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ICC Court President Alexis Mourre To Seek Another Term - Law360

Google International ADR News - Thu, 2018-04-12 15:39

ICC Court President Alexis Mourre To Seek Another Term
Law360
Law360 (April 12, 2018, 4:26 PM EDT) -- Alexis Mourre, the current president of the International Chamber of Commerce's International Court of Arbitration, has announced that he will be seeking an additional three-year term to begin in July. Mourre, an ...

ICC Court President Alexis Mourre To Seek Another Term - Law360

Google International ADR News - Thu, 2018-04-12 15:39

ICC Court President Alexis Mourre To Seek Another Term
Law360
Law360 (April 12, 2018, 4:26 PM EDT) -- Alexis Mourre, the current president of the International Chamber of Commerce's International Court of Arbitration, has announced that he will be seeking an additional three-year term to begin in July. Mourre, an ...

Winner of AALS ADR Section Best Article of 2017 Award

ADR Prof Blog - Thu, 2018-04-12 13:31
The AALS Section on Alternative Dispute Resolution is delighted to announce the winner of this year’s (inaugural) award for best scholarly article published in print or online in the previous year in the field of ADR. The Committee received a tremendous number of nominations of extremely high-quality articles, making the decision very difficult.  The Section’s 2018 … Continue reading Winner of AALS ADR Section Best Article of 2017 Award →

New arbitration and mediation centers in Japan - Lexology

Google International ADR News - Thu, 2018-04-12 11:23

New arbitration and mediation centers in Japan
Lexology
Centre for International Dispute Resolution, Tokyo. The Japanese government recently announced that it is proposing to establish a new dedicated dispute resolution centre in Tokyo. The move follows recent initiatives in countries such as South Korea ...

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India: The New Delhi International Arbitration Centre Bill, 2018: Creating An Ecosystem For International ... - Mondaq News Alerts

Google International ADR News - Thu, 2018-04-12 07:51

India: The New Delhi International Arbitration Centre Bill, 2018: Creating An Ecosystem For International ...
Mondaq News Alerts
Objective: To provide for the establishment and incorporation of the New Delhi International Arbitration Centre (NDIAC), for the purpose of creating an independent and autonomous regime for institutionalized arbitration and for acquisition and transfer ...

DCJ Mwilu urges judges to be firm, avoid unnecessary adjournments - Capital FM Kenya

Google International ADR News - Thu, 2018-04-12 06:18

Capital FM Kenya

DCJ Mwilu urges judges to be firm, avoid unnecessary adjournments
Capital FM Kenya
She was speaking during the opening session of a two-day National Alternative Dispute Resolution Stakeholders' Forum jointly convened by the Alternative Dispute Resolution (ADR) Taskforce and Nairobi Centre for International Arbitration (NCIA). The ...

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Appellate Court Limits “Procedural Loophole” to Enforce Foreign Arbitral Awards in New York Absent Jurisdiction over the Award Debtor or Its Property

Kluwer Arbitration Blog - Thu, 2018-04-12 02:15

Andreas Frischknecht

The recent decision by an intermediate New York appellate court in AlbaniaBEG Ambient Sh.p.k. v. Enel S.p.A.1)A.D.3d, No. 152679/14, 2018 WL 755355 (N.Y. App. Div. 1st Dep’t Feb. 8, 2018). jQuery("#footnote_plugin_tooltip_8816_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); has sharply curtailed “a procedural loophole in Chapter 2 of the Federal Arbitration Act”2)Commissions Imp. Exp. S.A. v. Republic of Congo, 916 F. Supp. 2d 48, 49 (D.D.C. 2013), rev’d and remanded sub nom. Commissions Imp. Exp. S.A. v. Republic of the Congo, 757 F.3d 321 (D.C. Cir. 2014). jQuery("#footnote_plugin_tooltip_8816_2").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); that some creditors have used to obtain indirect recognition of foreign arbitral awards in New York without having to establish personal jurisdiction over the debtor, or the presence of property belonging to the debtor, in New York.

Background: Different Jurisdictional Rules for Recognition of Foreign Arbitral Awards and Foreign Judgments

In New York, the vast majority of foreign arbitral awards are enforced directly under Chapter 2 of the U.S. Federal Arbitration Act (“FAA”). But unlike in some other jurisdictions, the holder of a foreign award for the payment of money also has the option of first obtaining a foreign court judgment recognizing the award and then seeking recognition of that judgment in New York as a foreign money judgment under Article 53 of the New York Civil Practice Law and Rules (“CPLR”).3)See Seetransport Wiking Trader Schiffahrtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 29 F.3d 79, 81 (2d Cir. 1994) (French judgment conferring exequatur on an arbitral award issued in a Paris-seated ICC arbitration was entitled to recognition under Article 53 of the CPLR as “the functional equivalent of a French judgment awarding the sums specified in the award”); see also Commissions, 757 F.3d at 323 (proceeding to enforce English High Court order recognizing ICC award in Paris-seated arbitration was “a lawful, parallel enforcement scheme” not preempted by the FAA). jQuery("#footnote_plugin_tooltip_8816_3").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); This is known as the “dual enforceability” principle. For a more fulsome discussion of this topic, see Andreas A. Frischknecht, Yasmine Lahlou & Gretta Walters, Enforcement of Foreign Arbitral Awards and Judgments in New York, at 210-12 (Kluwer Law International 2018).

A key reason why some holders of foreign arbitral awards have opted to seek recognition of a foreign judgment recognizing their award (rather than the award itself) in New York stems from the requirement that award creditors must establish jurisdiction over the debtor (known as personal jurisdiction) or the debtor’s property (known as quasi in rem jurisdiction) to obtain recognition of a foreign arbitral award under Chapter 2 of the FAA.4) See AlbaniaBEG, 2018 WL 755355, at *9 (citing Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393, 398 (2d Cir. 2009) & Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1118, 1122 (9th Cir.2002)). jQuery("#footnote_plugin_tooltip_8816_4").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In contrast, New York courts have held that the creditor may obtain recognition of a foreign money judgment in New York even if the judgment debtor is not subject to personal jurisdiction in New York and has no assets in the state. The rationale for this exception is that proceedings to recognize a foreign judgment are merely “ministerial” where a foreign court with proper jurisdiction over the debtor has already adjudicated the parties’ underlying dispute.5) Abu Dhabi Commercial Bank PJSC v. Saad Trading, Contracting & Fin. Servs. Co., 117 A.D.3d 609, 613 (N.Y. App. Div. 1st Dep’t 2014). jQuery("#footnote_plugin_tooltip_8816_5").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

AlbaniaBEG Reduces the Jurisdictional Gap

In AlbaniaBEG, the Appellate Division, First Department sharply limitecthe scope of this exemption from personal or quasi in rem jurisdiction for judgment enforcement proceedings. Going forward, the exemption applies only where the judgment debtor “does not contend that substantive grounds exist to deny recognition to the foreign judgment” under CPLR Article 53. Otherwise, the New York court’s “function ceases to be merely ministerial,” and the judgment creditor must establish either personal or quasi in rem jurisdiction. This newly-formulated rule reduces the jurisdictional discrepancy between proceedings to enforce foreign money judgments under the CPLR and proceedings to enforce foreign arbitral awards under the FAA.

The First Department reversed the trial court’s ruling and granted the Italian defendants’ motion to dismiss the Albanian plaintiff’s action to recognize and enforce an Albanian judgment arising from a dispute over the contemplated construction of a hydroelectric power plant in Albania. After one of the defendants prevailed against the plaintiff’s parent company in an Italian arbitration, the plaintiff commenced proceedings in Albania and obtained a judgment against the defendant in that country. The plaintiff then filed a motion for summary judgment in lieu of a complaint against the Italian counterparty and its parent company seeking enforcement of the Albanian judgment in New York.

The defendants moved to dismiss, asserting that the plaintiff had established neither personal nor quasi in rem jurisdiction because both defendants were “foreign corporations with no known presence in New York,” and the plaintiff neither alleged any dispute-related contacts between the defendants and New York nor identified any property of the defendants within the state. The defendants also planned to assert multiple ground for non-recognition of the Albanian judgment under CPLR Article 53, including that the Albanian proceedings were contrary to the parties’ arbitration agreement, and that Albanian tribunals and procedures are not compatible with due process.

Because the defendants “attacked the Albanian judgment as failing to meet the prerequisites for recognition under article 53” and the plaintiff did not seek jurisdictional discovery, the court granted the defendants’ motion to dismiss and directed entry of judgment in their favor.

The full impact of AlbaniaBEG in practice remains to be seen. In most cases, the creditor will have little incentive to pursue enforcement of a foreign arbitral award in New York unless the debtor is believed to have substantial connections with (and assets in) New York. 6)For a discussion of New York’s significance as a global hub for award enforcement generally, see Andreas A. Frischknecht, Yasmine Lahlou & Gretta Walters, Enforcement of Foreign Arbitral Awards and Judgments in New York, 3-5 (Kluwer Law International 2018). jQuery("#footnote_plugin_tooltip_8816_6").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In such cases, the creditor should be able to establish either personal or quasi in rem jurisdiction, such that the debtor can pursue enforcement directly under Chapter 2 of the FAA. Following AlbaniaBEG, however, the holder of a foreign arbitral award desiring to preserve “the opportunity to pursue [further] enforcement steps in futuro”7) Lenchyshyn v. Pelko Elec., Inc., 281 A.D.2d 42, 50 (N.Y. App. Div. 4th Dep’t 2001). jQuery("#footnote_plugin_tooltip_8816_7").tooltip({ tip: "#footnote_plugin_tooltip_text_8816_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); likely can no longer obtain recognition in New York of a foreign judgment recognizing the award if the debtor is not subject to personal jurisdiction in New York, lacks any assets in New York, and contests the enforceability of the foreign judgment on substantive grounds.

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References   [ + ]

1. ↑ A.D.3d, No. 152679/14, 2018 WL 755355 (N.Y. App. Div. 1st Dep’t Feb. 8, 2018). 2. ↑ Commissions Imp. Exp. S.A. v. Republic of Congo, 916 F. Supp. 2d 48, 49 (D.D.C. 2013), rev’d and remanded sub nom. Commissions Imp. Exp. S.A. v. Republic of the Congo, 757 F.3d 321 (D.C. Cir. 2014). 3. ↑ See Seetransport Wiking Trader Schiffahrtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 29 F.3d 79, 81 (2d Cir. 1994) (French judgment conferring exequatur on an arbitral award issued in a Paris-seated ICC arbitration was entitled to recognition under Article 53 of the CPLR as “the functional equivalent of a French judgment awarding the sums specified in the award”); see also Commissions, 757 F.3d at 323 (proceeding to enforce English High Court order recognizing ICC award in Paris-seated arbitration was “a lawful, parallel enforcement scheme” not preempted by the FAA). 4. ↑ See AlbaniaBEG, 2018 WL 755355, at *9 (citing Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393, 398 (2d Cir. 2009) & Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1118, 1122 (9th Cir.2002)). 5. ↑ Abu Dhabi Commercial Bank PJSC v. Saad Trading, Contracting & Fin. Servs. Co., 117 A.D.3d 609, 613 (N.Y. App. Div. 1st Dep’t 2014). 6. ↑ For a discussion of New York’s significance as a global hub for award enforcement generally, see Andreas A. Frischknecht, Yasmine Lahlou & Gretta Walters, Enforcement of Foreign Arbitral Awards and Judgments in New York, 3-5 (Kluwer Law International 2018). 7. ↑ Lenchyshyn v. Pelko Elec., Inc., 281 A.D.2d 42, 50 (N.Y. App. Div. 4th Dep’t 2001). 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: International Arbitration and the Rule of Law
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In a first, English High Court sets aside Investment Treaty Award against Poland

Kluwer Arbitration Blog - Wed, 2018-04-11 03:00

Kshama A. Loya and Vyapak Desai

On March 2, 2018, the England & Wales High Court (Court) for the first time set aside an investor-state arbitration award on jurisdiction (Award on Jurisdiction) passed against the Claimant in GPF GP S.a.r.l. v. Republic of Poland[1]. The Court ruled that:

  • A specific event in a series of creeping expropriation did not preclude the tribunal from assuming jurisdiction over other measures in the series;
  • Fair and equitable treatment (FET) claims fell within a dispute resolution clause covering expropriation ‘as well’ as other measures ‘leading to consequences similar to expropriation
  • Effet utile principle assured that effect and meaning be given to every word in a clause

Background

In 2008, the Claimant (a Luxembourg Company) made an investment in White Star Property Group (WSG, a Polish entity) to enable it to acquire shares in 29 Listopada. 29 Listopada held usufructuary rights in a property in Warsaw pursuant to a Perpetual Usufruct Agreement (PUA) for 99 years.

WSG sought recommendations from Warsaw officials on development of property held by 29 Listopada. Based on recommendations and permits granted by Warsaw authorities, the Claimant provided finance to WSG’s acquisition of shares in 29 Listopada.

Subsequently, Warsaw officials reversed their recommendations and permits. After recourse to local remedies, in 2013, the Warsaw Regional Court terminated the PUA. This decision stood confirmed by the Warsaw Court of Appeal in 2014. Appeal against the same was rejected by the Supreme Court.

The Claimant initiated claim under Article 9 of the Treaty between the Government of the People’s Republic of Poland and the Government of the Kingdom of Belgium and the Government of the Grand Duchy of Luxembourg, which became binding on 2 August 1991 (BIT).

Key Issues

The Claimant raised two claims in the arbitration: (a) that the series of measures adopted by Poland culminating into the Warsaw Court of Appeal decision constituted indirect expropriation in the form of creeping expropriation; and (b) the measures adopted by Poland violated the FET standard under the BIT. The Claimant averred that the arbitral tribunal (Tribunal) had jurisdiction over all claims under Article 9.1(b) of the BIT.

Article 9.1(b) covered:

disputes relating to expropriation, nationalization or any other similar measures affecting investments, and notably the transfer of an investment into public property, placing it under public supervision as well as any other deprivation or restriction of property rights by state measures that lead to consequences similar to expropriation.

With respect to (a) above, the Tribunal ruled that it only had jurisdiction to determine whether the Warsaw Court of Appeal decision constituted expropriation; and not whether other measures constituted indirect expropriation. With respect to (b), the Tribunal held that its jurisdiction under Article 9(2) read with Article 9.1(b) was restricted to expropriation and did not cover FET.

The Claimant challenged the Award on Jurisdiction before the Court under Section 67 of the English Arbitration & Conciliation Act, 1996 (“A&C Act”).

Analysis of the Decision

At the outset, the Court ruled that the hearing under Section 67[2] is in the nature of a re-hearing, and that a party can challenge an award of the tribunal as to its substantive jurisdiction.

The Court held that the Tribunal had erred on both aspects on its substantive jurisdiction. With respect to (a), the Court held that under creeping expropriation,[3] each act in the series was essential to determine a claim for creeping expropriation. The identification of a specific event as expropriation did not foreclose consideration of other acts in the series to have an effect similar to expropriation. Therefore, the Tribunal had erred in assuming jurisdiction only on the Warsaw Court of Appeal decision leading to termination of the PUA whilst denying jurisdiction on prior measures alleged to constitute creeping expropriation.

With respect to (b), the Court held that FET claims were covered under Article 9.1(b). The Court segregated Article 9.1(b) into two parts. The first part included ‘disputes relating to expropriation, inter alia placing it under public supervision’ (‘Part 1’). The second part included ‘as well as any other deprivation or restriction of property rights by state measures that lead to consequences similar to expropriation’ (‘Part 2’).

It held that Part 1 considered all measures relating to expropriation. The Court meticulously employed the principles of interpretation under the Vienna Convention on the Law of Treaties (VCLT) and stated that the use of the words ‘as well as’ in Article 9.1(b) formed a different category of disputes – not in continuation but in addition to Part 1. Moreover, the two parts envisaged separate category of disputes. The ordinary meaning of ‘deprivation or restriction’ in Part 2 entailed a lesser threshold of interference than ‘an expropriation’ in Part 1. In addition, the words ‘leads to’ and ‘consequences similar to expropriation’ in Part 2 envisaged something distinct from expropriation.

Additionally, the Court used the ‘effet utile’ principle to give effect and meaning to words in Part 2, as opposed to discarding the same as a ‘mere tautology’ as claimed by the Respondent.

Comment

The Court’s ruling on creeping expropriation is laudable. It assures that once a Tribunal assumes jurisdiction over expropriation claims, it would be inappropriate for the Tribunal to pick and choose select State acts especially in an alleged series, at the preliminary stage and narrow the scope of adjudication. This is a matter best judged by the Tribunal at the merits stage.

However, with respect to coverage of FET, the Court has granted jurisdiction based on interpretation of language of Part 1 and 2. Under prevalent interpretations adopted by tribunals to ‘measures leading to consequences similar to expropriation’, a claim for FET violation is distinct from expropriation. It is seldom considered hand-in-hand with a clause relating to expropriation.

Further, the distinction is based on detailed interpretation of the language of a French version of the BIT – agreed by the parties to be translated in English. It is pertinent to note that two of the Tribunal members are French speakers. It is unclear whether the Court considered this aspect while deciphering the ordinary meaning of words in the translated BIT.

While it is desirable that national courts adopt a slow pace in ‘over-ruling’ decisions of international arbitral tribunals, more particularly in the context of investor-State disputes, the present decision closely scrutinizes the award on jurisdiction on principles of interpretation and recognized concept in international investment treaty law. This power is derived from Section 67 of the A&C Act which offers wide latitude to re-consider facts and arguments placed before the tribunal, as also consider new arguments and evidence. This practice is prevalent in France and Switzerland which permit a wider scope of review to national courts.

The present case is unique in as much as it is the first instance where an English Court has rejected an arbitral award on substantive jurisdiction under an investor-state dispute. It is also a classic example of the interplay or conflict between interpretations adopted by specialized international law tribunals and national courts.

We will wait to see whether leave will be granted to Republic of Poland and if so, whether the decision of the Court would be confirmed, modified or over-ruled by the English Court of Appeal. In the absence of a specific leave to appeal, the case would move to the stage of merits. A deeper conflict may arise then since the Tribunal, having harbored a decision on denying jurisdiction on majority claims, will be compelled to adjudicate upon merits of the claims.

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[1] [2018] EWHC 409 (Comm)

[2] Section 67. Challenging the award: substantive jurisdiction.

(1)A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court—

(a)challenging any award of the arbitral tribunal as to its substantive jurisdiction; or

(b)for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(2)The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.

(3)On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order—

(a)confirm the award,

(b)vary the award, or

(c)set aside the award in whole or in part.

(4)The leave of the court is required for any appeal from a decision of the court under this section.

[3] As ‘a series of acts or measures that did not individually constitute expropriation but cumulatively had the effect of expropriation’. The Court also quoted the oft-used lines in this context, stating that ‘the last step in a creeping expropriation that tilts the balance is similar to the straw that breaks the camel’s back’.

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Dionne King, CEO of DMK Consults, says be engaged, empowered and equipped - Rolling Out

Google International ADR News - Tue, 2018-04-10 06:51

Rolling Out

Dionne King, CEO of DMK Consults, says be engaged, empowered and equipped
Rolling Out
Dionne M. King, a CEO and strategic consultant, leads DMK Consults LLC, a thriving executive consulting firm specializing in leadership development and inclusion initiatives. She is experienced in providing leadership strategies and effectuating change ...

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Nigeria: 'Paralegals Necessary in Legal Aid Strategy' - AllAfrica.com

Google International ADR News - Tue, 2018-04-10 06:25

Nigeria: 'Paralegals Necessary in Legal Aid Strategy'
AllAfrica.com
Lagos — Mrs Joy Bob-Manuel is the DG, Legal Aid Council of Nigeria (LACON), in this interview she speaks about international development partners, the need for sustaining prison decongestion projects, paralegals, LACON's collaboration with other ...

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The CJEU’s Achmea Judgment: Getting Through the Five Stages of Grief

Kluwer Arbitration Blog - Tue, 2018-04-10 03:50

Peter Nikitin

Many arbitration lawyers’ initial reaction to the CJEU’s Achmea judgment resembles the first three of the famous “five stages of grief” (denial, anger, bargaining, depression and acceptance). Some deny Achmea’s relevance under international law, others angrily dismiss it as unreasoned and politically motivated, while many attempts to “bargain” a way out for intra-EU arbitrations under the ECT and/or ICSID given their multilateral and extra-EU character.

In my view, Achmea is entirely consistent with both EU and international law, and applies equally to intra-EU ISDS under BITs, the ECT and ICSID. It may, therefore, be wisest to keep the stage of depression brief and accept the outcome before moving on to greener pastures.

The Autonomy and Primacy of EU Law

To restate several truisms, the TEU and TFEU ( “EU Treaties”) are inter-State agreements that establish an autonomous system of regional international law. The fundamental purpose – indeed, the raison d’être – of this system is to create a common market without internal frontiers. To this end, the CJEU has developed the doctrines of “primacy” and “effectiveness”, under which any domestic legal rule – even one that enjoys constitutional status – that is incompatible with EU law must be immediately disapplied, without awaiting formal revocation [C-6/64, Costa v. ENEL [1964] ECR 585; C-106/77, Simmenthal [1978] ECR 629]. The doctrines of primacy and effectiveness are long-standing and considered by all as an integral part of the EU Treaties.

Inter se agreements of EU Member States are not exempt from primacy and effectiveness, and have always been treated just like domestic law [E.g. C-235/87, Matteucci [1988] ECR 5589, paras 19-22]. This is logical because EU Member States cannot be permitted to deviate from common market rules by treaty any more than they can by domestic legislation. It is also consistent with the international treaty law, which expressly permits States to

(a) disapply provisions of an earlier treaty to the extent they are incompatible with those or a later treaty [VCLT Article 30(2)-(3)],

(b) enter into subsequent agreements concerning the interpretation and application of their previous treaties [VCLT Article 31(3)(a)], and

(c) subject their international agreements to other “rules of international law applicable in the relations between the parties” [VCLT Article 31(3)(c)].

In other words, there is nothing legally wrong with EU Member States agreeing, in the EU Treaties, that those Treaties will automatically prevail over all other inconsistent international agreements between those same Member States. There is no sense in denying the international character of such an agreement or its relevance under international law.

No “Outsourcing”

Like virtually all cross-border economic activity inside the EU, intra-EU investments take place squarely within the scope of the “four freedoms” of the EU’s internal market. Many areas in which investment disputes tend to arise (e.g., energy, environment, state subsidies) are heavily regulated by internal market directives, regulations and/or state aid law. Furthermore, Member State conduct is already subject to binding EU standards of protection of property rights, due process and legal certainty (including legitimate expectations), which are all relevant to the legitimacy of a particular government measure. Much as tribunals may seek to avoid them, questions of EU law therefore inevitably arise – indeed, centrally so – in many intra-EU arbitrations.1)See e.g., Electrabel v. Hungary Decision on Jurisdiction and Liability, paras 6.21-6.22, 6.70, Micula v Romania Award, para 691-707, 741-742, 792-793; Wirtgen v Czech Republic Award, paras 297-299, 337-342, 350; Postova Banka v Greece Award, paras 192-193, 207-208. jQuery("#footnote_plugin_tooltip_7992_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7992_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Given the fundamental importance of EU law primacy and autonomy, the CJEU always firmly opposed Member States’ “outsourcing” to non-EU fora disputes even potentially involving their EU law obligations. This was the case with the EEA Court in Opinion 1/91, inter-State arbitration in the Mox Plant case, the Patent Court in Opinion 1/09, and the European Court of Human Rights in Opinion 2/13. The Achmea judgment refers to this line of case law and is fully consistent with it.

Advocate-General Wathelet proposed treating ISDS tribunals as Member State courts, enabling them to refer EU law issues to the CJEU. That would have been an elegant solution indeed if it were not for one obstacle: convincing ISDS tribunals themselves. How can one be sure that a tribunal seated outside the EU and composed of non-EU lawyers would even recognise an EU law issue, let alone suspend proceedings for a CJEU reference?

It is, of course, correct that commercial arbitration is permitted under EU law, and commercial awards’ compliance with EU law can be verified by EU courts at the post-award stage [See e.g. C-126/97 Eco Swiss [1999] ECR I-3055]. However, parties to a commercial contract are not under a legal duty to ensure the primacy and full effectiveness of EU law in a certain territory. By contrast, Member States conferring jurisdiction on an ISDS tribunal do have that duty, and the remote possibility of post-award control by EU courts where the tribunal may not even be seated in the EU is far from sufficient to secure compliance.

There is thus nothing shocking or “political” about the Achmea judgment. The dismay that ISDS lawyers now express towards the Achmea judgment mirrors similar dismay expressed four years ago by human rights lawyers towards Opinion 2/13. However, like that Opinion, the Achmea judgment is only a restatement of the fundamental constitutional principles that have been at the heart of CJEU’s jurisprudence for many decades.2)See e.g., D. Halberstam, ‘It’s the Autonomy, Stupid!’ A Modest Defense of Opinion 2/13 on EU Accession to the ECHR, and the Way Forward, 16 German Law Journal 105 (2015) jQuery("#footnote_plugin_tooltip_7992_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7992_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Multilateral Agreements

There have been suggestions since the Achmea judgment that it may not apply to ICSID and/or ECT arbitration because those treaties include third countries.

However, the CJEU has always been clear that primacy also covers any intra-EU application of multilateral conventions [See e.g. C-301/08 Bogiatzi [2009] I-10185, paras 3-4, 19.]. This is consistent with TFEU Article 351, which regulates the relationship between EU law and international treaties involving third countries, as well as with VCLT Article 41(1)(b), which permits States to vary multilateral treaties as between some parties, to the extent this does not affect the rights of others.

The language of the Achmea judgment very clearly extends to all provisions “such as” Article 8 of the Czechoslovak-Dutch BIT. That includes the ISDS provisions of the ECT, which is, therefore, extinguished, as between EU Member States, by operation of primacy. Similarly, primacy will “turn off” the ICSID Convention to the extent it applies to intra-EU ISDS awards. Given that such application of primacy does not affect the interests of any non-EU States or their investors, neither the ECT nor ICSID can provide a safe ground on which intra-EU ISDS can continue. The CJEU is quite uncompromising and there is no place for bargaining here.

A Question of Trust

It would be unthinkable for an investor from Berlin (London, Paris) that is denied a planning permission in Munich (Manchester, Marseille) under German (British, French) administrative law to oppose the refusal outside the framework of that law, before a foreign arbitrator unfamiliar with that law, on the vague grounds that the refusal was “unfair” or “inequitable”. The relationship between investors operating within a single national market and the state that regulates that market is normally governed by the administrative law of that state based on the principle of equal justice for all. After all, Texas and California cannot agree on special privileges for each other’s investors independently and outside of US federal law.

Why should things be different within the European single market? The answer often given to justify this anomaly is that the courts of certain recent joiners to the EU are somehow inadequate compared to those of “old” EU Member States. Notably, no evidence of this appears in existing intra-EU awards, virtually none of which concerned any kind of judicial impropriety. However, the assumption that there is a risk of such impropriety does shed light on another ground on which the CJEU decapitated intra-EU ISDS: a breach of the EU principle of “mutual trust”.

After comprehensively reforming their legal system to meet the EU’s stringent accession criteria, the courts of “new” Member States are deemed to meet the standards of justice that all Europeans are entitled to expect. There are no “second-class” Member States in the EU and the principle of mutual trust implies a presumption that a Dutch investor in Slovakia can expect substantially the same quality of justice as it can in its home Member State.

If, as many complain, this is not the case, in reality, that would undoubtedly be a failure of the EU. However, it would be one that must be rectified at Union level, and in a manner that complies with Union law. ISDS lawyers can and should play a role in arriving at a solution, but the first step must surely be to understand and accept the reasons and consequences of the Achmea judgment, not deny, dismiss or try to bargain a way out of them.

Although the author is involved as counsel in investment disputes, the views expressed in this blog entry are the author’s alone and are not to be attributed to any person the author represents or has represented in the past.

References   [ + ]

1. ↑ See e.g., Electrabel v. Hungary Decision on Jurisdiction and Liability, paras 6.21-6.22, 6.70, Micula v Romania Award, para 691-707, 741-742, 792-793; Wirtgen v Czech Republic Award, paras 297-299, 337-342, 350; Postova Banka v Greece Award, paras 192-193, 207-208. 2. ↑ See e.g., D. Halberstam, ‘It’s the Autonomy, Stupid!’ A Modest Defense of Opinion 2/13 on EU Accession to the ECHR, and the Way Forward, 16 German Law Journal 105 (2015) 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: International Arbitration and the Rule of Law
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'Paralegals necessary in legal aid strategy' - Daily Trust

Google International ADR News - Mon, 2018-04-09 20:01

Daily Trust

'Paralegals necessary in legal aid strategy'
Daily Trust
Section 8 of the 2011 Act gave us additional responsibility to take up civil matters - mediation, Alternative Dispute Resolution and other fields. In the new 2011 Act, we can also take up matters in marriage, landlord / tenant, financial and land ...

Proskauer Adds Former SEC Counsel, Samuel Waldon, As Partner Bolstering Securities Litigation Offering - Business Wire (press release)

Google International ADR News - Mon, 2018-04-09 08:28

Business Wire (press release)

Proskauer Adds Former SEC Counsel, Samuel Waldon, As Partner Bolstering Securities Litigation Offering
Business Wire (press release)
... practice with extensive trial experience in virtually every major forum across the globe. We take a collaborative approach to representing defendants and plaintiffs, multinationals, middle-market and small-cap businesses, financial institutions ...

and more »

Turning Disputes Into Win-Win Relationships - Asian Scientist Magazine

Google International ADR News - Mon, 2018-04-09 05:59

Asian Scientist Magazine

Turning Disputes Into Win-Win Relationships
Asian Scientist Magazine
Growing a dispute resolution community in Singapore. Building on the success of this study, Professor Chua and Professor Quek have co-organised a research forum focused on alternative dispute resolution under the auspices of the Centre for Cross-Border ...

and more »

The Swedish Government Revives Efforts to Modernise the Arbitration Act

Kluwer Arbitration Blog - Mon, 2018-04-09 04:50

Brian Kotick

After almost 20 years, the Swedish Arbitration Act (“SAA” or “Act”) may be getting a well-deserved face lift. In February 2014, the Swedish Government decided to take definitive steps to begin modernising the Act. The purpose of the reform was to bring Swedish arbitration law more in line with certain advancements in arbitration and to address some practical gaps – making it more effective and attractive to users. The Government appointed an investigative committee, composed of established Swedish arbitration practitioners, to conduct an inquiry into the existing Act (“Inquiry”). On 1 April 2015, the committee filed its Inquiry, entitled “Review of the Arbitration Act” (“Översyn av lagen om skiljeförfarande”), which reviewed the existing law, noted certain pitfalls, and suggested new text for potential eventual adoption. However, since the Inquiry, the discussion of reform had gone stale – until now.

The Government recently consulted Swedish universities, organisations and institutions in hopes to redraft the Inquiry into a more focused proposal (“Proposal”). During the re-drafting process, some of the Inquiry’s suggestions were discarded. Among the discarded suggestions were: (i) the suggestion to repeal Section 33 of the Act, i.e. eliminating the differentiation between grounds for invalidity and setting aside an award; and (ii) the suggestion to include an express rule whereby an arbitral tribunal may order security measures via special awards.

On 1 March 2018, the Government sent the Proposal to the Swedish Council on Legislation, entitled “A Modernisation of the Arbitration Act”, aiming for its approval and entry into force on 1 March 2019.

There are a few amendments listed in the Proposal that are worth pointing out:

1. An arbitral tribunal’s decision on jurisdiction can be appealed to the Court of Appeal.

The Problem: In accordance with Section 2 of the SAA, arbitrators may decide on their own jurisdiction. If the arbitration has commenced and the tribunal has rendered a decision on jurisdiction, then the party dissatisfied with that decision may challenge it before the District Courts. However, despite the challenge to the decision, a tribunal may still continue the arbitration and even render an award. Should a party challenge the award on the ground that the tribunal lacked jurisdiction, the venue for such a challenge would be the Svea Court of Appeal. Thus, a situation exists in which the parties are faced with two concurrent court proceedings, in two different courts, hearing the same jurisdictional challenge.

The Proposal:
The law should introduce a rule whereby a challenge a tribunal’s positive decision on jurisdiction during the arbitral proceedings shall be referred to the Svea Court of Appeal. This rule would simultaneously be a bar to challenges in the District Court.

2. In the absence of an agreement between the parties, the arbitral tribunal will designate the applicable substantive law.

The Problem: Currently, there is no provision in the Act that establishes how an arbitral tribunal shall determine the applicable substantive law to the dispute, in the absence of the parties’ agreement. A tribunal can determine the applicable substantive law by referring to the conflict of laws rules or, as the SCC Arbitration Rules suggest, the tribunal can have full discretion to determine the law it deems appropriate.

The Proposal:
Parties are free to agree on the applicable substantive law or a regulatory framework for the dispute. The tribunal must respect the parties’ agreement. However, if the parties have not agreed on the applicable law, then the arbitrators are to decide on the applicable law as they see fit. The tribunal may decide the dispute ex aequo et bono if the parties have expressly authorised it to do so.

3. Several arbitrations may be consolidated under certain circumstances.
The Problem: There is no regulation in the current Act that governs the possibility to consolidate two or more arbitrations. In the preparatory works to the Act, the explanation for omitting such a provision was to avoid a potential conflict with the principle of party autonomy. However, since the Act entered into force, similar provisions on consolidation have been introduced into the Dutch arbitration act and the SCC and the ICC Arbitration Rules.

The Proposal:
The law should introduce the possibility that two or more arbitrations may be consolidated under certain circumstances. The circumstances necessary for consolidation should be: (i) the appointment of same arbitrators in all respective proceedings; (ii) the arbitrators’ decision that consolidation would be beneficial to the arbitrations; and (iii) no objections to consolidation from the parties. The proceedings may be subsequently severed; however, the arbitrators should consider how to memorialize such a division and address the issues of costs.

4. The ground to challenge an award for an excess of mandate should include the requirement that the excess of mandate likely affected the outcome of the dispute.

The Problem: The main principle that arbitration should resolve disputes quickly and effectively should also apply to challenge proceedings. It is, therefore, pivotal that the domestic courts and the parties are not burdened with unnecessary challenges. As the law stands now, there is a risk that a losing party could challenge an award despite the fact that, if successful, there would be no practical difference to the outcome of the dispute.

The Proposal:
A provision should be included in the Act whereby a requirement is imposed on a party challenging an award on the ground of the excess of mandate to prove that that excess affected the outcome of the dispute. This amendment would have a deterrent effect for the parties since they will now be aware that not all excess of mandate will lead to a successful challenge to an award.

Other suggested amendments presented in the Proposal included shortening the time limit to challenge an award to two months and introducing the possibility for a court to hear oral evidence in English without the use of translation services. With such concrete amendments to the Act expected to enter into force next year, it will be interesting to see what proposals survive scrutiny from the Swedish Council on Legislation and in what form.

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The Rule of Law As Created by Arbitrators – An Update on the Discussions At The Recent IBA Arbitration Day in Buenos Aires

Kluwer Arbitration Blog - Sat, 2018-04-07 20:00

Julián Bordacahar

At a time when Argentina is looking to modernize its arbitration culture and attract foreign investment, the IBA Arbitration Day held in Buenos Aires could not have been more opportune.  Gathering more than 400 arbitration experts from more than 45 countries, the venue and the event proved to be up to the challenge.  While arbitration has been a frequent target of criticism in recent years in Latin America, as highlighted by Eduardo Silva Romero during the conference’s opening, one of this year’s goals was to recognize arbitrators’ many positive contributions to the rule of law. To that end, presentations revolved, inter alia, around the principles of pacta sunt servanda and bona fide and the way in which arbitrators apply the law.  Interestingly in this regard, Prof. Kaufmann-Kohler started by analyzing certain statistical data and concluded that in 90% of cases, parties made a choice of law: they chose national law in 97% and transnational rules in only 3% of them.  Despite this, due to their diverse backgrounds and frequent lack of familiarity with the applicable national law, arbitrators tend to apply transnational rules in conjunction with national law.  Therefore, while applying national law, international arbitrators validate the outcome by reference to rules with wider recognition.  In essence, she concluded, arbitrators transnationalize the law.

This post attempts to report on that debate but also to add to it by taking the analysis a step back and assessing whether and to what extent arbitrators have the power to modify contracts, an issue which becomes particularly relevant in the field of cross-border transactions.  As highlighted by Philippe Pinsolle during the conference, we see more and more complex long-term relational contracts which include arbitration clauses.  Because these contracts are structured to last for many years, sometimes decades, they become more vulnerable to technological, political and/or economic changes which may substantially affect the parties’ rights and even disrupt the contract’s economic equilibrium.  Were that to happen, the possibility to restore that equilibrium through adjudication becomes crucial.  Now the question is: are arbitrators entitled to modify contracts?  The answer is, as almost any other answer to a legal question, “it depends”.  Nonetheless, as the IBA debate clearly showed, there exists a steady trend demonstrating that, whether expressly or impliedly, arbitrators often do so.

 

The Interaction Between Arbitrators’ Powers, Pacta Sunt Servanda And The Bona Fide Principle

It is especially in the context of lex mercatoria that pacta sunts ervanda is considered an essential feature.  However, just as any other legal principle, pacta sunt servanda is not absolute and is therefore subject to certain limits (e.g., rebus sic stantibus).  Some have argued that there has been a change of paradigm in international contract law which proposes that the sacred principle of pacta sunt servanda should not be abused by means of a blind, and sometimes hypocritical, compliance [K. P. Berger, “Power of Arbitrators to Fill Gaps and Revise Contracts to Make Sense”, Arbitration International, Ed. Oxford, 17(1): 1-18, p. 17 (2014)].  Notably, good faith and fair dealing have become the central yardstick for the social control of business behavior and of the fairness of business agreements.  In this regard, it has been noted that the “all or nothing rule” of the sanctity of contracts is being replaced by a more flexible, pragmatic approach seeking to produce results that are in line with commercial common sense, mutual cooperation, flexibility and an intrinsic willingness of the parties to adjust terms which reduces the rigid use of contract law [K. P. Berger, op. cit., p. 16].

It is against this background that the potential clash between the arbitrators’ power to modify contracts and pacta sunt servanda should be assessed.  After explaining how the various elements of the normative framework for interpretation interact with each other, Almeida Prado’s presentation at the IBA tried to convey the idea that, in case of conflict, international arbitrators tend to prioritize the contract’s wording and its nature; particularly given how the nature of the contract affects its interpretation and constitutes a reliable parameter for the interpretation of specific obligations.  Additionally, while he explained that the nature of the contract in itself does not create additional obligations, the contract’s nature coupled with the governing law and/or international usages may do so (bona fide).

In practice, pacta sunt servanda’s effects are further diminished by contractual and/or statutory provisions, such as those pertaining to changed circumstances.  Common examples are hardship, indexation, re-negotiation or price revision clauses.  Their inclusion may indicate that, in certain circumstances, parties are willing to provide arbitrators with the power to adapt their contracts, which they often do.

 

Legal Basis For Arbitrators’ Powers

One has to refer simultaneously to three different legal sources: the arbitration agreement and the underlying contract, the law applicable to the arbitration (lex arbitri) and the law applicable to the substance of the dispute (lex causae) [K. P. Berger, op. cit., p. 7 and 8].  Of course, party autonomy plays a decisive role in this assessment.  In cases where a contractual authorization is given, pacta sunt servanda would not speak against but in favor of arbitrators’ competence [K. P. Berger, op. cit., p. 5].  Conversely, if no express or implied authorization has been given [for example, an ICC tribunal found that an ICC clause contained in a long-term contract containing a number of provisions that required adjustment over the period of the contract, was an implied authorization (ICC Award No. 5754 cited by Craig, Park and Paulsson, International Chamber of Commerce Arbitration, 2nd ed., p. 112 (1990))], then arbitrators must look for legal authority in the applicable rules of law.  And here, the issue gets more complicated because, as stated above, there are several laws which might be relevant.

In relation to different lex arbitris, only a few arbitration laws contain express provisions dealing with arbitrators’ authority to adapt contracts [for example, the 1986 Dutch Arbitrators Act, the 1999 Swedish Arbitration Act, the 1993 Bulgarian Law on International Commercial Arbitration, etc.].  Where arbitration laws remain silent, a useful exercise is to refer to the competence of domestic courts in that particular jurisdiction and assess whether this power is procedurally available [C. H. Brower, “Mind the Gap”, BYU Law Review (2016), p. 18].

It can be argued that arbitrators’ powers to modify contracts should be placed on equal footing with those of State judges (parties should not be worse off in arbitration).  This is known as the principle of synchronized competences [P. Sanders, International Encyclopedia of Comparative Law, Vol. XVI, Ch. 12, p. 70].  However, State judges’ power to modify contracts is far from being internationally established [L. Beisteiner, “Adjusting Contracts in Arbitration?”, available here].  But it has been proposed that, under certain circumstances, arbitrators’ power can be wider than judges’ power.  One of the clearest examples is that, if parties agree, arbitrators are generally allowed to decide cases ex aequo et bono—a power which is generally outside of the scope of the competence of State judges.  If the domestic procedural law does not provide for a rule applicable to judges, then one must resort to the substantive law of that jurisdiction.  Because the assessment of the relevant rules of law is generally done holistically, the case may be that one of the applicable laws may allow the arbitral tribunal to do so while another may not.  Then, whether any of the provisions are mandatory will likely affect the outcome of that clash.

 

Conclusion

In practice, the line between contract interpretation and adaptation is not always clearly distinguishable.  However, even if unconsciously or under the disguise of “contract construction”, the IBA debate revealed a feeling among practitioners that whether expressly or impliedly, or directly or indirectly, arbitrators frequently adapt contracts to meet the needs and intentions of disputing parties, and by doing so, they contribute to the rule of law.  Were the tribunal not to do this, the dispute resolution procedure would not be fully effective.  Our comfort level with arbitrators acting in this manner is reflected in the express hardship or re-negotiation clauses which have become a common feature of modern contracts that establish complex and long-term arrangements.  As a general matter, the prevailing view seemed to be that we should not be too cautious to grant and/or accept that arbitrators have powers to fill gaps and adapt contracts, but we should demand that arbitrators be extremely cautious while making use of them.

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UK: Mediation For Expats – A Long Term Solution For Child Custody Disputes - Mondaq News Alerts

Google International ADR News - Sat, 2018-04-07 15:03

UK: Mediation For Expats – A Long Term Solution For Child Custody Disputes
Mondaq News Alerts
Clearly it is not just children cases which can benefit from alternative dispute resolution. A new initiative was recently launched by the International Family Law Arbitration Scheme (IFLAS) to help families where there is a dispute about which country ...

New Vienna Rules: Where do you stand on Security for Costs?

Kluwer Arbitration Blog - Sat, 2018-04-07 05:54

Lisa Beisteiner

Since their inception in 1975, the Vienna Rules (Rules of Arbitration and Mediation of the Vienna International Arbitral Centre) have undergone a number of major reforms keeping them abreast of the fast-moving tides of legal development in international arbitration. The latest revision of the Rules as from 1 January 2018 (previously covered in this blog) also introduced an explicit regulation of the tribunal’s power to order security for costs. By acknowledging such power, the Vienna Rules take an innovative and truly international stand, however stipulating a strict standard for security for costs orders which must be reserved to exceptional cases.

Clarification: Security for costs in exceptional circumstances

The new rule comes at a time when there is still little consensus1) Whilst some reject the tribunal’s power to order security for costs altogether, other scholars base such orders on the tribunal’s procedural power to conduct the arbitral proceedings within its discretion or – and this is the prevailing opinion – frame them as interim measures. The drafters of the Vienna Rules sided with this last approach. jQuery("#footnote_plugin_tooltip_7436_1").tooltip({ tip: "#footnote_plugin_tooltip_text_7436_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); on the admissibility and preconditions under Austrian law of this legal instrument. Unsurprisingly, the new provisions sparked a lively debate when officially presented to the Austrian arbitration community at the sixth ArbAut Forum on 19 February 2018. Considering the absence of statutory provisions and case law on security for costs in arbitration in Austria and (as it appears) in many other civil law jurisdictions,2) Whereas institutional rules in common law jurisdictions have traditionally included express rules (e.g. LCIA, SIAC, HKIAC), those in civil law jurisdictions were hesitant to address the issue (see, however, Article 38 of the new SCC Rules as of 1 January 2017; whilst the Belgian CEPANI Rules set out that security for costs may be ordered as an interim measure, they stop short of providing further guidance; the new DIS-Rules – as of 1 March 2018 – refrain from expressly regulating security for costs). jQuery("#footnote_plugin_tooltip_7436_2").tooltip({ tip: "#footnote_plugin_tooltip_text_7436_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); the new Vienna Rules 2018 bring valuable clarification and legal certainty. The Vienna Rules working group responded to what they felt was a practical need for security for costs orders in exceptional cases, not least in view of the recent rise of third party funding.3) Third party funding, too, was amongst the topics discussed by the Vienna Rules working group but eventually did not make its way into the new Rules. jQuery("#footnote_plugin_tooltip_7436_3").tooltip({ tip: "#footnote_plugin_tooltip_text_7436_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The good news upfront: Parties arbitrating under the Vienna Rules will now spare the time and costs which are often lost in debating the tribunal’s authority to order security for costs. Let’s look at some of the details:

Interim Measure

As from 1 January 2018, Article 33(6) and (7) Vienna Rules authorize tribunals to order security for costs as an interim measure, they read as follows:

(6) The arbitral tribunal may, at the request of the respondent, order the claimant to provide security for costs, if the respondent shows cause that the recoverability of a potential claim for costs is, with a sufficient degree of probability, at risk. When deciding on a request for security for costs, the arbitral tribunal shall give all parties the opportunity to present their views.
(7) If a party fails to comply with an order by the arbitral tribunal for security for costs, the arbitral tribunal may, upon request, suspend in whole or in part, or terminate, the proceedings (Article 34 paragraph 2.4).

Under Article 33(6) Vienna Rules, security for costs orders can be imposed on the claimant (including on the counter-claimant) at the request of respondent (including counter-respondent). The wording of the Vienna Rules excludes – in line with the intention of its drafters – security for costs orders against the respondent. Before deciding on the request for security for costs, the tribunal is required to grant all parties “the opportunity to present their views” (para 6): This general principle that interim relief may not be granted ex-parte (Article 33(1)) thus also extends to security for costs. Also, although not explicitly mentioned in Article 33(6) Vienna Rules, the tribunal first must ascertain its jurisdiction prima-facie based on the information before it. Requests for security for costs will typically be raised at the outset of the arbitration or, subsequently, after respondent becomes aware of circumstances giving rise to an enforceability risk. Whilst Article 33(6) Vienna Rules does not stipulate a strict period for making the request, the tribunal may consider any “delays” in the exercise of its discretion to grant the order.

Substantive requirements

Under Article 33(6) Vienna Rules, the respondent needs to demonstrate that, first, there is a possibility of an adverse costs award, and, second, that the enforceability of this award is at risk. The Vienna Rules do not spell out further requirements. The second prerequisite will be the real test in practice:

Potential costs claim

As envisaged by the working group, the first prerequisite (“potential claim for costs”) will hardly ever present an obstacle in practice. It will operate to exclude security for costs where, based on the parties’ agreement on costs allocation, an adverse costs award is not conceivable in the first place, e.g. where the arbitration clause provides for the “American rule” to govern the costs decision. In most cases, respondent will be able to show that the costs-follow-the-event rule may (amongst other principles) be applied in a prospective costs decision. The reference to a “potential claim for costs” also includes an additional requirement, namely that respondent has a (potential) defence case on the merits at all so that the loser pays rule could be applied in the first place. However, the procedural arguments on security for costs are not the place to engage the tribunal in (and for the tribunal to prejudge) the merits of the case. This requirement will therefore only strike out requests in such exceptionally rare cases where claimant can demonstrate that based on the limited information available on file respondent’s case is manifestly groundless, which would exclude even the remote possibility of a claim for costs.

Recoverability risk

In practice, the parties’ arguments will concentrate on the second requirement stipulated by the Vienna Rules: Respondent must “show cause that the [potential costs claim’s] recoverability is, with a sufficient degree of probability, at risk”, which is the case where claimant will have no funds to pay the costs award and where his assets will not be readily available for an effective enforcement. Such risk may materialize e.g. where claimant takes steps to frustrate a costs award, or where claimant is impecunious (e.g. a special purpose vehicle with no sizeable assets). Amongst other things, as was envisaged by the working group, the involvement of a third party funder may play a role in assessing the recoverability risk, but only if the third party funding indicates the impecuniosity of the party.

The language “show cause” is the English translation of the German “glaubhaft machen” (“show credibly”), which is defined in Austrian civil procedural law as reducing the standard of proof (Section 274 Austrian Code on Civil Procedure) to that of preponderant probability. Thus Article 33(6) three times refers to the probability of the enforcement of a costs award, namely by introducing the standard of preponderant probability as implied in “glaubhaft machen”, by referring to a “sufficient degree of probability” and by the use of the term “risk”, which again connotes a likelihood, namely that of an undesirable event materializing. Tribunals likely will focus on the requirement of “a sufficient degree of probability”, which works to increase the threshold for a security for costs order: Security for costs presupposes a high risk of non-recoverability. Not in every case of a preponderant probability of non-enforceability, but only where such probability is sufficiently high may security for costs be ordered.

Tribunal’s discretion

The Vienna Rules do not set out further express prerequisites. If the tribunal concludes that the requirements of Article 33(6) are met, it “may” grant the order within its discretion. Conversely, respondent has no procedural right to a security for costs order. Tribunals will exercise their discretion diligently and restrictively and limit security for costs orders to exceptional circumstances which manifestly call for such orders. This does not only flow from the current arbitral practice to limit security for costs to “very particular circumstances” (CIArb Guidelines on Applications for Security for Costs, Preamble, item 2) but will typically be corroborated by the reasonable expectations of the parties who agree on the Vienna Rules expecting a civil law style arbitration. Usually, the general rule that claimant needs to substitute respondent’s share on the advance on costs will suffice to deter futile claims.

In this vein, tribunals will typically treat the express substantive requirements for a security for costs order set out in Article 33(6) as a minimum threshold. Whilst a request may pass this – high – minimum threshold, the tribunal may still deem it inappropriate (or: “unfair”) to order security for costs. This may e.g. be the case where based on the information on file security for costs is unaffordable, i.e. where both claimant as well as any third parties holding a material economic interest in the proceedings on claimant’s side (including the main shareholders) are impecunious. In such case, the tribunal may wish to respond to concerns that ordering security for costs would unjustly stifle a genuine claim. Security for costs orders would then likely be restricted to manifestly abusive claims. Typically, this will also follow from an in favorem validitatis interpretation of the underlying arbitration clause: Imposing security for costs where it is unaffordable may – at least under Austrian law – entitle claimant to terminate the arbitration agreement for due cause.

It has also been submitted that if respondent was responsible for claimant’s impecuniosity this should militate against a security for costs order. However, this goes a far way into the merits of the case. Tribunals under the Vienna Rules may therefore be reluctant to open the interlocutory proceedings on security for costs to such arguments. Another factor which is sometimes mentioned as relevant is Respondent’s failure to pay its share on the advance on costs. In the author’s view, however, such failure must not exclude a security for costs order; rather, its legal consequences are spelled out in Article 42 Vienna Rules.

To recap: Whilst a preliminary and prima facie assessment of (certain aspects of) the merits of the case cannot always be avoided (most importantly: no stifling of legitimate claims), under the Vienna Rules there is no room for assessing the prospects of success of the parties’ claims and defences on the merits as a standard step in assessing a security for costs request.

Scope and legal consequence

According to Article 33(7) Vienna Rules, a failure of claimant to comply with a security for costs order entitles the tribunal to (wholly or partially) suspend or even terminate the proceedings (Articles 33(7) and 34 para 2.4 Vienna Rules) upon request of respondent. Again, as for the issuance of the order, the tribunal enjoys discretion as to the suspension or termination of the proceedings where claimant fails to provide security. Tribunals will have due regard to claimant’s right to (effective) access to (arbitral) justice, also considering claimant’s reasons for non-provision of the security.

Overall, under the new Vienna Rules security for costs orders are admissible but will be the exception rather than the rule. Tribunals will be called upon to act diligently and robustly, discouraging belligerent respondents from any attempts to misuse security for costs applications for prolonging proceedings and increasing costs.

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References   [ + ]

1. ↑ Whilst some reject the tribunal’s power to order security for costs altogether, other scholars base such orders on the tribunal’s procedural power to conduct the arbitral proceedings within its discretion or – and this is the prevailing opinion – frame them as interim measures. The drafters of the Vienna Rules sided with this last approach. 2. ↑ Whereas institutional rules in common law jurisdictions have traditionally included express rules (e.g. LCIA, SIAC, HKIAC), those in civil law jurisdictions were hesitant to address the issue (see, however, Article 38 of the new SCC Rules as of 1 January 2017; whilst the Belgian CEPANI Rules set out that security for costs may be ordered as an interim measure, they stop short of providing further guidance; the new DIS-Rules – as of 1 March 2018 – refrain from expressly regulating security for costs). 3. ↑ Third party funding, too, was amongst the topics discussed by the Vienna Rules working group but eventually did not make its way into the new Rules. 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: International Arbitration and the Rule of Law
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Is Iraq Fully Open for Business? Not Yet, But Very Soon | Iraq Energy Conference 2018

Kluwer Arbitration Blog - Fri, 2018-04-06 20:42

Noor Kadhim (Assistant Editor for the Middle East)

The 4th Iraq Energy Forum (IEF), coinciding with the 10th anniversary of the Iraq Energy Institute, took place this year on 28-29 March at the Rasheed Royal Tulip Hotel. Politically and economically, the context of this IEF was important. The context was that the global reconstruction package in Kuwait had been agreed with the IMF and others merely two months prior to the IEF, and the country is preparing for national elections. My intervention at the forum, upon the invitation of the IEF founder, Luay Al Khateeb, was to speak about the consequences of a development that many in the global legal community have been long been waiting for: Iraq’s future accession to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) which I have discussed in an earlier blog post, also in the context of the implications that Iraq’s membership of the treaty may have on foreign direct investment (FDI) and on improving Iraq’s business environment. The Iraqi cabinet’s welcome announcement that Iraq will finally join the New York Convention has surprisingly been under-publicised outside of national borders. However, it is not an insignificant decision, and Iraq is aware of this.

The IEF 2018 once again brought together many (over 400) participants ranging from Iraq’s economic and political decision-makers (government Ministry officials and representatives) to private sector companies (multinational banks and oil companies, and electricity and power companies). Besides the various international delegations, OPEC’s Secretary, Dr Barkindo, was the Forum’s guest of honour, as in 2017. His participation was key to the event as he commented on oil market share and added some insightful views on the OPEC/Non-OPEC Accord with respect to oil production cuts to balance market supply and demand.

Globally, the IEF again addressed oil (upstream and downstream) policy, and electricity/power policy, and to a lesser extent than in 2017, regional issues and the divergences between Kurdistan and federal Iraq oil policy.

In his interview with John Defterios (CNN’s anchor and emerging markets editor in the Middle East), the Prime Minister emphasised four main objectives during this critical time for Iraq: (i) encouraging Iraq to move from a purely oil-based economy (over 85% of its revenues are from crude oil) to a more diversified one, (ii) supporting and increasing private sector business and jobs (Iraq’s public-to-private sector jobs ratio (a massive 80/20), is probably the highest in the world), (iii) combatting corruption at all levels, and (iv) attracting foreign direct investment (FDI).

There was much optimism at the IEF 2018 for Iraq’s future thanks to the Kuwait conference but there was also some tension. This is only natural, given that the elections are imminent. There is a sense of urgency amongst the foreign and local businesses attending the forum, which was not as obvious in 2017. Last year, there was impatience amongst investors that transactions move quicker, and a desire that terms (at least with the international oil companies (IOCs)) be renegotiated to provide more balanced solutions for all stakeholders (government and business counterparties). This year, the impression was that it truly is now or never for Iraq to capitalise on the momentum generated by the Kuwait reconstruction conference and goodwill of the international community. As Alan Eyre, the Director of the Office of the Middle East and Asia for the US Department of State’s Bureau of Energy Resources, emphasised (hear his talk here (after 11:30 minutes)), Iraq cannot afford to procrastinate. It must get down to the business of concluding contracts with those states and companies willing to invest in rebuilding its infrastructure. There is no room for complacency because if Iraq does not deliver, investors will go elsewhere. One of my co-panellists for the Iraq Economy session expressed his view that the “jam tomorrow” attitude of the government towards private investors (where everything is promised but nothing delivered) should change. His concern was the bureaucracy surrounding what should be straightforward commercial transactions, leading to a stifling and strangling of the private sector. Indeed, the possibility of even more red tape was hinted at, at an energy conference held  in Berlin earlier this year. In addition to releasing new oil blocks to investors for exploration, Iraq’s ministry of oil has unveiled plans for a newthat it would create a “National Oil Company” to which operational decisions on international oil policy would be entrusted. Questions remain over the legitimacy and independence of such an entity (whether it truly can be separated from the Ministry of Oil, which has so far made all decisions on oil policy). Time will tell.

And yet, despite these concerns, the outlook for Iraq at the IEF 2018 remained optimistic. Capacity building has started already, with the recent recruitment of young, talented and ambitious Iraqi nationals to the Economic Reform arm of the Ministry of Finance. These hires are for the most part alumni of the world’s most established and respected investment banks. They will have a hand in forming the country’s economic policy.

The political backdrop of the IEF 2018 was important for another reason. The IEF 2018 is recognised to be a great networking opportunity for which senior staff from companies such as Honeywell, Siemens, Crescent Petroleum, Uruk, LUKOIL, BP, Deutsche Bank, JP Morgan, Petronas, Total, Exxon Mobil, General Electric and many others make a considerable effort to travel to. As such, it may have been used as a tool to facilitate and organise meetings ‘off-site’ between government and contractors/ investors to conclude or renegotiate deals. Some important meetings were happening on the fringes of the IEF 2018, such as the unforeseen meeting to which the Ministry of Oil invited investors on Day 2 of the conference. In that meeting, the MoO allegedly brought forward a deadline for the receipt of tenders for new oilfield concessions which were to be subject to a revised contract. According to the anecdotal evidence, the IOCs now have a challenging period of only 2 weeks (ending before the elections take place) to comment on the new contract and submit their bids. It is a process that would normally take not less than 6 weeks.

But attracting FDI to Iraq depends not only on meeting halfway with investors on contract terms and being reasonable. It is also crucial to provide investors with a stable legal framework for dispute resolution if those contracts are not respected, either by the government or by the private sector. In earlier posts, I highlighted (what for many readers of this Blog are obvious) implications of the ICSID Convention (for investment disputes) and the New York Convention (for commercial disputes) for Iraq. But what was interesting in IEF 2018 is that the same audience before whom I spoke last year, who were curious to know more about how arbitration (especially investment treaty arbitration and structuring) worked, now displayed a more savvy attitude. Between sessions, businesses approached me explaining issues they faced with certain government ministries (such as loss-causing delays on certain projects, cancelled licences) and with certain private companies (joint venture disputes, shareholder gripes). These companies are much more aware of the arbitral process; indeed, even the Iraqi state cannot be said to be ignorant. All parties are now looking for a way to solve the issues – which could involve a carefully considered and strategic arbitration, designed either to place pressure for settlement purposes, or be followed through to award stage.

I believe that on balance, the IEF 2018 was a success. As far as I am aware, unlike any other Iraqi global conference, it attracts a large and important cross-section of stakeholders who are interested and invested in Iraq’s future. The IEF 2018 has generated some important discussions. The mood at this year’s forum was even more positive that such discussions would soon translate to actions after years of stagnation at high-level. The Kuwait conference has spurred this. Iraq’s ambitious plans to ramp up its non-oil (power generation and communications, and construction) sectors are also a driving force. Its legislative activity (signing up to international conventions that have long gathered dust) are great indicators of the state’s eagerness to improve. For the arbitration community, this means not only acceding to important treaties like the New York Convention, but increasing capacity building in the institutions and relevant government departments. It is easy to forget how much this country has suffered in the last 45 years –  under Saddam’s rule and in the aftermath of the war that followed. No other country has suffered such a brutal sanctions regime. As John Defterios said, the resilience of the Iraqi people is truly astonishing. Hopefully, in time, Iraq will find its feet again, and truly be open for business.

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Vannin Names First-Ever Head of International Arbitration - Litigation Finance Journal (blog)

Google International ADR News - Fri, 2018-04-06 15:19

Litigation Finance Journal (blog)

Vannin Names First-Ever Head of International Arbitration
Litigation Finance Journal (blog)
Yasmin's appointment comes amid a period of long-term growth for alternative dispute resolution. Statistics from 11 of the world's largest international arbitration institutions* document an overall 37% increase in the number of new arbitration cases ...

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