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Mediation Summit in Changsha, China

Mon, 2018-09-17 05:46

The China Council for Promotion of International Trade (CPPIT) in conjunction with its Hunan Province Sub-Council convened a dynamic Mediation Summit in Changcha, China, on 12-13 September 2018.

The first panel discussed implications of the Belt/Road Initiative, announced five years ago.

GAO Xiaoli, Deputy Chief Judge of the Civil Tribunal of the Supreme People’s Court, addressed how Chinese courts can provide assistance in international disputes, particularly international commercial mediation.  She noted that increased engagement in international trade has challenged China’s capacity to resolve commercial trading disputes efficiently and in line with disputants’ interests.  She rejected the model of mediation as a substitute for litigation, and suggested that there is no need to approach the challenge with an “either/or” attitude.  It does require that mediated agreements be enforceable (either judicially or through the notary process), strengthening the effectiveness of the international mediation process.  Enforcement proceedings should also be quick and not protracted, and sensitive to commercial demands.  She proposed certain procedural administrative improvements to support the growth of mediated resolutions.  Some of these – such as court-appointed mediation — were promulgated already by decree dated 27 June 2018.    (A later panel, which I moderated, addressed enforcement of mediated settlement agreements through the newly promulgated Singapore Convention.)

Pasit ASAWAWATTANAPORN, Managing Director of the Thailand Arbitration Center, noted that his country is an important trade and investment partner with China.  It has benefited from China’s aggressive investment activities in connection with Belt/Road, resulting in a 10% growth in Chinese trade.  Thailand’s own infrastructure plans are heavily influenced by Belt/Road, for example the high-speed train from China through Laos to Thailand.  These public and private investments amount to at least 1.5 trillion baht (USD 45 billion) in the past five years, including roads, airports, hospitals, ports and tourism.  In acknowledgement of the critical nature of the success of these projects, the Thai government has eased restrictions on foreign workers, loosened regulations of procurement laws, and – in the case of the high-speed train project – taken actions to anticipate and forestall disputes.  He noted that arbitration is not the ideal approach inasmuch as disputes in this area are best addressed early, inexpensively, and with the goal of a consensual outcome.

CHEN Fuyong, Deputy Secretary General of the Beijing Arbitration Commission, offered several case studies of disputes that have arisen from activities associated with Belt/Road.  One was a construction dispute between a Hong Kong and Beijing corporations to complete a construction located in Russia, featuring an arbitration clause before the Beijing Arbitration Center.  Claimant initiated such an action, but Respondent sought to enforce the requirement of mediation prior to arbitration.  The arbitral tribunal interpreted the Russian “Development Project General Contract” to be too general to enforce, and permitted the arbitration to go ahead.  In another case involved a purchase agreement providing for payment by the acquired company of contingent debt or outcomes of lending legal proceedings.  Dispute resolution proceedings were sufficiently vague as to be commercially ineffective.  The lesson is a general one – clarity matters when drafting dispute resolution agreements and when transferring risk through contracts of insurance.

Prachant KUMAR, of the Bar Association of India, noted you can choose friends and enemies but not neighbors, and the close regional reliance with China has dictated consensual, non-confrontational dispute resolution processes between Chinese and Indian businesses.  Cultural traditions such as frugality, efficiency, and attention to elders inform the use of consensual resolution processes in the region; it is simpler and more cost-effective than alternatives.  He warned of the risk that, as happened with international arbitration, the simple features of mediation may be made obscure, legalistic and expensive if appropriated by the legal community.  He used an iPhone as an example of something that contains much expertise, but is designed to be very simple for the user of the device.  He urged that companies engaging in cross-border deals opt for simple agreement language, close monitoring of local advisors, and early attention to operational issues that, if left unattended, could develop into formal, disruptive disputes.  He reported on a 2018 initiative in Indian courts that commercial disputes be mandatorily referred to mediation – an effort that, if successful, could have a substantial and welcome impact on the state of civil justice in India.

 

Supreme Court Grants Cert Addressing Delegation of Arbitrability

Thu, 2018-07-05 14:46

Upon reconvening in October 2018, the Supreme Court will take up  an interesting question involving the familiar rules of First Options v. Kaplan:  Who is to decide whether a claim is subject to arbitration — a court or the arbitrator?  The peculiar facts giving rise to that concern in Archer and White Sales Inc. v. Henry Schein Inc. broaden, rather than limit, the case’s interest.

Archer, a distributor and seller of dental equipment, brought a suit against Schein, a manufacturer, alleging violations of the Sherman Antitrust Act through a pattern of conduct including price-fixing and anti-competitive agreements that were continuing.  The suit sought both money damages and an injunction prohibiting the continuing conduct.

Schein moved to compel arbitration pursuant to an arbitration agreement that required the application of AAA Rules and that carved out of its scope “actions seeking injunctive relief.”  The Magistrate Judge granted the defendants’ motion to compel arbitration on the grounds that (a) the choice of AAA Rules evince an intention to delegate arbitrability to the arbitrator, and that (b) the arbitration agreement can be reasonably construed as contemplating the inclusion of this dispute.

(AAA Rule 7(a) provides that an “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”)

The district court vacated the Magistrate Judge’s order and held that the dispute was not arbitrable  pursuant to the arbitration agreement, because it expressly carved out any claim for the injunctive relief sought by the plaintiff in the action.

Upon appeal to the Fifth Circuit, the parties agreed to the existence of an arbitration agreement, but not to whether its scope included the filed action.  Following its precedent in Douglas v. Regions Bank, the court entered into a two-step analysis, asking first whether the parties “clearly and unmistakably” intended to delegate the question of arbitrability to an arbitrator, and second whether there is a plausible argument for the claim’s being arbitrable.  This is so because, according to the Douglas analysis, if the argument of arbitrability is “wholly groundless,” it made no sense to send to an arbitrator a dispute as to which there are no grounds whatsoever for arbitration.

As to the first step — whether the parties unmistakably agreed to delegate arbitrability — the court skirted the question of whether AAA Rule 7(a) delegated the question of arbitrability to claims that are subject to the carve-out in the arbitration agreement.  Instead, it held that the second Douglas step was dispositive irrespective of the resolution of that first inquiry.  That second-step analysis was straightforward, according to the Fifth Circuit.  The arbitration agreement “expressly excludes certain types of disputes,” and among them are claims for injunctive relief.  Here we have a dispute where the claimant seeks injunctive relief.  Any conclusion  that the claim is subject to arbitration is therefore “wholly groundless,” and the court could see “no plausible argument that the arbitration clause applies” to it.  The district court therefore properly determined that the action was not subject to arbitration, and its order denying defendants’ motion to compel was affirmed.  “The mere fact that the arbitration clause allows [plaintiff] to avoid arbitration by adding a claim for injunctive relief does not change the clause’s plain meaning.”

[Note to Self:  Revise slide 19 of the “Drafting Arbitration Clauses” Power Point!]

So we have several interesting questions.  Does a clause carving out “actions seeking injunctive relief” carve out that portion of an action that seeks an injunction, but preserve that portion that seeks monetary damages?  Is the idea of booting “wholly groundless” claims of arbitrability properly applicable only to claims having nothing whatsoever to do with the contract at issue (say, a claim for an unrelated, non-contractual injury)? In determining the “wholly groundless” nature of the assertion of arbitrability, is the court improperly construing the arbitration agreement, in derogation of the parties’ determination that the arbitrator should do so pursuant to AAA Rule 7(a)?  Is there an at-least-colorable construction of the carve-out language that would hold that the parties may come to court to seek injunctive relief, but must arbitrate claims for money damages?

At least we will have no doubt about “who decides” these questions — the Supreme Court will.

Mediation Settlement Enforcement Protocol Approved

Tue, 2018-06-26 07:59

Deborah Masucci, Chair of the International Mediation Institute, advises:

“Yesterday [25 June 2018],during the 51st Session of UNCITRAL, the final drafts were finalized for a Convention on the Enforcement of Mediation Settlements and a Model Law for the same.  The drafts are being referred to the Commission for adoption later this year. The Group also approved a resolution to name the Convention the “Singapore Mediation Convention” with a signing ceremony expected in Singapore in 2019.  This action concludes three years of vigorous debate and acknowledges the role of mediation for dispute settlement in cross border dispute resolution. ”

Congratulations to all whose diligence and persistence has led to this welcome outcome.