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Hong Kong Arbitration Week Recap: International Arbitration in Times of COVID

Kluwer Arbitration Blog - Mon, 2020-10-19 21:00

The first day of Hong Kong Arbitration Week 2020, hosted by the Hong Kong International Arbitration Centre (“HKIAC”), was an opportunity for practitioners to discuss the topic: “Socially Distanced or Procedurally Flawed: International Arbitration in times of COVID“, which sought to address some of the ever-evolving challenges of conducting virtual hearings in times of COVID.1)The views expressed in this article are those of the authors and should not be attributed to Herbert Smith Freehills. jQuery("#footnote_plugin_tooltip_8051_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8051_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Insights were shared on a range of topics, from hybrid hearings to witness credibility and future trends to monitor.

The moderator guiding the event’s discussion was Mr Nicolas Wiegand of CMS Hong Kong, and he was joined by experts in the field representing the perspectives of clients, arbitrators, experts and counsel:

  • Ms Christina Taeuber of STRABAG;
  • Ms Judith Levine; and
  • Mr James Nicholson of FTI Consulting.

Mr Wiegand opened the session by asking the panellists for their observations on the benefits and challenges of the shift to virtual hearings in the wake of the COVID pandemic.

The panel broadly noted that the shift to virtual hearings, while difficult, had been relatively smooth. For example, Ms Levine noted that for arbitrators, some unexpected advantages had been not only time saved on travel, but time saved on travel planning and travel recovery. The online format has also facilitated easier discussions between arbitrators in different locations outside of hearing dates. Mr Nicholson, as an expert witness, noted that the expert actually can have more impact in a virtual hearing. Being the person navigating the online participants through the material, he can make sure that a tribunal gets a clear picture of what he is seeking to convey.

Ultimately, virtual hearings have not made physical hearings redundant, but they do open new opportunities.


How hearings are structured and whether hybrid hearings are effective

Broadly speaking, the panellists noted that wherever possible, the structure and format of the arbitration should conform to the circumstances of the case. This ranges from considerations of protocol, whether a hybrid format works for each party, whether a hearing should be delayed so it can be held in person, and whether a different approach may be appropriate for different stages within the arbitration.

While currently, a purely virtual hearing may be the only format available in some places, in others where lockdowns have eased, a hybrid format might be a possibility. This could take the form of some parts of the arbitration being held online, or with some participants appearing in person and some online as needed.

For example, Ms Taeuber noted that even if an in person element would be helpful for witnesses, it may still be possible to assess preliminary or final questions, such as jurisdictional issues or opening/closing submissions generally, in an online format. Alternatively, parties might decide that only those with speaking roles, such as counsel and witnesses are required in person, with support personnel participating online, creating cost efficiencies.

However, this hybrid model can also create issues. Ms Levine stated that in a hybrid model there may be a perceived, or real, inequality if there is no equality of physical representation for each party, and Mr Nicholson suggested that where one expert is in the room and the other is not, this could create a perception of disadvantage.


Issues surrounding witnesses

The panellists noted that while there are differing views on whether assessment of witness credibility is more difficult, no different, or even easier in an online format, in most circumstances issues with online witness evidence were able to be overcome and ultimately did not prevent a fair hearing.

While some parties have gone to extreme measures to combat any reliability issues, for example in one case, each party sending a witness to be physically present to monitor the giving of evidence in the expert’s house, generally a more common sense approach has developed, in which protocols are tailored for the specific circumstances. For example, a protocol may require the door to the room being visible, or the witness giving a 360 degree view of the room prior to giving evidence.

For witness observation, while online evidence means that tribunals may miss out on physical cues, such as nervous tapping or fidgeting, some perceive that all parties being able to see the witness in front-on profile allows for easier observation.


New issues, trends, and looking ahead to the future of arbitration

Going forward, the panellists agreed that there were real issues surrounding party agreement and digital equality in relation to virtual hearings, which need consideration by the arbitration community.

As Ms Levine noted, an online hearing is only as good as its weakest internet connection and for virtual hearings to be effective and just, this must be a paramount consideration. While a virtual hearing may give greater access to arbitration for those who may find it difficult to physically travel, a virtual hearing may also pose problems for those with weak connections or unstable power supplies.

Further, while many parties are willing to participate in online proceedings, there will of course be times when that is not the case. Two particular instances in which issues may arise are in respect of enforcement of judgments and challenges to arbitrators themselves. Ms Levine suggested that, while arbitration regimes are catching up with the sudden online shift, it is particularly important for tribunals to provide very clear reasons in deciding to conduct an arbitration online against the wishes of one party.

Finally, Mr Wiegand invited the panellists to comment on issues and trends to monitor over the coming period.

Mr Nicholson suggested that economically, there are likely to be parallels to the global financial crisis, with loss of profit claims poised to be a significant issue in the coming months and years. For these claims, whether loss is assessed before or after the beginning of the pandemic will result in significant ranges in damages.

Ms Taeuber believed that digital literacy of arbitrators will be significant, and may lead to a new generation of arbitrators getting opportunities previously not available to them. She further reiterated that developments in force majeure cases will be important to watch.

Ms Levine suggested that flexibility, preparation and equality are key for the profession going forward. The online and hybrid formats can create significant advantages, but pose issues of planning, digital equality and timing that must be properly considered.

In summary, despite the many and significant challenges for arbitrations raised by the COVID pandemic, the profession has quickly developed solutions to many of these challenges. These solutions will not only help the arbitration community weather the ongoing pandemic itself but, with care and consideration, will hopefully be the beginning of creating a stronger, more flexible, commercial and efficient arbitration framework for the post-COVID world.

More coverage from Hong Kong Arbitration Week is available here.

References   [ + ]

1. ↑ The views expressed in this article are those of the authors and should not be attributed to Herbert Smith Freehills. 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: Construction Arbitration in Central and Eastern Europe: Contemporary Issues
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Interviews with Our Editors: 360-Degree Discussion with Chiann Bao

Kluwer Arbitration Blog - Sun, 2020-10-18 21:00

Chiann Bao has been with Arbitration Chambers since 2018. She is currently Vice President of the ICC International Court of Arbitration. She previously acted as Secretary General of the HKIAC between 2010 and 2016, during which HKIAC was recognized in a 2015 International Arbitration Survey as the most preferred arbitral institution outside of Europe and was ranked the 3rd best arbitral institution worldwide in the same survey. We are pleased to kick off our Blog’s live coverage of HK Arbitration Week this year with our wide-ranging discussion with her.


Thank you Chiann for joining us!  


  1. Could you please share with us how you started your arbitration career?


It all began with a blank sheet of paper. On this page, I had to draw up a proposal as to my study plans in Hong Kong that would fit with the purpose of Fulbright scholarship – to promote international good will through the exchange of students in the fields of education, culture and science. With such a broad remit, I had difficulty narrowing my topic. With Google’s help, my searches including “dispute resolution” and “east and west”, resulted in arbitration and mediation. Seeing as I was drawn to the idea of resolving problems and was intrigued by the influence of culture on arbitration, it was certainly worth exploring, I thought. It turned out to be the perfect fit.


  1. How has your Chinese-American heritage shaped your perspectives? How did you feel you were received when you first moved to and led an Asian arbitral institution in HKIAC?


The way in which one sees the world is always influenced by their experiences. As a Chinese-American growing up outside of Washington DC and spending my summers in Asia, I was lucky to be gifted a dual-culture and dual-language upbringing. Immersed in both environments, I realized early on that there would not be one place where I would belong. Many years later, when I stumbled upon international arbitration, and eventually met colleagues and now friends in the field, I took great comfort in finding a space where the majority of arbitration practitioners had colorful backgrounds and were inherently curious about the world.

When I first moved to Hong Kong to lead HKIAC, I knew that I had little relevant experience. What I did know was that it was important to respect the blood and sweat of the community that had dedicated significant efforts over the years to building the institution. And while I may have looked the part, I knew that I was an outsider to the local communities who would be given no deference as a result of my age, my experience, and my cultural identity. Experience by experience, I learned, with loyal support and friendship working alongside me, I think I earned the trust of the community and felt great pride in being able to serve the needs of both the local and international communities.


  1. A great number of arbitral institutions and law firms have pledged support for equal representation of women in arbitration. Do you think gender blindness is the true test of gender equality in arbitration?


I can understand why the idea of gender blindness could be a good test of gender equality in arbitration as it neutralizes the impact of gender on decisions as to arbitrator or counsel. However, I think that what it also does at the same time is that, it avoids the underlying issue that there are certain fundamental biases that people have in relation to gender. To get to the root of the problem would be better: raising awareness of gender-related issues and recognizing unconscious bias would help eliminate the unwarranted biases and eventually reframe the discussion.


  1. In November 2016 Neil Kaplan commented in a lecture titled “Winter of Discontent that “every criticism of the present system can somehow be traced back to speed and cost”, and made suggestions on how the arbitral process can be improved so as to achieve more time and cost efficiency. What are your thoughts on that?


I think there is a lot of truth in that thought. When the process is slow or over-costly, the system is not working. The flexibility of process is intended to create efficiencies in the system, not permit frivolous tactics to stall or otherwise cause trouble for the arbitration. The idea is not to see how close the arbitral process can be to national court litigation or see how clever counsel can tie knots around the arbitral process, but rather to find the straightest line from commencement of an arbitration to its completion with an arbitral award.


  1. How do you envisage the unprecedented global challenges, such as the COVID-19 pandemic and the social unrest resulting from the injustices of the world, would impact on the development of international arbitration in the next 10 years?


With such global challenges pushing for changes to our status quo, I see massive disruption on the development of international arbitration. I imagine we will see technology taking the center stage in innovation of institutional case administration, online dispute resolution platforms, AI-related decision making, and predictive justice. With courts already pushing in this direction, arbitration must keep pace and in fact move ahead of courtroom developments. The challenges will also put the arbitration and dispute resolution community in the “front lines”, and we will have the responsibility of resolving them quickly and efficiently in order to move disputes off the books and allow companies to get back to business.


As part of our 360-degree interview, we would like to invite you to ask us a couple of questions in turn.


  1. Chiann: Mohamed Abdel Waheb has said that one of the most challenging things about entering arbitration practice was: “being liberated from the shackles of profiling, as an African and Arab practitioner, to be able to break through into the world of international arbitration.” What are your thoughts on that comment?


Theresa: Versatility is key to the functioning of international arbitration. As I view it, one of the most fascinating aspects of international arbitration is that it is a transnational legal field that presents transnational opportunities to social, economic and political progress worldwide. It is a field that develops along with and also responds to, the varied challenges arising from the ever-changing global realities, which in turn would continuously call for diverse perspectives and talents.

Profiling entails biases and generalization that could lead to overlooking human potential and impede the nurture of diverse talents that the field of international arbitration demands. Echoing your comments earlier, enhanced awareness and recognition of unconscious bias would help eliminate unwarranted biases. As jurisdictions across the globe are eagerly building up their arbitration capabilities, I am hopeful that limitations on entering arbitration practice, as a result of established national and cultural categories, will be progressively moderated.


  1. Chiann: Do you think the impact of COVID-19 pandemic on case management will bring more efficient arbitrations?


Benson: My personal experience was the government restrictions imposed globally due to the pandemic initially created a lot of uncertainty amongst institutions, tribunals, and counsel as to the case management process. But the subsequent speed and ease in which institutions and tribunals addressed the new circumstances in managing cases reflects the inherent nature of international arbitration as a flexible and adaptable dispute resolution mechanism. Whilst having an entirely virtual arbitration including virtual hearings may not be the answer for all cases, the longer-term impact of this pandemic on case management is that we have tested and enhanced the virtual hearing protocols during this pandemic. I think our knowledge can now be applied to manage smaller value, less complex cases more effectively and efficiently.


Thank you Chiann for taking time out to join us in our 360-degree interview! We hope our readers enjoy this interview as much as we did. We also look forward to our readers following our live coverage of Hong Kong Arbitration Week 2020.


More coverage from Hong Kong Arbitration Week is available here.


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

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Singapore’s Amendment to Its International Arbitration Act Pledges Its Leadership in the Asia-Pacific Region

Kluwer Arbitration Blog - Sun, 2020-10-18 04:18

Singapore has emerged as one of the leading international arbitration centers not only in Asia but also in the world. To keep this title, the Singapore Ministry of Law (“Ministry of Law”) played a major role by keeping track on international and commercial legislative developments, and, adapting and framing innovative legislations to promote international arbitration.

Recent amendment by the Ministry of Law in September 2020 of the International Arbitration Act (“IAA”) pledged to enhance Singapore’s status as an arbitration hub in Asia and improve the legal regime for international arbitration. The recent amendment was proposed for the first time in 2019 at Singapore government’s public consultations. Inputs were taken from businesses, arbitrators, professional bodies, academic and practitioners in both local and offshore law practices, academics and international dispute resolution institutions. Only two of the four propositions pertaining to ‘Default Mode of Appointment of Arbitrators in Multi-Party Situations’ and ‘Recognise that an arbitral tribunal and the High Court have powers to enforce obligations of confidentiality in an arbitration’ are adopted by the Ministry of Law and the other two pertaining to ‘Arbitrator(s) Decide on Jurisdiction at the Preliminary Stage if Requested by All Parties’ and ‘Provision for Parties to Opt-In to an Appellate Procedure on Questions of Law’ are still under consideration. The amendment clearly demonstrates Singapore’s intention to secure the position of top international arbitration seat in the competitive arbitration world. Furthermore, these reforms also indicate Singapore’s accomplishments in adapting to arbitration legislations and institutional rules.


Key features of the amendment

1. Default Mode of Appointment of Arbitrators in Multi-Party Situations

The International Arbitration (Amendment) Bill first proposes to amend Section 9A and insertion of Section 9B of the IAA. A default mode for appointment of arbitrators in multi-party situations is mentioned in Section 9B. To apply this provision, the agreement of parties must not specify any appointment procedure in a situation where there are more than two parties to a dispute. The new amendment also puts forward Section 9B with the default procedure for the appointment of a three-member tribunal as well as for the appointment of the presiding arbitrator in case of multi-party situations.

The new amendment brings Singapore’s IAA in line with the current procedures set out in leading arbitral institutions, such as Article 12(8) of ICC, Article 8.1 of LCIA, Article 8.2(c) of HKIAC. These institutions, more or less, state that the appointing authority will have the power to select all the three arbitrators where the parties, i.e. respondents or claimants, fail to select a co-arbitrator among themselves. This practice has been adopted by most arbitral institutions e.g. the ICC and DIAC did so under the influence of the famous Dutco Case.

The introduction of the default procedure in multi-party situations cures the deficiency in the IAA and shows Singapore’s steadfastness in adapting to recent trends and best practices of international arbitration. However the effect of this amendment would be restricted because it requires the parties not to adopt institution rules containing their own default multi-party nomination procedures.


2. Recognition of the powers of arbitral tribunal and the High Court to enforce confidentiality obligations

The presence of an express provision under the IAA on confidentiality obligations in arbitral proceedings and/or of the award would strengthen the legal framework and parties’ ability to enforce such obligations. Presently, the parties only had an implied default duty under the law of Singapore to keep the arbitration confidential on the parties in respect to all Singapore seated arbitrations under common law principles. Inserting Section 12(1)(j) to the IAA would not result in autonomous imposition of confidentiality obligation. Rather, it authorizes the arbitral tribunal to enforce confidentiality obligations. Section 12(1)(j) explicitly recognized the power of  arbitral tribunal and provided them with confidence while responding to breaches of confidentiality obligations. Furthermore, court-ordered interim measures provisions are also amended. Section 12A(2) is amended to empower both the arbitral tribunal and the High Court to make orders for enforcing confidentiality obligations when parties agree to such obligations in writing by virtue of arbitration agreement and/or applicable law and procedural rules.

This amendment aims to provide the arbitral tribunals with confidence to react to any violation of confidentiality appropriately by strengthening parties’ ability to enforce existing obligations rather than codifying confidentiality obligations. By way of comparison, Section 17 of Cap. 9 Hong Kong Arbitration Ordinance (“HKAO”) adopts a different approach by imposing express confidentiality obligations on parties in Hong Kong seated arbitrations. Nevertheless, the express power to enforce  confidentiality obligations by way of an order is absent in the HKAO. The Ministry of Law’s approach towards this part of the amendment could have been better if they would have further extended the scope by codifying further confidentiality obligations.  As of now, the approach adopted by the HKAO fares better as Hong Kong Courts often recognise arbitral awards in which  injunctions are used to prevent confidentiality.


Further areas where the IAA needs to be amended

Two propositions are still being considered by the Ministry of Law. These propositions are: Requirement That Arbitrator(s) Decide on Jurisdiction at the Preliminary Stage if Requested by All Parties (“first proposition”); and Provision for Parties to Opt-In to an Appellate Procedure on Questions of Law (“second proposition”).

Currently, Section 10(2) of the IAA which regulates power of the arbitral tribunal’s power to rule on jurisdictional issues on the basis of parties’ requests  appears to be underestimated. The first proposition seeks to amend this section to give due regard to parties’ requests for the arbitral tribunal to decide on jurisdictional issues at  preliminary stage of the arbitral proceedings. This proposition has the potential to encourage party autonomy and rapidly resolve jurisdictional issues. At the same time, it also encourages time and cost efficiencies of the arbitral proceedings. On the other hand, a downfall attached to this proposition is that it prioritizes party autonomy over the arbitral tribunal’s discretion over case management and sometimes the tribunal are in better position to determine the timing of such proceeding rather than the parties.

The second proposition seeks to permit parties to approach the appellate body in Singapore, i.e. Singapore High Court, to decide on questions of law that arises out of the final award. The proposition states the requirement of leave of court, which under Section 24A, would only be granted if there is a question of “general public importance and the decision of the arbitral tribunal is at least open to serious doubt,” or if the decision is “obviously wrong.” The latter is limited to truly egregious errors and described as ‘a major intellectual aberration’ by Justice Akenhead. Similarly, other arbitration laws such as the English Arbitration Act 1996 and the New Zealand Arbitration Act also provide for a limited right of appeal on a point of law arising out of an arbitral award. It is worth noting that a few arbitral institutions such as the AAA and the ICDR also adopted new appellate rules in 2013 which allow appeal in matters relating to errors of law and clearly erroneous fact. The bright side of the second proposition is that it reduces the risk of mistakes in the application of law. Parties with preference for minimum curial intervention would welcome this proposition as this limits the ground for annulling an award. However, to some extent, the proposition might erode the quick and efficient resolution of the disputes in arbitration. Though the consequences are limited as the parties are required to opt-in to the appellate procedure.



This amendment by the Ministry of Law reflects the fast pace of innovation, and shows Singapore’s adaptability in an increasingly competitive arbitration world. It further demonstrates Singapore’s capacity to enhance the framework of arbitration and reiterates the Singapore’s intention to strengthen the efficiency of arbitrations seated in Singapore with the likely consequence that it will remain the leading arbitral seat in the region.

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Limitation Period for Enforcement of Foreign Award: Supreme Court of India Finally Answers

Kluwer Arbitration Blog - Sun, 2020-10-18 00:34

The issue of limitation period applicable to the enforcement of a foreign award in India has been a vexed question for a long time because of various conflicting and diametrically opposite decisions rendered by different High Courts in India. The issue has finally been settled recently by the Supreme Court of India on 16 September 2020 in the case of Government of India v. Vedanta Ltd. (‘Vedanta Judgment’). This post briefly discusses the judicial trend on this issue and analyses the consequences of the Vedanta judgment.

New York Convention awards are enforced in India under Part II of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’). Section 47 to Section 49 of the Arbitration Act are of significance: Section 47 sets out the procedure for filing of a petition for enforcement of foreign award; Section 48 replicates Article V of the New York Convention and sets out the limited conditions on which enforcement of a foreign award may be refused; Section 49 states that a foreign award, enforceable under Section 48, would be deemed to be a decree of that court for the limited purpose of enforcement. The limitation period for instituting legal actions in India is governed by the Limitation Act, 1963 (‘Limitation Act’).

Neither the Limitation Act nor Part II of the Arbitration Act contains any specific provision prescribing a period of limitation for filing an application for enforcement of a foreign award. Articles 136 and 137 of the Schedule to Limitation Act are relevant for this purpose. This is in contrast with the legal position in China and Hong Kong where the domestic legislation specifically provides for a limitation period of two years and six years respectively for enforcement of a foreign award in Mainland China (as noted in this post).

Application Period of limitation Time from which it runs 136. For the execution of any decree or order of any civil court Twelve years When the decree or order becomes enforceable 137. Any other application for which no period of limitation is provided in this division Three years When the right to apply accrues

The recurring question before the courts has been whether the limitation period for enforcement of a foreign award is 3 years (Article 137 of the Limitation Act) or 12 years (Article 136 of the Limitation Act).


Judicial Trend

The Bombay High Court in Noy Vallesina Engineering SPA v. Jindal Drugs Ltd (‘Noy Vallesina’) held that the enforcement of a foreign award takes place in two stages. The first stage of determining the enforceability of a foreign award under Section 48 of the Arbitration Act would be governed by Article 137 of the Limitation Act which provides for 3 years from when the right to apply accrues. Upon determination of enforceability, the foreign award is deemed to be a decree and its execution would thus be governed by Article 136 of the Limitation Act which provides for a period of 12 years.

The Madras High Court in M/s Bharat Salt Refineries Ltd. v. M/s Compania Naviera “SODNAC” & Anr (‘Bharat Salt’) took a contrary view where it held that the limitation period of 12 years as provided under Article 136 of the Limitation Act is applicable both for enforcement as well as execution of the foreign award. For this, the Madras High Court relied on the decision of the Supreme Court of India in Fuerest Day Lawson v. Jindal Exports (‘Fuerest Day’) where it was held that a foreign award is already stamped as a decree and can be enforced and executed in one composite proceeding. The decision in Bharat Salt was subsequently followed by Bombay High Court in Imax Corporation v. E-City Entertainment where, departing from its earlier ruling in Noy Vallesina, it held that the phrase ‘foreign award is already stamped as a decree’ as used in the case of Fuerest Day should be construed as ‘foreign award is to be regarded as a decree’ and in that event Article 136 of Limitation Act would be the applicable provision, providing a limitation period of 12 years.


Vedanta Judgment

The Supreme Court in the Vedanta Judgment has taken a completely divergent approach and the ruling of the Court on this issue is encapsulated as follows:

  1. The enforcement of a foreign award under Part II of the Arbitration Act would be covered by Article 137 of the Limitation Act which provides a period of three years, starting from when the right to apply accrues.
  2. Article 136 of the Limitation Act would not be applicable for enforcement of a foreign award under Part II of the Arbitration Act since it is not a decree of a civil court in India.
  3. Section 5 of the Limitation Act permits condonation of delay if the court in its discretion is satisfied that there was a sufficient cause for not making the application within the relevant limitation period. Holder of a foreign award under Part II of the Arbitration Act may file an application under Section 5 of the Limitation for condonation of delay if required.
  4. The holder of a foreign award is entitled to apply for recognition and enforcement of the foreign award by way of a composite petition under Part II of the Arbitration Act. If the enforcing court is satisfied that the foreign award is enforceable, then under Section 49 of the Arbitration Act, the award shall be deemed to be a decree of that court and the court would then execute the award by taking recourse to Indian Law applicable to the execution of decrees.



By resolving the confusion created due to the inconsistent decisions of various High Courts, the Vedanta Judgment provides the long due clarity on the issue. The Vedanta Judgment needs to be seen in the context of the pro-enforcement stance of Indian courts with respect to the execution of foreign awards in India (as noted in this post).

The Supreme Court in the Vedanta Judgment, in the context of a separate issue, has reiterated the legal position that the courts should be reluctant to review the foreign award on merits and should give a narrow interpretation to grounds of refusal for enforcement of foreign award as enumerated under Section 48 of the Arbitration Act. With the enforcing courts unlikely to foray into the substance of the arbitration, losing parties in most cases have no option but to raise a sole objection on the ground of limitation to resist and delay enforcement of the foreign award. The enforcement proceeding in such cases where the losing party pleads the defence of limitation, cause the award holder to face an inordinate delay in their disposal due to the earlier prevailing lack of clarity on the applicable limitation period. The Vedanta Judgment, by settling the law on limitation period applicable to the enforcement of a foreign award, will lead to expeditious disposal of enforcement applications which are pending merely because of the issue of limitation is raised by the losing party.

The Supreme Court in the Vedanta Judgment has observed that the previously prevailing confusion regarding limitation period applicable to the enforcement of a foreign award would be a sufficient ground to condone the delay under Section 5 of the Limitation Act. This observation would ensure that all the foreign award holders who have not commenced enforcement proceedings in India within 3 years from when the right to apply has accrued are not left remediless. At least for the foreseeable future, such foreign award holders can seek condonation of delay under Section 5 of the Limitation Act on the basis of previous lack of clarity in the law.

It is pertinent to note that the Court has not delved deeper into the issue as to when the ‘right to apply accrues’ in terms of Article 137 of the Limitation Act in the context of enforcing a foreign award. The Court has not clarified when exactly the Limitation period commences for enforcement of a foreign award. It need not necessarily be the date of the foreign award and would ideally depend upon the facts of each individual case. Given the complex nature of commercial relationships between the parties and the stakes involved in international commercial arbitrations, it is conceivable that an award holder, who senses a better possibility for the satisfaction of his entire claim, might spend some time in negotiating payment terms with the losing party instead of opting for a long drawn enforcement proceeding in India where the assets of the losing party might be insufficient to cover the entire claim. In the event that the negotiation fails, it may be difficult for the courts to determine when exactly the cause of action arises for commencing the enforcement proceeding. The courts would have to adjudicate it depending upon the facts of each case.

The Vedanta Judgment does away with a lot of confusion and obscurity by pronouncing a definite position of law on the limitation period for enforcement of a foreign award. A conclusive all-encompassing judgment of the Supreme Court relating to ‘right to apply’ in the context of determining limitation for enforcement of foreign awards would be welcome.

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Cyberweek: November 2-6

ADR Prof Blog - Sat, 2020-10-17 21:22
From FFOI Noam Ebner: Welcome to Cyberweek 2020! This will be our 22nd ADR Cyberweek, and we’re confident it is going to be the best Cyberweek ever. This year Cyberweek will run from November 2 to November 6, 2020. Some highlights: Ethan Katsh interviewing Jim Melamed on 25 years of Mediate.com Leah Wing on ODR … Continue reading Cyberweek: November 2-6 →

Uber v. Heller: Can Third-Party Funding Limit Unconscionable Arbitration Agreements?

Kluwer Arbitration Blog - Sat, 2020-10-17 01:20

Uber Technologies Inc. v. Heller raises questions on the possibility of third-party funding limiting unconscionable arbitration agreements. This post examines (I) how third-party funding could reduce the amount of unconscionable arbitration clauses and (II) how it could promote more specific criteria for the doctrine of unconscionability. Finally, this post offers some concluding remarks.


I. Third-Party Funding Relationship with the Doctrine of Unconscionability

Some parties use arbitration agreements to implement standard terms or one-sided arbitration clauses to disincentive the other party from initiating a dispute. It has been considered that such clauses “tilt the scales of justice in their favor”. Usually, this is the case because these agreements are too troublesome or demanding for the other party to initiate arbitral proceedings. Under this thought, the doctrine of unconscionability has flourished.

When it is too unfair for a party to access justice, the arbitration agreement is deemed invalid. The latter is the conception in the recent judgment in Uber v. Heller, where the Supreme Court of Canada (“SCC”) held that Uber’s arbitration clause in its delivery services agreement was unconscionable after Heller started a class proceeding. The SCC concluded that the arbitration agreement must be affected by two factors to be unconscionable: first, the inequality of bargaining power between the parties and, second, the improvident cost of the arbitration. (Prior posts on the blog have analysed the decision from different perspectives.)

As noted by the ICCA-Queen Mary Task Force on Third-Party Funding, third-party funding has developed gradually but steadily in international arbitration. While the doctrine of unconscionability rests under the idea that an arbitration clause is profligate, third-party funding has been endorsed for its pro-access to arbitration capacity. Third-party funding does not promote frivolous lawsuits. On the contrary, its modern conception is that it “enables claimants to proceed with their arbitration claims while delaying payment until the issuance of any resulting arbitration award.”

In Uber v. Heller, the arbitration clause required arbitration under the ICC rules, with the seat of the arbitration in Amsterdam, and an administrative fee to commence the proceedings of $14,500.00 USD. Heller’s annual income was close to this amount, excluding the costs of traveling to Amsterdam and attorney fees. Notwithstanding, Heller’s case could have been an attractive investment for a third-party funder because he claimed $400 million in damages. For comparison, DeepNines, a Texas-based security company, obtained an $8 million loan from a third-party funder, which resulted in a $25 million settlement. The third-party funder for DeepNines received more than $10 million in return. While third-party funders do not routinely invest in disputes with low potential for damage awards, Heller’s case, due to the amount claimed, could have been attractive because it represented a possible high return on investment.

However, the merits of the case – which are pertinent when a third-party funder values an investment – would not have favored Heller. The SCC determined that the “agreement expressly states that it does not create an employment relationship.” Thus, Heller’s contention that the Ontario Employment Standards Act grants benefits to Uber’s delivery service drivers might not provide good prospects of success for potential investors.

The analysis that follows considers whether third-party funding can eradicate  impediments of access to justice, on the one hand, and improvident costs of arbitration (such as conditions or criteria to declare an unconscionable arbitration agreement), on the other.


Third-party funding as a means to promote access to justice

The argument  that investors “do not seem to invest in the types of cases where plaintiffs need access to justice” focuses on one main idea. That parties only seek third-party funding because they might prefer to use their existing assets to further their investment activities but not in arbitration per se. The industry should reject the latter argument. While it is true that funders invest in cases with “the most likely to be successful scenarios” and high potential damage awards, these criteria do not correlate with cases in need of access to justice. Lack of access to justice is not equivalent to low damage awards or meritless claims. A more probable explanation for less investment in access to justice-related cases would be the potential claimant’s lack of knowledge to request such funding.


Third-party funding inclusion to reduce improvident arbitration clauses

The SCC declared it unreasonable to impose the burden of improvident costs as a condition for arbitration on a party that cannot finance its share of the proceedings (¶ 47). However, how would this analysis change if the claimant could obtain third-party funding? Would the clause still be unconscionable? The relevant factor in releasing the claimant from an improvident arbitration clause is whether the claimant could not have acknowledged such an agreement’s implications. In this sense, the SCC determined that this is appropriate when it “could not be expected a person in Heller’s position to appreciate the financial and legal implications of the arbitration clause” (¶ 3).  Thereby, there must be a lack of knowledge of the consequences of the arbitration agreement by one side before it is rendered invalid.

As an example, to prevent this outcome, in AT&T Mobility v. Concepcion, the Supreme Court of the United States (SCOTUS) partially declared invalid an arbitration agreement, only up to the characteristics that were improvident. In that case, the arbitration agreement stated that any party who brings a claim against AT&T would have had to pay AT&T the costs of their attorney fees, regardless of the outcome of the arbitration. SCOTUS noted the unfairness of such condition and determined it was inoperative, while still maintaining arbitration as the proper procedure on the merits. Gary Born pointed out that it might not have been declared unconscionable at all if AT&T had been more careful in the drafting of their arbitration clause. Similarly, in Uber v. Heller, some drafting modifications, such as a more notorious arbitration clause in a standard agreement, could have saved the arbitration clause.

If Heller’s arbitration clause had required arbitration in Canada instead of the Netherlands, the outcome could have been different. Canada is known for being a third-party funding friendly jurisdiction, particularly with class proceedings such as Heller’s claim. Therefore, Heller could have had access to multiple international litigations funders, reducing the arbitration clause’s possibility of being classified as improvident.

Suppose the arbitration clause had required that any party unable to pay for the arbitration had first to attempt to obtain funding. In that case, the arbitration clause might have been upheld as valid, regardless that Amsterdam was the seat of the arbitration. As Justice Coté stated in a dissenting opinion in the case, the arbitration seat is not synonymous with the place of the hearings. Moreover, today more than ever, we understand the usefulness of online hearings in arbitration.


II. Developing the Criteria for the Doctrine of Unconscionability

The inclusion of third-party funding before determining its legitimacy in an arbitration clause would develop the doctrine of unconscionability into a more concrete concept, have pro-arbitration effects, and prevent dilatory tactics.

Third-party funding could clarify the role of “bargaining power” in unconscionable clauses. To assume that all arbitration clauses which are not negotiable are unconscionable would conclude that all adhesion and most concession contracts are not arbitrable. The latter should not be the case.

Third-party funding in this context would advocate the usage of litigation investments while encouraging parties to enroll in arbitral procedures. The fact-sensitive character of unconscionability would give room for third-party funding to be included on a case-by-case basis. Only the particular position of a claimant would trigger unconscionability and not an ambiguous perception that all unilaterally burdensome clauses are automatically invalid.

To this point, we should lastly bear in mind the following questions:

  • What if the arbitration clause had reflected the costs of the administrative and filing fees?
  • What if the arbitration clause required or suggested that parties unable to commence the arbitration should seek a third-party funder before attending local courts?
  • Consequently, would Heller have been forced to seek funding for his claim?
  • Would Heller still be able to argue a lack of knowledge of the implications of such an arbitration agreement?



In conclusion, for an arbitration agreement to be unconscionable, it must be: (i) too onerous to exercise, (ii) the party must not have acknowledged the implications of the clause, and (iii) if there existed a possibility to bargain, there must have been inequality of bargaining power. However, third-party funding would give room for parties to steer clear of these conditions.

The relationship between third-party funding and the doctrine of unconscionability can be mutually beneficial. While third-party funding will not automatically bypass unconscionability, it could help rebalance the scale of justice by serving as an empowering instrument that facilitates access to arbitration (and thereby justice) for all users of arbitration.

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One Size Does Not Fit All: US Circuit Court Declines To Apply Domestic FAA Vacatur Clause to International Award

Kluwer Arbitration Blog - Fri, 2020-10-16 00:12

In a recent opinion, the Eleventh Circuit Court of Appeals confirmed its prior decisions that the Federal Arbitration Act’s domestic provision on vacatur does not apply to international awards. In Earth Science Tech Inc. v. Impact UA, No. 19-10118, 2020 WL 1861402 (11th Cir. April 14, 2020) (unpublished), the Court specifically held that an international arbitration award fell within the Panama Convention and was subject to its purview. Notably, similarities between the Panama and New York Conventions (“the Conventions”) allowed for application of legal authorities decided under either Convention.1)See also, Productos Roche S.A., v. IUTUM Services Corp., No. 20-20059-Civ-Scola, 2020 WL 1821385 at * 1 (S.D. Fla. April 10, 2020) (the New York and Panama Conventions “are substantially identical. Thus the case law interpreting provisions of the New York Convention are largely applicable to the Panama Convention and vice versa.”). jQuery("#footnote_plugin_tooltip_3550_1").tooltip({ tip: "#footnote_plugin_tooltip_text_3550_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Earth Science involved a commercial dispute between a Florida-based CBD company and a Salvadoran biotechnology supplier regarding the quality of product provided pursuant to a distribution agreement. The parties’ agreement provided for arbitration before JAMS International pursuant to the UNCITRAL rules with a New York seat. The arbitration demand asserted claims for breach of contract along with conversion and tortious interference with contract. The tribunal ultimately ruled in favor of the Salvadoran company which then sought to confirm the award in a Florida district court. In response, Earth Science sought vacatur on the grounds that the tort claims were not arbitrable and the damages awarded excessive. The Eleventh Circuit affirmed the district court’s decision confirming the arbitral award.

The Court held that the seven exceptions to enforcement of an international award pursuant to the Conventions were the exclusive means of any challenge to an arbitral award. None of those exceptions had been invoked in Earth Science’s petition to vacate the award which instead relied on 9 U.S.C. § 10(a)(4) of the FAA. That provision provides for vacatur or rehearing “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” The Court held that FAA Section 10(a)(4) was limited to challenges to domestic awards and held it inapplicable.

The Court dispensed with several challenges. First, Respondent Earth Science challenged the tribunal’s jurisdiction to address tort related claims. The Court held the broad arbitration clause which invoked the UNCITRAL Rules specifically provided the tribunal with broad authority enabling it to do so.

Next, Earth Science challenged the amount of the award contending it was excessive and subject to modification pursuant to pursuant to 9 U.S.C. § 11 of the FAA. The Court again held the domestic provision inapplicable and determined it lacked the power to substantively amend or modify the award. While the claimant put forth ample evidence supporting the claim including an expert report and substantiating evidence, Earth Science failed to introduce any report or counter-veiling evidence. As such, the claim was not only procedurally improper but also lacked merit.

The Eleventh Circuit applied a similar stance in Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GMBH, 921 F.3d 1291, 1301-02 (11th Cir. 2019). There, the Court affirmed the dismissal of a petition to vacate an international award where respondent INPROTSA also failed to raise any New York Convention defenses. In so holding, the Court specifically rejected INTPROTSA’s contention that the U.S. Supreme Court had abrogated its holding in Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1446 (11th Cir. 1998) that “the defenses enumerated by the Convention provide the exclusive grounds for vacating an award subject to the Convention:”

The Court’s reasoning in refusing to vacate the award – that an asserted ground for vacatur under the FAA did not apply on the merits – does not directly conflict with Industrial Risk’s holding that such a ground would not have warranted vacatur because the ground is not enumerated in the Convention.

At most, the Supreme Court’s analysis indirectly suggests that the Convention does not supply the exclusive grounds for vacating an international arbitral award. (cites omitted). But that is not enough under our precedent to conclude Industrial Risk has been overruled.

Nonetheless, the Court held the arguments presented in support of vacatur (that the tribunal exceeded its authority pursuant to 9 U.S.C. § 10(a)(4) of the FAA) lacked merit and granted claimant’s petition to confirm the award. In doing so, the Court also rejected a public policy defense premised on fraud advanced in opposition to the petition to confirm; a topic addressed broadly by Professor Margaret Moses here, and, in particular as to fraud, here. Id. at 1306.

In short, in these two recent decisions, the Eleventh Circuit has clearly reaffirmed its holding in Industrial Risk that any challenge to an international arbitration award must travel exclusively under the terms of the Conventions and not the domestic FAA provisions.

References   [ + ]

1. ↑ See also, Productos Roche S.A., v. IUTUM Services Corp., No. 20-20059-Civ-Scola, 2020 WL 1821385 at * 1 (S.D. Fla. April 10, 2020) (the New York and Panama Conventions “are substantially identical. Thus the case law interpreting provisions of the New York Convention are largely applicable to the Panama Convention and vice versa.”). 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: Construction Arbitration in Central and Eastern Europe: Contemporary Issues
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Asynchronous Instruction in This Year of Living Dangerously

ADR Prof Blog - Thu, 2020-10-15 17:51
Probably every student and instructor has had difficult challenges this year accommodating to the routines needed because of the pandemic. Many faculty have been teaching fully or partially online and will continue to do so next semester because the virus is still way out of control in the US. Although using video has some advantages, … Continue reading Asynchronous Instruction in This Year of Living Dangerously →

‘International Arbitration and the COVID-19 Revolution’ (Part 2 of 2)

Kluwer Arbitration Blog - Thu, 2020-10-15 00:57

This is the second of a two-part blog post series for an upcoming publication titled International Arbitration and the COVID-19 Revolution edited by us. As detailed in Part 1 of this series, the book contains 17 chapters from 31 leading international arbitration practitioners. The focus of the contributions range from procedural topics in international arbitration emerging during and due to the COVID-19 pandemic addressed in Chapters 1 through 11, which are covered in Part 1 of this series, and industry-sector specific contributions addressed in Chapters 12 through 17 covering construction, energy, aviation, TMT, finance, and insurance, which are covered in this post.

COVID-19 has detrimentally impacted every country worldwide, affecting many sectors. However, it has also incentivised new thinking on how to improve business continuity and efficiency. Chapters 12 through 17 address relevant points in this regard, from government-imposed sanctions to the benefit of remote hearings in collective action lawsuits and the capacity for dealing with added complexity and novel issues in different sectors, as well as the efficacy of international arbitration in times of economic strain. Although some major arbitrations have already surfaced due to COVID-19, many more disputes with increasing complexity will likely arise, rendering the importance of the points discussed in the below contributions even more fundamental for timely, sustainable, and business-oriented solutions.

In ‘COVID-19 and Construction Disputes’, Todd Wetmore and Simon Elliot of Three Crowns LLP explore the effects of COVID-19 on construction disputes. They analyse the impact that the imposition of social distancing measures has had on the procurement and execution of construction projects, thus exploring the domino effects of such measures across operations, from work site attendance and development timelines to financial and supply sustainability.

The authors of this chapter also explore the different types of claims that are expected to be triggered by the COVID-19 pandemic in civil and common law systems, including requests for extensions of time and prolongation costs. The expected increased reliance on the doctrines of hardship, force majeure, and contractual change of law doctrines, as well as on the doctrines of frustration, impossibility, and other non-contractual doctrines, are thoroughly assessed in this chapter. The authors posit that the complexity of disputes will continue to increase, with contestation in areas such as concurrency and causation becoming more frequent.

In ‘COVID-19 and Energy Disputes’, Samaa Haridi and Samuel Zimmerman of Hogan Lovells LLP explore the effects of COVID-19 on energy disputes. They explore how project development has been affected across the entire global supply chain, also analysing the adoption by many States around the world of ‘green recovery’ aid packages focussed on investments in green energy projects.

The authors consider the types of disputes that will arise, covering contract terminations, disrupted supply chains due to manufacturing concentration (as in the case of solar panels in China), and non-performance, expecting that many of these disputes will turn on the applicable law and the specific language of the contract. The expected reliance on force majeure as well as hardship is also analysed. The chapter further provides an exploration of the different types of investor-state disputes, with focus on cases such as Philip Morris, Marfin, and CMS, which provide a framework for the analysis of the types of disputes that are expected. The enforcement of arbitral awards is also becoming more difficult during the pandemic, due to restricted mobility and backlogged courts, or because the award debtor is forced into insolvency, thus rendering the decision to commence arbitral proceedings one of paramount commercial importance.

In ‘COVID-19 and Aviation Disputes’, Johnny Champion, Rupali Sharma, and Patrick Bettle of Stephenson Harwood LLP explore the effects of COVID-19 on aviation disputes. With international passenger demand reduced dramatically, thus triggering revenue losses for airlines that precipitate across the global supply chain, the aviation industry has had one of the most severe downturns caused by the pandemic. The authors discuss that much of the future performance of the industry depends on the severity of further waves of the pandemic. Diverse supply chain stages of the industry, such as jet fuel costs, are also explored, along with the significant liabilities accrued due to previously sold flight tickets that were cancelled because of government-imposed restrictions.

The nature of the industry and the symbiotic relationship between airlines, aircraft manufacturers, and aircraft lessors is also analysed in this chapter, in combination with the reduced availability of resources amongst stakeholders that are considering disputes to move to arbitration or litigation. The types of disputes that are explored include those relating to aircraft leases and aircraft purchase agreements, with the doctrines of hardship, force majeure, and frustration anticipated to feature significantly in this context.

In ‘COVID-19 and Technology, Media and Telecommunication Disputes’, Olga Hamama of V29 Legal and Danielle Herrmann of Neuland Legal explore the effects of COVID-19 on technology, media, and telecommunications (TMT). With TMT being a broad sector that includes manufacturers of mobile devices and semiconductors, enterprise software providers, as well as broadcast and media firms, the impact of the pandemic has been varied, from remote work leading to variations in the demand and production time for certain software applications (such as online streaming and video-conferencing tools) and hardware (such as laptops).

The authors explore the changing nature of the TMT industry and the way competitors are working together, and also the spur in digital innovation that the COVID-19 Revolution has brought. Although many disputes relating to TMT have traditionally been subject to litigation, the efficiency of arbitration through the build-up of remote hearings and e-filings has made it acutely catered to address the current commercial needs of TMT stakeholders.

In ‘Finance Disputes and a Pandemic: The Eye of a Perfect Storm?’ Philippa Charles of Stewarts Law LLP explores the effects of COVID-19 on disputes in the financial sector. The contribution explores different types of government responses in the form of aid to drive liquidity and economic activity to keep businesses active within the financial sector. However, because of travel, work, and other government-imposed restrictions, meaningful economic activity has been lax. The author contends that the range of disputes will continue to grow, increasing in complexity and type, but that engaging in ‘breathing space’ from disputes is critical for the future functioning of the sector.

Many of the disputes will seek to use, as with other sectors, the doctrines of force majeure, frustration, adverse change, as well as business interruption policies touched upon in ‘COVID-19 and Insurance Disputes’. However, COVID-19 has also brought with it additional spurs of innovation within the financial services sector, particularly in relation to fintech, blockchain, and cryptocurrency projects whose tools lend themselves to arbitration to help augment the level of security, automation, and efficiency. There has been significant progress in each area with new disputes that clarify outstanding issues and pave the way for future applications.

In ‘COVID-19 and Insurance Disputes’, Alexander Oddy and Chris Parker of Herbert Smith Freehills LLP explore the effects of COVID-19 on insurance and reinsurance disputes. With many, if not most, disputes having been and being anticipated to continue to be resolved by arbitration, the authors unpack the types of disputes that may arise with a focus on England and Wales and on liability, trade credit, and business interruption policies aiming to recoup costs for business continuity after having suffered reduced profits due to government lockdowns. The contribution also discusses the most recent test case the UK Financial Conduct Authority (FCA) brought in the English High Court against a number of insurers, namely The Financial Conduct Authority v. Arch Insurance (UK) Limited and others [2020] EWHC 2448 (Comm), which was handed down on 15 September 2020 largely in favour of policyholders.

Chapters 12 through 17 address the repercussions of the COVID-19 pandemic on diverse industries and sectors. While it is indisputable that the COVID-19 pandemic has had an unparalleled impact on the economy and businesses across every sector, industry, and country, rendering it a truly global crisis, it has also triggered a revolution in many fields, international disputes being no exception. Although the pandemic is giving rise to more complex arbitrations that are conducted differently with respect to both procedure and substance, it also brings novel ways of addressing disputes in international arbitration through cooperation, creativity, commercial awareness, and technology.


The authors wish to thank Hazem Nakib and Sicen Hu, WilmerHale, for their help in preparing this blog post.

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Upcoming Educational Programs

ADR Prof Blog - Wed, 2020-10-14 15:34
The Boston Law Collaborative Institute will offer the following programs on implicit and systemic bias. October 15:  “Assessing Workplace Bias in the Era of #MeToo and Black Lives Matter,” with Jody Newman, Esq. October 27:  “Biased? Who, Me?!?  A Candid Look at the Problem of Implicit Bias,” with Audrey Lee, Matt Thompson, and David Hoffman. … Continue reading Upcoming Educational Programs →

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Investigating Allegations Of Corruption In International Arbitration: Practical Considerations

Kluwer Arbitration Blog - Wed, 2020-10-14 00:04

Corruption has been a hot topic in investor-state arbitration in recent years. This is particularly the case in situations where Claimant investors are alleged to have procured their original investment through bribery, which, if proven, may lead to tribunals denying their claims, especially under ICSID.

Many commentators have focused on legal aspects such as the burden of proof (a party’s right and duty to support its claims through the introduction of evidence) and the standard of proof, a concept more familiar to common law practitioners. In April 2019, the Basel Institute on Governance published a toolkit for arbitrators summarising the thinking and current practice on corruption in international arbitration. A dedicated ICC Task Force aims to explore existing approaches to allegations or signs of corruption in disputes, and articulate guidance for arbitral tribunals on how to deal with such occurrences.

This article focuses on a practical question: how can one go about proving (or disproving) that the initial investment was obtained through corrupt means?

Potential Claimants and their legal teams may wish to carry out their due diligence before launching a claim to assess to what extent the original investment complied with applicable laws and the Claimant’s anti-bribery policies and processes. Arbitrators may also consider investigating allegations of corruption sua ponte. In that case, we assume that the Claimant would agree to providing access to their staff and their books and records to enable a forensic accountant to carry out their work.

Whilst corruption can take several forms, this article focuses on bribery, which can be defined as giving or receiving a financial or other advantage in connection with the improper performance of their duties by someone in a position of authority (often a public official). We outline below the approach that forensic accountants typically adopt to shed light on the circumstances surrounding an investment. After formulating a working hypothesis, investigators typically carry out interviews with key individuals of the Claimant’s corporation or key individuals involved in the transaction, search available financial data, contracts, books and records and review email correspondence. The aim is to identify potentially relevant transactions and gather evidence of their intended or actual beneficiary and documented purpose. We provide more detail on each of these steps below.


Formulating a hypothesis. The first step of a bribery investigation is to formulate one or several working hypothesis(es): if bribery occurred in this particular case, how would it have manifested itself?

Bribery can involve direct payments of cash, such as gifts or commissions paid to intermediaries in a tender process. These are the type of schemes envisaged by the Basel Institute. However, bribery can also manifest itself more indirectly. For example, a company can provide goods or services for free or provide expensive and/or repeated entertaining and hospitality to people in a position of authority to qualify or be selected for a bid. In those cases, the Claimant may have paid its regular suppliers (e.g. hotels, restaurants) which (absent large one-off amounts or a “tip”) may not raise suspicion.

In the context of due diligence, it is important to discuss with the potential Claimant and their lawyers what possible bribery scenarios could have taken place, which will constitute the starting point of the investigation. It is also important to understand the applicable framework (laws, internal anti-bribery policies and procedures) and the potential Claimant’s usual business practices. This will help assess to what extent any transactions identified depart from acceptable standards.


Interviewing key individuals. Human intelligence is key to increasing the chances of identifying relevant transactions and key evidence.

In our experience, there is no replacement to being ‘on the ground’ and speaking directly to the company’s staff, including junior people who may have a better/different/alternative view of past events and may help refine the working hypothesis.

Staff insight is often key to understanding how transactions were recorded. For example, payments to consultants, agents and intermediaries may have been made through a small subsidiary that is not material at group level and recharged as a management charge. Without a “tip” pointing in that direction, such a payment may be easily missed, in particular if the subsidiary’s books are held outside the group’s core finance systems. Similarly, the company’s staff may have recollection of specific hospitality events or deliveries of goods and services around the relevant time.

The quality of human intelligence that can be obtained in that way will depend heavily on the company’s culture, its policies and processes for speaking up, the geography(ies) and the networks of people involved. There is immense value here in bringing in local expertise – people well versed in the local language and local culture – to increase the chances of building a relationship of trust on the ground.


Analysing financial data and documentation

Where bribery involves direct cash payments, the well-known mantra is: ‘Follow the money’. Forensic accountants typically aim to:

  • identify outgoing payments made by the party suspected of having obtained a contract or business advantage from bribery, and
  • assuming a payment of cash, follow the funds through to its ultimate beneficiary(ies).

Identifying any outgoing payments made by the investor is typically based on bank statements and/or cash books, supported by other accounting records such as invoices, goods receipt notes or proof of acceptance of service delivery. If a list of all outgoing payments made in a certain period can be extracted from a finance system (e.g. a cash book), advanced data analytics techniques can be used to try and identify outliers and relevant transactions based on patterns, amounts, beneficiaries or keywords in narrative descriptions. However, books and records can be incomplete or patchy, for example due to the size of certain subsidiaries (which may warrant a less sophisticated finance system) or the standard of record-keeping prevalent in a certain geography. In that case, identifying outgoing payments can become a more manual exercise, and one where the assistance of the potential Claimant’s staff will be all the more valuable.

Following the funds through to its ultimate beneficiary(ies) can be an arduous task. Bribery schemes often involve intermediaries, offshore entities and circular payments, which make them inherently difficult to trace, track and evidence. The main sources of information here are often what can be found in the public domain. It may be useful to involve corporate intelligence and asset tracing professionals who will search publicly available information, such as databases, company registers, internet and social media sites. Often, though, the trail of evidence will go cold very quickly without cooperation from the Claimant, present or former employees and key third parties such as banks. The involvement of offshore entities in a bribery scheme often proves insurmountable as financial data and the identity of directors and ultimate beneficiaries may not be easily obtainable (if at all).


Evidencing the purpose of transactions: Once relevant transactions have been identified, the next step is to gather evidence on the recorded purpose of such payments and how they compare to what was commercially expected, what happens in the normal course of business and the potential Claimant’s policies and usual business practices.

The extent of documentation available will be key. Emails and documents saved on the company servers will typically be gathered and searched using document review platforms. In certain jurisdictions and for older investments, it may be necessary to search through paper files on site. In many cases, though, the best available evidence of the purpose of transactions will be the recollections of key individuals.


Reporting on findings

In a due diligence context, findings are typically reported to the potential Claimant in an advisory report (which may be privileged depending on the jurisdiction). Should an arbitration be initiated, findings can be introduced either by way of a witness statement or via an expert report. In the latter case experts may be asked for example to provide an opinion on the extent to which any identified transactions appear to be within the entity’s business purpose, policies and usual business practices.

Defining the scope of an investigator’s work is key. Conclusions are necessarily constrained by the intelligence and available data. Often it will be difficult to conclusively say that bribery did or did not take place. Conclusions may well be limited to flagging a series of transactions, clues and reported events, leaving their interpretation to the tribunal.



In summary, proving bribery is a challenging task: many years may have passed, key staff may have left or be unwilling to assist, financial and other data may be patchy and proactive steps may have been taken to conceal evidence of transactions. Disproving corruption is even more challenging as a lack of evidence does not necessarily mean that the transactions did not occur. The outcome of an investigation depends heavily on the availability of adequate, sufficient and complete data and the cooperation of key individuals.


The views expressed in this article are the authors’ and do not necessarily represent EY’s position.

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