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The Act is not the entire story: How to make sense of the U.S. Arbitration Act

Kluwer Arbitration Blog - Tue, 2018-04-03 22:22

Ylli Dautaj

The central point of this note is that the U.S. law of arbitration is not clear from the text of the Federal Arbitration Act (FAA). The FAA is archaic and in need of updating. The FAA is the oldest – but still functioning – arbitration statute in the world. Case law has rewritten much of its content, so that the statute’s true content is buried in federal decisional law. Foreign-trained lawyers or scholars especially are unlikely to understand the U.S. law of arbitration through the statute.

The U.S. Supreme Court has played an important role in developing international commercial arbitration (ICA), which in turn has played a huge role in developing and recrafting the U.S. law of arbitration. The Supreme Court early on distinguished international and domestic agreements in order to broaden the subject-matter arbitrability of the former. This would account for, among other things, global realities and international comity. For example, securities and antitrust disputes came to fall within the ambit of arbitrability in ICA.

The Supreme Court later relied on the precedents established in ICA related cases in order to justify the creation of, for example, securities arbitration in domestic arbitration (see Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220 (1987) and Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989)). This author thinks that the U.S. Supreme Court has justified the widening of subject-matter arbitrability in a domestic setting on the basis of (1) being pro-arbitration, and (2) on precedent that was initially based on the distinction between international and domestic agreements.

This note will highlight three cases that demonstrate the importance of judge-made law in U.S. arbitration: The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Scherk v. Alberto-Culver Co., 417 U.S. 506, reh’g denied, 419 U.S. 885 (1974); and Mitsubishi Motors Corp. v. Soler Chrysler-Playmouth, Inc., 473 U.S. 614 (1985). In Arbitration Law in a Nutshell, Professor Carbonneau describes this “trilogy” as one of four pillars of U.S. arbitration. It represents the fourth pillar – the international one. As Professor Carbonneau writes, the case law has established that: (1) arbitration is vital to the resolution of labor and management disputes; (2) the FAA can preempt contrary state laws on arbitration; (3) arbitrators have substantial authority to resolve matters of arbitral procedure; and (4) some of the international arbitration cases have “played a decisive role in crafting the general domestic doctrine on arbitration [and] […] [given] rise to another string of cases on subject-matter or statutory arbitrability.” This note will discuss part of the fourth – international – pillar, only.

Case Analysis

In Scherk, the parties agreed to arbitrate in Paris. Alberto-Culver alleged that Scherk’s breach violated the 1933 Securities Act and the 1934 Securities Exchange Act. Could that issue of regulatory law be resolved by arbitrators? The court in Scherk held that:

A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually destructive jockeying by the parties to secure tactical litigation advantages.

[…]

For all these reasons, we hold that the agreement of the parties in this case to arbitrate any dispute arising out of their international commercial transaction is to be respected and enforced by the federal courts in accord with the explicit provisions of the [FAA].

With this decision, the Supreme Court of the United States took a leadership position in the elaboration of the legal doctrine on ICA. It concluded that contracts for arbitration were vital to both global commerce and international contracting. The ruling in favor of “international comity” was followed by the Court’s decision in Mitsubishi. There, the Court cited Scherk with approval and determined that there was a virtually irrebuttable presumption favoring enforcing freely-negotiated transborder contracts. It decided that antitrust disputes arising from national law were arbitrable as a general matter, and international arbitrators could rule on the application in that particular case.

U.S. courts also favor arbitration and arbitrability at the enforcement stage of the arbitral process. For example, in The Bremen (which involved the enforcement of a forum-selection-clause) the Court stated that international commercial contracts implicate special policy concerns and the “[d]omestic strictures on judicial jurisdiction and the enforceability of contract provisions had to yield to the provisions in the parties’ bargain.” Professor Carbonneau has analyzed this case as follows:

The Court emphasized new global commercial realities and asserted that legal doctrine should be made to respond to them in a nonsectarian fashion. In matters of transborder litigation, the function of domestic courts was not to create legal roadblocks to, or compete with, arbitration for jurisdictional supremacy.

[…]

The Bremen is the first case in which the Court established a marked boundary between law for domestic and international matters, holding that domestic rules could be unsuitable for application in the international sector and that these rules should be disregarded or modified when such a conflict emerged.

As Professor Carbonneau has written, Scherk and Mitsubishi established that a “special regime emerged for international business contracts “allowing international arbitrators” to rule upon claims based upon U.S. regulatory law.” The Court blurred the distinction between domestic and international arbitration in relation to subject-mattter arbitrability and “made universal subject-matter arbitrability an integral part of U.S. domestic law.” The Court was willing to facilitate arbitration and protect and implement its “purposes.” Through the Court’s doctrine, the U.S. legal system had taken a business efficient and effective pro-arbitration stance. U.S. courts would enforce international dispute resolution clauses providing for arbitration that may not have been enforceable domestically. The Court had established a federal policy favoring international commerce and arbitration.

In both McMahon and Rodriguez de Quijas the Supreme Court interpreted Mitsubishi and Scherk to support its reasoning in order to discredit  the Wilko Doctrine (see Wilko v. Swan, 346 U.S. 427 (1953)). These two cases led to the creation of what Professor Carbonneau calls “securities arbitration.” This author is of the view that the Supreme Court failed to mention that the international aspects in the above-mentioned trilogy was crucial for those holdings.

Concluding Remarks

The pro-arbitration stance has led to the growing scope of arbitrability in ICA and subsequently in domestic arbitration, too. Possibly, a growing scope of arbitrability might lead to “judicialization” of arbitration. “Judicialization” of arbitration might be a good thing, but it can also be the opposite. This author wants to remind the reader of two crucial distinctions; that is, (1) there is a significant difference between domestic and international arbitration, and (2) the “pros” of arbitration—confidentiality, flexibility, speed, costs, etc.—might slowly diminish with a “judicialization” of arbitration. However, the growing scope of arbitrable cases may help in reducing the back-log of courts in civil matters and provide for further expertise to the dispute, and therefore the pro-arbitration stance might sit well with judges and the business community. Notwithstanding this, cases including, among other things, issues of antitrust and securities might have a public importance that trumps the pro-arbitration stance in domestic arbitration. While public interest may trump pro-arbitration sentiments domestically, it could be decided that it does not trump the growing scope of arbitrable cases in ICA. This is because of “international comity” and the need for a predictable ICA system. With that said, the U.S. courts will still have the enforcement stage available to ensure that their securities and antitrust laws have been properly enforced. The New York Convention guarantees the public policy exception to enforcement or recognition of arbitral awards.

While these cases do not paint the entire picture of U.S. arbitration law, they indicate the origins of its evolution. For purposes of informing oneself on the content of U.S. arbitration law, the case law on the FAA is vital. This author has benefited extensively from – and would take this opportunity to recommend – Professor Thomas Carbonneau’s 4th edition on “Arbitration Law in a Nutshell.”

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

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The post The Act is not the entire story: How to make sense of the U.S. Arbitration Act appeared first on Kluwer Arbitration Blog.

South Africa – Stepping onto the International Arbitration stage in 2018 - JD Supra (press release)

Google International ADR News - Tue, 2018-04-03 15:36

JD Supra (press release)

South Africa – Stepping onto the International Arbitration stage in 2018
JD Supra (press release)
Alternative dispute resolution procedures ("ADR") are the commonly used first step in dispute resolution for construction disputes, and commercial arbitration is more often than not the dispute resolution mechanism of choice in infrastructure ...

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Kluwer Mediation Blog – March Digest

Kluwer Arbitration Blog - Tue, 2018-04-03 03:13

Anna Howard

“It turns out that the “little things” are in fact the “big things”. Forget to focus on them, and we are doomed to fail. Forget to value them, and we will find ourselves chasing shadows and permanently dissatisfied.” Bill Marsh

This wonderfully wise advice from Bill Marsh’s latest post on the daily work of the mediator has much wider resonance beyond the context of mediation. A summary of Bill’s post and all the other posts on the blog last month appears below. We hope you enjoy the wide range of topics addressed on the blog last month.

In Dung Beetles and Basics, Bill Marsh identifies the basics that lie at the heart of what mediators do and emphasises the importance of doing these basics well. Bill offers this comprehensive and thoughtful description of the “stuff of mediation”:

“Whilst we may dream about the dramatic moments, real progress and transformation is usually achieved through the little things – the small acts of respect, such as listening to someone who hasn’t been properly heard for a long time, acknowledging people’s right to make their own decisions while feeling able to engage them in a serious discussion about the wisdom of their choices, the odd humorous line, the power of a silence. This is the “stuff” of mediation, the raw material at our disposal. Pretty much all progress is made up of this “stuff”. There are no short-cuts.”

In Turkey: Mandatory Mediation is the new game in town, Idil Elveris provides a comprehensive overview of Turkey’s new mandatory mediation regime for labour disputes. Idil explains the path to the adoption of mandatory mediation and identifies the challenges presented by this development.

In Mediation Inside Out, Andrea Maia draws on a recent talk by Toby Landau QC and an article by Eryn J. Neumann and Maryanne Garry as she considers the nature of false memories and how understanding more about false memories can help mediators to better serve their clients.

In Reasons to Mediate, Constantin-Adi Gavrila identifies a number of insights which he recently gained regarding the various perceptions of mediation of those who are not familiar with mediation. Constantin also challenges some of these perceptions and clarifies why they may be held.

In A Convention on the enforcement of iMSAs… AND a new model law, Nadja Alexander summarises the recent developments at UNCITRAL Working Group II (Dispute Settlement) 68th session in New York and identifies the next steps which are needed before the mediation community gets its own “New York Convention.”

In Dirty Tricks in Mediation, Martin Svatos identifies a number of dirty tricks which he has witnessed in mediation and considers the drawbacks of using such tricks.

In Separate the People from the Problem – or the Person from the Action. Strategy or Compassion? In Theory and in Practice, Greg Bond considers Ury and Fisher’s recommendation to separate the people from the problem and, drawing on the work of Noah Levine, suggests a different approach. Greg suggests separating the people from the action which allows us to finally see the confused human being behind his or her hurtful act.

In Optimising the Use of Joint Sessions in Mediation, John Sturrock questions whether the use of the joint session in mediations is really in demise and draws on a recent mediation to highlight the abundant use by the parties of joint sessions.

More from our authors: International Arbitration and the Rule of Law
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The post Kluwer Mediation Blog – March Digest appeared first on Kluwer Arbitration Blog.

Natural Disasters, Stakeholder Engagement and Dispute Resolution

ADR Prof Blog - Mon, 2018-04-02 22:06
The following notice about our upcoming conference at Texas A&M is from  my wonderful colleague, and FOI, Nancy Welsh: Dear Colleagues, On Friday, April 13, 2018, Texas A&M University School of Law will hold a conference entitled Natural Disasters, Stakeholder Engagement and Dispute Resolution. The conference will address how dispute resolution and collaborative processes can … Continue reading Natural Disasters, Stakeholder Engagement and Dispute Resolution →

Business people, April 3, 2018 - Santa Fe New Mexican

Google International ADR News - Mon, 2018-04-02 20:04

Santa Fe New Mexican

Business people, April 3, 2018
Santa Fe New Mexican
Timothy L. Garcia, a former New Mexico Court of Appeals judge, has joined Montgomery & Andrews, P.A., where his law practice will focus on mediation and alternative dispute resolution. Garcia stepped down from his judicial post in February after nearly ...

Looking for Law in All the Right Places

Reproduced below are the Power Point slides that accompanied an oral presentation by Mr. Goldstein to the International Arbitration Club of New York on March 19, 2018. A transcript of the presentation is expected to be available in the week of April 9 and will be uploaded to a revision of this post. *** 1/21 Looking for Law In All the Right Places: A Modern Spin on Jura Novit Arbiter *** 2/21 JNC – US & CANADA JUDICIAL POSITION “The concept of jura novit curia is not directly part of the law of Canada and a search of the usual Canadian...
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Interim Measures: Another Plea for the International Standards

This post is the text Mr. Goldstein has prepared for an oral presentation in a panel program on provisional relief in aid of arbitration on April 5, 2018 in Washington, D.C. at the annual conference of the American Bar Association’s Section of Dispute Resolution. Mr. Goldstein’s co-panelists are the Hon. Faith Hochberg (Ret.) and the Hon. Bruce E. Meyerson (Ret.).   These remarks about interim measures in international commercial arbitration were prepared for listeners and readers, perhaps many of you, who have become arbitrators in international cases as a rather new phase of an illustrious career spent mainly within US...
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Spotlight On Diversity: An Engaging And Informative Panel On ADR - The Chattanoogan

Google International ADR News - Mon, 2018-04-02 10:36

The Chattanoogan

Spotlight On Diversity: An Engaging And Informative Panel On ADR
The Chattanoogan
Miller & Martin's Women's Network, along with the Atlanta International Arbitration Society Young Practitioners Group and Arbitral Women, hosted a panel discussion on March 7, 2018, entitled “Spotlight on Diversity: Professional Perspectives on ...

Expedited Arbitration at the SCC: One Year with the 2017 Rules

Kluwer Arbitration Blog - Mon, 2018-04-02 03:15

Anja Havedal Ipp

“In its origins, the concept of arbitration as a method of resolving disputes was a simple one . . . . Two traders, in dispute over the price or quality of goods delivered, would turn to a third whom they knew and trusted for his decision.” (Redfern & Hunter 2014 at 1-03)

Arbitration has strayed quite far from this rosy picture, as business transactions have grown ever more complex and globalized over the past several decades. The trend has consistently led toward longer, more complex and resource-intensive proceedings, causing some users to complain of arbitrations that are over-lawyered and overly sophisticated and neither quicker nor more efficient than proceedings in national courts.

Expedited arbitration stands in contrast to this trend; arguably, it still bears some resemblance to Redfern & Hunter’s portrayal of arbitration’s origins. In an expedited proceeding, the dispute is heard by a sole arbitrator, and the parties are allowed a limited number of submissions and shorter time frames than in a typical arbitration.

In 2017, the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) launched revised Rules for Expedited Arbitration (“Expedited Rules”), following a two-year review that took into account user feedback and the Institute’s own experience. The revision process sought to update the Expedited Rules and offer users an even more streamlined, efficient and cost-effective dispute resolution process. One year after the revised rules entered into force, the following observations can be made.

  • Front-loading the case. One significant change in the 2017 Expedited Rules was that the Request for Arbitration also constitutes the Statement of Claim, and that the respondent’s Answer also constitutes the Statement of Defence (Art 6 & 9). This “front-loading” of the case aims to save time by having the main submissions in place when the arbitrator receives the case file. The rules do not stipulate a time limit for the respondent’s Answer, but the SCC typically gives four weeks from when the respondent is served. Although some observers were nervous that this “front-loading” would create confusion among users and counsel, the new procedure has been welcomed by parties and arbitrators alike and has worked well in practice.
  • Limited submissions, short time frames. The 2017 Expedited Rules stipulate that each party may make one supplementary written submission in addition to the Request for Arbitration and the Answer (Art 30). The arbitrator may, of course, request the parties to make additional submissions if the circumstances are compelling. The rules also specify that submissions should be brief and, importantly, that the timeframe for submission must not exceed 15 working days; this time may of course be extended by the arbitrator when necessary. In the spirit of expediency, the rules also require that a case management conference be held promptly after referral, and that a timetable be set within seven days. In the SCC’s experience, arbitrators, parties and counsel generally accept and comply with these deadlines.
  • No hearings. As a main rule, an expedited arbitration should be in writing, but in practice a brief hearing is often held. In the 2017 Rules, the provision relating to hearings was revised so that a hearing is to be held only if a party so requests and if the arbitrator considers that special reasons exist (Art 33). So far, a hearing has been held in about one-third of the cases initiated under the 2017 Expedited Rules. The absence of a hearing typically contributes to a quicker resolution of the dispute. In 2017, 54 percent of awards under the expedited rules were rendered within 3 months of referral, and another 38 percent within 6 months.
  • The arbitrator’s mandate. Prior to the revision of the Expedited Rules, some arbitrators complained that the parties’ expectations of the arbitral proceedings did not match the framework of the rules. This motivated several changes in the revised rules; notably, the arbitrator was given a greater mandate to limit the proceedings and reject parties’ requests for further submissions or longer hearings. The Expedited Rules now support the arbitrator’s efficient handling of the dispute even in situations where the parties cannot agree on the procedural framework. The article regarding the conduct of the arbitration now places greater emphasis on efficiency and expediency, and instructs the arbitrator to “consider at all times the expedited nature of the proceedings” (Art 24).
  • Rules upgrade. The Expedited Rules apply only where the parties have so agreed. Most commonly, this is by stipulation in the arbitration agreement, but it also happens that the parties agree on the expedited procedure after a dispute has arisen. A new provision was introduced in the 2017 Expedited Rules whereby the SCC may invite the parties to “upgrade” to the regular Arbitration Rules (Art 11). In assessing whether a dispute is suited for expedited arbitration, it is not necessarily the value of the parties’ claims that is determinative; the question is rather if the complexity and the nature of the dispute allows for it to be decided through a limited written exchange and without extensive oral evidence.

Of the 200 new arbitrations registered by the SCC in 2017, 72 were expedited cases. This was a significant increase over previous years; typically around one-fourth of the total SCC caseload have been disputes under the Expedited Rules. In 2016, there were 55 expedited arbitrations out of 199 total.

Most of the expedited arbitrations administered by the SCC are related to commercial agreements between small and medium-sized companies in Sweden, or within the EU. These disputes often arise out of relatively limited, straightforward business transactions where there is no need for full-fledged arbitration, or where the value of the transaction makes regular arbitration cost-inefficient. Through the expedited arbitral proceeding, the parties receive a quick and just resolution to their dispute, allowing them to get back to business. Sometimes, the parties’ business relationship even survive the brief arbitral process.

In agreeing to arbitrate under the Expedited Rules, arbitration users are aware of the limited scope of the procedure; in a sense, they are agreeing to resolve their disputes in the same spirit as the merchants in Redfern & Hunter’s historical retrospect on arbitration. Perhaps this procedural simplicity is precisely what has made expedited arbitration an increasingly attractive dispute resolution method.

 

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The post Expedited Arbitration at the SCC: One Year with the 2017 Rules appeared first on Kluwer Arbitration Blog.

A Good Bad-Faith Policy?

ADR Prof Blog - Sun, 2018-04-01 21:37
“[I]f . . . I act for the Big Bad Wolf against Little Red Riding Hood and I don’t want this dispute resolved, I want to tie it up as long as I possibly can, and mandatory mediation is custom made.  I can waste more time, I can string it along, I can make sure … Continue reading A Good Bad-Faith Policy? →

Ashghal organises seminar on dispute resolution methods - Gulf Times

Google International ADR News - Sun, 2018-04-01 16:33

Ashghal organises seminar on dispute resolution methods
Gulf Times
The Public Works Authority (Ashghal) has hosted seminar in co-operation with the Qatar International Court and Dispute Resolution Centre (QICDRC) and Chartered Institute of Arbitration (CIArb). The seminar addressed alternative dispute resolution ...

Ashghal organises seminar on dispute resolution methods - Gulf Times

Google International ADR News - Sun, 2018-04-01 16:33

Ashghal organises seminar on dispute resolution methods
Gulf Times
The Public Works Authority (Ashghal) has hosted seminar in co-operation with the Qatar International Court and Dispute Resolution Centre (QICDRC) and Chartered Institute of Arbitration (CIArb). The seminar addressed alternative dispute resolution ...

Navigating Specialist Energy and Natural Resources Arbitration in East Africa

Kluwer Arbitration Blog - Sun, 2018-04-01 03:00

Wairimu Karanja

The countries of Africa are nascent economies, some with well developed, and most with burgeoning energy and natural resources (ENR) sectors. With the vast resource of wealth comes a greater expectation of economic development and a greater interest in ENR and infrastructure investment. Disputes are often inevitable, considering the vested interests involved. Navigating ENR arbitration has become increasingly important, especially for African arbitrators and arbitration practitioners.

This post will focus on ENR arbitration in the East African countries of Kenya, Tanzania and Uganda, and will discuss: an overview of ENR investment in East Africa; East Africa’s international arbitration regimes; dispute provisions in ENR agreements and laws; peculiarities ENR disputes; main causes of ENR disputes; selected ENR disputes in the region; and involvement of East African arbitrators and practitioners. The article will conclude with suggestions for arbitrators and practitioners to be better equipped to navigate specialist ENR arbitration involving East Africa.

ENR Investment in East Africa

East Africa has made major strides in national and cross-border ENR development.

In oil and gas, Uganda’s crude oil reserves stand at 3.5 billion barrels, and Kenya’s at 750 million barrels. Tanzania’s gas reserves stood at 57 Trillion Cubic Feet (TCF) in 2016.

In October 2017, the Kenya Government signed a joint development agreement (JDA) with Tullow Oil, Africa Oil and Maersk Oil for the USD 2.1 Billion, 820 Km Lamu-Lokichar Crude Oil Pipeline. Uganda and Tanzania are constructing a 1,445 Km crude oil pipeline at a cost of USD 3.5 Billion with Tullow, Africa Oil and Maersk Oil.

In mining, Tanzania’s 2015 mineral exports amounted to USD 1.37 Billion (24% of total exports). Titanium mining is dominant in Kenya. Uganda’s main minerals include cobalt and gold.

In power, all three countries are members of the 10 member Eastern African Power Pool (EAPP). The EAPP aims to increase regional power generation from 63 gigawatts (GW) in 2015, to 6,110 GW in 2025 and regional transmission by 3,000 Kms with a capacity of over 6,000 megawatts (MW).

The above, and others, will require substantial investment by large and small players.

East Africa’s International Arbitration Regimes

All countries are members of the International Centre for Settlement of Investment Disputes (ICSID) and signatories to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Kenya and Uganda are members of the Permanent Court of Arbitration (PCA).

Kenya’s Arbitration Act of 1995 and Uganda’s Arbitration Act of 2000 are based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.

Regionally, the East Africa Court of Justice (EACJ) seated in Arusha, Tanzania, has an arbitration court. Further, IGAD, in partnership with the Djibouti Chamber of Commerce, is developing the Djibouti International Arbitration Centre (DJIAC).

Nationally, Kenya has 3 international arbitration institutions: CIArb – Kenya Branch; the Nairobi Centre for International Arbitration (NCIA) and the ICC Regional Office. Uganda has the Centre for Alternative Dispute Resolution (CADR). Tanzania has the Tanzania Institute of Arbitrators (TIA).

Dispute Provisions in ENR Agreements

Kenya’s 2015 Model Production Sharing Contract (PSC) provides for arbitration under UNCITRAL Rules with ICSID as an appointing authority. Under the Kenya Mining Act 2016, dispute resolution in mineral agreements should be through international arbitration, and mineral rights disputes should undergo mediation or arbitration.

Under the Kenya Energy Act 2006, licensing disputes should undergo arbitration. The Kenya standardized power purchase agreement (PPA) for above 10 MW provides for arbitration under the Kenyan Arbitration Act or the ICC Rules.

In Tanzania, the 2013 Model production sharing agreement (PSA) provides for arbitration under ICC Rules.

In Uganda, the 1999 Model PSC provides for arbitration under the ICSID Rules. Further, Uganda’s Mining Act 2003 provides for mineral agreement disputes to undergo international arbitration, and mining rights disputes to be settled by arbitration.

Peculiarities of ENR Disputes

The sovereignty of natural resources is vested in the people and managed by governments and this is recognized under international laws such as the United Nations Convention on the Law of the Sea (UNCLOS) and under National laws. Disputes, therefore, mainly involve governments.

Due to a government being a party, one peculiarity is that national legislation may have a special government dispute procedure. For instance, in Kenya, the Government Proceedings Act has special party and notice requirements.

Investor-State disputes can be directly under investment contract (PSA, PPA, Mining Agreements) or under Bilateral Investment Treaties (BITs).

A dispute can also be state-state, such as the Kenya-Somalia maritime dispute at the International Court of Justice (ICJ) and the Tanzania-Malawi dispute over Lake Nyasa/Lake Malawi.

In ENR arbitration, amounts involved are significant, and disputes can be highly technical. Involvement of forensic experts and technical sectoral experts is common, if not a necessity.

Another peculiarity is that disputes are highly emotive and may have a political angle. Sometimes, termination is not about the facts, but about national sentiments, political opinions and election cycles.

Main issues in ENR disputes

The main ENR dispute issues are:

(a) Resource nationalism. This can be direct, for instance, after political unrest, where the government takes over projects. It can be indirect through a change in law and change in taxation regimes.

(b) Local content. The East African countries have growing local content regimes. Local content requirements may cause contract cancellation for not meeting thresholds or disputes between foreign companies and local partners.

(c) Resource price volatility in oil, gas and mining. Governments globally are known to implement production share, taxation and royalty to cover price volatility.

(d) Project delays. This leads to cancellation or contracts by governments, or delay compensation claims by investors.

Select East Africa ENR Arbitrations

At ICSID, Tanzania has had four ENR arbitrations, with one concluded and three pending. The parties include the Tanzania government, the Tanzania Electricity Supply Company (TANESCO), Independent Power Tanzania Limited (IPTL) and Standard Chartered Bank (Hong Kong) relating to PPAs.

Uganda has had three petroleum sector investment arbitrations at ICSID, with one concluded and two pending. The claimants have been Tullow Uganda and Total E&P. The Tullow Uganda cases entail petroleum agreements worth about USD 2.9 Billion.

Kenya has two pending ENR arbitrations at ICSID: a 2015 geothermal licence case by Walam Energy worth approximately USD 620 Million; and a 2015 mining case by Cortec Mining and Stirling Investment, worth about USD 2 Billion.

The ICSID cases are available on the ICSID website.

With the increased investment and recent and on-going changes in law, arbitration in East African ENR has potential to grow.

Involvement of African Arbitrators and Practitioners

Each of the ENR cases discussed had a three-member tribunal. Only two African arbitrators were appointed in two cases: David Unterhalter (South Africa) in Standard Chartered v Tanzania; and Swithin Munyantwali (Uganda) in Walam Energy v Kenya.

African counsels included private practitioners and ministry/state counsels. Generally, there is a shortage of African arbitrators, and further, a shortage of African women arbitrators. Prominent ICSID women arbitrators include: Brigitte Stern (French) – Cortec Mining v Kenya and StanChart v Tanzania; and Jean Kalicki (US) – Tullow v Uganda.

In the ICSID Panel of Arbitrators (women): Kenya has nominated Ms. Jacqueline Kamau and Ms. Njeri Kariuki; Tanzania has nominated Ms. Verdiana Nkwabi Macha; Uganda has no female nominee. It is hoped that these East African women arbitrators and more, will obtain appointments in ICSID cases.

Conclusion

The potential for international investment and commercial arbitration in the East African ENR sector is significant. How can East Africans seize the opportunities?

There should be greater exposure and recognition. Arbitrators should list themselves as energy arbitrators in institutional databases such as CIArb, ICC, LCIA, NCIA and other centres. Arbitrators and Practitioners should publicise their expertise (subject to confidentiality) and participate in arbitration conferences.

There should be an awareness of industry best practices, and country energy and mining laws, noting recent overhaul changes.

There should be an appreciation for the need for technical experts (drilling, piping, electricity charges, energy charges, taxation) and forensic experts in calculating quantum.

Very importantly, one needs to be aware of local realities, but be objective and steer clear of political issues.

Finally, keep learning. National centres like CIArb-Kenya, CADR in Uganda and TIA in Tanzania can offer courses on ENR arbitration. Other organisations include the International Law Institute-Africa Centre for Legal Excellence (ILI-ACLE) in Uganda and the London Centre for International Law Practice (LCILP) – Centre for Energy and Natural Resource Law.

Opportunities abound for East African arbitrators and arbitration practitioners in ENR arbitration. With targeted efforts, regional practitioners can more strategically compete in the global arbitration market.

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

More from our authors: International Arbitration and the Rule of Law
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The post Navigating Specialist Energy and Natural Resources Arbitration in East Africa appeared first on Kluwer Arbitration Blog.

Lack of Judges Leads to Longer Litigation Times - JD Supra (press release)

Google International ADR News - Sat, 2018-03-31 22:56

JD Supra (press release)

Lack of Judges Leads to Longer Litigation Times
JD Supra (press release)
In addition, even if a lawsuit is brought in state court, the defendant could remove it to federal court in some instances. Businesses also may want to consider other options for resolving disputes, such as mediation or arbitration. These alternative ...

Lack of Judges Leads to Longer Litigation Times - JD Supra (press release)

Google International ADR News - Sat, 2018-03-31 22:56

JD Supra (press release)

Lack of Judges Leads to Longer Litigation Times
JD Supra (press release)
In addition, even if a lawsuit is brought in state court, the defendant could remove it to federal court in some instances. Businesses also may want to consider other options for resolving disputes, such as mediation or arbitration. These alternative ...

Complaint channels for insurance policyholders - International Law Office

Google International ADR News - Sat, 2018-03-31 10:45

Complaint channels for insurance policyholders
International Law Office
... there are various channels for making a complaint. For instance, if a policyholder's claim is unfairly denied, he or she could make a complaint to the Insurance Claims Complaints Bureau. On January 16 2018 the Insurance Claims Complaints Bureau was ...

Simon Walker CBE Appointed Independent Chair Of UK SME Complaints And Resolution Review - Global Banking And Finance Review (press release)

Google International ADR News - Sat, 2018-03-31 07:33

Global Banking And Finance Review (press release)

Simon Walker CBE Appointed Independent Chair Of UK SME Complaints And Resolution Review
Global Banking And Finance Review (press release)
Simon Walker CBE – the former Director General of the Institute of Directors – has been appointed as independent chair of the finance and banking industry's review into the complaints and alternative dispute resolution (ADR) landscape for the UK's SME ...

Can alternative dispute resolution tools reduce Middle East construction conflicts? - Construction Week Online

Google International ADR News - Sat, 2018-03-31 04:07

Construction Week Online

Can alternative dispute resolution tools reduce Middle East construction conflicts?
Construction Week Online
... and improvements to alternative dispute resolution (ADR) mechanisms have received backing from a number of legal professionals, as well. But to understand why ADR has become an important topic, it is necessary to first understand why so many ...

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Les Jeux Sont Faits: Swiss Supreme Court Upholds Investment Treaty Award against Public Policy Challenge in a Gambling Case

Kluwer Arbitration Blog - Sat, 2018-03-31 01:05

Georg von Segesser

The Swiss Federal Supreme Court, in a rare appeal against an award in a bilateral investment treaty arbitration, confirmed its statutory restraint in reviewing arbitral awards pursuant to article 190 of the Private International Law Act (“PILA”) and rejected the host state’s request to set aside the award for violating substantive public policy. (Case 4A_157/2017, 14 December 2017)

Facts of the Case

Following the development of a market economy in the 1980s, State X undertook different measures to regulate gambling, including low-stakes gambling with slot machines. The relevant regulation was strengthened over the years, with concurrent increases in taxation. In 2009, following a scandal involving members of X’s government, the regulations were again increased. With this change, all new slot machines were prohibited, with existing slot machines being allowed to remain in operation until the expiration date of their current authorization. This change too was accompanied by an increase in the taxation of slot machines.

Since 2004, three companies organized according to the laws of the State Y (which had entered into a bilateral investment treaty (“BIT”) with State X) were active in X through participations in local companies operating slot machine. While these companies continued to operate their existing slot machines, the increased regulatory and fiscal burden led them to retire most machines and abandon the market entirely in 2015.

In 2014, A, B and C (the State Y companies), after failed conciliation attempts, submitted a request for arbitration against X. They claimed damages, arguing that they were victims of a violation of the fair and equitable treatment (“FET”) clause in the BIT between X and Y.

A three-member arbitral tribunal was constituted with seat in Geneva, which handed down its final award on 16 February 2017. The arbitral tribunal found that X had violated the BIT’s FET clause and ordered it to pay 37M zlotys, with interest. While the Arbitral Tribunal did not find that the companies had been victims of unlawful expropriation, it held that the strong increase in taxation constituted a violation of the FET standard, which warranted the payment of damages to the Claimants.

State X appealed to the Swiss Federal Supreme Court (“FSC”) for the decision to be set aside.

The Supreme Court’s Decision

In line with its constant practice, the FSC based its assessment on the facts of the case as determined by the arbitral tribunal. It reiterated its position that it could not correct or complete the facts on its own initiative even if they were manifestly incorrect or had been determined in a manner that was incompatible with the law; the sole exception being the grounds for review explicitly and exhaustively enumerated in article 190 (2) PILA.

With regard to the violation of the substantive ordre public (public policy), the Supreme Court went on to elaborate that such a violation could only be found under a very restrictive set of circumstances. Specifically, such a violation could only be seen in a decision that failed to consider fundamental legal principles and, in doing so, became irreconcilable with the essential and generally accepted system of values, which – from the point of view predominant in Switzerland – should underlie any legal system. Such principles are, inter alia, the principle pacta sunt servanda, the duty to act in good faith, the prohibition of abuse of law, the prohibition of expropriation without compensation, the prohibition of discrimination and the protection of minors and vulnerable adults. Moreover, a violation of the substantial ordre public could only be found in a decision whose outcome (rather than just its reasoning) was incompatible with the aforementioned ordre public.

In the present case, the appellant argued that the decision violated the substantial ordre public on three different counts, namely by restricting X’s fiscal sovereignty, by disregarding that it acted in the public interest of fighting the dangers of gambling, and by failing to sanction X’s reasoned approach in regulating low-stakes gambling.

In rejecting the appeal, the SFC recalled that its power to review decisions under appeal depended on the arguments invoked against the appealed decision. It then went on to clarify that this differentiated approach was the same whether the appealed decision was rendered in an investment treaty arbitration against a host state or any other type of international arbitration.

It further recalled that, in reviewing jurisdictional decisions pursuant to article 190 (2) (b) PILA, it examined questions of law freely, including any preliminary questions that were determining for jurisdiction. By contrast, when called to examine a violation of the substantial ordre public under article 190 (2) (e) PILA, its review was strictly limited and, consequently, it could not review an erroneous interpretation of a clause in the BIT, even to the point of such interpretation being arbitrary, if it did not fulfill the conditions of article 190 (2) (e) PILA as established in its long-standing jurisprudence.

The FSC ultimately refused to examine whether the arbitral tribunal was right to find that the substantial increase in taxation of the slot machines violated the FET clause under the BIT. It justified its refusal by pointing out that the appellant failed to substantiate how the Arbitral Tribunal’s findings violated the substantial ordre public as defined in the context of a Supreme Court review of an international arbitral award according to PILA 190 (2) (e). Instead of referring to the relevant notion of ordre public, the appellant had referred to a different, vastly more expansive notion, namely a textbook definition of ordre public as the “sum of all legal rules issued in the interest of the community”. As a result, the Supreme Court could not examine how the appellant’s criticism of the appealed decision constituted a violation of the substantial ordre public. Consequently, the appeal was rejected.

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The post Les Jeux Sont Faits: Swiss Supreme Court Upholds Investment Treaty Award against Public Policy Challenge in a Gambling Case appeared first on Kluwer Arbitration Blog.

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