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Mosten and Cordover’s New Collaborative Law Book

ADR Prof Blog - Fri, 2018-07-20 15:42
You probably know – or at least know of – Forrest (Woody) Mosten.  He is the award-winning mediator, lawyer, and peacemaker who is called the “father of unbundling,” referring to the process of offering legal clients discrete services as distinct from a complete bundled representation, as lawyers traditionally provide.  He also is a prominent collaborative … Continue reading Mosten and Cordover’s New Collaborative Law Book →

Digital Business in Luxembourg - Lexology

Google International ADR News - Fri, 2018-07-20 09:31

Digital Business in Luxembourg
Lexology
What alternative dispute resolution (ADR) methods are available for online/digital disputes? How common is ADR for online/digital disputes in your jurisdiction? The following ADR mechanisms are available and are increasingly relied upon for online ...

Digital Business in Brazil - Lexology

Google International ADR News - Fri, 2018-07-20 08:51

Digital Business in Brazil
Lexology
The General Data Protection Act sets forth rules for collection and use of personal data in Brazil, rights of data subjects, processing requirements, rules for international transfer of data, among other provisions. The General Data Protection Act ...

New Model BIT proposed by Ecuador: Is the Cure Worse than the Disease?

Kluwer Arbitration Blog - Fri, 2018-07-20 05:44

Javier Jaramillo

Like a chronicle of a death foretold, the  systematic denunciation by Ecuador of the Bilateral Investment Treaties (“BITs”) signed with various states formally began in 2009.  Although, the origin of the complaints goes back to 2008, when the current Constitution of the Republic of Ecuador was enacted and specifically forbid the execution of any international treaty in which the Ecuadorian State “surrendered jurisdiction to international arbitration entities”.

In 2010, Ecuador approved the termination of treaties executed with Finland, the United Kingdom and Germany; in 2011, those signed with Sweden and France, and in 2017, the remaining 12 BITs in force with Argentina, Bolivia, Canada, Chile, China, Spain, USA, Italy, Netherlands, Peru, Switzerland and Venezuela.

On this basis, in 2013, former President Rafael Correa created the Commission for Sovereignty, Integration, International Relations and Security of the National Assembly (“CAITISA”) in charge of reviewing the provisions of all the BITs executed by Ecuador, which, in its final report, deeply criticized the text of the majority of them. Many of its observations are reflected in the new Model Bilateral Investment Agreement (“BIA”).

This document intends to (non-exhaustively) outline the salient characteristics of the BIA that Ecuador intends to negotiate with other States.

Definition of Investment

Regarding the definition of investment, in principle, the BIA provides for the requirements of the Salini test to establish the existence of an investment in article 3(2). These requirements are: (i) a contribution of money or assets; (ii) a certain duration; (iii) risk; and (iv) a contribution to the host State’s economy. However, the BIA also introduces requirements that must be met in addition to the test. These additional requirements are: (i) respect for human rights obligations; (ii) respect for environmental obligations; and (iii) subjection to national legislation, which is tied to the condition that there are no acts of corruption in order for the investment to exist. Consequently, article 15(5) of the BIA includes the clean hands doctrine to prevent arbitration for investors who commit acts of corruption; something that was adopted in the iconic World Duty Free case.

The same article provides a list (which given its literalness seems to be specific rather than illustrative) of the types of capital deployment that constitute an investment provided they meet the requirements determining its existence. Some examples are: (i) shares and participations in companies; (ii) real property rights; (iii) contractual rights; and (iv) concessions. The same article, at the end of section 2, contains a specific list of activities that are not considered investments under the Treaty. In essence, it excludes activities such as the following: (i) portfolio investments; (ii) intellectual property rights that are not protected by the host State; (iii) commercial contracts for the sale of goods and services; (iv) bank loans; and (v) debt instruments from some contracting states. Any activities that are not considered as investments on the basis of the BIA are excluded from its protection.

Definition of Investor

Article 3 (3) of the BIT prescribes two regimes to define an investor. Firstly, for a natural person, it implements the International Law test of effective nationality; that is, the individual will be a national of the State with which he/she has the closest connection. For an investor with dual nationality, one of these nationalities cannot be of the host State. Secondly, for a legal person, the BIA provides for the theory of effective control. Therefore, only a company with an activity in the issuing State will be considered an investor, provided that it is not controlled by a national of the host State or a third party of another State. In both cases, the investor must have an investment in the host State to be considered as such.

Fair and Equitable Treatment (FET)

FET is one of the most important substantive protections for investors under International Investment Law. This standard is included in article 7 of the BIA. Its definition equates Fair and Equitable Treatment to the minimum standard of international treatment, similar to article 5 in Chapter 11 of the NAFTA. The definition is complemented by the standard of national treatment for foreign investors, stipulated in article 5 of the BIA. The exception to this is in article 6, which refers to the different types of treatment that the host State may accord investors of Small and Medium-sized Enterprises (SMEs). Lastly, article 7 states that investor treatment will be guided by Customary International Law.

Despite the above, and somewhat contradictorily, the BIA limits violations of FET to two specific situations: i) denial of justice, and, ii) discrimination.

Firstly, FET can be violated by denial of justice. The BIA provides for two situations where there is a denial of justice: (i) illegal judicial decision; and (ii) wrongful refusal by the judicial authority to hear the claim. In any case, the investor must exhaust “all national levels of jurisdiction”, in order to be able to file a claim for breach of this standard. In principle, it would seem that this requirement is limited to the scenario where the authority fails to hear the claim; thus excluding the standard of effective means recognized in previous cases against Ecuador.

Secondly, FET is violated in the case of discrimination. The BIA defines it as “an exceptional and singular treatment of the investor”. However, this type of treatment only breaches FET when it is based on “reasons of nationality, sex, race or religion”. Other types of singular treatment, even if illegal, are not protected under the treaty.

Expropriation

The BIA meets the standard of the Chorzow case. Any legitimate expropriation must: (i) be in the public interest; (ii) observe due process; and (iii) provide a just, adequate and prompt compensation.

There are two special circumstances that are regulated by the BIT. Firstly, article 17 provides for the scenarios that must be considered in order to quantify the compensation for the investment, namely: (i) the use of the investment; (ii) pending obligations of the investor; (iii) fault of the investor in the damage caused; and (iv) any type of environmental damage. These situations are above all illustrative. The host State may analyze “any other relevant consideration to achieve an adequate balance between the public interest and the interests of the investment or investor”.

Secondly, article 7 (9) expressly excludes claims for indirect expropriation from the treaty. This would seem to be a response to a historical reason relating to ICSID arbitrations pursued by certain oil companies against Ecuador, which had differing results. For example, in the Burlington case, the Tribunal ruled that there was no indirect expropriation. On the contrary, in the face of similar events, in the Perenco case, the  Tribunal concluded that there was an indirect expropriation. In any case, there is a certain risk in the exclusion, since creeping expropriation cases would be left unprotected, something which occurred in the Yukos case, and there would be no way to file a claim under the BIA.

Dispute Resolution

In accordance with the BIA, arbitration for violation of the treaty is only possible if it is submitted to “arbitration mechanisms in regional proceedings in Latin America” or to arbitration centers of the host State, under the premise that the “place of arbitration is a Latin American country agreed by the Contracting Parties”.

Claims for violation of the treaty seek to protect the investment. In this case, there is a multi-tiered clause that provides for direct negotiation before arbitration.

The claim only begins when the other party is notified of the dispute. The BIA establishes the extinguishment of the right to arbitration if the arbitration claim has not been filed within three years following notice of the dispute. Furthermore, if the claimant has not begun negotiations within 90 days, the claim will be understood to be abandoned and it will not be possible to re-file the claim. Another distinction of the notice of dispute is that the BIA requires the notice of dispute to have the same subjective and objective subject matter as the arbitration claim that is subsequently filed.

On the basis of the experience in the Burlington case, article 21 of the BIT provides standing to the host State of the investment to file counterclaims in arbitration based on violations by the investor of its obligations under the treaty (e.g. human rights, environment, corruption, etc.).

Additionally, in keeping with the inclination towards local legislation concerning public private partnerships and investment promotion, for investor-State claims, article 21 of the BIA requires local administrative proceedings to be exhausted as a prior condition for arbitration. This requirement does not apply to State-State disputes.

Tax matters are expressly excluded from the subject-matter jurisdiction of arbitral tribunals formed under the BIA.

Also, the BIA limits the sanctions that can be imposed by arbitral tribunals on the host States of the investment, stating that such sanctions may only be economic and, under no circumstances, of specific performance.

Lastly, the BIA states that the award is final for State-State disputes, but provides for the possibility of filing (i) a horizontal motion for clarification; (ii) a vertical motion of appeal (pursuant to the method in the BIA); or (iii) an action for annulment of the arbitral award in cases of investor-State disputes. The action for annulment is admissible on specific grounds that concern: (i) violation of due process; (ii) inconsistencies and (iii) lack of jurisdiction of the arbitral tribunal.

***

It is clear then that the new BIA brings significant changes compared to the current BITs in force around the world. Many of the changes seem positive, but many others eliminate protections that are necessary for promoting investment, which could negatively affect its acceptance by other States.

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


The post New Model BIT proposed by Ecuador: Is the Cure Worse than the Disease? appeared first on Kluwer Arbitration Blog.

New California Law Would Draw International Arbitrations to State - Lexology

Google International ADR News - Fri, 2018-07-20 04:36

New California Law Would Draw International Arbitrations to State
Lexology
Under the new law, foreign qualified counsel in good standing may “provide legal services in an international commercial arbitration or related conciliation, mediation, or alternative dispute resolution proceeding” if one of the following conditions is ...

Calif. Gov. OKs New Law For Int'l Commercial Arbitration - Law360

Google International ADR News - Thu, 2018-07-19 20:11

Calif. Gov. OKs New Law For Int'l Commercial Arbitration
Law360
Jerry Brown on Wednesday signed into law a bill allowing out-of-state and foreign attorneys to appear in international commercial arbitrations in the state, legislation that proponents say sends a "clear message" that California is open for business ...

Transfer Pricing Audits Under the New Transfer Pricing Examination Process - JD Supra (press release)

Google International ADR News - Thu, 2018-07-19 18:29

Transfer Pricing Audits Under the New Transfer Pricing Examination Process
JD Supra (press release)
The Treaty and Transfer Pricing Operations (TTPO) group of the Large Business & International (LB&I) division of the Internal Revenue Service (IRS) issued a memorandum (LB&I-04-0618-012) on June 29 announcing the release of the Transfer Pricing ...

Transfer Pricing Audits Under the New Transfer Pricing Examination Process - JD Supra (press release)

Google International ADR News - Thu, 2018-07-19 18:29

Transfer Pricing Audits Under the New Transfer Pricing Examination Process
JD Supra (press release)
The Treaty and Transfer Pricing Operations (TTPO) group of the Large Business & International (LB&I) division of the Internal Revenue Service (IRS) issued a memorandum (LB&I-04-0618-012) on June 29 announcing the release of the Transfer Pricing ...

1200 world lawyers gather in Nairobi for annual conference - Kenya Broadcasting Corporation

Google International ADR News - Thu, 2018-07-19 04:20

Kenya Broadcasting Corporation

1200 world lawyers gather in Nairobi for annual conference
Kenya Broadcasting Corporation
... Africa Law and the County Government of Nairobi among other sponsors will among other things discuss constitutional amendments, justice and penal reform, alternative dispute resolution, mechanisms, construction law development, media, sports and ...

Interpreting Contracts Under Singapore Law in International Arbitration — The Sequel

Kluwer Arbitration Blog - Wed, 2018-07-18 21:53

Darius Chan

YSIAC

Article 16(3) of the Model Law provides in relevant part that, “if the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request … the court … to decide the matter”. One question that arises is, to the extent issues of evidence arise, what rules of evidence should the court apply when “decid[ing] the matter”? Does the court apply national rules of evidence, or does the court apply the same rules of evidence, if any, that the tribunal was obliged to apply?

 

This thorny question reared its head recently in a Singapore High Court decision of BQP v BQQ [2018] SGHC 55, which follows an earlier discussion by a different Judge in HSBC Trustee (Singapore) Ltd v Lucky Realty Co Pte Ltd [2015] SGHC 93.1)See also the previous post discussing this decision. jQuery("#footnote_plugin_tooltip_8771_1").tooltip({ tip: "#footnote_plugin_tooltip_text_8771_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

 

Background

 

By way of background, subject to various exceptions and as a general rule under English law, pre-contractual negotiations, such as prior drafts of contracts, are inadmissible to interpret a contract.  At least where Singapore litigation proceedings are concerned, the issue of whether pre-contractual negotiations are admissible in evidence to construe written agreements, and if so, the applicable limits or safeguards (the “admissibility issue”), remains an unsettled question.

 

The Singapore Court of Appeal has held that extrinsic evidence (including pre-contractual negotiations) to interpret a contract is admissible under Singapore law only if it is “relevant, reasonably available to all the contracting parties and relates to a clear or obvious context” (Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27 (hereinafter called the “Zurich criteria”)).

 

Subsequently, the Court of Appeal formulated specific court pleading requirements to ensure that the Zurich criteria are met (Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43), namely:

 

(a) parties who contend that the factual matrix is relevant to the construction of the contract must plead with specificity each fact of the factual matrix that they wish to rely on in support of their construction of the contract;

 

(b) the factual circumstances in which the facts in paragraph (a) above were known to both or all the relevant parties must also be pleaded with sufficient particularity;

 

(c) parties should in their pleadings specify the effect which such facts will have on their contended construction; and

 

(d) the obligation of the parties to disclose evidence would be limited by the extent to which the evidence is relevant to the facts pleaded in paragraphs (a) and (b).

 

In 2015, the Singapore Court of Appeal (eg, Xia Zhengyan v Geng Changqing [2015] SGCA 22 and other cases) sounded the caution that the admissibility issue is still an open question under Singapore law. Reliance on prior drafts of contracts should not be permitted as a matter of course.  At a minimum, the Zurich criteria must still be met.

 

In the 2015 High Court decision of HSBC Trustee (Singapore) Ltd v Lucky Realty Co Pte Ltd [2015] SGHC 93, the Judge opined, by way of dicta, that a dispute over how a contract is to be construed must yield the same final determination whether the contract is construed by a court or in arbitration.  The Judge’s observation did not sit comfortably with Singapore’s Evidence Act, which provides expressly in section 2 that certain parts of the Evidence Act do not apply to “proceedings before an arbitrator”.  The Judge’s observation also does not sit well with institutional rules which typically provide that an arbitral tribunal can determine whether to apply strict rules of evidence to determine the admissibility of evidence.  For instance, the current SIAC Rule 19.2 expressly provides that evidence need not be admissible in law.

 

The Judge’s observation also raises questions concerning whether, and if so how, arbitral tribunals ought to apply the Court’s caution in Xia Zhengyan v Geng Changqing when considering whether to admit or rely on pre-contractual negotiations.  Is extrinsic evidence admissible in international arbitrations where the underlying contract is governed by Singapore law? If an arbitral tribunal finds jurisdiction by construing a contractual provision in a certain manner by relying on prior drafts of the relevant contract, is the tribunal’s decision on jurisdiction susceptible to challenge?  In BQP v BQQ, the Court was confronted with these issues.

 

Facts

 

In BQP v BQQ, the arbitral tribunal, after admitting and relying on evidence of prior drafts and negotiations in construing a certain contractual provision, found that the tribunal enjoyed jurisdiction.

 

The plaintiff applied before the Singapore courts to challenge the tribunal’s jurisdiction ruling under section 10 of Singapore’s International Arbitration Act read with Article 16(3) of the Model Law.  After meticulously analysing the evidence (including extrinsic evidence) that had been adduced before the tribunal, the Singapore High Court agreed with the tribunal’s interpretation, and dismissed the plaintiff’s challenge.

 

The plaintiff applied for leave to appeal, contending inter alia that the issues surrounding admissibility of pre-contractual negotiations were questions of importance or questions of general principle to be decided for the first time. The Court refused, holding that the Singapore Court of Appeal had already decided that rules concerning admissibility of evidence are rules of evidence or procedural law (which generally would not bind arbitral tribunals), and not a matter of substantive law.

 

In essence, the Court held that national rules concerning admissibility of evidence, including the Zurich criteria, are procedural in nature, and do not bind international arbitration tribunals.  The Judge made the following observations:

 

(a) There is a specific provision in Singapore’s Evidence Act that precludes the Act’s applicability to “proceedings before an arbitrator”.

 

(b) Parties resort to international arbitration precisely because they wish to avoid national laws shackling their quest for a speedy, commercial and practical outcome to their dispute, and preclude the application of laws and procedures which may be alien to them.

 

(c) To the extent parties may have agreed to institutional arbitration, many institutional rules give the tribunal broad discretion to decide on the admissibility, relevance, materiality and weight of evidence offered.

 

Discussion

 

The Court in BQP v BQQ had meticulously reviewed the evidence (including extrinsic evidence) adduced before the tribunal before eventually reaching the same interpretation of the relevant contract as the tribunal.  This can be understood as an exercise where the Court was simply applying rules of contractual interpretation (found in the law of contract) against the body of evidence that had already been adduced before the tribunal.

 

Separate from the issue of whether a tribunal was bound to apply national rules concerning admissibility of evidence (which the Court in BQP v BQQ ruled in the negative), it is not evident whether there was any argument questioning whether the Court itself was bound to apply national rules concerning admissibility of evidence in an Article 16(3) application.  Yet, at the same time, the Court in BQP v BQQ (at para 123) stated that the Zurich criteria (which according to the Court was a rule of evidence) had, in fact, been met.  Whilst this may have been a statement made out of prudence, it provokes the vexed question: what if the Zurich criteria had not been met? In those circumstances, would the Court exclude certain extrinsic evidence which had been adduced before the Tribunal?

 

A possible argument would be that it should not matter whether the Zurich criteria had been met — the Court should not revisit a tribunal’s decisions concerning admissibility of evidence because that would effectively frustrate the parties’ expectation (or agreement) that the tribunal has wide discretion to deal with issues of evidence and procedure unfettered by national rules of evidence and procedure.  In the context of an Article 16(3) or Article 34(2)(a) application, whether the Zurich criteria had been met may well be an academic question.  Practically speaking, to the extent the Court disagrees with the tribunal’s reliance on a certain piece of evidence that had already been adduced before the tribunal, the Court can simply assign limited weight to that evidence, rather than revisit a tribunal’s decision on admissibility.

Be that as it may, one can imagine scenarios where national rules of evidence may, in fact, be relevant.

 

Under Singapore law, in applications under Article 16(3) or Article 34(2)(a) of the Model Law, parties are not precluded from advancing new arguments that were not previously advanced before the Tribunal (see, for instance, the dicta in Tan Poh Leng Stanley v Tang Boon Jek Jeffrey [2000] SGHC 260).   It is also the position under Singapore law that parties may adduce new evidence for the purposes of an Article 16(3) application (Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] SGHC 15) or an Article 34(2)(a) application (AQZ v ARA [2015] SGHC 49).  In determining whether new evidence could be adduced, the Singapore High Court in Sanum had applied what the Court called a “modified Ladd v Marshall test” which, in fact, stems from national rules of evidence.

 

Imagine further an Article 16(3) or Article 34(2)(a) application where the applicant seeks to introduce a new argument based on interpreting a contract using new extrinsic evidence (such as prior drafts of contracts).  In this scenario, can an objection based on the Zurich criteria be sustained in relation to the new evidence sought to be adduced?  Perhaps more practically, would the caution in Xia Zhengyan v Geng Changqing (namely, reliance on prior drafts of contracts should not be permitted as a matter of course) apply in this scenario?  A possible argument would be that the Court can decide the issue of admissibility by applying national rules of evidence when there has been no prior decision on admissibility by the tribunal.

 

Given the steady stream of arbitration cases flowing through the Singapore Courts, one might not have to wait long before the Court has to grapple with these issues again.

References   [ + ]

1. ↑ See also the previous post discussing this decision. 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 Interpreting Contracts Under Singapore Law in International Arbitration — The Sequel appeared first on Kluwer Arbitration Blog.

SOAS Arbitration in Africa Survey

ADR Prof Blog - Wed, 2018-07-18 19:13
Hello all: This is my maiden post on Indisputably! A big thank you to my esteemed colleagues Andrea, Michael, Sarah, Art, Jill, Cynthia, Jen, and John for letting me blog with you. I hope you don’t regret it.

Has Acting as Arbitrator Become a Risky Business?

Kluwer Arbitration Blog - Wed, 2018-07-18 03:00

Nathalie Voser

Schellenberg Wittmer

Comments on the Decision of the Paris Court of Appeal Dated 27 March 20181)CA Paris, Pôle 1, Chambre 1, 27 mars 2018, n°16/09386. jQuery("#footnote_plugin_tooltip_6326_1").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

Neither the author nor Schellenberg Wittmer was personally involved in any of the cases mentioned in this blog, and all information disclosed is publicly available.

The appellant in the case before the French Court of Appeal, Saad Buzwair Auotomotive and Co., (SBA) is a Qatari car distributor who in 2007 concluded two agreements (one regarding Audi and one regarding Volkswagen vehicles) with Audi Volkswagen Middle East Fze (AVME) limited to the distribution of cars, spare parts and after-sales services for the territory of Qatar.

In February 2013, SBA initiated arbitration under the ICC Rules after AVME informed SBA that it would not renew the two distribution agreements. In an award of March 2016, the three-member Paris-seated tribunal fully rejected SBA’s claim of USD 150 million, holding that AVME was entitled not to renew the distribution agreements. In April 2016, SBA filed a request to set aside the award. Almost two years later, on 27 March 2018, the Paris Court of Appeal granted the request and annulled the award.

The Paris Court was called upon to decide whether a partner of a German law firm appointed by SBA was conflicted. In the five-page “whereas”-decision there were several, also evidentiary, issues at stake. The key findings regarding the issue of conflict are as follows:

  • Based on the 2015/16 edition of a JUVE, a German legal magazine, the Court considered it as established that the co-arbitrator’s law firm represented Porsche, an entity of the Volkswagen group, in a case before German state courts in the years 2014 and/or 2015. Since this representation took place during the arbitration, and because this case was important to the firm, such circumstance could create reasonable doubt as to the co-arbitrator’s independence and impartiality.
  • In addition, the co-arbitrator had not disclosed, when being appointed, that his firm had provided banking law advice to Porsche between June and November 2010. According to the testimony of an in-house counsel of Porsche, this was a one-time occurrence and the fees amounted to EUR 7,520.80.

It is common ground that justifiable doubts as to an arbitrator’s impartiality and independence exist if there is, from the point of view of a reasonable third person, a likelihood that an arbitrator “may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision” as expressed in GS 2(c) IBA Guidelines on Conflicts of Interest.

The most striking feature of the decision of the Paris Court is that it does not explain why the co-arbitrator’s assessment of the merits of the case before him could have been influenced by his firm’s representation of Porsche, a representation which was terminated at the time when the award was rendered. The only fact that is mentioned is that Porsche is an entity of the Volkswagen group. The Paris Court obviously assumed that this was per se sufficient to constitute an appearance of a conflict.

According to GS (6)(a) IBA Guidelines “if one of the parties is a member of a group with which the arbitrator’s firm has a relationship, such fact should be considered in each individual case, but shall not necessarily constitute by itself a source of a conflict of interest […].” Furthermore, according to GS 6(b), “If one of the parties is a legal entity, any legal or physical person having a controlling influence on the legal entity, or a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration, may be considered to bear the identity of such party.”

While the IBA Guidelines are obviously not binding, this nevertheless shows the general understanding that an affiliation is not sufficient per se to create a conflict, but rather that additional elements must occur. The IBA working group chose the elements “controlling influence”, “direct economic interest”, or “duty to indemnify”, to identify an affiliate to a party in the arbitration. One can consider this threshold as too high but it shows that as a minimum, there must be a real and actual interest of the affiliate in the outcome of the arbitration.

Other courts have shown what constitutes an adequate analysis in similar situations and have considered when the representation of an affiliate by the law firm of the arbitrator constitutes an appearance of a conflict.

The Swiss Supreme Court addressed the issue at stake in 2013. The so-called “Nespresso-decision”2)DSC 139 III 433 dated 27 August 2013. jQuery("#footnote_plugin_tooltip_6326_2").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); was rendered in the context of patent infringement proceedings before the Federal Patent Court between Nestlé and Denner over Nespresso-compatible coffee capsules. The Supreme Court had to decide on the appearance of a conflict of a judge in the following situation: A French sister company of Denner had instructed a partner of the judge’s law firm regarding trademark matters. The Supreme Court rejected a rigid approach to conflicts in a ‘group-of-companies’ situation which would consist in treating all affiliates as one entity. However, the Supreme Court found that the mother company, Migros-Genossenschafts-Bund, had an immediate interest in all its trademarks, including all trademarks held by any of its subsidiaries, and in related disputes. Therefore, Migros-Genossenschafts-Bund itself was to be treated both as a party to the proceedings before the Federal Patent Court and a client of the judge’s law firm. The Supreme Court, therefore, concluded that there was an appearance of bias.

In another 2013 decision, the Southern District of New York Second Circuit3)Ometto v. ASA Bioenergy Holding A.G., 2013 WL 174259 (SDNY), aff’d, 2014 WL 43702 (2d Cir.). jQuery("#footnote_plugin_tooltip_6326_3").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); applied § 10(a) of the Federal Arbitration Act providing for setting aside of an award in cases where there was “evident partiality” of an arbitrator. Ometto argued that in three instances the chairperson’s law firm had advised an affiliate of the opposing party. While these mandates were not disputed, Judge Rakoff found no evidence refuting the sworn testimony of the arbitrator that he had no knowledge of the circumstances put forward by Ometto. The mistakes made when recording the conflict could not create evident partiality nor could the deficiency of the law firm’s conflict check system. Therefore, he rejected the request for setting aside.4)Other Circuit courts apply a lower threshold and to date there is no subsequent Second Circuit or Supreme Court decision on “evident partiality” clarifying this issue. The latest Circuit Court decision is Hawaiian Supreme Court decision in Noel Madamba Contr. LLC v. Romero (2015); 133 Haw. 447, 329 P.3d 352, 2014 Haw. App. LEXIS 252 (Haw. Ct. App., May 23, 2014). jQuery("#footnote_plugin_tooltip_6326_4").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] });

The Swiss Supreme Court discussed the simultaneous representation of an affiliate by the arbitrator’s law firm again in 2016 in the “CMS-Case”.5)See DSC 4A_386/2015 dated 7 September 2016. jQuery("#footnote_plugin_tooltip_6326_5").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); An arbitration partner in the Swiss branch of CMS acted as sole arbitrator. Respondent lost over a damage claim and filed a petition to the Supreme Court to vacate the award. It claimed that only then did it discover a press release of CMS Germany revealing that CMS Germany had represented a German company belonging to the same group of companies as the claimant in the arbitration. The Supreme Court analyzed the specific circumstances and held that that the arbitrator’s subjective impartiality could not be doubted since he was undisputedly not aware of the advice provided by CMS Germany to the affiliate of the claimant. Therefore, the arbitrator had no reason to favor the claimant. Regarding the objective impartiality, given that CMS constituted a network of financially independent firms, the link between the arbitrator and claimant’s affiliate was too tenuous to be relevant.

The decision of the Paris Court of Appeal is in stark contrast to these decisions. There is no discussion of any reasons why the previous representation of Porsche by the co-arbitrator’s law firm could have influenced his decision. Considering the territorial and strictly pecuniary aspect of the dispute between SBA and AVME, it seems difficult to see an overreaching interest of the whole Volkswagen group and thus also of Porsche in the arbitration. Furthermore, the assumed representation was apparently over when the award was rendered. Finally, it is unclear whether the Paris Court assumed that the co-arbitrator was aware of the representation and how this impacted its decision.

As to the second leg of the reasoning put forward by the Paris Court of Appeal, the advice in question was given more than two years prior to the co-arbitrator’s appointment. While it should have been disclosed, the relevant question is whether non-disclosure as such justifies setting aside the award. The more convincing and reasonable position is that this is not the case.6)See Explanation (c) to GS (3) IBA Guidelines. jQuery("#footnote_plugin_tooltip_6326_6").tooltip({ tip: "#footnote_plugin_tooltip_text_6326_6", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Setting aside has too important consequences to warrant using it to reprimand an arbitrator whose lack of disclosure was possibly the consequence of circumstances outside the scope of his or her personal responsibility.

In order to maintain the legitimacy of arbitration, the impartiality and independence of arbitrators is of the highest importance. However, courts have the obligation to explain why there is a real likelihood that an arbitrator might have been influenced by factors other than the merits of the case.

Where courts limit themselves to a cursory analysis, accept very tenuous connections to disqualify arbitrators, or take a non-disclosure as such as a basis for setting aside an award, they open the door to potential liability claims against arbitrators. Then, yes, being an arbitrator has become a very risky business.

References   [ + ]

1. ↑ CA Paris, Pôle 1, Chambre 1, 27 mars 2018, n°16/09386. 2. ↑ DSC 139 III 433 dated 27 August 2013. 3. ↑ Ometto v. ASA Bioenergy Holding A.G., 2013 WL 174259 (SDNY), aff’d, 2014 WL 43702 (2d Cir.). 4. ↑ Other Circuit courts apply a lower threshold and to date there is no subsequent Second Circuit or Supreme Court decision on “evident partiality” clarifying this issue. The latest Circuit Court decision is Hawaiian Supreme Court decision in Noel Madamba Contr. LLC v. Romero (2015); 133 Haw. 447, 329 P.3d 352, 2014 Haw. App. LEXIS 252 (Haw. Ct. App., May 23, 2014). 5. ↑ See DSC 4A_386/2015 dated 7 September 2016. 6. ↑ See Explanation (c) to GS (3) IBA Guidelines. function footnote_expand_reference_container() { jQuery("#footnote_references_container").show(); jQuery("#footnote_reference_container_collapse_button").text("-"); } function footnote_collapse_reference_container() { jQuery("#footnote_references_container").hide(); jQuery("#footnote_reference_container_collapse_button").text("+"); } function footnote_expand_collapse_reference_container() { if (jQuery("#footnote_references_container").is(":hidden")) { footnote_expand_reference_container(); } else { footnote_collapse_reference_container(); } } function footnote_moveToAnchor(p_str_TargetID) { footnote_expand_reference_container(); var l_obj_Target = jQuery("#" + p_str_TargetID); if(l_obj_Target.length) { jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight/2 }, 1000); } }More from our authors: International Arbitration and the Rule of Law
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Arbitration in 2018: A Global View - JD Supra (press release)

Google International ADR News - Tue, 2018-07-17 19:46

JD Supra (press release)

Arbitration in 2018: A Global View
JD Supra (press release)
But when it comes to international disputes, arbitration continues picking up steam. In fact, Georgia is increasingly a place where global parties prefer to host arbitration, as we will discuss later in this blog. Business Arbitration Within the United ...

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Digital Business in Belgium - Lexology

Google International ADR News - Tue, 2018-07-17 10:12

Digital Business in Belgium
Lexology
On a European level, the EU Payment Services Directive (2015/2366/EC) of 25 November 2015 puts in place comprehensive rules for payment services, with the goal of making international payments (within the European Union) as easy, efficient and secure ...

Judicial Clarification on Anti-suit Injunctions: The Right Approach?

Kluwer Arbitration Blog - Tue, 2018-07-17 03:50

David Ndolo

On 6 June 2018, Justice Males at English High court in Nori Holdings Ltd v Bank Financial Corp [2018] EWHC 1343 (Comm) (Nori Holdings) provided clarifications on some of the legal issues on anti-suit injunctions.

The facts revolved around an application for an anti-suit injunction to restrain the court proceedings commenced by the defendant (Bank) in Russia and Cyprus, which were alleged to be brought in breach of a London arbitration clause. The application raised the following legal issues in relation to anti-suit injunctions in the arbitration context.

Do Courts Have Jurisdiction to Grant an Anti-Suit Injunction When an Arbitral Tribunal Has Been Constituted?

It is well established under English law that senior courts in England have ‘general power’ to grant anti-suit injunctions in support of arbitration under s.37 of the Seniors Courts Act 1981. However, they exercise this general power cautiously and ‘sensitively’ in the arbitration context ‘with due regard for the scheme and terms’ of the Arbitration Act 1996 (AA 1996) (see Lord Mance, Ust-Kamenogorsk Hydropower Plant [2013] UKSC 35, at 60).

Of interest in Nori Holdings was s.44(5) AA 1996 which states that in any case ‘the court shall act only if or to the extent that the arbitral tribunal … has no power or is unable for the time being to act effectively.’ Accordingly, the defendant argued that, because the arbitral tribunal had already been constituted, the court should allow the arbitrators to decide whether to grant an anti-suit injunction.

Justice Males held that there is ‘no reason why the court should not exercise the jurisdiction to grant anti-suit relief which it undoubtedly has‘ (at 41). To further strengthen his decision, he referred to Lord Mance’s decision in AES Case [2013] UKSC 35 (at 58-60), in which his lordship held that ‘it is inconceivable that the 1996 Act intended or should be treated sub silentio as effectively abrogating the protection enjoyed under s.37.’ It follows, therefore, that a constitution of an arbitral tribunal and the tribunal’s power to issue an anti-suit injunction, was not a valid reason for a court to refuse to grant an anti-suit injunction or grant a limited injunction until arbitrators consider it (Nori Holdings, at 42).

Justice Males’ decision does indicate that the outcome would have been different if the defendant had made a claim for a stay in proceedings under s.9 AA1996 (at 41). However, it was impractical for the defendant to make such a claim because they denied the jurisdiction of the arbitral tribunal and that the foreign proceedings (in Russia) were in breach of the arbitration proceedings.

Is West Tankers Good Law?

In a controversial and extensively analysed West Tankers case [(C-185/07) EU:C:2009:69 (ECJ (Grand Chamber)], the Court of Justice of the European Union (CJEU) held that the anti-suit injunctions of this nature run counter to the principle of mutual trust among the EU member states as required by the Brussels I Regulation (the Regulation). As a result, EU member state courts, including English courts, cannot issue an anti-suit injunction in favour of arbitration where a party commences foreign court proceedings in an EU state. In Nori Holdings case, the defendant argued that under West Tankers the English Court cannot issue an anti-suit injunction to stop the proceedings in Cyprus as both countries are EU Member States.

The claimant sought to rely on the fact that the Regulation was replaced by the Brussels I Recast (the Recast), which expressly removed arbitration from its scope (Recital 12 para.4). Furthermore, the claimant relied on the Advocate General Wathelet (AG) decision in Gazprom [EU:C:2014:2414], where the AG held that;, if West Tankers had been decided under the Recast, anti-suit injunctions in favor of arbitration would not have been held to be incompatible with the Regulation due to the arbitration exception:

‘…also excludes ancillary proceedings, which in my view covers anti-suit injunctions issued by national courts… supporting… the arbitration’ (Opinion of the AG in Gazprom, at 138).

According to the claimant, that stance indicates a departure from West Tankers under the Recast.

However, Justice Males held that ‘the opinion of the Advocate General on this issue was fundamentally flawed’ for, inter alia, several reasons (at 91-98).  First, the CJEU did not adopt the AG’s approach; instead, it reaffirmed the decision in West Tankers and emphasized the importance of the mutual trust principle among the national courts of the EU Member States. Second, the Recast replaced the Regulation with the aim to explain how the Regulation should be interpreted. As a result, it did not bring any change in the law. Indeed, in Gazprom, the CJEU affirmed such reasoning by reaffirming the interpretation in West Tankers. Third, the approach of the AG to treat the arbitration exception to mean excluding any proceedings in which the validity of an arbitration agreement was contested is a ‘far too sweeping’ and incorrect. Instead, the exception states that such a ruling should not be subject to the rules of recognition and enforcement listed in Chapter III of the Recast. Fourth, the AG’s approach incorrectly envisaged the court proceedings related to anti-suit injunctions as valid under the Recast if the court first seized issued the anti-suit injunction. The Court held such an interpretation as incorrect given that it (a) creates legal uncertainty and unpredictability, and (b) leads to jurisdictional conflicts as to which court was in fact seized first, both of which are contrary to the fundamental principles of the Recast.  Following this, Justice Males held that ‘there is nothing in (the Recast) to cast doubt on the continuing validity of the (CJEU) decision in West Tankers case’ (at 99).  As a result, the English court could not grant an anti-suit injunction to stop the proceedings in Cyprus.

The Nori Holdings decision reaffirms West Tankers as good law and in doing so clears up most of the confusion that had been brought up by the AG opinion in the Gazprom case in relation to the arbitration exception in the Recast. The CJEU’s strong decisions against the issuance of anti-suit injunctions in the arbitration context within EU Member State courts in West Tankers and Gazprom, coupled with the importance and effect they have had does indicate that if there was to be a change in practice it would come directly from a clear CJEU decision.

Is the Fragmentation of Proceedings a Strong Reason Not to Issue an Anti-Suit Injunction?

English courts usually exercise their power to grant anti-suit injunctions in favor of arbitration, unless there are strong reasons not to do so (see in Donohue v Armco Inc (Donohue) [2002] 1 Lloyd’s Rep 425, (at 24)). In Nori Holdings, the defendant argued that there are strong reasons not to issue an anti-suit injunction to stop the foreign proceedings. Specifically, in the interest of justice, it would be necessary to allow the whole dispute to be decided in a single forum that is the Russian court as some of the claimants did not agree to the London arbitration.

However, Justice Males held that if the anti-suit injunction is issued, it would not be possible to submit the whole dispute to a single forum as some of the claimants had agreed to arbitration in London (at 113). Importantly, this case was distinguished from the Donohue, where the court refused to grant an anti-suit injunction to allow, inter alia, the whole dispute to be decided by a single forum. Nori Holdings was materially different as such a result was not possible. Moreover, Nori Holdings also adds to precedence that the fragmentation of proceedings by itself, especially where a single forum for the dispute resolution cannot be achieved either way ‘is not a strong reason not to grant an anti-suit injunction’ (at 113).

Conclusion

Unsurprisingly, the English courts continue to protect their power to grant anti-suit injunctions, in this instance, it remains unfettered even where an arbitral tribunal is constituted. Pragmatically, if there is fragmentation of proceedings, in the interest of justice these courts will exercise that power depending on whether it is possible to submit the whole dispute to a single forum. With regards to issuing anti-suit injunction between EU Member state courts, despite the controversy that the AG’s opinion raised in Gazprom, the English courts still firmly apply the CJEU’s approach in West Takers. But what is yet to be seen is whether the English courts will still favor this approach post-Brexit.

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BLM snaps up partners for London Market and reinsurance - Insurance Business

Google International ADR News - Tue, 2018-07-17 01:20

Insurance Business

BLM snaps up partners for London Market and reinsurance
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“BLM has a solid reputation with London's insurers, reinsurers, and brokers,” noted Cleary, who also has international legal expertise. “I want BLM to be seen increasingly as part of the fabric of EC3 and its connections both locally and globally ...

Examining contemporary issues on international maritime law - Guardian (blog)

Google International ADR News - Mon, 2018-07-16 23:39

Guardian (blog)

Examining contemporary issues on international maritime law
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Again, the CJN canvassed efficient engagement of the Alternative Dispute Resolution (ADR) mechanisms, stressing that conciliation and mediation process had proven to engender expeditious resolution of maritime cases. Also speaking, the Attorney ...

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Stone Soup in Canada

ADR Prof Blog - Mon, 2018-07-16 19:14
Last month, Michaela Keet (Saskatchewan), Martha Simmons (Osgoode Hall), Gemma Smyth (Windsor), and I gave a presentation about the Stone Soup Project at the joint annual conference of the Association for Canadian Clinical Legal Education (ACCLE) and Canadian Association of Law Teachers (CALT). You can click on the following powerpoint to get an overview of … Continue reading Stone Soup in Canada →

Hong Kong Arbitration Center Floats Draft Rules - Law360

Google International ADR News - Mon, 2018-07-16 18:47

Hong Kong Arbitration Center Floats Draft Rules
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Law360 (July 16, 2018, 7:30 PM EDT) -- The Hong Kong International Arbitration Centre has released a second draft of proposed new administered arbitration rules aimed at streamlining proceedings at the arbitration hub. ... The second draft of the ...

Global lessons for deinstitutionalisation from the ill-fated transfer of mental health-care users in Gauteng, South ... - The Lancet

Google International ADR News - Mon, 2018-07-16 17:44

Global lessons for deinstitutionalisation from the ill-fated transfer of mental health-care users in Gauteng, South ...
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Deinsitutionalisation is a sensitive process that requires full commitment from a range of stakeholders, including those directly affected, and people with expertise and experience. Ideally, people with international experience and successful projects ...

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