employees’) cost in international arbitration. Baltag explained that the issue must not be addressed in isolation, but by looking at the evolution of the role of in-house counsel in international arbitration. Baltag noted that the broad language of institutional rules has always given arbitrators ample discretion to allow for recovery of such costs, referring to reimbursement of “legal or other costs” or of “legal and other expenses. Surveying the available case law, including ICC cases and investment treaty arbitration cases, such as Oko Pankki v. Estonia, Baltag observed that arbitrators are often inclined to grant in-house costs nowadays in principle but that there appears to be no settled rule as to how these costs should be calculated. She noted that in-house counsel typically do not have time-management systems comparable to those of external counsel.

Providing the perspective of parties, Michael Mcilwrath of Baker Hughes GE in Florence, Italy, said the first thing business executives typically ask about an arbitration is not whether they will win or lose but how much it will cost. Unfortunately, in-house counsel struggle to provide a reliable answer because of cost issues under the control of tribunals, such as the rule of cost allocation they will adopt in their final award, or the standards they will apply in deciding an application for security for costs or an interim order of costs relating to discovery. Mcilwrath suggested corporate counsel would hold arbitration in higher regard if there were guidelines or standards that permitted them to estimate costs at the outset of a case.


Security for costs and third-party funding

Celeste E. Salinas Quero, legal counsel at ICSID, Washington, D.C., shared results from a review of the forty ICSID cases in which security for costs were requested. She pointed out that tribunals seek to balance a respondent’s risk of being unable to recover an award on costs against the risk of infringing on a claimant’s right to pursue a meritorious claim. Although there is no express provision in the ICSID Rules, tribunals have dealt with these requests as interim measures, moving from requiring a respondent to demonstrate a right in need of protection to a less restrictive hypothetical entitlement to recover costs. But tribunals still require a showing of exceptional circumstances, which respondents have tried to show by demonstrating the claimant has adopted a specific corporate structure to shield its assets, misrepresented its financial standing, abused the process, or has a history of defaulting. While some tribunals have held that certain circumstances, if cumulatively present, may warrant an order for security for costs, only two ICSID tribunals have granted such requests to date. ICSID tribunals have also consistently held that impecuniosity and third-party funding are not per se sufficient to grant security for costs.

John Fellas from Hughes Hubbard & Reed LLP in New York discussed whether a prevailing party who relied upon third party funding could recover the premium paid to a funder, and n whether the use of third-party funding is evidence of impecuniosity.  With respect to the first issue, Fellas discussed the English case of Essar Oilfield Services limited v. Norscot Rig Management Pvt Limited, where the English High Court declined to vacate a costs award in an ICC case that included the funder’s premium on the theory that both the English Arbitration Act and the ICC Rules permitted an arbitrator to award “other costs.”  Fellas noted that many other arbitration rules provide an arbitrator with that authority.  With respect to the second issue, Fellas suggested that arbitrators will often look to the use of funding as rebuttable evidence of impecuniosity on the part of funded party, and typically give that party the opportunity to prove its financial health.

Prof. Catherine Rogers of Penn State Law and Queen Mary, University of London, addressed third-party funding in international arbitration. Starting with a conference at which she and Patricia Shaughnessy spoke on the topic back in 2014, she traced developments in the field and identified the challenges ahead. In homage, she framed her remarks around Professor Shaughnessy’s hallmark ability—balancing integrity and pragmatism in establishing manageable responses to professional challenges.”


Developments in damages awards

Prof. Stefan Kröll, Bucerius Law School, discussed to what extent post-cartel damages claims are covered by arbitration clauses in contracts between members of the cartel and their customers. The decision of the CJEU in CDC-Akzo had held that such disputes are not covered by “normal” forum selection clauses under the Brussel-I Regulation, but refrained from addressing arbitration clauses. The case law is divided on the issue. While some courts have followed the approach of the CJEU also in relation to arbitration clauses others have adopted a broad interpretation according to which arbitration clauses also cover post-cartel damage claims irrespective of the fact that the customer did not foresee the participation of its supplier in the cartel. Kröll addressed the various objections raised against such a broad interpretation finding that the arguments in favor of such an interpretation may be weaker in the case of post-cartel damages than in other cases.

Prof. Petra Butler, Victoria University of Wellington, compared the damages regimes for unlawful expropriation under a human rights framework with that under an investment arbitration framework using the respective Yukos decisions as examples. Petra’s conclusion emphasized that neither damages regime was necessarily better than the other but different which meant that counsel might want to strategically bring a case in both fora.

Prof. Andrea Bjorklund of McGill University in Montreal concluded the rich day by commenting on the presentations and thoughtful papers in honour of Patricia Shaughnessy.  Despite the broad range of issues covered, the speakers illustrated recurrent themes: the role of ethics for arbitrators, for counsel, for experts, and for funders; pleas for more guidance in the form of standards or rules instead of ambiguous default presumptions in the award of costs; and a desire to preserve the discretion of arbitrators to adjust their responses in light of the facts and law.  Ethics, rules, and faith in arbitrators underscored why educators like Prof. Shaughnessy make an enormous contribution to the quality of arbitration by imparting their wisdom and their ethical sense to their students.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Tribunal’s Reference to Annulled Awards: Beyond a Question of Persuasiveness?

Kluwer Arbitration Blog - Wed, 2019-05-15 00:51

Dimitris Kontogiannis


This post explores whether a Tribunal may refer to an annulled arbitral award in support of its factual findings or legal assessments. Although a simple reference to annulled awards lies outside the context of any obligation for the Tribunal in terms of res judicata and stare decisis, this quest is aligned with annulled awards’ effectiveness and persuasive value. In essence, it has to do with the perception of annulment’s effect; whether and to what extent the annulment impacts the award’s value – if any – as a source of reference. This reflects a perception of the role of the seat of arbitration and its legal significance as the sole link between arbitration and national legal orders which decisively inform the award’s fate.


The Annulment of Arbitral Awards

In the course of the examination of the different doctrines over annulment, it is important not only to distinguish the annulment of commercial and investment awards but also to examine annulment as perceived in the enforcement context (within and outside the New York Convention (“NYC”)). The NYC covers awards rendered in commercial and investment arbitrations (in general outside ICSID) subject to the requirements of Article I. The ‘commercial reservation’ of Article I (3) does not preclude the use of the NYC in order to enforce investment awards since a narrow interpretation of the term ‘commercial’ neither is consistent with the purpose of the NYC, nor has been adopted in practice. Outside the NYC a more favorable enforcement regime applies.


Annulment Within the Context of the NYC

The existence of annulment’s international effect in conjunction with the NYC presupposes a specific stance over the role of the seat and the autonomy of the arbitration – if applicable – from this forum. Three approaches have been established: the ‘territorial’, ‘delocalized’ and ‘middle’ approach.

According to the ‘territorial’ approach, the selection of the seat submits the arbitration to a specific legal framework within which the arbitration will be conducted. Arbitration has a forum; the award is legally rooted in the arbitration law of the seat and the seat’s courts enjoy supervisory jurisdiction and exclusive competence to set it aside. The curial law permeates arbitration’s validity and the proper functioning of its procedural aspects. The legal authority of the award, which is conditioned upon annulment, emanates from that forum. In essence, the annulment prevents the award from having legal force (binding and res judicata effect) since it has ceased to legally exist. Thus, its enforcement is impossible (V(1)(e), NYC). ‘[E]x nihilo nil fit’. The Court of the forum recognationis refuses recognition, in a quasi-automatic process, without being competent to examine the grounds of annulment and without any residual discretionary power. The seat is the primary jurisdiction having the first and last say on awards’ validity and (non)existence. Thus, annulment, a ‘repressive’ control in terms of national law enjoys an international effect.

The second, ‘delocalized’ or ‘French’ approach questions annulment’s international reach. The Court has discretionary power to refuse enforcement even if it could be justified. Non- enforcement is permitted but not required by NYC. This is aligned with the permissive nature of Articles VII (‘more favorable right’ provision) and VI (discretionary adjournment). In essence, arbitration operates in the international sphere and is not anchored to a specific legal forum. Its legitimacy and the arbitrators’ power derive from any legal forum that recognizes the arbitration agreement’s and the award’s validity. The ‘juridicity of arbitration is rooted in a distinct transnational legal order’. This approach does not attribute any legal significance to the seat and annulled awards continue to legally exist.

Pursuant to the third approach, which indirectly accepts the seat’s legal significance, annulment’s international reach is recognized only when it resulted from a non-local standard (based on grounds similar to Article V(1)(a) to (d), NYC). Arbitration is thus protected from any particularity of the seat. This approach is similar to the perception that annulled awards must be enforced only in extraordinary circumstances, namely when their annulment constitutes a fundamental procedural impropriety, such as fraud. It has also been argued that the annulled award’s enforcement is subject to the recognition of the foreign court’s annulment judgment by the forum recognationis based on a ‘judgment route analysis’ (for instance, see the Maximov case as previously discussed on the blog).


Annulment Outside the NYC

Pursuant to the ‘most favorable right’ provision (Article VII, NYC), the most favorable enforcement regime established either in a treaty or in national legislation takes precedence and applies in its entirety.

By virtue of this article, the ‘French’ approach applies. It embraces a ‘universalist’ perception attributing no legal impact to the seat. French courts have consistently recognized an award as an international decision of justice, which by definition is not integrated or anchored in the national legal order of the seat. Thus, the awards’ legal validity and existence are conditioned upon any possible forum recognationis and the annulled award continues to legally exist.

Furthermore, a more favorable treaty regime applies. This permeates both investment and commercial arbitration. The ICSID Convention applies as both more favorable lex specialis and lex posterior rule. It provides for a self-sufficient annulment system, autonomous from national laws and Court’s interference. It constitutes the only really delocalized form of arbitration. There is no seat, and the annulment is feasible only within the ICSID system for specific grounds and beyond national Court’s control. The annulled award ceases to legally exist, and the annulment has an erga omnes effect (de facto international reach) within the contracting parties. Lastly, in the context of commercial arbitration, the 1961 European Convention on Commercial Arbitration applies. It attributes international reach to annulment only when is based on specific grounds (those mirroring the grounds of Article V(1)(a) to (d), NYC).


Tribunal’s Quasi- Unfettered Freedom to Make Any Reference When Determining Facts and Law: A Jura Novit Arbiter Question?

The Tribunal has been entrusted with the power to affect or confirm parties’ rights and obligations in a final and binding manner. In the course of fulfilling its mandate, it has the power to reach a decision based on its own legal and factual analysis, knowledge and research without being bound by parties’ input (‘Jura novit arbiter’). In essence, it is free to assess the legal relevance of factual findings and adjudicate on different legal grounds from those submitted by the parties. It can also take initiatives to obtain factual evidence as a counterpart of the application of law. An award is not subject to review on the merits, neither its legal and factual findings are subject to de novo assessment, at the annulment or enforcement phase. Thus, it cannot be annulled or non-enforced by virtue of wrong application of law and facts or references to any source when dealing with the merits.

However, this freedom is not unfettered. The Tribunal can exercise in full extent its decision-making power within the limits of its ambit as delimited by parties’ agreement and submissions (‘ne ultra petita’ principle). This power must be exercised in conformity with due process and procedural fairness (right to be heard; principle of contradiction), in order to have award’s enforceability ensured (V(1)(c), NYC). Thus, there is no rule prohibiting the Tribunal from having recourse to any source (such as dissenting opinions, annulled awards) in support of legal or factual findings as long as these are related to legal issues which lie within tribunal’s mandate. In cases where it raises proprio motu any factual or legal issue, it has to give to the parties a fair opportunity to comment, primarily when the issue was reasonably unforeseeable for them (procedural fairness).


The Impact of a Reference to a Nonexistent Source

We have associated the possibility of having annulled awards as a source of reference with annulment’s international reach as perceived in the enforcement context. This reference is not a reliance in terms of res judicata and stare decisis. First, annulled awards are deprived of res judicata effect under the ‘territorial’ approach and potentially under the ‘middle’ approach. However, even if we could assume that it had res judicata or at least it continued to exist, any precedential value would not be attributed to the award. In commercial and investment arbitration there is no stare decisis doctrine. Possibly, there is only a need for consistency. In that sense, since the Tribunal is not obliged to follow precedent (a legally nonexistent award does not form precedent) and since any unjust or unfounded legal or factual assessment is not sanctionable, this reference could raise only concerns of persuasiveness.

However, in ICSID arbitration, a reference to annulled awards could lead to annulment. It touches upon the award’s reasoning. In this context, the annulled award does not exist. Thus, the Tribunal bases its reasoning on a nonexistent source. As a result, this reference – either as the only or as the most decisive ground on which the decision is based – may lead to annulment by virtue of Article 52(1)(e), ICSID Convention. It could amount to lack of legal reasoning, if it is the only ground, or at least to insufficient and inadequate reasoning. However, the annulment of the award will not succeed if the reference is made to support a legal principle that already exists. Then, the reasoning could be deemed implicitly existent in the consideration of the award and thus, reasonably inferable. Additionally, the adequacy of a reasoning based on an annulled award could bring a question of correctness and thus the risk of having an appeal in disguise is raised. Although the reference’s persuasive value does not justify annulment, it remains debatable whether this reference is a reason with substance, a ‘sufficiently pertinent reason’ or a reason which ensures the award’s logic and coherence allowing the reader to understand its logical flow.

Lastly, an annulled ICSID award seems not to have any (persuasive) value (see also Procedural Order in the Fraport case). In commercial and non-ICSID investment arbitration the annulled award seems either not to have any value at all (legally nonexistent), not having been affected by the annulment (‘delocalized’ approach), or at least having its effect and persuasive value impaired depending on the ground on which it was annulled.  In that sense, such a reference could impact only on the arbitrator(s)’ reputation and credibility, and the award’s persuasive value. It could be seen as weak decision-making. However, it could be argued that in the ICSID context, a reference to an annulled award is associated with legal consequences beyond the award’s persuasiveness.

Overall, it seems that an annulled award could be a source of law or facts affecting arbitrators’ credibility but not (necessarily) the second awards’ fate.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

The Abu Dhabi Global Market: An Arbitral Seat Open to All

Kluwer Arbitration Blog - Mon, 2019-05-13 19:15

John P Gaffney


The Abu Dhabi Global Market (“ADGM”) is a financial free zone in the United Arab Emirates. Foreign parties are attracted to the ADGM for a number of reasons, including its direct application of English common law, the ability to use English language to conduct proceedings in the ADGM Courts, and its enhanced adoption of the UNCITRAL Model Law on International Commercial Arbitration (“UNCITRAL Model Law”) (see previous discussion here).

Further, the ADGM has recently opened an arbitration centre, which is equipped with hearing facilities that are made available to parties resolving their disputes through mediation or arbitration. The launch of the ADGM arbitration centre further enhances the ADGM’s attractiveness as an arbitral seat to all parties, including those registered in the ADGM, as well as to those with no connection with the ADGM.

Notwithstanding that the ADGM arbitration law was enacted in 2015, regrettably there appears to be some misunderstanding on the scope of its arbitral jurisdiction.

This article is intended to address such misunderstanding.


The Proper Scope of the ADGM’s Arbitral Jurisdiction

It has been suggested in a number of articles, including in a previous Kluwer Arbitration Blog by Dr Gordon Blanke, that the ADGM’s arbitral jurisdiction is more narrowly drawn than the DIFC (i.e., the underlying dispute must have some nexus to the ADGM).

Most recently, it was posited that:

“Unlike the case in the DIFC, future arbitrants cannot contract into the resolution by arbitration of any disputes in the ADGM: arbitrating in the ADGM requires a subject-matter nexus to the ADGM. This essentially means that arbitration in the ADGM is limited to (i) the resolution of civil or commercial disputes involving the ADGM or any ADGM stakeholders (ie ADGM authorities or establishments) or to (ii) the resolution of disputes arising out of a contract or a transaction conducted in whole or in part in the ADGM or out of an incident that occurred in the ADGM. As a consequence, DIFC arbitration is an attractive option to all those that wish to arbitrate general commercial disputes in a common law environment in the Middle East.”1) Gordon Blanke, “Free zone arbitration in the DIFC and the ADGM”, Arbitration International, 2019, 0, 1–22, at 2. jQuery("#footnote_plugin_tooltip_4796_1").tooltip({ tip: "#footnote_plugin_tooltip_text_4796_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

There appears to be a misunderstanding. The Arbitration Regulations enacted in 2015 (“Arbitration Regulations 2015”), which govern arbitrations seated in the ADGM, represent an enhanced adoption of the UNCITRAL Model Law. Part 3 of the Arbitration Regulations 2015, which governs arbitration proceedings, applies to arbitrations “where the seat of the arbitration is the Abu Dhabi Global Market, or where an arbitration agreement applies these Regulations” (Article 8 of the ADGM Regulations).

The “seat” is the juridical seat of the arbitration designated (a) by the parties to the arbitration agreement, or (b) by the arbitral tribunal or any institution or person vested by the parties with powers in that regard. Article 33 (Seat of arbitration) of the Arbitration Regulations 2015 provides:

“The parties are free to agree on the seat of arbitration. Failing such agreement, the seat of arbitration shall be determined by (a) any arbitral or other institution or person vested by the parties with powers in that regard, or (b) the arbitral tribunal, having regard to the circumstances of the case, including the convenience of the parties.”

Therefore, contrary to what has been suggested, the Arbitration Regulations 2015 establish the ADGM as a seat of arbitration for (a) disputes with a nexus to the ADGM, or (b) for disputes unconnected to the ADGM, where the parties (i) choose the ADGM as the seat of arbitration, or (ii) agree to the application of the ADGM Arbitration Regulations.

The foregoing, and rather self-evident, conclusion is underlined by Article 32 (Determination of rules of procedure) of the Arbitration Regulations 2015, which provides in sub-section (3):

“Unless otherwise agreed by the parties, the tribunal has the power to order a claimant to provide security for the costs of the arbitration. This power shall not be exercised on the ground that the claimant is (a) an individual ordinarily resident outside the Abu Dhabi Global Market, or (b) a corporation or association incorporated or formed other than in the Abu Dhabi Global Market, or whose central management and control is exercised outside the Abu Dhabi Global Market.” [Emphasis added]

As may be seen, the Arbitration Regulations 2015 thus contemplate that the parties to an arbitration seated in the ADGM or to which the Arbitration Regulations 2015 otherwise apply will not necessarily have a nexus to the ADGM. If the requirement of a nexus to the ADGM did exist, the highlighted passage in Article 32(3), above, would be unnecessary.

This is consistent with the scope of jurisdiction of the ADGM Courts, in respect of which it is possible for parties to opt into the jurisdiction of the ADGM Court of First Instance, even where the transaction or dispute in question has no connection with the ADGM.2) The ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 (“ADGM Court Regulations”), as amended, which also govern the jurisdiction and procedures of the ADGM Courts (in addition to Abu Dhabi Law No. 4 of 2013 (“Founding Law”) which defines in part the scope of the ADGM Court’s jurisdiction), provides in Article 16 that the ADGM Court of First Instance may exercise jurisdiction conferred on it by (a) Article 13(6) and 13(7) of the ADGM Founding Law; (b) Applicable Abu Dhabi Laws; (c) the ADGM Court Regulations; (d) any other ADGM enactment; or (e) any written request by the parties to have the ADGM Court of First Instance determine their dispute. jQuery("#footnote_plugin_tooltip_4796_2").tooltip({ tip: "#footnote_plugin_tooltip_text_4796_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });



It is regrettable that there remains to be some misunderstanding in relation to the scope of ADGM’s arbitral jurisdiction. The Arbitration Regulations 2015 establish the ADGM as a seat of arbitration for (a) disputes with a nexus to the ADGM, or (b) for disputes unconnected to the ADGM, where the parties choose the ADGM as the seat of arbitration. Thus, contrary to what has been suggested, parties with no “subject matter nexus” to the ADGM may freely choose the ADGM as the seat of arbitration and the ADGM Arbitration Regulations as the procedural law of the arbitration.


John Gaffney is a Senior Counsel at Al Tamimi & Company in Abu Dhabi.

References   [ + ]

1. ↑ Gordon Blanke, “Free zone arbitration in the DIFC and the ADGM”, Arbitration International, 2019, 0, 1–22, at 2. 2. ↑ The ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 (“ADGM Court Regulations”), as amended, which also govern the jurisdiction and procedures of the ADGM Courts (in addition to Abu Dhabi Law No. 4 of 2013 (“Founding Law”) which defines in part the scope of the ADGM Court’s jurisdiction), provides in Article 16 that the ADGM Court of First Instance may exercise jurisdiction conferred on it by (a) Article 13(6) and 13(7) of the ADGM Founding Law; (b) Applicable Abu Dhabi Laws; (c) the ADGM Court Regulations; (d) any other ADGM enactment; or (e) any written request by the parties to have the ADGM Court of First Instance determine their dispute. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

What Compensates Tears? A Case Study in How To Determine Damages In Large Proportion Disasters in Brazil through Class Arbitration

Kluwer Arbitration Blog - Sun, 2019-05-12 18:52

Luiz Olavo Baptista

Brumadinho Dam’s Rupture1)The dam collapse happened on 25 January 2019.. On the first day, the fire department, responsible for the rescues, estimated that the number of victims was about 200. Ten days after the disaster, the death toll was confirmed to be 134, while 199 were still missing. Trigger Warning: At this link one can find material produced by the BBC, showing images after the break of the dam near the city of Brumadinho. Discretion advised. jQuery("#footnote_plugin_tooltip_1249_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1249_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and the First Gulf War

Writing about these events side by side might seem like a mistake at first as they hold no historical connection and emerged under completely distinct circumstances. However, amidst these personal tragedies, we cannot ignore this common denominator: the human and material losses suffered by the victims. In both cases, either federal prosecutors or attorneys acting on behalf of the victims will have to deal with the complex process of calculating a fair compensation (for the lack of a better expression) over the damaged properties, the lost business expectations, and the work and salary prospects of the perished victims. All these elements matter in the determination of a fair value for the indemnification.


The UNCC Model

But how can we ensure that fair compensation is paid and justice done, given the magnitude of the disaster? In 1991, in the aftermath of the first Gulf War, the UN Security Council created the United Nations Compensation Committee (“UNCC”), a subsidiary organ whose purpose was to determine the compensation owed to those directly affected by the conflict. Under those circumstances, it was established that a class action would be the most suitable course of action.

What makes the UNCC model special is the separation of claims into two phases. In the first phase, the claimant could present claims arising from their own rights and other substantive aspects of the dispute. Hence, the victims may be aided by lawyers or other professionals as they argue their case. In the second phase, the Panels examined the claims in terms of their admissibility for each claimant or victim, including consideration of the existence of a nexus of causality and the determination of the quantum – using as main criterion the real value, in market conditions, of the damaged goods and/or establishments.


Translating the UNCC Model to Class Arbitration in Brazil  

Taking a cue from UNCC experience, one could imagine that a possible solution in the event of mass disasters, such as Brumadinho’s and/or even in case of wars, is class arbitration2) In Brazil, arbitration is considered an accepted alternative to long-standing lawsuits, which may obstruct access to justice, see explanatory discussion here. jQuery("#footnote_plugin_tooltip_1249_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1249_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });.

In Brazilian law, both class actions and arbitration are well established practices for dispute resolution in several situations.3) In Brazilian law this means of dispute resolution is available to some associations acting on behalf of their members (e.g., pension fund associations) jQuery("#footnote_plugin_tooltip_1249_3").tooltip({ tip: "#footnote_plugin_tooltip_text_1249_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });. However, compared with the American counterpart, the practice of class arbitration in Brazil is still in its infancy.

To consider the merits of this approach, we must pose ourselves the following question: why is class arbitration only an afterthought in the minds of Brazilian jurists? An attempt to answer this question requires understanding the legal premises of class action in Brazil, and how those foundations may or may not allow for class arbitration, which then allows for a comparison to the American experience in this area of law.

Brazil adopts the civil law system, in which its legal system is based on codified and written law, as opposed to the role played by precedents in common law systems. Nowadays, legal grounds for typified class actions are found in two main legal sources: the Public Civil Action Law (Law 7,347 of 1985) and the Consumer Protection Code. If in the United States class actions are only valid after the Court verifies the conditions under which the class was certified, in contrast, in Brazil the law already grants them legitimacy beforehand. Another difference is that class action decisions in the U.S. are binding to all members except those who informed the Court before the procedure that they were not to be considered as members of the class. This process, known as “opting out”, does not occur in Brazil. Instead, given that class actions lawsuits protect plaintiffs’ collective rights, a decision in a class action is only binding if it is favorable to class members.  If the decision is unfavorable, plaintiffs are still free to file individual lawsuits before the Court.

In Brazil, class action and arbitration law were designed independently and the legal framework does not necessarily provide for a specific legal apparatus to allow combination of the two. Still, that does not mean that class arbitration is impossible, nor that the nature of class action or arbitration are incompatible with Brazilian law. Rather, it does seem more of a lack of forethought by the legislator than an outright prohibition. In fact, the Federal Constitution allows labor class arbitration in the Article 114, §1, and legislatures previously discussed Bill No. 5139/2009, which deals precisely with arbitration as an alternative dispute resolution method for class litigations. Discussions over this particular bill, however, have since been discontinued.

Yet, at the end of 2018 the Court of Justice of the State of São Paulo accepted a collective arbitration. Shareholders of Petrobras (one of Brazil’s main state-owned company) decided to sue the company as a class after Federal Police’s Operation Car Wash corruption scandals were revealed. As a defense, Petrobras argued, before the first instance court, that the shareholders signed contracts with arbitration clauses, thus removing the state courts’ jurisdiction over their claims. The shareholders replied that they signed the clause as individuals, not as a group. In the decision, the judge ruled that, since all members of the class signed the arbitration clause, the arbitral tribunal had jurisdiction to adjudicate the claim. Yet, it would not be necessary for each individual to file an independent action. Collective arbitration could happen through class representation, reducing costs for the claimants. The Court of Justice thus upheld the decision of the first instance judge.


Applying the UNCC Model to Large Proportion Disasters in Brazil

On November 5, 2015, a dam in Mariana, located in the state of Minas Gerais, collapsed, causing catastrophic damage. Samarco, a joint venture between Vale (another one of Brazil’s main state-owned companies and the one responsible for the Brumadinho incident) and the BHP group, was responsible for the dam. Four years have passed and the environmental damage from the disaster remains, with an aftermath of 19 deaths and lawsuits being filled at the State and Federal levels. Out of the several administrative penalties applied, Samarco only paid one. An astonishing amount of dozens of public civil actions and more than fifty thousand individual lawsuits remain pending before the judiciary awaiting trial.

State-owned company Vale submitted to the Public Prosecutor’s Office the following proposal: (i) compensation for moral damages, ranging from R$ 75,000 to R$ 300,000, depending on the relationship the person had with the victim; (ii) monthly payment corresponding to two-thirds of the wages of the deceased worker until the date on which he would turn 75 years old; (iii) guarantee of “employment or salary” for the surviving employees of Brumadinho until the end of 2019; and (iv) health plan for families of independent and outsourced workers.

The Atlantic Forest’s Non-Governmental Organizations Network filed a civil lawsuit against Vale claiming compensation for collective moral damages in the amount of R$ 30 billion and compensation of R$ 500,000 to R$ 1 million for relatives of the deceased and surviving victims of the dam’s rupture.

In an interview, Supreme Court Justice Dias Toffoli said that the best alternative to Samarco’s reputation and to alleviate the suffering of the victims was through conciliation. The Coordinator of the program “Development and Socioenvironmental Rights” at the NGO Conectas, Caio Borges,  commented that “unlike the way in which businesses and the authorities acted in the case of the Rio Doce, this time the whole remediation process must be carried out through legitimate means and this means the participation of the people affected.” [

Given the large number of victims and the extensive material and environmental damage, I dare not say there is a method that both satisfies and reduces the impact of this incident with the various possibilities to be explored along the third-party funding companies in the market. For this reason, the legal model and mentality used in the Panels of the UNCC could be transported and adapted to the reality of Brumadinho – perhaps with the new perspective of a class arbitration.

The combination of both methods – bifurcated proceedings to be assisted by a fully and strictly vetted group of accountants and collective action – in the UNCC was paramount in the long process of damage determination and quantification. By implementing this reasoning, we could more adequately compensate the victims of the incident, as well as their families, for their material and immaterial losses, thus also reducing the risk of spending years or decades in the State courts in the search for justice.

References   [ + ]

1. ↑ The dam collapse happened on 25 January 2019.. On the first day, the fire department, responsible for the rescues, estimated that the number of victims was about 200. Ten days after the disaster, the death toll was confirmed to be 134, while 199 were still missing. Trigger Warning: At this link one can find material produced by the BBC, showing images after the break of the dam near the city of Brumadinho. Discretion advised. 2. ↑ In Brazil, arbitration is considered an accepted alternative to long-standing lawsuits, which may obstruct access to justice, see explanatory discussion here. 3. ↑ In Brazilian law this means of dispute resolution is available to some associations acting on behalf of their members (e.g., pension fund associations) function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Brexit: Could Arbitration Be A Port In The Storm?

Kluwer Arbitration Blog - Sun, 2019-05-12 01:31

Bianca Berardicurti

The Brexit clock is ticking and, under the current circumstances, the no deal scenario is being increasingly regarded at least as a concrete option – although the situation is changing on a daily basis and the extension of the two-year term under Article 50 TFEU could provide some breathing room.

In the context of the uncertainties surrounding the ratification of the withdrawal agreement, the consequences of a hard Brexit in the field of civil justice and private international law represent a major concern: It is not difficult to see that an exit of the United Kingdom (UK) from European Union (EU) without a deal would have disruptive effects especially in terms of jurisdiction and enforcement of decisions.

As matters stand, the jurisdiction, recognition and enforcement of decision across the European Union are regulated by the Recast Brussel Regulation 1215/2015 which, broadly, provides for:

  1. Specific rules for determining the intra-EU jurisdiction, with a rather explicit favor towards parties’ choice of forum;
  2. A relatively fast and simple procedure for decisions issued in EU Member States to be recognized and enforced across the EU space.

In case of hard Brexit, the Recast Brussel Regulation would most likely be swept away, with no chance for the UK, as a Non Member State, to re-join it. As a result, the fear is that no reciprocal regime would be in place between the UK and the remaining Member States for determining the jurisdiction, recognizing and enforcing decisions in civil and commercial matters.

The harsh effects of a possible no deal scenario on the civil justice field have also been quite eloquently stressed by the European Commission in its “Notice to Stakeholders: Withdrawal of the United Kingdom and EU rules in the field of civil justice and private international law” issued on January 2019. Indeed, among other issues addressed by the document, as far as jurisdiction and enforcement of decisions are concerned, it has been clearly stated that:

  1. for proceedings involving a United Kingdom domiciled defendant initiated on or after the withdrawal date, international jurisdiction will be governed by the national rules of the Member State in which a Court has been seized;
  2. unless a judgment of a UK court has been exequatured before the withdrawal date, the EU rules on recognition and enforcement of such judgments of the UK will not apply to a judgment of a UK court that has not been enforced prior to the withdrawal date, even where the judgment has handed down, or the enforcement proceedings commenced, before the withdrawal date;
  3. for proceedings to enforce a judgment of a UK court commenced as of the withdrawal date in the EU-27, recognition and enforcement will be governed by the national rules of the Member State in which recognition or enforcement is sought.

Moreover, the European Commission invited all stakeholders to take all the above consequences “into consideration when assessing contractual choices of international jurisdiction”.

In this respect, not even the “Convention of 30 June 2005 on Choice of Court Agreements” entered into by the EU, Denmark, Montenegro, Mexico and Singapore (2005 Hague Convention) (also referred by the Commission in its Notice), which was ratified by the UK in its own right in December 2018, seems to be a satisfactory tool to keep jurisdiction and enforcement of decisions unaffected by a no deal Brexit for two reasons. Firstly, there is a question as to whether the UK actually enjoyed legal standing in respect of ratifying the Hague Convention in its own right, given that the judicial cooperation in civil matters falls under the EU’s jurisdiction according to Article 81 TFEU, and the UK was still a Member State of the EU at the time of ratification. Secondly, it has to be kept in mind that the Hague Convention is far more limited in its scope than the Recast Brussels Regulation, since

  1. it applies only to exclusive choice of court agreements concluded in civil or commercial matters (see Article 1, 2005 Hague Convention);
  2. a number of matters are excluded from the scope of the Convention (see Article 2, 2005 Hague Convention), and
  3. no detailed rules are provided for dealing the issue of parallel proceedings.

By the same token, the possibility for the UK to re-join the 2007 Lugano Convention on jurisdiction, recognition and enforcement of judgments in civil and commercial matters (the provisions of which are largely similar with the Recast Brussel Convention), in its own right is, at this stage, shrouded in uncertainty. Indeed, among other things, the agreement of all the current signatories (EU, Iceland, Norway, and Switzerland) would be needed for the UK to re-join.

In the face of all the above, not only arbitration does seem to be completely unaffected either by a withdrawal agreement being ultimately signed between the EU and the UK, or by a no deal scenario (since the validity of arbitration clauses, the arbitral tribunals’ jurisdiction and the enforcement of awards largely depend on non-EU legislation); but, also, there is some room to expect a slight increase in the use of arbitration clauses in this interim phase, as well as in case of hard Brexit, or even, if the deal eventually occurs, after the transition period provided in the current draft.

This is because irrespective of Brexit, the UK and the remaining Member States will continue to be a part of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is enacted in the UK by the 1996 Arbitration Act. As a result, the arbitration clauses will be reciprocally respected, and arbitral awards will in any event continue to be readily enforceable. Also, so far as investment treaty arbitration is concerned, the UK will still be part, inter alia, to the ICSID Convention, also enacted in the International Investment Disputes Act of 1966. On this last point, it might be also interesting to consider whether, if the UK leaves the EU with no deal, an opportunity could emerge to narrow the effects of the Achmea decision on the non-compatibility of arbitration clauses contained in intra-EU Bilateral Investment Treaties with EU law (Court of Justice of the European Union (CJEU) Case C-284/16) for UK-based investors. Just by way of example, although CJEU case law adopted before the exit day will be retained, the UK will however not be bound by any further decision that might be handed down by the CJEU with respect to the non-compatibility of arbitrations based on the Energy Charter Treaty with European law (see here).

Finally, on a merits perspective, arbitration also appears to be the intelligent mid-way solution in all those circumstances where parties do not feel like deferring exclusive jurisdiction to English Courts, but English law is still deemed, for whatever reason, to be essential in the balance of the agreement – for example the purpose of narrowing certain typical (and sometimes unappealing) civil law good faith related effects on contracts.

Indeed, in such a case, the choice of an arbitration clause would not only serve to avoid the potentially awkward situation of a foreign court deciding on English law issues, but, also, would provide the parties with the opportunity of building a more “English law friendly” environment around the case. To this aim, parties would indeed have the chance to appoint arbitrators having a common law background. Also, parties could choose one of the highly reputable English arbitral institutions such as the LCIA (see here). It is worth noting that, practically speaking, costs and expenses in arbitration proceedings are at least comparable to the costs and expenses in the context of an English Court litigation. The consequence is that one of the main (if not the main) unappealing traits of arbitration in certain civil law jurisdictions is unlikely to represent an issue in the UK.

All the above being said, whilst the jurisdictional system seems to wobble under the Brexit gunfire, international arbitration stands instead. In other words, if the worst comes to the worst, arbitration can be considered as a safe port in the current Brexit storm.

More from our authors: Arbitration in Belgium: A Practitioner’s Guide
by Edited by Niuscha Bassiri, Maarten Draye
€ 185

Syndicate content