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Foreign Investments in Poland in Light of the Achmea Case and “Reform” of Polish Judicial System – Catch 22 Situation?

Kluwer Arbitration Blog - Sat, 2018-04-21 18:02

Marcin Orecki

On 6 March 2018, the Court of Justice of the European Union (“CJEU”) in the case no. C‑284/16 Slovak Republic v. Achmea BV (“Achmea case”) (available here) stated that arbitration agreements concluded between the Member States of the European Union (“EU”) in the so-called intra-EU BITs have an adverse effect on the autonomy of EU law. Achema case is a precedent in many respects and has already resulted in many comments.  It must be noted  that the Judgment of the CJEU prima facie is not surprising – taking into account primacy and autonomy of the EU law – especially the four freedoms of the Single Market of EU: free movement of goods, capital, services and labour. This post aims however to highlight a probably unintended aspect of the Achmea case which might lead to difficulties of a legal situation for foreign investors in EU Member States in which judicial systems are not efficient or have issues with political influence (see the fifth edition of the EU Justice Scoreboard, available here).

The Achmea case, as entire EU Law, is based on the principle of mutual trust and cooperation between EU Member State. Using the words of the CJEU in the Achmea case:

“EU law is […] based on the fundamental premise that each Member State shares with all the other Member States, and recognizes that they share with it, a set of common values on which the EU is founded, as stated in Article 2 TEU. That premise implies and justifies the existence of mutual trust between the Member States that those values will be recognized, and therefore that the law of the EU that implements them will be respected […] In order to ensure that the specific characteristics and the autonomy of the EU legal order are preserved, the Treaties have established a judicial system […] it is for the national courts and tribunals and the Court of Justice to ensure the full application of EU law in all Member States and to ensure judicial protection of the rights of individuals under that law […] Article 8 of the BIT [arbitration agreement – added by the author] is such as to call into question not only the principle of mutual trust between the Member States but also the preservation of the particular nature of the law established by the Treaties, ensured by the preliminary ruling procedure provided for in Article 267 TFEU, and is not therefore compatible with the principle of sincere cooperation” [emphasis added].

The mutual trust between the EU Members led the CJEU to the conclusion that an arbitration agreement concluded in the intra-EU BITs is incompatible with EU Law. This should not be controversial. However, the devil, as always, lies in the detail. Poland can serve as an example.

In 2016, the Polish Government initiated a so-called “reform” of the Polish judicial system (see my post on this reform here). The Polish Government “reformed” the Polish Constitutional Tribunal, the National Council of the Judiciary of Poland (constitutional organ safeguarding independence of courts and judges), the Polish Ordinary Courts and finally the Supreme Court. Many of the amendments are deemed by some unconstitutional. The reform of the Polish judiciary lead to the precedent procedure adopted under art. 7(1) of the Treaty on European Union (see here).

Simultaneously with the “reform” of the Polish judicial system, the Polish Government started to terminate intra-EU BITs (see my posts here, here). Until now, Poland commenced the procedure to terminate its BIT with Portugal, Denmark, Netherlands, Cyprus, BLEU – Belgian – Luxembourg Economic Union, France, Austria, United Kingdom, Bulgaria, Germany, Finland, Spain, Greece, Sweden, Latvia, Lithuania, Hungary and Croatia. The Polish Government persistently repeats:

“the law, as well as access to courts in Poland, guarantees foreign investors the protection of their investments with a possibility to execute investors’ rights before courts. Poland , as an EU Member State, established democracy which respects market rules and has a confident, independent, and impartial judiciary system”.

One may say that reasons given by the Polish Government to justify termination of intra-EU BITs concur with the reasoning of the CJEU in the Achmea case. However, in the light of the “reform” of the Polish Judicial system reasons given by the Polish Government are questionable, especially in the eye of other EU Member States. On 13 March 2018, it was reported that the Irish High Court decided to ask the CJEU for a ruling on the effect of recent legislative changes in Poland which are, in the opinion of the Irish Court

“so immense, the High Court has been forced to conclude that the common value of the rule of law has been systematically damaged and democracy in Poland has been breached. The recent changes in Poland have been so damaging to the rule of law that this Court must conclude that the common value of the rule of law as well as democracy in Poland had been breached. Respect for the rule of law is essential for mutual trust in the operation of the European arrest warrant”  (the case deals with an extradition due to the issued European Arrest Warrant, see here, here, here).

We will have to wait for the decision of the CJEU regarding the “reform” of the Polish Judicial system and its effects on the mutual trust and cooperation between Poland and other EU Members. At this moment, one may aptly ask the question: If the arbitration agreements concluded in the intra-EU BITs are incompatible with EU Law (what is now confirmed by the CJEU) and if the rule of law has been violated in Poland, then where and how should foreign investors execute their rights?

Prof. Nikos Lavranos in his Kluwer blog post proposed to

“One way to improve the situation could be to draft and adopt an EU regulation on investment protection that would incorporate the substantive and procedural standards currently contained in the gold standard BITs, such as in particular the Dutch BITs.

Accordingly, this regulation would contain the Fair and Equal Treatment, Most-Favored-Nation, National Treatment standards as well as an (in)direct expropriation with full compensation provision and an umbrella clause. The procedural standards would include specified timelines for concluding the proceedings and guarantees for the impartiality and independence of domestic courts.”

This proposition sounds interesting. However, it is somewhat doubtful that an EU regulation would intervene into a procedural aspect of investment protection before domestic courts or influence institutions of a particular judicial system of an EU Member State in order to guarantee the impartiality and independence of domestic courts from political influence (institutional aspect).

Hence, another solution which would allow foreign investors to execute their rights would be a creation of a separate, independent adjudicatory body (whether ad hoc or permanent) which would represent a neutral forum. It could be similar to the Iran-United States Claims Tribunal or take the form of the (EU) Multilateral Investment Court. Namely, on 20 March 2018, the Council adopted the negotiating directives authorising the EU Commission to negotiate, on behalf of the EU, a convention establishing a multilateral court for the settlement of investment disputes (see here). It would, therefore, be important to include intra-EU investment disputes under the jurisdiction of the court. An example of other independent bodies and committees which could serve as an example are the Advisory Commission and the Alternative Dispute Resolution Commission, which will act under the EU Council Directive 2017/1852 of 10.10.2017 on tax dispute resolution mechanisms in the EU.

The Achmea case has “emancipated” EU Member States and investors from arbitral tribunals constituted under the intra-EU BITs. Now the EU, in order to guarantee investors right for independent and impartial proceedings, must provide them with an independent body of a different external appearance but of an identical function. One could say that intra EU-BITs constitute a thesis, whereas the Achmea case constitutes the antithesis. The synthesis will be reached once the EU adopts an effective mechanism for the protection of EU investors and replace the old system. Until that moment, foreign investors are probably in a “Catch 22” situation.

To make sure you do not miss out on regular updates on the Kluwer Arbitration Blog, please subscribe here.


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The post Foreign Investments in Poland in Light of the Achmea Case and “Reform” of Polish Judicial System – Catch 22 Situation? appeared first on Kluwer Arbitration Blog.

What Next for Intra-EU Investment Arbitration? Thoughts on the Achmea Decision

Kluwer Arbitration Blog - Sat, 2018-04-21 03:38

Neil Newing, Lucy Alexander and Leo Meredith

On 6 March 2018, the Court of Justice of the European Union (the “CJEU“) delivered its ruling in the case of Slovak Republic v Achmea (“Achmea“), holding that the investor-state arbitration provisions in a bilateral investment treaty (“BIT“) between the Netherlands and the Slovak Republic are invalid, as they are incompatible with EU law.

In reaching the opposite conclusion to that set out in the Advocate-General’s Opinion in September 2017, the CJEU decided that: (i) a tribunal formed under the BIT could be called on to interpret or apply EU law (because EU law is part of the law of both States and because EU law derives from an international agreement between the States), yet (ii) the dispute resolution mechanism of the BIT could prevent the kind of legal review of EU law questions that is required by EU law as a tribunal formed under the BIT had no power to make a reference to the CJEU. This had an adverse effect on the autonomy of EU law and, accordingly, the arbitration clause was incompatible with EU law.

The CJEU’s judgment raises more questions than answers, not least as it looks, prima facie, to have far-reaching implications on both current and future intra-EU BIT disputes (there are currently 196 intra-EU BITs in force containing arbitration clauses which would potentially be affected).  It is likely as a result that attempts will be made to distinguish or get around Achmea, in order to maintain some semblance of protection for intra-EU investment. We consider three possible areas of concern below.

Impact on Countries yet to Join the EU 

Countries such as Serbia and Albania, who are currently in negotiations with the EU regarding accession, have concluded BITs with a number of EU Member States. Once they join the EU, arguably no dispute relating to an intra-EU investment made after that date could be referred to arbitration under those BITs (indeed, that was precisely the position in Achmea). However, what about investments made prior to accession? If the dispute itself arose before accession, it might be argued that neither the investment nor the measure giving rise to the dispute involve EU law, and so the CJEU’s reasoning would not apply as no tribunal would need to consider EU law.  However, this could become more complicated if the measure giving rise to the dispute did not arise until after accession, and even more so if the measure in question was a direct result of accession and the imposition of EU law into that State. Yet, when the investment was made, there would likely have been no expectation of EU law being relevant.

There is little to no direction as to whether future EU Member States will have to terminate their current BITs as a condition of accession. In any event, this will not affect investments made pre-accession, as many BITs contain ‘sunset clauses’ designed to protect investors post-termination of BITs.

It is, of course, only the ISDS (investor-state dispute settlement) mechanisms of intra-EU BITs that are potentially affected by the CJEU’s decision. The substantive protections in the BITs still exist, yet the investor would have potentially no means of effectively enforcing them. Claims could be brought before the host State’s courts, yet in many jurisdictions, i.e. those with less developed or slower court systems or where there may be issues of impartiality and lack of due process, this will not be a satisfactory alternative.

This uncertainty could (conveniently) give the European Commission the impetus required to push forward their proposals for an investment court system, mooted as an alternative to vocal opposition to the current system.

Impact on BITs Between the UK and other Member States post-Brexit

The immediate impact of the Achmea decision will be to reduce confidence in the EU as a place for investment treaty arbitration, both in terms of structuring any future investment (so as to avoid relying on intra-EU BITs) and choosing a seat for any arbitration (to avoid as far as possible any recourse to EU Member State courts). This could, however, make post-Brexit Britain more attractive.

As it currently stands, the Achmea decision arguably renders ISDS provisions in BITs between the UK and EU Member States invalid under EU law, yet once the UK leaves the EU, it will cease to be a Member State. It does not appear to be the case that the effect of the Achmea decision is to essentially ‘strike’ out ISDS provisions in BITs as if they never existed (although the European Commission may well argue to the contrary).  Therefore, arguably,  the ISDS provisions will continue to exist and could then be relied on post-Brexit as if the UK had never been a Member State.  It could, however, also be argued that they should apply only to investments carried out or disputes that arose after the UK ceased to be a Member State (as until that point the UK had been subject to EU law and the supremacy of the CJEU).

Of course, the precise relationship that will exist between the EU and the UK post-Brexit remains to be seen. There is a debate surrounding the role of the CJEU and its influence on the UK going forward, which will clearly impact the UK’s autonomy. The question of the proper resolution of investment disputes between the UK and EU Member States is also likely to be discussed in the Brexit negotiations. If, however, the CJEU is not the final point of authority post-Brexit, in line with the UK Government’s stated objective, and in the absence of any alternative mechanism, then the UK could become a more attractive place (i) to structure investments through, and (ii) as a seat for BIT arbitrations against EU Member States.

Impact on Multilateral Treaties

The Achmea decision also raises questions concerning multilateral treaties such as the Energy Charter Treaty (“ECT“).  Under this treaty, where a Member State is involved on both sides, it could be argued that the judgment in Achmea would apply as EU law may well need to be considered and applied.  However, arguably disputes under the ECT differ from those under intra-EU BITS for at least the following two reasons:

(a)             there are non-EU Member State signatories to the ECT, and

(b)             both the European Union and Euratom are signatories to the ECT in their own right.

Where a dispute is intra-EU, it may be that the CJEU looks to assert its authority as in Achmea.  However, different questions arise where the ECT is invoked by or against a party from outside the EU which has not agreed to be subject to the supremacy of EU law. This could create a situation where EU investors are unable to bring claims in arbitration against EU Member States, but non-EU investors are, effectively creating two classes of investor within the ECT, contrary to the wording of the treaty.  Indeed, a key tenet of the ECT’s investment protections is non-discrimination.

Moreover, as a signatory, the EU itself (and also Euratom) has given its “unconditional consent to the submission of a dispute to international arbitration” under Article 26(3)(a). In doing so, it has arguably also ratified the same consent given by the individual EU Member States that are signatories, and no declaration has been made by the EU that would appear to limit this consent. Arguably, therefore, the EU has already agreed, on an international level, that disputes falling under the ECT are to be dealt with by way of arbitration, effectively carving such disputes out from the jurisdiction of the CJEU. Any CJEU ruling that sought to undermine this would be undermining the political will of the signatories, and arguably also (as an institution of the EU) acting contrary to the EU’s obligations under the ECT.

It is noted that the EU has never been party to an ECT dispute.  Indeed, if it were, it could hardly argue that it lacked the capacity to set out the correct understanding of EU law to the tribunal.  However, as the EU does not have sovereignty over the energy resources of its constituent member states, it is unlikely at the current time that it would ever be a party to such a dispute.  Accordingly, there is currently uncertainty as to how the CJEU will deal with ECT claims in light of Achmea. For non-Member State investors, it may be advisable, where possible, to look to BITs as a more certain mechanism for asserting claims against Member States. When the dispute is between Member States, investors may wish to consider structuring their investments differently – through non-Member State entities that are either signatories to the ECT or, perhaps better still, that have relevant BITs.

Final Thoughts

The Achmea decision does not reach as wide as may be feared. It expressly excludes commercial arbitration and does not apply to ICSID arbitration (which is governed by the ICSID Convention). Whilst national courts of Member States will be bound by the decision, arbitral tribunals will not. Further, it may be possible to seek to isolate the decision as specific to the BIT in question. The UK could, meanwhile, seek to benefit from this uncertainty by positioning itself post-Brexit as the obvious jurisdiction for both structuring investments into the EU and bringing BIT disputes.

To make sure you do not miss out on regular updates on the Kluwer Arbitration Blog, please subscribe here. 

More from our authors: International Arbitration and the Rule of Law
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The post What Next for Intra-EU Investment Arbitration? Thoughts on the Achmea Decision appeared first on Kluwer Arbitration Blog.

Upcoming ABA DR Section Programs

ADR Prof Blog - Fri, 2018-04-20 17:06
From Ben Davis, Chair of the ABA Section of Dispute Resolution Dear Colleagues, Here are the upcoming programs through the end of June for the ABA Section of Dispute Resolution. Advanced Arbitration Series Webinar #6: Ethical Aspects to Consider While Building an Arbitration Practice Apr. 25, 2018, Web Mid-Atlantic Chapter May Brownbag: Restorative Justice: Mediation … Continue reading Upcoming ABA DR Section Programs →

Area Attorneys Chosen For 2018 Super Lawyers List - Greater Wilmington Business Journal

Google International ADR News - Fri, 2018-04-20 13:04

Greater Wilmington Business Journal

Area Attorneys Chosen For 2018 Super Lawyers List
Greater Wilmington Business Journal
... Injury General: Plaintiff FIRM: Shipman & Wright TITLE: Partner EDUCATION: UNCW (B.A.); Campbell University (J.D.) CAREER HIGHLIGHTS: Wright has been practicing since 1999. He is licensed to practice in all state and federal courts in North ...

and more »

The 2018 Update to the CPR's Non-Administered Arbitration Rules: A Reflection of Current Trends in Arbitration - JD Supra (press release)

Google International ADR News - Fri, 2018-04-20 12:35

JD Supra (press release)

The 2018 Update to the CPR's Non-Administered Arbitration Rules: A Reflection of Current Trends in Arbitration
JD Supra (press release)
This article was published in the April 2018 issue of ConsensusDocs (Vol. 4, Issue 2). It is reprinted here with permission. On March 5, 2018, the International Institute for Conflict Prevention & Resolution (CPR) unveiled its revised Non-Administered ...

The 2018 Update to the CPR's Non-Administered Arbitration Rules: A Reflection of Current Trends in Arbitration - JD Supra (press release)

Google International ADR News - Fri, 2018-04-20 12:35

JD Supra (press release)

The 2018 Update to the CPR's Non-Administered Arbitration Rules: A Reflection of Current Trends in Arbitration
JD Supra (press release)
This article was published in the April 2018 issue of ConsensusDocs (Vol. 4, Issue 2). It is reprinted here with permission. On March 5, 2018, the International Institute for Conflict Prevention & Resolution (CPR) unveiled its revised Non-Administered ...

Kenyatta Markets Kenya as Preferred Investor Destination - AllAfrica.com

Google International ADR News - Fri, 2018-04-20 03:40

Kenyatta Markets Kenya as Preferred Investor Destination
President Uhuru Kenyatta has promised to speed up plans for an arbitration centre in Nairobi to attract investors who complain of delays in the Judiciary. On the sidelines of the ongoing Commonwealth Heads of Government Summit in London, President ...

and more »

UMaine Hutchinson presents two-day program on mediation, conflict transformation - Republican Journal

Google International ADR News - Thu, 2018-04-19 23:57

UMaine Hutchinson presents two-day program on mediation, conflict transformation
Republican Journal
Mediation and the Process of Conflict Transformation can be counted toward the 40-hour basic mediation course requirement to join the Maine State Court Alternative Dispute Resolution Mediation roster. Program presenter Will Galloway earned a Master of ...

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Could Blockchain Help the Recognition of International Arbitration Awards?

Kluwer Arbitration Blog - Thu, 2018-04-19 20:00

Mauricio Duarte

 “We simply cannot go on with this utterly outmoded way of working…Endlessly re-keying in the same information; repeatedly printing and photocopying the same documents; moving files about, losing all or parts of them in the process… It is a heavy handed, duplicative, inefficient and costly way of doing our work and it is all about to go. Considerably past time, we will finally catch up with the world.”  Sir Brian Leveson.

An initial issue in any effort to obtain recognition and enforcement of an international arbitral award is the proof of the existence of an award. This subject is addressed by both the New York Convention and many national arbitration laws, which generally seek to simplify the process of proving the existence of an award. However, in a digital world, the way we operate could be more efficient. Blockchain promises to solve many problems, and just like Charlie Morgan mentioned in his article published on March 5, 2018, smart contracts executed on blockchain could be a part of the future in arbitration. Now, what if I told you that the recognition and enforcement of awards could be disrupted by blockchain as well? With blockchain, we can imagine a world in which international awards are rooted in digital code, stored in a transparent platform, and are protected from removal, tampering, and alteration Eventually, there will be no need to “prove” the existence of a duly rendered award that requires additional costs and procedures.

Under Article IV of the New York Convention, the party seeking enforcement of an award must provide: the duly authenticated original arbitral award or a duly certified copy. Additionally, if the award is not in the official language of the country in which enforcement is sought, Article IV requires that an official or sworn translation be provided. It is clear that the creditor bears the burden of proving the existence of an award under Article IV.

Many arbitration laws around the world contain provisions regarding proof of an arbitral award closely paralleling those of the New York Convention. Article 35(2) of the UNCITRAL Model Law requires parties seeking to enforce an international arbitral award to provide the original award and arbitration agreement, or “duly certified” copies thereof. Arbitration legislation in a few jurisdictions imposes less rigorous proof requirements than Article IV of the Convention. For example, the French Code of Civil Procedure omits any requirement for a certified translation or original copy of the award, instead embracing a simpler approach that an award can be proven in the same manner as contracts.

Another preliminary issue concerns the procedures that apply in national courts to actions to recognize arbitral awards. The New York Convention leaves this issue largely to national law, subject to a general principle of non-discrimination awards. The Convention thus does not require either speedy or efficient procedural mechanisms for enforcing Convention awards. It merely requires Contracting States to use procedures no more burdensome than their domestic enforcement procedures. It is clear that the Convention imposes a mandatory rule, requiring Contracting States to recognize and enforce foreign awards, except where one of Article V’s exceptions applies. Article III provides that “each Contracting State shall recognize arbitral awards as binding” and enforce awards in accordance with the Convention and its national procedural rules.

One of the central objectives of the New York Convention was to eliminate the “double exequatur”, meaning that the award needed the confirmation in the place of the arbitration before it could be recognized internationally. If either court denied exequatur, the award could not be recognized and enforced. This process made the recognition and enforcement of arbitral awards difficult, unreliable and slow. The New York Convention eliminated the double exequatur requirement, with the objective of making foreign awards efficiently enforceable and subject to fewer opportunities for judicial challenges.

If we want foreign awards efficiently enforceable, could blockchain, the technology behind Bitcoin, provide another perspective to this issue? Blockchain can best be described as a digital platform or a distributed and immutable ledger that stores records, known as blocks. Blocks can store various kinds of information; in the case of Bitcoin, blocks store information about financial transactions. These blocks, which collectively form a “blockchain”, are stored on various nodes (“computers”), which ensure that no single person or entity can manipulate the ledger without everyone else knowing.

A key property of blockchain technology, which distinguishes it from traditional database technology, is that it is publicly verifiable, supported by integrity and transparency of the system. In other words, it would be practically impossible to change an entry in the database, because it would require changing all of the data that comes before, on every single node.

With this mechanism, it is possible to store a duly rendered award in an arbitration proceeding. By having this information in the blockchain, the competent authority could verify the existence of the award and avoid additional costs, judicial proceedings, and the traditional method of doing things. Forget about having the “burden of proof” to show the existence of the award that is duly certified. The blockchain can do the task in its own.

The Harvard Business Review listed blockchain as one of the “8
Tech Trends to Watch.”  Blockchain technology is expected to disrupt many different industries, and law will be one of them. In a near future, every award, every process, and every task, will have a digital record that could be identified, validated, stored, and shared. This is the immense potential of blockchain. By having a distributed database for awards, courts can benefit from increased accessibility, accuracy, and safety, all of which will result in better and efficient outcomes.

Utilizing blockchain in arbitration could have the effect of automating recognition of awards without human action. Applications are currently in use and others are in development to use the blockchain in law. This technology will apply to almost everything in the future and, as lawyers, we will have to embrace this technology. Just be watchful.

To make sure you do not miss out on regular updates on the Kluwer Arbitration Blog, please subscribe here.

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
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The post Could Blockchain Help the Recognition of International Arbitration Awards? appeared first on Kluwer Arbitration Blog.

A New Anagram from Michael Leathes

Business Conflict Blog - Thu, 2018-04-19 16:44

The irrepressible — and for many of us irreplaceable — Michael Leathes has spread the word of a new proposal, for an international negotiation initiative called the International Negotiation Initiative, or INI.

Leathes, author of the recent and excellent book Negotiation: Things Corporate Counsel Need to Know But Were Never Taught (enthusiastically reviewed here) is putting flesh on the bone of one of the central propositions of his book: that skilled negotiation is not intuitive but rather a strategic exercise of developed skill — and a critically necessary one to the well-managed enterprise.  He floats the idea that a global, trans-cultural and well-funded non-profit entity should be established whose mission is to promote skills of achieving consensual outcomes; to develop and articulate core concepts of negotiation; to “bridge gaps in access” to these skills for those who need but can’t afford world-class negotiation training; and to provide a collaborative platform for scholars, trainers and practitioners of negotiation.

Leathes, former in-house counsel at BAT, was a founder of IMI, which is generously supported by ICC, CEDR, AAA, JAMS, SIAC, GE and others.  It assists the formation of QAPs, drives the YMI Initiative, was critical to the recent success of the GPC project, and advocates international independent standards through its ISC.  Leathes notes that the IACM, meeting in Philadelphia in July, will feature a session on the proposed INI and invites contributions to the discourse through INI’s website, linked here.

And why not, I say.  ML has always been A-OK with me!

Uhuru markets Kenya as preferred investor destination - Daily Nation

Google International ADR News - Thu, 2018-04-19 14:23

Daily Nation

Uhuru markets Kenya as preferred investor destination
Daily Nation
The Judiciary has previously put forth suggestions for alternative dispute resolution mechanisms such as traditional village barazas, mediation and arbitration. A report published by the Judiciary in February says 315, 378 cases were still pending ...

and more »

Protesters confront Uhuru in London - Daily Nation

Google International ADR News - Thu, 2018-04-19 14:23

Daily Nation

Protesters confront Uhuru in London
Daily Nation
The Judiciary has previously put forth suggestions for alternative dispute resolution mechanisms such as traditional village barazas, mediation and arbitration. A report published by the Judiciary in February says 315, 378 cases were still pending ...

and more »

She’s Not Bossy, She’s the Boss

ADR Prof Blog - Thu, 2018-04-19 09:49
From my fabulous assistant Carrie, here is a lovely video from Disney Junior that I’ll be including when teaching about gender and what changes in society need to be made! For more on this, see Negotiating While Female…

Daily Business Report-April 19, 2018 - San Diego Metropolitan

Google International ADR News - Thu, 2018-04-19 09:42

San Diego Metropolitan

Daily Business Report-April 19, 2018
San Diego Metropolitan
... the Alternative Dispute Resolution (ADR) community nationwide. Coleman received the award on April 5 during the ABA 20th annual Section of Dispute Resolution Spring Conference in Washington, D.C.. Coleman serves as vice president for mediation at ...

Backhanded Compliments

ADR Prof Blog - Thu, 2018-04-19 07:58
Those of us who teach negotiation often focus on building rapport and being attentive to relational dynamics. Expressing appreciation is part of the negotiator’s skillset, and giving compliments falls somewhere in this area. But how do we do this effectively? A new study explores the effectiveness of the “backhanded compliment” in interpersonal dynamics. As it … Continue reading Backhanded Compliments →

UK: The Basics: What Should A Dispute Resolution Clause Say? - Mondaq News Alerts

Google International ADR News - Thu, 2018-04-19 06:25

UK: The Basics: What Should A Dispute Resolution Clause Say?
Mondaq News Alerts
Something else to consider, particularly in international contracts, is appointing a service agent in the jurisdiction where court proceedings would be commenced. This means that the parties agree in their contract that court legal proceedings may be ...

ICCA Sydney: The Increasing Participation of Public Entities in International Arbitration

Kluwer Arbitration Blog - Thu, 2018-04-19 00:29

Mitchell Dearness

Young ICCA

On the second day of the ICCA Sydney 2018 Congress, two separate panels considered ‘Arbitrations Involving Public Bodies and Public Interest Salient Issues’. The first panel, moderated by Professor Stavros Brekoulakis (Queen Mary University of London) focused on ‘the Increasing Participation of Public Entities in International Arbitration.’ The panel comprised of Marie Talašová (Government of the Czech Republic), Paolo Di Rosa (Arnold & Porter), Reza Mohtashami QC (Freshfields Bruckhaus Derringer) and Adriana Braghetta (L.O Baptista Advogados). Each panellist brought a different perspective to the table.

Experience of counsel engaged by states

Paolo Di Rosa considered the position of counsel engaged by states, noting some challenges often encountered. The expectations of states and more specifically individual representatives of states can differ to those of private clients. Often observed is an increased fear of decision-making scrutiny with regard to the conduct of a dispute and a greater reluctance to consider settlement options and the expectations of the public. Counsel might often face challenges in the context of document production and locating responsive documents – government agencies often change, merge or move to different locations. Di Rosa also raised some key considerations with respect to the type of fact witnesses engaged by states. Commonly these witnesses are former state officials who may have very little incentive or indeed might have a disincentive to participate in the arbitration. The experience of counsel may of course differ depending on the particular state and the nature of the entity being represented. For example, representing a State Owned Entity (SOE) is likely to be different from representing the state itself although, as noted by Di Rosa, this is likely to depend upon the degree of control the particular state has in the SOE’s operations and decision-making within the SOE.

Expectations of the state

Marie Talašová shared the perspective of ‘the State’ drawing from a wealth of experience negotiating investment treaties on behalf of the Czech Republic. From the state’s perspective the difference between private commercial arbitration and public investment arbitration may not be so great. This is because both types of arbitrations often involve the same economic transactions and could be related to the measures taken by states. Furthermore, the public interest implications (including expenditure of tax payer money) are usually central to both types of arbitration proceedings. Talašová‘s paper (which has been co-authored with Jaroslav Kudrna) will, once formally published in the ICCA Congress Series No. 20 publication, provide an interesting case study on the ramifications of commercial and investment arbitrations on Central European states.

Issues encountered by private parties

Reza Mohtashami QC commented from the perspective of private parties engaged in arbitration proceedings against states. Mohtashami examined some key jurisdictional and practical challenges which arise uniquely in the public-private arbitration process. One such obstacle often encountered is jurisdictional challenges in the context of commercial arbitrations launched by states. Commonly these challenges are based on certain aspects of the state’s internal domestic law. By way of example, Mohtashami refers to Article 139 of the Iranian Constitution, which makes the submission to arbitration of disputes involving state property conditional upon the approval of the Council of Ministers and notification to Parliament. Such objections rarely succeed often due to what is considered to be a ‘substantive rule of arbitration’ although it is always important for non-state parties to consider carefully the seat of the arbitration to limit the prospect of such a challenge succeeding.

Insights from Latin America

Adriana Braghetta provided an insight from Latin America, which is of particular relevance given forecasted infrastructure development and associated public-private partnerships in the impact the region. Braghetta noted that local arbitration laws with Latin American states can differ, some are more pro-arbitration than others. Nevertheless, it can be observed that some domestic laws do in some instances impose conditions on arbitration which impact the conduct of arbitrations between states and private parties. Some conditions which arise within Latin American states include the need for the relevant arbitration institution to be registered as a public entity in the jurisdiction, restrictions on the language, place and applicable law of the arbitration and the liability for costs incurred in the arbitration.

Key takeaway

There will almost always be a tension between the interests of states and private parties with regard to the manner in which public-private and investor-state arbitrations ought to be conducted. As the panel has noted there can however be some divergence between the expectations of different states. Not every state is the same. It is however necessary for counsel for both states and private-parties to be alive to these expectations and also the types of legal issues which have a proven track-record of materialising in these types of proceedings.

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ICCA Sydney: New Frontiers in International Arbitration II: Potential of Arbitration Involving New Stakeholders

Kluwer Arbitration Blog - Wed, 2018-04-18 23:56

Jonathan Mackojc

Young ICCA

The morning session of the last day of the ICCA Sydney 2018 Conference on “Potential of Arbitration Involving New Stakeholders” was moderated by Ndanga Kamau and had the insightful contributions of Dr. Campbell McLachlan QC, Prof. Makane Moïse Mbengue and Silvia Marchili.

Ndanga Kamau opened the final plenary session by asking the following question: why do we need to evolve? The answer was rather simple: to ensure that the industry can survive. Ndanga Kamau warned delegates that we are still restrained by the myth that inclusiveness leads to the dilution of quality practitioners (counsel or arbitrators), and it is certainly not good enough to keep thinking about inclusiveness, rather than doing what is necessary to address it. Further, in regions where international arbitration is not developed, there is nothing inherent that stops interested parties from participating in the industry. It is important that we involve new stakeholders, even those with little or no understanding of international arbitration.

Ndanga Kamau invited each of the panellists to share their views on the topic.

Dr. Campbell McLachlan QC referred to the Abyei Arbitration and the Bangladesh Factory Accord as two examples where arbitration agreements were used in an innovative manner to protect the rights of all stakeholders affected by the subject matter of the dispute.

Dr. Campbell McLachlan QC offered five relevant themes and conclusions arising from these cases:

1. Access to new stakeholders – there is no inherent difficulty regarding access as it comes down to the will of the disputing parties as well as the arbitration community.

2. Role of arbitration in wider process of dispute settlement – arbitration is only part of a larger dispute resolution process, but it is a significant part.

Engagement of the international community – a reference was made to Chief Justice Sundaresh Menon’s speech earlier in the conference. It was agreed that the success of the global system depends not only on party autonomy but more importantly active support from the international arbitration community.

4. Capacity of arbitral process to handle disputes – the arbitral process has the capacity to deal with claims other than those where a contact or treaty is invoked.

5. Enlargement of facilitation – processes must be developed to promote facilitation, rather than to inhibit collective claims. This will ensure consistency, efficiency and most importantly access. Tribunals must actively promote the consolidation of claims.

Dr. Campbell McLachlan QC assured delegates that a strong understanding of these five key messages will ensure that arbitral tribunals are viewed as being highly independent, impartial, and international.

Silvia Marchili considered that evolution naturally brings about unintended consequences, and that we often fail to appreciate this as we are overly fixated on new initiatives. Silvia Marchili acknowledged the concerns regarding the legitimacy of ISDS, where some nations have denounced the ICSID Convention and where negotiations regarding regional agreements have often veered off course. Further, involving the local population in the process has a limited impact. Although NGOs and other community organisations may help ‘demystify the secrecy aspect’ of international arbitration, they alone are not capable of addressing broader concerns regarding the legitimacy of arbitration.

Silvia Marchili compared international arbitration to teenagers who believe they are capable of changing the world, questioning whether arbitration is in fact a suitable mechanism to solve human rights disputes. Silvia Marchili left the audience with two proposals which may assist with business and human rights (BHR) disputes: working groups and the need to amend BITs and other investment agreements to better reflect matters of consent, arbitrability, and enforceability.

The final part of the panel discussion involved a brief update on investment arbitration in Africa, and how new stakeholders are being considered in recent negotiations of agreements. Prof. Makane Moïse Mbengue noted that African countries have now become ‘rule-makers’, as opposed to ‘rule-takers’ as Africa is becoming more innovative, particularly with respect to new stakeholders in arbitration. Africa has also strived to strike a balance between rights and obligations in agreements, with the latter recently receiving significant attention. Many agreements also now include provisions regarding investor liability.

Prof. Makane Moïse Mbengue also highlighted that there is significant divergence regarding whether or not ISDS requires reform, and suggested that if it is to be reformed, the best avenue is by arguing that it must welcome (and be more accessible to) new stakeholders. Such an approach is ideal as it would also ease general concerns regarding ISDS reform in African countries.

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ICCA Sydney: New Voices

Kluwer Arbitration Blog - Wed, 2018-04-18 18:31

Jonathan Mackojc

Young ICCA

The afternoon session of the second day of the ICCA Sydney 2018 Conference on “New Voices” was moderated by Monty Taylor and had the insightful contributions of Jawad Ahmad, Lucas Bastin, Samantha Lord Hill and Solomon Ebere.

Monty Taylor opened the session by noting that not only was this a new initiative for ICCA, but that panellists were selected following a public call for paper abstracts and a rigorous selection process.

Arbitration in conflict and post-conflict zones

Samantha Lord Hill immediately set the scene for a topic that is often overlooked, but highly relevant considering recent geopolitical tensions and conflicts. Samantha Lord Hill noted that there have been over 20 armed conflicts in recent years, many giving rise to lucrative investment opportunities for foreign investors, and noted the World Bank’s commitment of over US$4 billion to restore Iraq. Samantha Lord Hill cautioned legal professionals that timely advice regarding project opportunities for interested investors is not enough; such advice must outline potential disputes and provide guidance on relevant risk assessment and management within these regions of instability. Delegates were provided with an overview of three key risks:

1. A poorly drafted dispute resolution clause – a clause must be correct from the start, with an appropriately selected institution and seat. A fundamental risk is where an institution ceases to operate, or where local judges and lawyers flee the area due to fear of persecution. To avoid this, the designated seat must always be outside the conflict zone.

2. Party non-participation – where the respondent is unable to, or chooses not to, participate in the arbitration. This is less of a concern if it occurs at the beginning of proceedings, but difficult to manage later in the process. Although the tribunal has inherent power to continue with the arbitration, it is important that the non-participating party is still given the opportunity to re-engage, by continuing to copy them into communications. Such an approach will reduce the risk of a challenge or a refusal to enforce the award.

3. Lack of documentary evidence – evidence is often seized or destroyed and access to project areas is limited or restricted. Risks involve parties being unable to produce sufficient supporting documents to prove their own case, or an inability to comply with disclosure obligations. The solution is to ensure that a proper document management process exists, and to store documents outside of the jurisdiction facing conflict.

Fresh approaches to briefing damages in investment arbitration

Jawad Ahmad commenced with an interesting observation – we are preoccupied with issues relating to investment arbitration, such as legitimacy concerns and areas of reform, to the extent that we often forget what it is all about – money. It was also stressed that despite the importance of compensation, lawyers and academics regard quantum as the ‘poor cousin’, when compared to merits or claims.

Jawad Ahmad briefly discussed two significant points:
date of breach affects the availability of the contributory fault analysis or the mitigation analysis as defences pleaded by the respondent; and
depending on which analysis is used, economic consequences will be vast.

Contributory fault and mitigation analyses both focus on the investor’s conduct but have different economic consequences. Contributory fault discounts are expressed in the form of percentages ranging from 25 % to 50 % of the total value of damages available to the investor. Mitigation analysis, however, produces discounts that are ‘hard numbers’ of a financial gain acquired—or not acquired—with respect to an identified activity. There is thus less discretion involved in the mitigation analysis.

Contributory fault analysis takes place prior to the date of the breach. Mitigation analysis, however, is carried out after the date of the breach. The date of breach is not, however, always clear. It will depend upon the primary obligation at issue and the factual circumstances of the case. For example, in ‘creeping’ expropriation cases any series of measures could be conceivably the date of the breach. Therefore, if the date of breach is undetermined then investor’s conduct could be analyzed through the lens of either contributory fault or mitigation.

Jawad’s presentation highlighted the importance of determining the date of breach at an early stage of one’s case as it affects both liability and quantum.

Emergence of sovereign wealth funds as active players

Solomon Ebere presented his topic in three key parts – a background on sovereign wealth funds (SWFs), references to several cases involving SWFs, and technical issues in the context of investment treaty arbitration.

Solomon Ebere indicated that SWFs are regulated according to the Santiago Principles – a framework of generally accepted principles and practices that relate to governance and accountability. It was noted that SWFs have, in recent years, attracted significant criticism whereby it is argued that they operate as investment vehicles fostering geopolitical, rather than commercial, interests. Solomon Ebere noted that SWFs can broadly be categorised according to three waves:

1. born in the 1970s, in the Gulf countries;
2. the China and Russia phase; and
3. more recently, born in emerging markets.

As SWFs are significant investors, they are a natural candidate for new commercial and investment arbitrations. Most cases involving SWFs are largely related to the 2008 Financial Crisis, or from high-level corruption scandals. Technical issues that were discussed involved jurisdiction, whether the definition of ‘investor’ includes an SWF and whether their actions may be regarded as an ‘investment’, under BITs and the ICSID convention.

In response to a question from the panel, Solomon Ebere noted that in many BITs, the definition of ‘investor’ encompasses SWFs, but others still require clarification. Amendments to investment agreements will likely occur once countries notice more claims coming from SWFs.

Inter-generational blame and praise in investment arbitration

Lucas Bastin surveyed a group of emerging arbitration practitioners under the age of 40, predominantly practising in investor state dispute settlement (ISDS). These interviews generated a report card on perceptions of experienced practitioners.

A recurring issue, which forced Lucas Bastin to revise the scope of his paper, was the concern that ISDS allowed for personal preferences and biases to permeate the practice, which ultimately affect the decision. Those in a position of influence were seen to be caught up in ‘decision-making individuality’, which questions the legitimacy of ISDS. A key concern was that not only does this diminish integrity and impartiality among legal practitioners, but that one must create a brand in order to be recognised and selected as an arbitrator.

In response to a question regarding solutions, Lucas Bastin noted that one (more extreme) response suggested that an overall cap be placed on the number of ISDS appointments.

Lucas Bastin acknowledged that previous generations have worked tirelessly to build and develop ISDS, and the speed of development has not been mirrored in other international legal practices. The emerging generation means no disrespect, but asks that we regulate the role of the individual in ISDS.

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