Feed aggregator

Interim Measures by Chilean Courts in Aid of Foreign Arbitration

Kluwer Arbitration Blog - Sun, 2018-09-09 17:13

Orlando Palominos and Catharina Müller

Throughout the years, Chilean courts and legislation have fostered a pro-arbitration and a pro-enforcement environment, favoring arbitration and recognizing the benefits that are generally attached to it. In such regard, the Civil Procedure Code, the Code on the Organization of Tribunals, the New York Convention on the Recognition and Enforcement of Arbitral Awards and Law No. 19,971 on International Commercial Arbitration (also known as “LACI”), encompass a clear commitment towards arbitration, particularly in connection with the finality of arbitral awards and the enforcement of foreign awards.

However, in light of recent judgments, this pro-arbitration bias seems to suffer when it comes to the request of interim measures, before national courts, in aid of foreign arbitrations. Indeed, some Chilean courts have refused to grant them in aid of an international arbitration seated in a country other than Chile and involving parties not domiciled in Chile. Is such approach consistent with Chilean law? It does not seem so.

I. Interim Measures by Chilean Courts: A Confusing Signal

Following the UNCITRAL Model Law on international arbitration, LACI meant a major improvement and modernization of Chilean legislation in this regard. As per interim measures, Article 9 LACI provides that “It shall not be deemed incompatible with the arbitration agreement for a party to request, before arbitration proceedings or during their process, from a court an interim measure nor for a court to grant such a measure.”

The provision does not distinguish on the seat of the arbitration nor the nationality or domicile of the parties thus, apparently, providing for full assistance from national courts on the issuance of interim measures, be it before or after the commencement of the arbitration. Is that so?

In GCZ Ingenieros S.A.C y Otra v. Latin America Power Perú S.A.C y Otras, a civil court of Santiago casts doubts on such a straight interpretation and rejected a request for interim relief in aid of a foreign arbitration. To do so, the court argued that Chilean law did not allow such a resolution because the arbitration proceeding was seated in another country and that the respondent parties were not domiciled in Chile. To support its reasoning, the court referred to Articles 1 and 107 et seq. of the Chilean Code on Organization of Tribunals and Articles 279 et seq. of the Chilean Civil Procedure Code that, purportedly, would provide for a territorial scope of Chilean law on arbitration.

However, such arguments and provisions are not convincing and pose a contradiction with the wording of Article 9 LACI, its legislative history and its purpose.

First, since the wording of Article 9 does not distinguish between arbitrations based in Chile or abroad, the interpreter or the court cannot make such a distinction in order to restrict the scope of the rule. Moreover, Article 1.2 LACI recognizes that Article 9 LACI is applicable if the seat of the arbitration is located outside the Chilean territory.1)BLACKABY, Nigel/PARTASIDES QC, Constantine/REDFERN, Alan/HUNTER, Martin (2015): Redfern and Hunter on International Arbitration, Student Version (Oxford, Oxford University Press, Sixth Edition), p. 429, para. 7.24. jQuery("#footnote_plugin_tooltip_3573_1").tooltip({ tip: "#footnote_plugin_tooltip_text_3573_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Therefore, article 9 LACI is a clear exception to the principle of territoriality.

Furthermore, LACI was enacted to fill a legal vacuum and provide a special and autonomous set of rules, procedurally and substantially, for the international commercial arbitration.2) Message of the President of the Republic of Chile in History of the Law No. 19,971, Library of the National Congress, 2004, p. 7. jQuery("#footnote_plugin_tooltip_3573_2").tooltip({ tip: "#footnote_plugin_tooltip_text_3573_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Therefore, it is improper to resort to general rules (such as the Civil Procedure Code and the Code on Organization of Tribunals) to reject interim measures in aid of foreign arbitral proceedings. Such rules remain applicable to local arbitration proceedings due to the dualistic nature of the Chilean arbitration system: on the one hand, domestic arbitration governed by general rules and, on the other hand, international commercial arbitration governed by LACI.

This approach is consistent with the adoption of the UNCITRAL Model Law and its aim at creating legal certainty, avoid the risk of the local law and to follow the general international consensus in this field. In this regard, the commentary and explanatory note by UNCITRAL on this Model Law confirms that interim measures by local courts do not depend on the place of arbitration.

Moreover, the judgement may present an additional risk if read along with certain decisions of Chilean courts in connection with interim measures granted abroad. In particular, the criterion of Chilean higher courts, as shown in Western Technology Servis Internacional Inc. v. Caucho Industriales S.A., is to reject the exequatur of interim measures granted abroad regarding assets located in Chile. Such approach, and the uniform decisions of Chilean courts in connection with the exclusive application of Chilean law over assets located in Chile, may leave claimants without proper legal protection and, on the other hand, may convey a message to defendants that Chile offers a sort of “safe haven” regarding the request and enforcement of interim measures. This would be an even bigger issue before the constitution of the arbitral tribunal or in the case of measures affecting a third party.

Another civil court also rejected an interim relief request in Hyundai Engineering & Construction v. Construtora OAS S.A. but on the basis of a very limited reasoning: “the seat in which the request was filed”. Fortunately, the judgment was overruled by the Court of Appeals of Santiago but it did not provide reasons to reach such decision.

II. Foreign Decisions May Shed Some Lights on the Subject

The issue is not new and it has already been addressed by foreign courts that, in general, have favored interim measures in aid of foreign arbitration proceedings under certain circumstances.

In such regard, although the United States’ Federal Arbitration Act does not contain a specific provision on the subject matter, the mere fact that the arbitration is seated abroad was not considered a determinative argument for rejecting an interim measure in its aid by a New York court. Indeed, in Sojitz Corp. v. Prithvi Info. Solutions Ltd., and based on Section 7502(c) of the Civil Practice Law and Rules (as amended on 2005), the court affirmed a decision that granted an interim measure on the basis that the arbitration award would otherwise be rendered ineffectual and that the account seized was a debt owed by a New York domiciliary.

Quite similar to the United States is the situation in the United Kingdom. In such regard, Section 44 (5) of the United Kingdom’s Arbitration Act authorizes interim relief by national courts if the arbitral tribunal is not able to grant them effectively. Pursuant to Section 2 (3), in the case of a foreign arbitration, the national court is allowed to reject interim measures provided that approving them is “inappropriate” considering the foreign seat. Accordingly, local courts have ruled that there must be some kind of connection to the territory of the UK, thus rejecting cases in which there was only a tenuous link to the UK (Econet Wireless Services Ltd v. Vee Networks Ltd [2006] EWHC 1568 (Comm); Company 1 v. Company 2 [2017] EWHC 2319 (QB)).

III. Promoting an International Approach from Chilean Courts towards Interim Measures

As detailed above, the denial of court-ordered interim measures in aid of a foreign arbitration by some Chilean courts, based on the location of the arbitration seat and the defendants’ domicile is inconsistent with the wording, legislative history and purpose of Article 9 LACI. Moreover, such an approach is counterintuitive considering the UNCITRAL Model Law and the international consensus and decisions on the subject.

Accordingly, Chilean courts should develop a proper balance between the autonomy of the arbitral tribunal, the supportive interference of national courts and the need to foster the effectiveness of the arbitral award.

An approach based on the existence of a sufficient connection with Chile would be consistent with LACI, the international consensus and the Chilean court’s cautiousness. Bearing that in mind, and considering that in the Chilean case mentioned above the operation of the respondents which the claimants aimed to inhibit took place in Chile and that a substantial part of the respondents’ obligations was connected with companies whose shares and assets were situated in Chile, it would have been possible to conclude the existence of “sufficient connection”, thus granting the requested

References   [ + ]

1. ↑ BLACKABY, Nigel/PARTASIDES QC, Constantine/REDFERN, Alan/HUNTER, Martin (2015): Redfern and Hunter on International Arbitration, Student Version (Oxford, Oxford University Press, Sixth Edition), p. 429, para. 7.24. 2. ↑ Message of the President of the Republic of Chile in History of the Law No. 19,971, Library of the National Congress, 2004, p. 7. 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
by Andrea Menaker
€ 240


The post Interim Measures by Chilean Courts in Aid of Foreign Arbitration appeared first on Kluwer Arbitration Blog.

First Lusophones’ Arbitration Meeting: Note and Invitation Translating Cultures and Promoting Arbitration

Kluwer Arbitration Blog - Sun, 2018-09-09 02:02

Eduardo Silva da Silva, Yves Derains and Ana Gerdau de Borja Mercereau

Fernando Pessoa and Machado de Assis.  What do these names have in common other than the fact that they are celebrated Portuguese-speaking writers?  Far away situated because of geography, history, and culture, these two writers have left an important legacy that has brought closer different cultures through their literary work.  In addition to being writers, Pessoa and Machado have also worked as translators.  And, in the translation of a poem, they have met at last.  The poem translated by them is the Portuguese version of a well-known text by Edgar Allan Poe, an American writer, originally published in 1845, entitled The Raven.1) The poem The Raven is one of the most well-known works of Edgar Allan Poe.  The English text has its own musicality and uses many figures of speech, which make translation a real challenge.  The translations of the Brazilian writer Machado and of the Portuguese writer Pessoa have been examined by the Brazilian writer Carlos Heitor Cony, “As traduções de o Corvo”, Jornal Folha de São Paulo, Editoria de Opinião (20 April 1997). jQuery("#footnote_plugin_tooltip_1717_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1717_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

This literary encounter of Pessoa and Machado perhaps could illustrate or translate the First Lusophones’ Arbitration Meeting that took place during the Paris Arbitration Week (PAW) in April 2018.

The Portuguese-speaking world, whether it is Portuguese, Brazilian, Angolan or Mozambican, has been inspired by the Roman-Germanic legal tradition.2) See DAVID, René. Os grandes sistemas do Direito contemporâneos (Martins Fontes 2002). jQuery("#footnote_plugin_tooltip_1717_2").tooltip({ tip: "#footnote_plugin_tooltip_text_1717_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  This legal tradition – as rightly puts Professor Miguel Reale – has courageously travelled across the seas.3) REALE, Miguel. Fontes e modelos do Direito (Saraiva 1994). jQuery("#footnote_plugin_tooltip_1717_3").tooltip({ tip: "#footnote_plugin_tooltip_text_1717_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });  As far as arbitration is concerned, the relations between Portuguese-speaking countries relate to economic realities.  Despite the different realities of these countries, they shared the same need for arbitration as a means to strengthen their internal market and to engage in foreseeable international commercial transactions.  If in contemporary Portugal international arbitration has also grown in light of the European tradition, in Brazil arbitration was needed as a better-suited solution for commercial disputes.  In turn, Mozambique and Angola as African commercial hubs with an important oil & gas sector have also used international arbitration as a tool to translate different legal systems.

In light of the above perspective, Mr. Yves Derains, who has become fluent in Portuguese on his own merits, opened the First Lusophones’ Arbitration Meeting welcoming the Portuguese-speaking guests at his Paris-based firm on the occasion of the enriching activities promoted by the International Chamber of Commerce (ICC) and by other entities supporting the PAW.  In his opening speech, Mr. Derains presented the three topics for discussion at the meeting to incite the encounter and the debate among participants, including exchanges between the different countries then represented.

The first panel discussed the topic “Institutional Initiatives Aiming at Increasing Publicity and Transparency in Arbitration”, animated by the moderator Mr. Fernando Mantilla-Serrano, Partner of Latham & Watkins, Paris.  Ms. Ana Serra e Moura, Deputy Secretary-General of the ICC International Arbitration Court, presented the topic, with comments by Mr. Felipe Moraes, Secretary-General of Câmara de Mediação e Arbitragem Empresarial do Brasil (CAMARB).  Their presentations considered (a) publicity and transparency in relation to players (constitution of the arbitral tribunal and disclosure obligations of arbitrators), (b) publicity in relation to the proceedings (in relation to amici curiae and to the reasons of the arbitral institution’s decisions), and (c) publicity of awards, including their publication and later enforcement proceedings.

Among other matters, Ms. Ana Serra e Moura from the ICC reported its experience in proceedings with Brazilian, Portuguese and African parties, relevant statistics, and the progress made towards greater transparency with the adoption of measures set forth in the Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, available on the ICC website.

In turn, Mr. Felipe Moraes from the CAMARB reported on its increasing experience with State entities and on its efforts to promote greater transparency.  He mentioned recent updates in Brazilian law on publicity in arbitration involving State entities, and the experience of CAMARB in this respect.   He also talked about the new CAMARB Arbitration Rules (2017) with provisions on publicity and transparency in cases involving State entities, distinguishing between public and private law State entities.  Articles 12.2 and 12.5 of these Rules state that the CAMARB Secretariat will publish on its website information about CAMARB arbitrations concerning State entities of public law, including the date of the request for arbitration, the names of the parties, and the award.  Pursuant to Article 12.3, the CAMARB will not provide additional information about these arbitrations to third parties, information which may otherwise be provided by the parties themselves according to the law.  Further, Article 12.4 provides that the arbitration hearing will not be opened to the public, unless the parties agree otherwise.

Moreover, Mr. Felipe Moraes mentioned the new legal provisions on transparency in arbitrations involving corporate and capital markets issues, such as the 2017 amendment to Instruction No. 358 of the Brazilian Securities and Exchange Commission (Commissão de Valores Mobiliários or “CVM”) requiring publicly traded companies’ disclosure of the institution of arbitration proceedings that may affect a company’s economic and financial situation.  Finally, he commented on CVM’s recent decisions in this regard.

The second panel discussed the topic “Arbitration with the State and State Entities in Brazil and in Portugal”.  The moderator Dr. Ana Gerdau de Borja Mercereau presented the speakers Mr. Renato Stephan Grion, Partner of the law firm Pinheiro Neto Advogados from São Paulo, and Mr. Filipe Vaz Pinto, Partner of MLGTS from Lisbon.  The arbitration experience with the State and State entities in Portugal and in Brazil is challenging with new developments shared by the speakers and the participants.

Among other matters, Mr. Filipe Vaz Pinto discussed the Portuguese reform of 2018, in light of the adoption of Decree-Law No. 111-B/2017, which, among other provisions, introduced changes to Article 476 of the Code of Public Contracts (on alternative dispute resolution).  The changes came about at a time when the Judiciary in Portugal is facing increasing difficulties to deal effectively with the case load brought before State Administrative Courts, while at the same time arbitration involving State entities is facing growing public criticism, even if sometimes based on wrong perceptions, not actual facts.  This is perhaps what justifies the unease feeling that this reform “gave with one hand what it took away with the other”: while the new rules purport to expand the use of arbitration in disputes involving the State or State entities, including disputes concerning public tenders, they also establish a non-waivable right of appeal in respect of all disputes with an amount exceeding € 500,000.  It remains to be seen how these rules will play out in practice and be perceived by investors.

In turn, Mr. Renato Stephan Grion discussed Brazilian initiatives like the new provisions on arbitration with State entities under the Brazilian Arbitration Law (Law 9,307/1996, Article 1, § 1, and Article 2, § 3, modified by Law No. 13,129/2015), the Federal Decree 8,465/2015 (on port sector arbitration), and the Decree of the State of Rio de Janeiro 46,245/2018  (on arbitration with State entities of the State of Rio de Janeiro).  He also referred to the survey “Arbitration in Regulated Infrastructure Sectors” published in 2017 by the FGV/CERI and The Word Bank, which shows that several Brazilian agencies such as ANP (National Petroleum Agency or Agência Nacional do Petróleo), ANTT (National Land Transport Agency or Agência Nacional dos Transportes Terrestres), ANAC (National Civil Aviation Agency or Agência Nacional de Aviação Civil) and ANATEL (National Telecommunications Agency or Agência Nacional de Telecomunicações) have concluded arbitration agreements.  In relation to the ANP, Mr. Renato Grion referred to Proceedings No. 139,519/RJ (Conflito de Competência), in which the Superior Court of Justice (Superior Tribunal de Justiça or “STJ”), in 2017, referred the ANP to ICC arbitration proceedings instituted by the mixed capital company Petrobras based on an arbitration clause under an oil & gas concession contract concluded with the ANP.  Later, he discussed the implications of the new publicity provision under Article 2, § 3, of Law 9,307/1996, noting that several Brazilian institutions have adjusted their arbitration rules in light of this.

Finally, the third panel considered the topic “Arbitration in the Oil & Gas Sector in Angola and Mozambique”, moderated by Prof. Dr. Eduardo Silva da Silva, Partner of S&R Dispute Resolution Office, from Brazil.  The speakers were Ms. Sofia Martins, Partner of the law firm Miranda Advogados, from Lisbon, and Ms. Filipa Cansado Carvalho, of Counsel of the law firm PLMJ, also from Lisbon.  They discussed the legal and regulatory framework of the oil & gas sector in these countries, the type of disputes and ways to tackle political, economic and social questions related to arbitration in Angola and Mozambique.

Ms. Sofia Martins described in detail the structure of oil & gas operations in both Angola and Mozambique, focusing in particular on the structure of Production Sharing  Agreements, on the standard dispute resolution provisions as well as on mandatory arbitration-related provisions in the laws of both countries.

In turn, Ms. Filipa Cansado Carvalho highlighted some difficulties that might arise within or in connection with arbitration proceedings seated in Angola or Mozambique and shared some war stories. Among other issues, Ms. Cansado Carvalho explained why it is fundamental to involve Portuguese-speaking lawyers at the negotiation stage as well as when a dispute arises.  She also spoke of recent legislation enacted in Angola seeking to prevent non-members of the Angolan Bar Association to act in arbitrations seated in Angola, describing how this has been applied in practice so far and comparing this to the current situation in Mozambique.  Ms. Cansado Carvalho concluded on a positive note stating that, although arbitration and, in particular, oil & gas arbitration involving Angola or Mozambique is not without challenges, with knowledge of what these difficulties are and of how these jurisdictions work it is generally possible to manage them.

The debate about the above-mentioned topics has been enriching and promoted the interaction between the Portuguese-speaking practitioners.  Among the participants were Ms. Ana Paula Montans (Arbitrator, London), Dr. Clávio Valença (Partner, Valença Galíndez, São Paulo), Dr. Daniel de Andrade Levy (Of Counsel, Enyo Law, London), Prof. Dr. Diego Fernández Arroyo (Sciences Po, Paris), Dr. Gustavo Scheffer da Silveira (Counsel, ICC, São Paulo), Prof. Dr. Judith Martins-Costa (Partner, Judith Martins-Costa Advogados, Porto Alegre), Ms. Luiza Saldanha Pena Costa (Associate, Betto Seraglini, Paris), Prof. Dr. Mariana França Gouveia (Partner, PLMJ/Universidade Nova de Lisboa, Lisbon), Dr. Matthieu de Boisséson (Arbitrator, Matthieu de Boisséson, London and Hong Kong), Mr. Miguel de Almada (Partner, MLGTS, Lisbon), Prof. Dr. Nadia de Araujo (Partner, Nadia de Araujo Advogados/PUC-Rio, Rio de Janeiro), Mr. Ricardo Ranzolin (Partner, Silveiro Advogados, Porto Alegre), and Ms. Sofia Ribeiro Mendes (Arbitrator, Lisbon).

As arbitration practitioners and Portuguese speakers, we practice arbitration according to the tones and nuances of our cultures.  Like Fernando Pessoa and Machado de Assis, we live in our own political, economic and social environment.  Acknowledging that arbitration could be designated “lusophone” depends on an increasing effort towards contributing, interacting and understanding: this is our role as “translators” of different legal cultures in arbitration.

We met, in this first edition, in Paris, the city of lights, a place of meaningful encounters.  Just like Pessoa and Machado, we too have become translators.  We have reciprocally translated our own particularities and multiple potentialities.  And this experience like the literary encounter of Pessoa and Machado can inspire and produce new lusophone perspectives in arbitration.  Portugal as an international destination and Brazil as a developing country clearly present opportunities and potentialities. Angola and Mozambique although needing economic and legal infrastructure present important resources for the international trade.  These countries present a whole world to explore and to translate.  May Camões’ language, which brought together in a poem Machado and Pessoa, be used as a tool for this task.  In 2019, we shall continue this fruitful exercise in the Second Edition of the Lusophones’ Arbitration Meeting.

References   [ + ]

1. ↑ The poem The Raven is one of the most well-known works of Edgar Allan Poe.  The English text has its own musicality and uses many figures of speech, which make translation a real challenge.  The translations of the Brazilian writer Machado and of the Portuguese writer Pessoa have been examined by the Brazilian writer Carlos Heitor Cony, “As traduções de o Corvo”, Jornal Folha de São Paulo, Editoria de Opinião (20 April 1997). 2. ↑ See DAVID, René. Os grandes sistemas do Direito contemporâneos (Martins Fontes 2002). 3. ↑ REALE, Miguel. Fontes e modelos do Direito (Saraiva 1994). 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
by Andrea Menaker
€ 240


The post First Lusophones’ Arbitration Meeting: Note and Invitation Translating Cultures and Promoting Arbitration appeared first on Kluwer Arbitration Blog.

Amaka Orakwue: One Woman, Many Dreams - THISDAY Newspapers

Google International ADR News - Sat, 2018-09-08 22:18

THISDAY Newspapers

Amaka Orakwue: One Woman, Many Dreams
THISDAY Newspapers
As a corporate person, she equally belongs to many reputable associations like the Nigerian Bar Association, Association of Professional and Mediators (Alternative Dispute Resolution), Federation International de Abogadas (FIDA), International ...

ICADR holds seminar on 'Judicial Reforms and ADR for Business Sustainability' in Hyderabd - United News of India

Google International ADR News - Sat, 2018-09-08 10:11

ICADR holds seminar on 'Judicial Reforms and ADR for Business Sustainability' in Hyderabd
United News of India
Hyderabad, Sep 8 (UNI) The International Centre for Alternative Dispute Resolution (ICADR), Regional Centre Hydeabad in association with Confederation of Indian Industry (Cll) conducted a Seminar on "Judicial Reforms and Alternative Dispute Resolution ...

ICADR holds seminar on 'Judicial Reforms and ADR for Business Sustainability' in Hyderabd - United News of India

Google International ADR News - Sat, 2018-09-08 10:11

ICADR holds seminar on 'Judicial Reforms and ADR for Business Sustainability' in Hyderabd
United News of India
Hyderabad, Sep 8 (UNI) The International Centre for Alternative Dispute Resolution (ICADR), Regional Centre Hydeabad in association with Confederation of Indian Industry (Cll) conducted a Seminar on "Judicial Reforms and Alternative Dispute Resolution ...

Cleansing the (Un)clean: The Ongoing Saga of the Clean Hands Doctrine

Kluwer Arbitration Blog - Sat, 2018-09-08 05:00

William Kirtley and Thomas Davis

The arbitral tribunal in Glencore Finance (Bermuda) Limited v. Bolivia has recently hinted at its intent to address an old question: What is the doctrine of “clean hands” in investment arbitration?

On 31 January 2018, an arbitral tribunal composed of Professor Ricardo Ramírez Hernández, Professor John Gotanda and Professor Philippe Sands issued a Procedural Order No. 2 on the issue of bifurcation. While the order itself is uncontroversial, the tribunal notes that the standard and scope of clean hands will have to be examined thoroughly. Therefore, the tribunal will have an opportunity to clarify a problem that has frustrated former tribunals and led to divergent decisions.

Bolivia had objected to Glencore’s claims, arguing that the privatization of the assets underlying the investment in question had been illegal under Bolivian law, the acquisition of mining and leasing assets were contrary to the Bolivian Constitution and the circumstances surrounding the privatization of the assets were contrary to transparency and good faith. Based on this, Bolivia claimed that under the “clean hands” principle, the foreign investor could not present claims tainted by illegality which the foreign investor was aware of when it received the assets in question. The Claimant maintained that the investment was made lawfully through a public tender process.

In its Order, which rejected bifurcation, the tribunal referenced Churchill Mining to agree that the clean hands doctrine had found “expression” internationally, but that its “status and exact contours” remain uncertain (para. 46). The tribunal acknowledged its doubts that a “mere assertion of unlawful conduct” would raise the objection above the required threshold (para. 47), but indicated that it would not only have to accept the clean hands principle, but also to lay out its contours. The tribunal also indicated that it would need to look at the merits to address this objection.

There remains significant disagreement about the status of the clean hands doctrine under international law.

Proponents argue that the doctrine exists as a general principle, pointing to international tribunals and a significant number of national legal decisions (e.g., P. Dumberry, “State of Confusion: The Doctrine of “Clean Hands” In Investment Arbitration after the Yukos Award“, 17 Journal of World Investments and Trade (2016), pp. 229-259). Past tribunals have relied on similar good faith principles, international public policy and the duty to honor local laws (e.g., Inceysa Vallisoletana, S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award (2 August 2006), para. 244 (‘[N]o legal system based on rational grounds allows the party that committed a chain of clearly illegal acts to benefit from them.’). According to Dumberry, the legality requirement is itself a manifestation of the clean hands doctrine.

However, to become a general principle of law, a principle must have “a certain level of recognition and consensus” (Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA 227, Final Award (18 July 2014), para. 1359.). The ILC Articles on State Responsibility and Diplomatic Protection do not contain any reference to the doctrine of unclean hands. As the Yukos tribunal noted – which itself included a member who had previously dissented in an ICJ case based on a finding of unclean hands (para. 1361) – there is not a single majority decision by an international tribunal which has applied the clean hands doctrine to an investor-State dispute to conclude that it operated as a bar to claims as a principle of international law (para. 1362).

In Fraport II, for instance, the principle did not operate to exclude the investor’s claim, since the relevant treaty contained a legality requirement clause (para. 328). In another case, Al-Warraq v. Indonesia, the tribunal’s finding that claimant’s conduct fell within the scope of the application of the clean hands doctrine and therefore could not benefit from the protection afforded by the OIC Agreement was made, but in obiter dictum (para. 647). Given the lack of relevant case law, it is difficult to determine the doctrine’s status, let alone the standard to be applied.

A 2013 case provides a potential solution. The tribunal in Niko Resources v. Bangladesh (“Niko”) addressed clean hands separately from contentions of bad faith and international public policy (para. 476). It also sidestepped determining the status of unclean hands as a general principle of law by focusing on its content. It found that, at the principle’s core, some form of reciprocity was required, i.e., a nexus between the relief forming the objection and past actions which may be characterized as unclean hands (para. 483). In doing so, it relied on three elements referenced by Judge Hudson’s opinion in Guyana v. Suriname (para. 481):

  1. the breach must concern a continuing violation;
  2. the remedy sought must be ‘protection against the continuance of that violation in the future’, not damages for past violations and
  3. there must be a relationship of reciprocity between the obligations considered

In Niko, as the violation was not continuing, the remedy did not concern protection against a past violation and there was no relationship between the relief being sought and the acts in the past characterized as involving unclean hands, the respondents’ objection based on acts of corruption were dismissed (paras. 483, 485).

The tribunal in Glencore might apply this narrow standard, which would avoid the contentious task of outlining the standard and scope of unclean hands as a general principle of law, while addressing genuine concerns of illegality. This would also allow the tribunal to avoid making a distinction between admissibility and jurisdiction, should Bolivia fail to corroborate its objection.

While some treaties expressly cover only those investments that are made in accordance with host State law, the question of whether there is a general principle of international law which requires “clean hands” is unsettled, at best. In the authors’ opinion, the most that can be said is that rather than forcing the parties to guess at the appropriate standard to apply in cases where the clean hands doctrine is invoked, it is important for the arbitrators in Glencore to provide the parties guidance as early as possible, so that the parties can adapt themselves to those standards, strengthening due process while minimizing tilting at windmills.

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
€ 240


The post Cleansing the (Un)clean: The Ongoing Saga of the Clean Hands Doctrine appeared first on Kluwer Arbitration Blog.

Alternative Fee Structure Goes Live For American Arbitration Association - JD Supra (press release)

Google International ADR News - Fri, 2018-09-07 10:11

JD Supra (press release)

Alternative Fee Structure Goes Live For American Arbitration Association
JD Supra (press release)
Although arbitral institutions like the London Court of International Arbitration and International Chamber of Commerce have historically based arbitration costs on models other than a pure hourly-basis, the American Arbitration Association ...

Alternative Fee Structure Goes Live For American Arbitration Association - JD Supra (press release)

Google International ADR News - Fri, 2018-09-07 10:11

JD Supra (press release)

Alternative Fee Structure Goes Live For American Arbitration Association
JD Supra (press release)
Although arbitral institutions like the London Court of International Arbitration and International Chamber of Commerce have historically based arbitration costs on models other than a pure hourly-basis, the American Arbitration Association ...

Alternative Fee Structure Goes Live For American Arbitration Association - JD Supra (press release)

Google International ADR News - Fri, 2018-09-07 10:11

JD Supra (press release)

Alternative Fee Structure Goes Live For American Arbitration Association
JD Supra (press release)
Although arbitral institutions like the London Court of International Arbitration and International Chamber of Commerce have historically based arbitration costs on models other than a pure hourly-basis, the American Arbitration Association ...

India: International Arbitration To Unlock The Stalemates - Mondaq News Alerts

Google International ADR News - Fri, 2018-09-07 08:12

India: International Arbitration To Unlock The Stalemates
Mondaq News Alerts
The parties take resort to international institutions, prescribing rules and procedures regulating to arbitration. Some such institutions are International Chamber of Commerce, International Centre for Alternative Dispute Resolution, etc. In India ...

Seminar on Judicial Reforms and Alternative Dispute Resolution in Hyderabad - United News of India

Google International ADR News - Fri, 2018-09-07 02:50

Seminar on Judicial Reforms and Alternative Dispute Resolution in Hyderabad
United News of India
Hyderabad, Sep 7 (UNI) To promote, propagate and popularise Alternative Dispute Resolution (ADR) Methods, ICADR (International Centre for Alternative Dispute Resolution (ICADR), Regional Centre, Hyderabad in association with Confederation of Indian ...

Seminar on Judicial Reforms and Alternative Dispute Resolution in Hyderabad - United News of India

Google International ADR News - Fri, 2018-09-07 02:50

Seminar on Judicial Reforms and Alternative Dispute Resolution in Hyderabad
United News of India
Hyderabad, Sep 7 (UNI) To promote, propagate and popularise Alternative Dispute Resolution (ADR) Methods, ICADR (International Centre for Alternative Dispute Resolution (ICADR), Regional Centre, Hyderabad in association with Confederation of Indian ...

Digital Business in Norway - Lexology

Google International ADR News - Thu, 2018-09-06 18:00

Digital Business in Norway
Lexology
Only banks and other financial undertakings with a licence from the Norwegian Financial Supervisory Authority and corresponding international institutions – as well as a licence from the applicable country of origin – can provide payment services in ...

Construction in Australia - Lexology - Lexology

Google International ADR News - Thu, 2018-09-06 18:00

Lexology

Construction in Australia - Lexology
Lexology
Sector overview. Trends, developments and prospects. What is the general state of the construction sector in your jurisdiction, including current trends, notable ...

and more »

Practical Tips for Handling Construction Claims and Disputes: Managing Documentary Evidence

Kluwer Arbitration Blog - Thu, 2018-09-06 17:37

Tanya Landon and Azal Khan

This is one of the five construction arbitration posts, providing the technical discussion from the SCAI, CAM, TILPA conference in Geneva and Mexico City.  The authors include: Ms Almudena Otero De La Vega (on State enterprises) Ms Tanya Landon & Ms Azal Khan (on evidence), Dr Manuel Arrollo (on multiple procedures), Mr Serge Y. Bodart (on dispute boards and PPPs) and Dr Jorge Huerta-Goldman (on prevention to arbitration & state disputes).

Construction projects typically involve complex technical issues and several parties working together over long periods of time.  This results in complex facts, legal issues and most importantly, voluminous documentation.  Contemporaneous documents are the backbone of any construction case because they provide the most accurate and credible evidence to support a party’s claims and defences.  For this reason, the proper management of documentary evidence in construction cases is crucial to the success of a party’s case.  Managing the documentary evidence is an ongoing process and should start from the very outset of the arbitration – in fact, even before the dispute arises – and continue until the end of the case.

Typical Documents in Construction Arbitration

Documentary evidence can come in many shapes and sizes: written documents, photographs, drawings and maps, in both physical and electronic media.  While each construction dispute is unique and generates its own set of facts and corresponding documentation, the categories of documents typically seen in construction cases include:

  • pre-contractual documents, including draft specifications and drawings, tender documents, and pre-contractual correspondence between the parties;
  • contractual documents, including contracts, annexes and appendices, and final specifications and drawings;
  • original and amended time schedules (particularly important in cases with delay claims);
  • post-contractual correspondence between the parties, including notices dealing with day-to-day technical issues and/or legal notices;
  • correspondence and other day-to-day records, including minutes of meetings, site logs and progress reports; and
  • quantum documents, including invoices, receipts, proof of payments and costs documentation.

Document Management Before the Arbitration Begins

The “Paper Trail”

Documents should be consistently managed throughout the life of a construction project and the corresponding dispute.  Starting the process early is essential because gathering the evidence from a voluminous and unorganized pool of documents only after the dispute arises can be a cumbersome, expensive and eminently frustrating process for all involved.  It can also create unnecessary delay in starting the arbitration or responding to a claim.

Parties involved in construction projects should therefore adopt internal policies and practices to ensure that a “paper trail” of all the essential aspects of the project is kept and organized in a way that will be useable later on.  Given that questions of contractual interpretation are staple issues in many construction disputes, parties should be mindful of recording their “intent” from the very beginning.  Parties should also maintain records of every meeting, negotiation and transaction, and follow-up on any oral conversations with e-mails and notes to file.  This becomes particularly important when signs of a dispute arise.  It is also critical to document any mitigation attempts, which can later serve as proof in discharging a party’s burden to mitigate.  Parties should consider engaging outside counsel early on, even before a dispute has formally arisen.  This assists with the preparation of legal notices and other documents which will help to shape the narrative of the future dispute.

Use of EDMS

Parties involved in significant construction disputes should consider investing in electronic document management software (“EDMS”) to facilitate the storing, sorting and analysis of voluminous documents.  While investing in EDMS can involve significant upfront purchase and training costs, for highly-complex, document-heavy construction disputes, it can be a gift that keeps on giving.  EDMS can help filter out irrelevant documents in the early stages of the dispute, and drastically reduce the pool of documents that need to be reviewed.  EDMS also allows parties to search and analyze documents based on chronology or theme, which can be very useful when it comes to crafting a compelling narrative and case theory that will help a party win its case.  Moreover, with the rapid rise of artificial intelligence tools and machine learning, parties and counsel involved in construction disputes would be wise to invest the time and energy now to become knowledgeable and comfortable with these new technologies which are likely to revolutionize the way documentary evidence is handled in international disputes tomorrow.

Early Review of Documents

As soon as the signs of a dispute arise, parties should conduct an early case assessment, which necessarily involves a comprehensive document review.  This can help a party separate out the documents that are most relevant, and identify those documents or categories of documents that it does not have, and which it will need to request from its counterpart or third parties once the arbitration begins.  Early document review can also help spot privileged and confidential documents that a party can withhold in the upcoming arbitration.  Again, engaging outside counsel to assist with the early review of documents as part of an early case assessment can pay off in spades later on in the dispute.

Document Management during the Arbitration

Document Production

As with other types of disputes, a party asserting a claim in a construction arbitration bears the burden of proof.  To discharge this burden of proof, a party relies primarily on contemporaneous documents to prove its case and disprove the case of the other party.  The document production phase of the arbitration plays a pivotal role in helping parties obtain the critical evidence they need to prove their claims.

When a party does not possess certain documents relevant to prove its claims, it may request the production of such documents from the opposing party during the document production phase.  Based on international best practice as embodied in the IBA Rules on the Taking of Evidence in Arbitration, document requests in arbitration should be narrowly tailored, described in sufficient detail, be shown to be relevant to the case and material to its outcome, and must not be in the possession, custody or control of the requesting party.  Since the arbitral tribunal may draw adverse inferences against a party which refuses to produce ordered documents, it is important for the parties to take the process seriously.  On the other hand, international arbitration tribunals typically look unfavorably on fishing expeditions, and parties and their counsel are thus expected to do the hard work necessary to identify relevant documents with specificity.  As discussed above, this is where an early document review with the help of EDMS can address these issues in advance and minimize the scope for any unpleasant surprises in the document production phase.

Presentation of Documentary Evidence

The golden rule in construction arbitration, which often involves not only voluminous but complex technical evidence, is to help the arbitral tribunal “cut through the noise” and present the most compelling evidence in the simplest manner possible.

Given that many construction disputes involve time-based or delay claims, a chronology-based presentation of events is often recommended.  A good chronology presented to the arbitral tribunal at the outset of the case can be a strong foundation on which to build the party’s narrative throughout the proceedings.  In complex and protracted disputes, an arbitral tribunal may request that the parties agree on the undisputed facts and prepare an agreed chronology.  While this can help the arbitral tribunal and the parties to narrow the scope of issues to be addressed, it can be an arduous task to get two opposing parties to agree on a chronology of facts.

Once the chronology is established, a party should also consider presenting its case and arguments – in the written pleadings, witness statements and expert reports – by particular claim or issue.  As various layers of evidence are submitted through the course of the proceedings, it is helpful to refresh the memory of the arbitral tribunal with regard to the status of the contentious issues, e.g., if an assertion or evidence has not been challenged or if a party has reversed its earlier stance on an issue.  For this purpose, “Scott Schedules” are a useful format to follow as they allow an arbitral tribunal to easily identify the status of a particular issue or claim.

Parties should also embrace the use of visual aids such as organizational charts, timelines, 3D or 4D programs, photographs, maps and diagrams to help simplify complex technical evidence for the arbitral tribunal.

Finally, in document-heavy construction disputes, parties and arbitral tribunals should seriously consider adopting systems to facilitate “paperless” arbitrations.  These are typically web-based electronic filing systems which allow all parties involved in the arbitration to upload and download the written submissions and exhibits, leading to more efficient management of documents during the proceedings and likely saving a significant number of trees!  In a paperless system, the evidence can be collated and numbered into agreed working files and core bundles which can then be used by all participants at the hearings, and help to avoid the frequent situation of dozens (if not hundreds) of binders being shipped to hearing centers, containing multiple copies of the same exhibits.  Parties are also frequently adopting technology to create e-briefs, which include hyperlinks to all the cited evidence.  Though these trends are encouraging, these systems only work if the parties, and most importantly the arbitral tribunal, are comfortable using technology in real-time at the hearing.

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
€ 240


The post Practical Tips for Handling Construction Claims and Disputes: Managing Documentary Evidence appeared first on Kluwer Arbitration Blog.

International Arbitration to unlock the Stalemates - Lexology

Google International ADR News - Thu, 2018-09-06 10:30

International Arbitration to unlock the Stalemates
Lexology
The parties take resort to international institutions, prescribing rules and procedures regulating to arbitration. Some such institutions are International Chamber of Commerce, International Centre for Alternative Dispute Resolution, etc. In India ...

Do Parties Need Recourse against Interim Awards?

Kluwer Arbitration Blog - Wed, 2018-09-05 21:00

Harsh Hari Haran

Introduction

The 2018 International Arbitration Survey: The Evolution of International Arbitration undertaken by the Queen Mary University and White and Case LLP found flexibility to be the third most valuable characteristic of international arbitration.

The flexibility inherent in the arbitral process allows tribunals to conduct the proceedings (ideally) in an expeditious manner. One common method used by tribunals is to delineate the issues in dispute and, where appropriate, determine some issues at an early stage of the proceedings by way of a “partial” or “interim” award.

Challenges to jurisdiction, questions of liability and applicable law are just some of such issues. In fact, a 2012 survey undertaken by the Queen Mary University and White and Case LLP found that partial or interim awards are issued in one third of arbitrations.

Given the potentially significant impact that an interim award can have on the arbitration proceedings, most jurisdictions provide parties with immediate recourse against an interim award. However, the Supreme Court of India in M/s Indian Farmers Fertilizer Co-operative Limited v M/s Bhadra Products (Civil Appeal No. 824 of 2018) (“Bhadra Products“) invites the Indian Parliament to disrupt this delicate balance.

The current state of play

The Indian Arbitration and Conciliation Act, 1996 (“the Arbitration Act“) is, in many ways, unique. One area where the Arbitration Act departs from the Model Law (and many other jurisdictions) is with respect to the remedies available to a party where a tribunal rules, as a preliminary question, that it has jurisdiction.

Article 16(3) of the 1985 UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) provides a party with immediate recourse where the tribunal rules as a preliminary question that it has jurisdiction. By contrast, Section 16(5) of the Arbitration Act states that where a tribunal rejects a challenge to its jurisdiction, it shall continue with the arbitral proceedings and make an arbitral award and, pursuant to Section 16(6), a party aggrieved by such an award may make an application for setting aside such an award. In other words, under the Arbitration Act, where the tribunal rules as a preliminary question that it has jurisdiction the aggrieved party has no immediate recourse and must await the final award on merits.

There is some weight to the argument that the position taken by the Arbitration Act is far from satisfactory as it compels parties to incur unnecessary time and costs in potentially useless arbitration proceedings. But parties could take comfort in the fact that they could apply to set aside an interim award on any other issue. However, that too may soon change given the Supreme Court’s observations in Bhadra Products.

The Supreme Court’s decision

In arbitration proceedings between the appellant (respondent in the arbitration) and the respondent (claimant in the arbitration), the tribunal issued a “First Partial Award” rejecting the appellant’s objection that the respondent’s claims were time barred. The appellant applied to have the “First Partial Award” set aside. The trial court dismissed the petition on the ground that the tribunal’s decision did not constitute an interim award and therefore could not be set aside under Section 34 of the Arbitration Act. The appeal to the High Court was also dismissed which resulted in an appeal to the Supreme Court.

The respondent argued that the tribunal’s decision on limitation was a ruling with respect to its jurisdiction and, in accordance with Section 16(6) of the Arbitration Act, can only be challenged together with a final award.

Rejecting the argument the Supreme Court held that the term “jurisdiction” in Section 16 of the Arbitration Act has been used in the narrow sense and, similar to Section 30 of the English Arbitration Act, 1996, refers to (i) the existence of a valid arbitration agreement; (ii) whether the tribunal has been properly constituted; and (iii) whether the matters have been submitted to arbitration in accordance with the arbitration agreement.

Accordingly, the Supreme Court found that a determination on limitation is not a determination on the tribunal’s jurisdiction but a determination on the merits of the claim and therefore constituted an interim award which can be set aside under Section 34 of the Arbitration Act.

Fatal parting words?

By adopting a narrow definition of “jurisdiction“, the Supreme Court mitigated the potentially harmful consequences of Section 16(6) of the Arbitration Act as only a limited category of decisions would constitute a tribunal’s decision on its jurisdiction.

However, the Supreme Court’s judgment concludes with an invitation to the Parliament to consider amending Section 34 of the Act, such that all interim awards can only be challenged together with the final award. If accepted, this would severely reduce the attractiveness of arbitration in India.

Take the hypothetical situation where, in an arbitration arising from a construction contract, a contractor claims damages for wrongful termination of the contract and payment for work done and the employer counter-claims for costs incurred in engaging a replacement contractor. An interim award holding that the contract was validly terminated, would greatly reduce the scope of the damages hearing.

The Supreme Court’s invitation, if accepted, would require the contractor to first contest the entire arbitration and thereafter apply to have the interim award set aside together with the final award. If the contractor is successful in having the award set aside, it will then have to potentially re-commence arbitration in order for its claim for damages to be determined. This is clearly unsatisfactory and would greatly increase the time and costs incurred by the parties.

Where does the balance lie?

The Supreme Court’s invitation was motivated by a concern for the unnecessary delay and additional expense incurred by parties in dealing with “piecemeal challenges“. While it is true that parties’ incur time and costs in dealing with challenges to interim awards, the solution is not to remove all recourse to interim awards. Instead, the author suggests that the balance is struck when both tribunals and court exercise their discretion in an appropriate manner.

An arbitral tribunal should only determine an issue by way of an interim award if it will have a significant impact on the merits hearing. Courts, when faced with a challenge to an interim award, should be circumspect in granting a stay of the arbitration proceedings pending the determination of the challenge. Indian Courts may find guidance on this issue in the decision of the Singapore High Court in BLY v BLZ & Another [2017] 4 SLR 410, where the Singapore High Court, determining an application for a stay of the arbitration pending a challenge against the tribunal’s ruling on its jurisdiction, held:

  • The “default position” is that the arbitration will continue pending curial review;
  • The court’s discretion to stay the arbitration must be exercised judicially and with reference to all the circumstances of the case; and
  • In order to justify the exercise of its discretion, there must be “special circumstances” necessitating a stay of the arbitration proceedings, which can include the conduct of the other party in relation to the arbitral proceedings. However, costs incurred in potentially useless arbitration proceedings would not constitute special circumstances.

 

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
€ 240


The post Do Parties Need Recourse against Interim Awards? appeared first on Kluwer Arbitration Blog.

Commerce Court Leader Talks New Initiatives, Juggling Roles and Why the Commerce Program Is for 'Nerds' - Law.com

Google International ADR News - Wed, 2018-09-05 15:51

Law.com

Commerce Court Leader Talks New Initiatives, Juggling Roles and Why the Commerce Program Is for 'Nerds'
Law.com
Glazer stepped into the role over the summer after former Philadelphia Judge Patricia McInerney stepped down to do alternative dispute resolution. The Legal talked with Glazer .... I also have an interest in the international area. I have gotten ...

Privacy Policy - KPTV.com

Google International ADR News - Wed, 2018-09-05 11:29

Privacy Policy
KPTV.com
International Users. The Services are controlled and offered by Meredith from its facilities in the United States of America. Meredith makes no representations that the Services are appropriate or available for use in other locations. Those who access ...

Is Article 16(3) of the Model Law A ‘One-Shot Remedy’ for Non-Participating Respondents in International Arbitrations?

Kluwer Arbitration Blog - Tue, 2018-09-04 20:54

Darius Chan

YSIAC

It is not uncommon for practitioners acting for claimants in an arbitration to encounter a respondent who chooses to boycott the arbitral process.  In cases involving such ‘non-participating’ respondents, what are the rights and obligations of each party? Specifically, insofar as Model law jurisdictions are concerned, if a Tribunal decides on jurisdiction as a preliminary issue must the non-participating respondent apply under Article 16(3) of the Model Law to the curial court to review that decision, or otherwise lose the right to challenge any eventual award thereafter on jurisdictional grounds? Can the non-participating respondent surface at a later stage to set aside, or alternatively resist enforcement, of any eventual award based on jurisdictional grounds?

 

There are two Singapore High Court decisions which appear to have given differing guidance on this issue.

 

‘Participating Respondents’

 

Preliminarily, it would be helpful to remind ourselves of the position for ‘participating’ respondents.

 

Insofar as participating respondents are concerned, the Singapore High Court in Astro Nusantara International BV v PT Ayunda Prima Mitra [2013] 1 SLR 636 (Astro HC) had ruled that a party who does not seek curial review of a Tribunal’s decision under Article 16(3) of the Model Law cannot subsequently set aside or resist enforcement of any eventual award on the same jurisdictional objections.  In so deciding, the Singapore High Court was motivated by concerns of “minimis[ing] dilatory or obstructionist tactics so as to avoid unnecessary wastage of time and money”.

 

However, this was reversed on appeal.  The Singapore Court of Appeal in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others [2014] 1 SLR 372 (Astro CA) opined that Article 16(3) is not a “one-shot” remedy.  A party who does not seek curial review of a Tribunal’s decision under Article 16(3) of the Model Law can subsequently resist enforcement of any eventual award on the same jurisdictional objections.  However, that party may be precluded from setting aside the award on the same jurisdictional objections.  The Court of Appeal opined in dicta (at [130]) as follows: ‘[the Court of Appeal] would be surprised if a party retained the right to bring an application to set aside a final award on the merits under [Article 34 of the Model Law] on a ground which they could have raised via other active remedies before the supervising court at an earlier stage when the arbitration process was still ongoing’.

 

We turn now to address two cases which have considered the rights of ‘non-participating respondents.

 

‘Non-participating Respondents’

 

(1) Astro Nusantara International BV v PT Ayunda Prima Mitra [2013] 1 SLR 636

 

The first case is the first instance decision of Astro HC by Belinda Ang J.

 

Ang J took the view that a non-participating respondent who does not seek curial review of a Tribunal’s decision under Article 16(3) can subsequently seek to set aside or resist enforcement of any eventual award on jurisdictional grounds.  A non-participating respondent could be a party who boycotts the arbitral process from the commencement of the arbitration, or a party who elects to leave the arbitral regime after the Tribunal renders an unfavourable decision on jurisdiction as a preliminary issue.  Put simply, on Ang J’s analysis, a non-participating respondent’s rights under Articles 34 and 36 of the Model Law are not fettered by the fact that the respondent had chosen not to participate in the arbitration.

 

Ang J opined (at [133]) that the counterparty ‘would have ample notice of this from the boycotting party’s absolute refusal to participate’.  Ang J ([133]) reasoned that “this possibility is hinted at” in the travaux préparatoires of the Model Law, namely The Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN.9/264, 25 March 1985).  The travaux suggested that, a party who fails to raise a jurisdictional objection within the time limit under Article 16(2) of the Model Law (eg, ‘not later than the submission of the statement of defence’) would be precluded from raising jurisdictional objections whether to set aside or resist enforcement of an award (subject to certain limits such as public policy and arbitrability).  However, according to the travaux, the Model Law provisions on setting aside and resisting enforcement remains applicable to cases ‘where a party did not participate in the arbitration, at least not submit a statement or take part in hearings on the substance of the dispute’.

 

We turn next to contrast Ang J’s views against a recent decision by Quentin Loh J in Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2018] SGHC 78.

 

(2) Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2018] SGHC 78

 

In this case, Loh J, citing the Court of Appeal’s ruling in Astro CA, held that non-participating respondents who do not seek curial review of a Tribunal’s decision under Article 16(3) can subsequently seek to resist enforcement of any eventual award under jurisdictional grounds.  However, such non-participating respondents cannot seek to set aside any eventual award on jurisdictional grounds.

 

Loh J reasoned that where a tribunal has chosen ‘to decide jurisdiction as a preliminary issue, considerations of finality, certainty, practicality, cost, preventing dilatory tactics and settling the position at an early stage at the seat militate against allowing a [non-participating] respondent to reserve its objections to the last minute and indulge in tactics which result in immense delays and costs’. In Loh J’s view, it is an ‘abuse of process’ for ‘a [non-participating] party to wait till the opposing party goes through the whole arbitral process, obtains an award, only to be met by a setting aside application at the seat on the ground of a lack of jurisdiction’.

 

It is interesting to note that, even though concerns with dilatory, obstructionist tactics as well as time and costs had played central roles in both cases described above, the Judges appeared to reach differing conclusions on the rights of the non-participating respondent.  Four points can be made.

 

First, in reaching his conclusion, Loh J purported to adopt the Court of Appeal’s ruling in Astro CA described above.  However, it is not clear that the Court of Appeal in Astro had in mind the specific situation of a non-participating respondent.  Loh J did not specifically engage the views of the travaux cited by Ang J.

 

The travaux speaks of another situation where a party ought to be precluded from raising objections at the setting aside or enforcement stage: under Article 4 of the Model Law, a party is taken to have impliedly waived any objection to another party’s non-compliance with certain procedural requirements if that first party knew about the non-compliance, but proceeds with the arbitration without making a timely objection.  A corollary to the travaux is that any party that does not ‘proceed with the arbitration’ arguably has not waived its objection(s) to jurisdiction; in other words, it should be permitted to raise that objection in a future setting.

 

Second, taking a step back, assume an arbitral tribunal does not decide jurisdiction as a preliminary issue, but in a final merits award instead.  In that scenario, it appears to be currently accepted (and which finds support from the travaux cited above) that a non-participating respondent may seek to set aside and resist enforcement of any eventual award on jurisdictional grounds.  It is not intuitively obvious why the rights of the same non-participating respondent should automatically be diminished (by losing the right to set aside any eventual award on jurisdictional grounds) if the tribunal chooses instead to decide the issue of jurisdiction as a preliminary issue.  The practical implication of Loh J’s decision is that there may be tactical advantage for a claimant facing a non-participating respondent to press a tribunal to decide the issue of jurisdiction as a preliminary issue.  If the tribunal agrees, that places the respondent under pressure: if the respondent continues not to participate in the arbitration, it loses the right to seek a setting aside of any eventual award on jurisdictional grounds.

 

Third, insofar as Loh J’s decision was motivated by concerns of finality, certainty, time and costs, those same concerns arguably ought to lead to an outcome where, in addition to losing its rights to set aside any eventual award on jurisdictional grounds, a non-participating party should not be permitted to resist enforcement of any eventual award on jurisdictional grounds.  It is therefore not intuitive why concerns of abuse of process, finality, and certainty should justify barring the non-participating respondent from setting aside the award, but not preclude the same respondent from resisting enforcement of the same award.  This observation has led some commentators to question the correctness of Astro CA, and led to calls that the Singapore legislature should consider the stance adopted by section 73(2) of the English Arbitration Act by precluding a party, who could have but did not object to the tribunal’s ruling on its jurisdiction, from raising those objections in a future setting.  According to these commentators, this is justifiable on the policy bases of preventing an abuse of process, good faith and efficiency.

 

However, such arguments by commentators are not without problems.

 

First, in Astro CA the Court of Appeal had signaled (at [117]) that the architecture of Art 16(3) is not certainty-centric; concerns of certainty, time and cost efficiency are not paramount objectives.  In fact, English Arbitration Act itself in section 72 preserves the rights of persons who take no part in arbitral proceedings, including the right to challenge any ultimate award on jurisdictional grounds.  The Model Law is therefore not alone in giving similar rights to a non-participating party.  In court proceedings in common law jurisdictions, a non-participating defendant is, generally speaking, not precluded from applying to set aside a judgment obtained in default of appearance simply because the defendant was non-participating.

 

Furthermore, these arguments are premised on the assumption that a non-participating party is an abuser of process out to obstruct a process that it had earlier signed up for.  Whilst that may be often the case, that assumption may not always be true.  Arguably, the claimant needs to go through the process, any way, to obtain an award.   Second, in many cases, the non-participating respondent would already have made known to the claimant and the tribunal its views as to the tribunal’s lack of jurisdiction.  In that sense, the non-participating respondent cannot be said to be inducing the claimant to proceed on a false or misleading basis.  Finally, as the commentators themselves have recognized, the curial review mechanism under Article 16(3) is as much for the claimant as it is for the respondent, whereby the right to curial review is available to “any party”, not “party in whose favour the ruling is made”, and the power of the court is to “decide any matter”, not “set aside the ruling”.   The claimant itself arguably has the opportunity to avoid the risk of wasting time and resources; the claimant itself can go to the court to obtain a declaration that the tribunal’s preliminary ruling on jurisdiction is valid.  This forces the non-participating respondent to decide whether to appear before the court to fight the declaration sought.  Commentators have argued that such a “self-help” mechanism for claimants may be limited in scope because a declaration from the Singapore court may not be easily enforceable in other jurisdictions.  But enforcement of the declaration itself is not the point: the court ruling will bind the tribunal, and it is likely foreign enforcement courts will at least consider the court ruling when considering whether to enforce any eventual award.

 

Finally, coming back to the fundamental issue, how should courts apply Article 16(3) to different types of respondents?  Given the silence from the text of the Model Law (see [110] and [131] of Astro CA), this is a difficult issue worthy of a separate discussion.  Preliminarily, it is suggested one would have to consider distinctions between:

 

(a) a fully participating respondent, who continues to participate in the arbitration after receiving an unfavourable award on jurisdiction decided as a preliminary issue;

(b) a partially participating respondent, who boycotts the arbitral process after receiving an unfavourable award on jurisdiction decided as a preliminary issue; and

(c) a fully non-participating respondent, who does not participate in the tribunal’s determination of jurisdiction as a preliminary issue.

 

For the first two categories, Astro CA has indicated an inclination towards precluding the respondent from raising jurisdictional objections at the setting aside stage.  If one had to support this position, one could formulate a waiver argument along the lines of Article 4 of the Model Law, namely, by electing to participate in the arbitration – whether fully or partially – without invoking a curial challenge under Article 16(3), that respondent has waived its rights to set aside any eventual award on jurisdictional grounds.  This would have a similar effect as section 73(2) of the English Arbitration Act.

 

For the third category, as a matter of principle, these respondents ought to be no worse off than a non-participating respondent in an arbitration where the tribunal decides the issue of jurisdiction alongside the merits.  Since it currently appears the latter has unfettered rights to set aside or resist enforcement of any eventual award on jurisdictional grounds, the third category of respondents should enjoy the same unfettered rights.  This would have a similar effect as section 72 of the English Arbitration Act.

 

More from our authors: International Arbitration and the Rule of Law
by Andrea Menaker
€ 240


The post Is Article 16(3) of the Model Law A ‘One-Shot Remedy’ for Non-Participating Respondents in International Arbitrations? appeared first on Kluwer Arbitration Blog.

Syndicate content