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Colombia Prevailed in Two Arbitrations Related to the Financial Sector under the Colombia-US TPA

Thu, 2021-09-30 01:53

Earlier this year, Colombia prevailed in two arbitrations under the Colombia-US Trade Promotion Agreement (“TPA”). The claims were filed by Alberto Carrizosa Gelzis, Felipe Carrizosa Gelzis and Enrique Carrizosa Gelzis (“Carrizosa brothers”) under the UNCITRAL Arbitration Rules, and by Astrida Benita Carrizosa (“Ms. Carrizosa”) under the ICSID Convention.

In both arbitrations Ms. Carrizosa and the Carrizosa brothers alleged that Colombia breached the fair and equitable treatment and national treatment standards, among other provisions of the TPA by undertaking a series of regulatory measures in 1998, and a series of judicial decisions between 2005 and 2014, that affected its investment in Granahorrar, a financial institution in which the claimants were shareholders.

The United States filed a Non-Disputing Party submission in both arbitrations on its interpretation of the relevant provisions of the US-Colombia TPA.

On April 19, 2021, the tribunal constituted under the ICSID Convention decided that it did not have ratione temporis jurisdiction over Mr. Carrizosa’s claims. On May 7, 2021, the tribunal constituted under the UNCITRAL Arbitration Rules rejected the claims presented by the Carrizosa brothers as it alsofound that it did not have ratione personae jurisdiction over their claims.

In both cases, the tribunals ordered the claimants to bear the entirety of the arbitration costs and 50% or more of Colombia’s legal costs and expenses.



Granahorrar was incorporated in 1972 as a subsidiary of Banco de Colombia. Granahorrar was a a financial institution authorized to obtain capital via private savings and to finance the construction industry through loans and mortgages. In 1986, the Carrizosa brothers and their parents, Ms. Astrida Bentia Carrizosa and Mr. Julio Carrizosa Mutis (the “Carrizosa Family”), acquired shares in Granahorrar. Within the following two years, the Carrizosa Family became a majority shareholder in Granahorrar. They indirectly owned 58.76% of Granahorrar. As of October 1998, the Carrizosa Brothers’ stake in Granahorrar amounted to 40.2570%. Ms. Carrizosa, in turn, owned 2.3307% of Granahorrar.

In the late 1990s Colombia suffered an economic crisis. In this context, the Colombian government adopted measures to subject financial institutions to strict supervision. In 1998, Granahorrar suffered a severe liquidity crisis, and thereby sought support from Colombian authorities. In response, the Central Bank provided funds as “temporary liquidity support” (TLS), equivalent to approximately US$194 million at the time. In turn, Fogafín (a Government entity created to protect savings) undertook to guarantee up to approximately US$222 million of Granahorrar’s interbank financing. In exchange, Granahorrar agreed to issue promisory notes to Fogafín valued at 134% of the guaranteed amount.

In the following months, Granahorrar’s financial standing continued to deteriorate. On October 2, 1998, the Superintendency of Finance ordered Granahorrar to raise approximately US$ 99.8 million in new capital to offset its insolvency. Granahorrar, however, did not raise the additional capital. On the next day, October 3, 1998, the Superintendency issued a report to Fogafín concluding that Granahorrar was insolvent and illiquid. On the same date, Fogafín’s board decided that the Government would take over Granahorrar, and ordered the company to reduce the nominal value of its shares to COP 0.01.

Fogafín capitalized Granahorrar and became the majority shareholder in the bank. The financial situation of Granahorrar improved andFogafín sold Granahorrar to the Spanish bank Bilbao Vizcaya Argentaria in 2005.

Following the measures adopted by Colombian authorities, the Carrizosa Family initiated a number of administrative judicial proceedings that culminated in a judgment in 2005,  rejecting the claims on the merits. The Carrizosa Family appealed this decision. Colombia’s Council of State upheld the appeal and ordered the Superintendency and Fogafín to compensate the Carrizosa Family in an amount up to US$ 114 million (the “2007 Judgment”).

On March 5, 2008, the Superintendency and Fogafín filed constitutional injunctions (tutelas) against the 2007 Judgment. On May 26,  2011, the Constitutional Court issued a unanimous judgment, whereby it reversed the 2007 (the “2011 Judgment”). Although the Carrizosa Family requested the annulment of the 2011 Judgment, the Constitutional Court dismissed this request in 2014 (the “2014 Order”).


International Claims against Colombia

 The UNCITRAL Arbitration

In the UNCITRAL arbitration proceedings, the Carrizosa brothers requested compensation in the amount of US$ 323 million for the alleged breach of the TPA.

The UNCITRAL Tribunal addressed and upheld the respondent’s ratione personae objection, pursuant to which Colombia alleged that Article 12.20 of the Colombia-US TPA only covered claims filed by U.S nationals, or dual nationals with US dominant and effective nationality.

The UNCITRAL Tribunal analyzed the “dominant and effective nationality” of the Carrizosa Brothers, concluding that the claimants had the burden of proving their dominant and effective nationality. The tribunal decided not only to analyze the critical dates of the arbitration (the date of the alleged breach, and the date of the submission of the Notice of Arbitration), but also the entire life of the Carrizosa brothers. For this purpose, the tribunal undertook an objective factual enquiry rather than considering the subjective appreciations of the Carrizosa Brothers on what they considered their “dominant and effective” nationality to be.

The tribunal analyzed, among other criteria: the habitual residence, place of birth, property, assets, passives, economic center of their business, social life, where have they voted, tax payments, and social security, health and pension payments.

After examining the evidence in the record, the UNCITRAL Tribunal concluded that it was clear that the Carrizosa brothers were not predominantly U.S nationals but Colombian nationals.Thus, the Tribunal held that the Carrizosa brothers were not covered by the TPA.

Accordingly, the UNCITRAL Tribunal decided that it had no jurisdiction ratione personae under Article 12.20 of the TPA and dismissed claimants’ claims. The tribunal further decided that claimants should bear the entirety of the fees and expenses of the PCA, and pay all of the legal costs and expenses of Colombia (save for a US$ 30,000 adjustment).


The ICSID Arbitration

On January 25, 2018, Ms. Carrizosa filed a Request for Arbitration with ICSID against Colombia under the US-Colombia TPA, the Colombia-India BIT, and the Colombia-Switzerland BIT, seeking compensation of US$ 40 million for the alleged breach of the TPA.

The tribunal upheld Colombia’s ratione temporis objection. This was based on the fact that the measures that allegedly breached the TPA took place before the TPA entered into force on May 15, 2012. The tribunal concluded that the TPA did not cover the administrative measures adopted by Colombian authorities in 1998, and the 2011 Judgment issued by the Constitutional Court.

The ICSID Tribunal clarified that although the 2014 Order was issued after the TPA entered into force, the claims related to the 2014 Order were not independently actionable The 2014 Order merely rejected the Carrizosa’s Family request to annul the 2011 Decision and therefore left unaltered the outcome of the 2011 Decision. Accordingly, the tribunal concluded that the measures giving rise to the arbitration predated the entry into force of the TPA and were outside of the temporal scope of the tribunal’s jurisdiction.

The tribunal further analyzed Colombia’s objection regarding the three-year limitation period provided in Article 10.18.1 of the TPA. Under Article 10.18.1 of the TPA, no claim may be submitted to arbitration if more than three years have elapsed as from the date on which the claimant first acquired, or should have acquired knowledge of the breach.  Ms. Carrizosa acquired knowledge of the 2014 Order shortly after the Constitutional Court issued said decision on June 25, 2014. Yet, she commenced the arbitration on January 24, 2018, which is more than three years after she acquired knowledge of the alleged breach of the TPA. Consequently, the tribunal concluded that her action was outside the temporary scope of jurisdiction of the tribunal.

To overcome this hurdle, Ms. Carrizosa tried to invoke the TPA’s most-favoured nation (MFN) clause to substitute the three-year period contained in the TPA with the allegedly more favorable five-year period set out in Article 1.5 of the Colombia-Switzerland BIT. The tribunal, however, concluded that it was not within its jurisdiction to apply the MFN clause given that Article 12.1.2(b) of the TPA provides that the subject-matter scope of the tribunal’s jurisdiction on disputes under Chapter 12 (Financial Services) is limited to four substantive provisions of the TPA that do not include the MFN clause.

The tribunal further noted that even if it were to apply the five-year period of the Colombia-Switzerland BIT, the claim would still be time barred given that the events that gave rise to the dispute took place in 1998 and 2011, which is more than five years prior to the Request for Arbitration.

In sum, the ICSID Tribunal dismissed Ms. Carrizosa’s claims and ordered her to bear the entirety of the arbitration costs and expenses, and bear 50% of Colombia’s legal fees and other costs.


Final remarks

After prevailing in both arbitrations, Colombia will pursue the recovery of 100% of the arbitrations’ costs and expenses, 100% of the legal fees spent in the UNCITRAL Arbitration, and 50% of the legal fees spent in the ICSID Arbitration. The total sum of the money that Colombia would recover amounts to approximately US$ 2,9 million.

However, the dispute between the Carrizosa Family and Colombia has not concluded. On June 6, 2012, the Carrizosa Family et. al filed a petition with the Inter-American Commission of Human Rights (“IACHR”), alleging that Colombia had breached their due process and property rights in the context of the measures adopted over Granahorrar. They requested, inter alia, that the Constitutional Court Judgment be overruled. In 2016, the Registry of the ICHR rejected the petition given that one of the victims was a legal corporation and thereby the claim fell outside the jurisdiction of the IACHR. The Carrizosa Family  submitted two additional revision petitions on October 4, 2017 and on July 4, 2018, which are pending resolution.





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Interviews with Our Editors: Illuminating Investment Treaty Arbitration and Institutional Services with Antonio R. Parra, Former Deputy Secretary-General of the ICSID

Wed, 2021-09-29 01:00

Antonio R. Parra led a lengthy and luminous career of international public service, having held various roles in the OPEC Fund and the World Bank. Of special interest to our readers is that from 1990 to 1999 Mr. Parra was Legal Adviser at the International Centre for Settlement of Investment Disputes (ICSID), and then from 1999 to 2005 (when he retired), he was ICSID’s first Deputy Secretary-General. During his service at ICSID, the institution grew in prominence and scale to become the premier institution for investor-State dispute settlement (ISDS). Even still, many working at the ICSID Secretariat speak of the lasting legacy of Mr. Parra’s contribution. It’s an honor and a privilege to have him share his perspective with our readers.


  1. Mr. Parra, your vision and leadership have been instrumental to shaping the practice of ISDS. Yet, you have also made significant contributions to academia, having published several books and served ICSID Review – Foreign Investment Law Journal as Managing Editor, and then Editor-in-Chief. In your view, how does academic input influence ISDS practice?


The influence of scholarly writings on ISDS practice is clear from a glance at written pleadings and arbitral decisions in the field. Contributions of scholars are frequently cited by parties and arbitrators on the myriad procedural and substantive legal issues that arise in the cases.

In launching the ICSID Review—Foreign Investment Law Journal, Ibrahim Shihata, General Counsel of the World Bank and Secretary-General of ICSID during most of the 1980s and 1990s, observed that such contributions could help to clarify the law applicable to foreign investments and assist in its balanced and progressive development.

The article that Shihata published in that first issue of the ICSID Review, had a large impact on the practice, and in particular growing acceptance, of ISDS at ICSID. Entitled “Towards a Greater Depoliticization of Investment Disputes: the Roles of ICSID and MIGA,” the article was based on a paper that Shihata had presented at a 1985 international arbitration conference in Rio de Janeiro. In the paper, Shihata showed how the ICSID system respected considerations underlying the Calvo Doctrine followed in Latin America, notably by precluding the home State of an investor from espousing its national’s claim if the matter was being or could be dealt with by an ICSID arbitral tribunal.

On re-publication of the article in 1991, Shihata observed that, when he presented the paper six years earlier, only four Latin American countries had signed the ICSID Convention but that the number of Latin American signatories had since doubled (and now encompasses almost all countries of the region).



  1. Do you believe that the ICSID Convention facilitates and promotes Foreign Direct Investment (FDI) by protecting investments and investors? From your perspective, what are the greatest threats facing the ICSID system and how can they be addressed?


Encouraging increased foreign investment certainly was regarded by ICSID’s founders as the basic objective of the ICSID Convention. They did not, however, see ICSID as serving this objective merely by protecting investments. Rather, they considered that the availability of balanced international facilities for the settlement of investment disputes could help to foster an atmosphere of mutual confidence conducive to stimulating greater investment flows. (I am paraphrasing the 1965 Report on the ICSID Convention of the Executive Directors of the World Bank, who had formal responsibility for drawing up the Convention.) The founders were clear-eyed about the impact of the Convention. They foresaw that countries with good investment climates would continue to attract  investments even if they did not become parties to the Convention or use ICSID’s dispute settlement facilities. However, adherence to the Convention could, the founders expected, enable countries seeking more investment to “provide additional inducement” for investment (in the words of the Report of the Executive Directors). The Convention obviously can be counted a success in this respect. The extent to which it may be credited with actual rises in investment flows, a much larger question, is probably impossible to measure, if only because the factors determining investment decisions are so varied and subjective. But given the central role that ICSID plays under most bilateral investment treaties, reference might be made in this connection to studies finding a positive correlation between such treaties and investment flows.

As dangers for ICSID, now approaching its 60th anniversary, I think that many would highlight recent moves, ironically of advanced economy countries, to narrow or even eliminate the scope for recourse to ISDS under their investment treaty arrangements—keeping ISDS only for disputes arising out of Mexico-U.S. investments under the new USMCA; the termination, in view of their ISDS clauses, of intra-E.U. bilateral investment treaties; and the proposal championed by the E.U. to replace ISDS mechanisms with a permanent multilateral investment court (MIC).

For ICSID, these might best be considered opportunities instead of dangers. Retreat from ISDS, in the sense of investment treaty arbitration, may enlarge possibilities for resort to contract-based arbitration, which still represents a significant proportion of ICSID’s caseload. ICSID conciliation and fact-finding facilities may at last find users. If a MIC materializes, it may only be after a long time, given the complexity of the project. But ICSID’s superb infrastructure and skilled Secretariat might make it an ideal host for the MIC. In all these ways, as well as by still administering investment treaty arbitrations, ICSID would be continuing to serve its objective of promoting international investment.


  1. In recent years, ISDS has seen backlash from external stakeholders, including NGO activists and journalists, which perhaps has led to a legitimacy crisis and demands for radical reforms. From your perspective, what could be one or two reforms to the ISDS system that would meaningfully address legitimacy-based concerns?


It may be useful, when we think about the legitimacy crisis of ISDS, to keep in mind what we mean by legitimacy in this context. In several  of its very good notes on IIA Issues, UNCTAD has referred to the legitimacy of ISDS as its authority, in the eyes of the public at large, to assess the validity of a State’s acts. Because of the structure of investment treaty arbitration, we can only look for that authority in the arbitration and substantive treatment provisions of the underlying treaty. Consternation about the outcome of a case may often best be directed at these provisions as permitting or indeed demanding the outcome. Makers of investment treaties and other stakeholders increasingly recognize the need for greater care in the elaboration of the provisions, especially those on indirect expropriation. Investment treaties however remain a patchwork of varying norms, probably becoming even more diverse as newer treaties slowly replace older ones. A solution might consist in the conclusion of a global investment treaty, though countries may be discouraged from attempting this difficult task again, after the repeated failures to finalize such a treaty at the OECD. A set of non-binding guidelines on the treatment of foreign investment was issued under World Bank auspices in the early 1990s. Reissuance by such a universal organization of widely accepted updated guidelines, for countries to emulate in their investment treaties and laws, might well help to address legitimacy-based concerns about ISDS.


  1. Relatedly, recent years have seen significant ISDS reform efforts, including the ICSID rule amendment project and UNCITRAL Working Group III, with significant input from various stakeholders, including the States and investors themselves. From your perspective, what are the top three issues to be addressed?


From such ambitious and wide-ranging reform processes, it is difficult to choose just three topics to discuss. Among the many overlapping issues being addressed in the UNCITRAL and ICSID processes, three of particular interest to me are issues relating to challenges of arbitrators, security for costs, and frivolous claims. In these and other respects, the ICSID process is more advanced and focused, dealing just with the institution’s own rules.

In accordance with the ICSID Convention, challenges of an arbitrator for lack of independence, or for ineligibility to serve on the arbitral tribunal, have been decided by the other arbitrators, unless they are equally divided, in which case the challenge has been decided by the Chair of the Administrative Council of ICSID (the President of the World Bank). Having unchallenged arbitrators, at least in the first instance, decide the challenge of their fellow arbitrator has rightly been termed unsatisfactory by the annulment committee in a recent ICSID case.

Requests for a tribunal to direct a party to provide security for costs have been handled within the framework of the article of the ICSID Convention on provisional measures, under which an arbitral tribunal may grant provisional measures to preserve the respective rights of either party. The requests made on this basis for security for costs have seldom been granted. In several instances, the tribunals considered that they could not issue provisional measures in respect of rights that were hypothetical or to be created only in the event of the requesting party prevailing in the proceeding.

By a provision added to its Arbitration Rules in 2006, ICSID introduced a procedure for the early dismissal of claims manifestly lacking legal merit. In subsequent proceedings, the provision has been interpreted as covering claims that are unsustainable from the jurisdictional as well as substantive viewpoints, although this was not clear from the provision (which I feel free to criticize because I was its initial drafter).

These shortcomings, and many others, are addressed in the outstanding package of new amendments prepared by ICSID. Thus, under the new amendments, if unchallenged arbitrators find themselves unable for any reason to rule on the challenge of their colleague, they will be deemed to be equally divided on the challenge, which will then be decided by the Chair of the Administrative Council; orders for security for costs will no longer be treated as provisional measures under the ICSID Convention; and the Arbitration Rules will put beyond doubt the possibility of early dismissal of claims that are manifestly ill-founded as to jurisdiction.


  1. In 2009, following unfavorable outcomes in several investment disputes, Ecuador notified the World Bank of its denunciation of the ICSID Convention. Ecuadorian leaders went as far as adding a provision (Article 422) to the Ecuadorian Constitution to prevent future governments from entering new International Investment Agreements (IIAs) that could ‘yield sovereignty’ to international arbitration. Now, a decade later, Ecuador has taken steps to rejoin the ICSID Convention. At the very least, this example illustrates that State views on IIAs and related dispute resolution can evolve over time depending on the context. From your perspective, how can ICSID best be mindful over sovereignty concerns and criticism while promoting the benefits of ISDS? Should we revisit the utility in academic discourse on “de-politicization” of investment disputes?


Sovereignty concerns were indeed invoked for Ecuador’s denunciation of the ICSID Convention in 2009. In my understanding, the denunciation was precipitated, not so much by experiences of Ecuador in particular cases, as by the decision in 2007 of members of the Bolivarian Alliance for the Americas—ALBA—to withdraw from the ICSID Convention, a decision acted upon, among ALBA members, by Bolivia and Venezuela as well as Ecuador. Attracting much attention around the time of Ecuador’s denunciation were government statements calling into question the neutrality of ICSID arbitration. As you suggest in your question, it is crucial for such debates to be grounded in fact. In 2010, the same year that the denunciation of Ecuador took effect, ICSID redoubled its efforts to meet this need with the inauguration of its semiannual publication, The ICSID Caseload—Statistics. ICSID has also become very active in offering courses and training on ICSID arbitration to government officials and the public at large. Such efforts have been doing much, to use your words, to promote the benefits of ISDS, particularly ICSID procedures, while remaining mindful of the concerns and criticism.


  1. Several times in past posts on the Blog our contributors have commented on whether India should join the ICSID Convention. On this debate, India has emphasized the perception of ICSID being “pro-developed countries” and also underscored the lack of review as a major disadvantage (i.e. the self-contained, detached structure). On the other hand, it has been argued that the Indian economy would benefit from a transparent, reliable, and predictable legal framework for investor/investment protection, and therefore that joining the Convention would “enhance investor confidence and promote incoming investments”. In your view, which of the two better reflects reality and why?


On the first side of this debate, I would disagree with the contention that ICSID is “pro-developed country.” Its governing body, the Administrative Council, comprising one representative of each member, each with one vote, is overwhelmingly composed of representatives of developing countries. Moreover, the respondents in ICSID cases, most of them governments of developing countries, have prevailed in more than half of the cases decided by tribunals. It is interesting that, on this side of the debate, the exclusion of review by national courts of ICSID arbitral awards is cited as “a major disadvantage.” The exclusion was put in the ICSID Convention precisely to help governments of developing countries obtain enforcement of awards rendered in their favor without being subject to undue delays or defenses based on local laws. (For compliance with awards rendered against governmental parties, it was considered sufficient that such compliance would, under another provision of the Convention, represent an international law obligation of the government concerned.)

On the other side of the debate, adherence to the ICSID Convention might facilitate increased investment in India but the first of the quoted posts on your Blog considers adherence by India to be “highly unlikely.” It seems from that and the second quoted Blog post that much of the reluctance about joining the ICSID Convention stems from the potential of ICSID claims being brought against India. But adherence to the ICSID Convention does not in and of itself obligate a country to submit all or indeed any of its investment disputes to ICSID. Importantly for an investment exporter such as India, adherence will make its nationals eligible to use ICSID’s dispute resolution facilities for disputes with host countries of their investments abroad. To the extent it is not already doing so, it might be useful for India, in its further consideration about the possibility of joining the ICSID Convention, to keep in view its position as a home country, as well as a host country, for foreign investments.


  1. Could you please share with our audience two negative trends and two positive trends you have observed with ISDS the last five years?


Two aspects of ISDS nowadays that I would single out for criticism are a continued lack of diversity among members of arbitral tribunals and the continued lack of an international appeals facility such as the one proposed at ICSID in 2004 (in a report written by me). According to my last count, only about 20 percent of the individuals appointed as ICSID arbitrators have been nationals of emerging or developing countries and only about 10 percent women. Responsibility for this rests, of course, mainly with parties to proceedings, who make most of the appointments. In suitable contexts, where parties to investment treaties agreed to incorporate the envisaged appeals facility rules by reference into their treaties (and took steps to make the necessary modification of the ICSID Convention as between themselves), the mechanism might have enhanced the credibility and consistency of ISDS, if only under the particular investment treaty or treaties concerned.

Two positive developments that I would highlight are the growing popularity of investor-State mediation and the intensified attention being paid to ways of cutting the duration of arbitration proceedings. On mediation, I refer especially to the mediation rules that ICSID has included in its proposed rule amendments. On duration, I particularly have in mind the proposed ICSID amendments more extensively stating time limits, counting them more strictly, and offering parties the option of agreeing to expedited arbitration proceedings with shortened timeframes.


Thank you, Mr. Parra, for sharing these insightful views.  We appreciate your time and continue to wish you the best!

This interview is part of Kluwer Arbitration Blog’s “Interviews with Our Editors” series.  Past interviews are available here.  

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Growing Gender Diversity in International Arbitration: A Half Truth?

Tue, 2021-09-28 01:00


In the past few years, there has been a visible focus on ensuring diversity, especially in terms of gender, in international arbitration (IA). This engagement has, arguably, assumed the most prominent or tangible form in respect of arbitrator appointments, which has been previously discussed here and here. One of the most significant steps taken for achieving this goal is the Equal Representation in Arbitration Pledge (ERA Pledge), which was adopted in 2016 and currently has more than 4,700 signatories. However, despite these efforts, commentators have identified a diversity paradox, which is the “apparent inability to translate [the concerns with respect to lack of diversity in IA] into actual appointments in individual cases”.

In this context, this post analyses whether the recent statistics published by various arbitral institutions on arbitrator appointments actually narrate a success story for gender diversity in IA. Specifically, this post analyses gender diversity in IA from an intersectional lens, accounting for geographic and ethnic diversity, along with making a case for sustainable participation at all levels of seniority.


2020 statistics

The International Chamber of Commerce (ICC) published its dispute resolution statistics for 2020 in August 2021. While commemorating the five year mark of the ERA Pledge, ICC highlighted that “the number of confirmations and appointments of women arbitrators in ICC case continues to steadily rise – increasing from 312 in 2019 to 355 in 2020, representing today over 23% of all confirmations or appointments up from 21.1% in 2019”. While commenting on geographical and gender diversity, the ICC statistics state that 2020 saw “1,520 appointments and confirmations…with arbitrators coming from 92 countries and comprising 23.4% women arbitrators appointed or confirmed”. In terms of nationalities, the highest percentage of arbitrators came from the UK (14.5%), followed by the US (10%), Switzerland (8.9%), and France (6.6%). More than half of the arbitrators on ICC tribunals in 2020 (52.3%) were from North and West Europe.

The London Court of International Arbitration’s (LCIA) casework report for 2020 also notes that “the overall percentage of female arbitrators appointments reach[ed] a high of 33% in arbitrations pursuant to the LCIA Rules, a growth from 29% in 2019”. In terms of nationalities, the report stated that, “37% of appointments comprised appointments of arbitrators from 40 different countries, with the next highest numbers of arbitrators [after British arbitrators] being from Canada, the United States, Ireland, Germany, and Mexico”.

The caseload statistics for 2020 published by the Singapore International Arbitration Centre (SIAC) notes that “[o]f the 143 arbitrators appointed by SIAC, 46 (or 32.2%) were female”.

The annual report published by the Hong Kong International Arbitration Centre (HKIAC) in 2021 states that “[o]f the 149 appointments made by HKIAC in 2020, 34 (22.8%) were of female arbitrators”. The percentage of female arbitrators appointed by parties in HKIAC arbitrations was much lower at 11.1%.

At the outset, while these statistics indicate a gradual rise in gender diversity in arbitrator appointments, the absolute numbers of women arbitrators are still substantially lower than their male counterparts. Further, geographic diversity amongst arbitrators still seems to be relatively limited, with European (especially English) arbitrators being appointed most frequently in IA tribunals. This is also consistent with the findings of the recent survey by White & Case and Queen Mary (a different aspect of this survey is discussed here) which found that “[m]ore than half of respondents agree that progress has been made in terms of gender diversity on arbitral tribunals over the past three years. However, less than a third of respondents believe there has been progress in respect of geographic, age, cultural and, particularly, ethnic diversity”.

The picture only becomes grimmer when one considers the possibility of repeat appointments for a set pool of experienced arbitrators – an issue which has been identified as one of the challenges to diversity in arbitral tribunals in past studies. Worse even, when viewed from the perspective of intersectional identities or that of sustainable participation at all levels, the existing data appears inadequate to reflect the nuanced realities of diversity in IA, i.e., the intersectional lens of diversity, which is explored in detail below.


Intersectional identities  

The intersectional lens, which is “a prism for seeing the way in which various forms of inequality often operate together and exacerbate each other”, can be particularly relevant for understanding diversity in IA. For instance, when considered in isolation, there might be an increase in both gender and geographical diversities internationally. However, when taken as a whole, the proportion of women arbitrators from Asian or African countries in IAs is likely to be significantly lower than those from Europe or America.

Taking the example of India, out of the 30 Indian arbitrators who have been appointed in various ICC tribunals (based on the publicly available data on ICC’s website, which includes information for ICC cases registered as of 1 January 2016), only one (3.33%) is a woman. In the ICC India Arbitration Group, which includes the selection committee for arbitrators (responsible for nominating arbitrators upon the request of the ICC Court), there is only one woman (out of 25 members in total). Similarly, out of the 36 Indian arbitrators who are included on SIAC’s panel of arbitrators, only three (8.33%) are women, and out of the 11 Indian arbitrators on HKIAC’s panel, only one (9.09%) is a woman (who is also a part of SIAC’s panel). Therefore, as far as these three institutions are concerned, in total, names of only four women Indian arbitrators are publicly available, as opposed to the names of about 90 odd Indian men. This is despite the fact that these institutions administer a significant volume of arbitrations involving Indian parties. This situation may not be peculiar to India and may hold true for many other countries.

Such intersectional analysis becomes relevant for understanding actual diversity because in many countries with a nascent IA practice, the real opportunities available to women practitioners can only be fully appreciated by accounting for their identities as women from their countries of origin. This is because, more often than not, practitioners from these countries are only appointed as arbitrators in arbitrations where at least one of the parties is from that country. Again, taking the example of India, as per the ICC 2020 statistics, 79 (3.15%) Indian parties participated in ICC arbitrations. On the other hand, only 20 (1.32%) Indian arbitrators were appointed to ICC tribunals. Tellingly, as per the SIAC 2020 statistics, while 690 (63.89%) Indian parties participated in SIAC arbitrations, only 14 (4.86%) Indian arbitrators were appointed to SIAC tribunals. The relatively higher number/percentage of Indian arbitrating parties as compared to the number/percentage of Indian arbitrators, coupled with the general preference for arbitrators from western countries, suggests that Indian arbitrators on ICC or SIAC tribunals were probably only appointed in arbitrations involving Indian parties. Therefore, in turn, the near absence of Indian women arbitrators in IAs is on account of issues linked to both, gender diversity and geographical diversity.


Sustainable participation at all levels

As discussed in an earlier post, to appreciate the issue of diversity in IA, along with addressing the lack of women’s representation in leadership roles (such as arbitrator appointments), it is crucial to address issues relating to sustainable participation at all levels. This is because sustainable participation, which involves issues relating to opportunities available to young women to practice and gain experience, and the availability of means to stay in such opportunities, is bound to impact leadership in the long run.

Pertinently, the 2020 Report of the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings identified the unavailability of sufficiently qualified and well-known practitioners from diverse backgrounds as one major barrier to achieving greater diversity in IA. This was also confirmed in the White & Case survey, wherein participants indicated that at the end it is “always the demands of the case that determine choice of arbitrators”. Therefore, in order to ensure diversity in arbitrator appointments (and in IA generally), it is crucial to create sufficient opportunities for women from diverse backgrounds to gain relevant experience and visibility.

In recent years, while there has been a consistent push to ensure diversity in leadership in IA, issues linked to sustainable participation of women have probably attracted less traction. In our view, trying to address the lack of diversity solely through interventions with respect to leadership roles is more likely to aggravate the diversity paradox as opposed to solving it. Therefore, while proposals for setting a new norm/standard that “all panels should include at least one woman or other diverse practitioner and panels that do not are Defective Panels”, or efforts solely directed towards leadership issues, would have some immediate impact, in the long run, they have to be coupled with efforts for ensuring sustainable participation to guarantee a holistic improvement in diversity. In the absence of inclusion and capacity-building initiatives catering to women at all levels and across all geographies, the leadership pool is likely to be limited to a small number of established practitioners (even if women).

Currently, in absence of much data (especially country-specific data) on practitioners at all levels of seniority, it would be difficult to comment on the state of diversity in IA generally.  Having said this, it is probably safe to conclude that issues with respect to gender diversity are only half understood when solely viewed from the perspective of leadership.


Possible ways forward?

Ways to improve intersectional diversity and sustainable participation in IA, which could, in turn, improve diversity as a whole, could include the following active efforts from all actors in IA, such as arbitral institutions, law firms, chambers, etc.:

  1. Publishing detailed data regarding diversity (gender, geographical and ethnic) in IA across different levels of seniority.
  2. Viewing diversity from a more intersectional lens that accounts for overlapping identities and therefore, publishing diversity data accounting for such identities.
  3. Including more women from various races, seniorities, nationalities, ethnicities etc., as speakers in panel discussions, conferences etc., which could improve the visibility of women practitioners.
  4. Initiating conversations with industry bodies and other potential clientele on the need for diversity and the problems with homogeneity in the lawyers advising them.

These are undoubtedly broad suggestions that require a much more nuanced analysis of different legal systems, existing wage gaps, and the potential roles of the various actors involved in IA. Having said this, it is undeniable that it is high time that all stakeholders of IA understand and discuss diversity holistically and address various inequalities collectively, as opposed to addressing them in a piece-meal manner. Further, it is a collective responsibility to sustain the conversation and debate on this topic until IA truly becomes non -“pale, stale and male”.


We thank Mr. Rishab Gupta (Shardul Amarchand Mangaldas & Co) for his inputs.

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Revision of the WIPO Arbitration Rules: Adapting to an Increasingly Remote Setting In Technology Disputes

Mon, 2021-09-27 01:00

On July 1, 2021 the World Intellectual Property Organisation (WIPO) revised its Arbitration Rules (2021 WIPO Rules). The amendments include a possibility for the parties to conduct remote hearings, an obligation to disclose third-party-funder agreements and a decrease in costs in arbitration proceedings. As elaborated below, the 2021 WIPO Rules have been adapted to reflect modern trends of dispute resolution in an increasingly remote environment. This post provides an overview of the WIPO, discusses these revisions to its Rules, and suggests areas where perhaps the WIPO could have gone further in its revisions to its Rules.



WIPO is a global forum for intellectual property and one of the United Nations (UN) specialised agencies. Its Arbitration and Mediation Centre (WIPO ADR) provides time- and cost-efficient alternative dispute resolution, which benefits from specialised arbitrators, privacy, confidentiality, and a simple enforcement procedure. These advantages stand clear in contrast to common courts, where parties may end up with a judge without the necessary expertise, hearings are often public, and enforcement proceedings last for years.

As a result, the demand for ADR in technology disputes has been steadily increasing in recent years. According to the WIPO Caseload Summary, the number of cases it has administered grew from 41 in 2011 to 182 in 2020. In its 2020 report, WIPO ADR highlighted the importance of arbitration as a forum to resolve technology disputes.

The 2021 WIPO Rules introduced a series of amendments as a response to the COVID-19 pandemic. They replace the 2020 Rules, which expired on 30 June 2021 but apply to disputes registered until that date. The main change concerns remote hearings and coincides with revisions of other arbitration rules such as the ICC rules for 2021, LCIA rules for 2021 and the Swiss Arbitration Centre rules for 2021. Further changes concern third-party funding agreements, electronic filings and fees.


Remote hearings as a response to the post-COVID-19 era

Remote communication tools have gained in popularity as a result of restrictions on the functioning of arbitration tribunals around the world due to the COVID-19 pandemic.

Remote WIPO arbitration hearings are now not only expressly permitted in the 2021 WIPO Rules, but also parties are encouraged by the WIPO to use this tool (as WIPO indicated in its official communication). Article 55 of the 2021 WIPO Rules provides that the adjudicating panel may, after consulting the parties to the proceedings, conduct hearings by videoconference, using online tools, or in-person.

Remote hearings are of great importance because WIPO manages IT disputes in which the parties are accustomed to online communication. Moreover, given the characteristics of disputes resolved under the 2021 WIPO Rules, including disputes involving infringement in licensing, the parties are typically concerned with bringing the case to a quick resolution and stopping further infringement as soon as possible.

Most of the arbitration institutions have already introduced similar solutions. The possibility of conducting proceedings by videoconference was introduced by the Swiss Arbitration Centre in June 2021 (Article 27), the International Chamber of Commerce in January 2021 (Article 26(1)), and in October 2020 – by the London Court of International Arbitration (Article 19(2)).

The solution presented by WIPO is not only a response to the COVID-19 pandemic but also a response to the needs of a centre handling disputes mostly involving technology companies.


Electronic filing to make parties’ lives easier

The 2021 WIPO Rules permit the electronic filing of cases, as well as ordinary communication, as the default option for communication. The amendment proposed to Article 4(a), although it is a more cosmetic change, organizes and clarifies the issue of online communications. WIPO thus emphasized online communication, making it the default mode of contact, perhaps with no room for other interpretation. On its website, WIPO offers that the request for arbitration be submitted online using the WIPO IP Portal form.

A similar solution was introduced by ICSID at the last revision of the Arbitration Rules of the International Centre for Settlement of Investment Disputes (ICSID) in June 2021 (in case of request for arbitration regulated by Article 36 of the ICSID Convention). At the time, Meg Kinnear, ICSID’s Secretary-General, said that: “Given the state of information technology—and the ease with which participants in ICSID cases have adapted to online file sharing in recent years—it made sense to make electronic filing the norm”.

This solution could potentially improve the administration of cases by WIPO, as in practice WIPO uses email to communicate with the parties and arbitrators, thus making all case-related documents in one place on a secured online file-sharing platform (see blog coverage here).

On the other hand, there are potential dangers with online hearings, including the issue of confidentiality and potential leakage of information. In particular, the issue of confidentiality in using online platforms should be subject to constant digital transformation. A significant number of proceedings conducted before WIPO are technology disputes and, as data show, more than 30% of parties to the technology disputes found confidentiality as an important element (Report on International Trends, WIPO, 2018). Crucially, IT market is very competitive, therefore any leakage of information may result in substantial losses to the company revenue or its reputation.

Moreover, there is a serious risk of cyberattacks. If file-sharing platforms are not properly secured, it may harm the confidentiality of a dispute, which may be a critical issue in disputes concerning intellectual property and related claims. There are many guidelines for parties and arbitrators on how to conduct the virtual hearings properly, using specific tools that arbitration institutions have already put in place (for example, the ICC Guidance Note, the HKIAC Guidelines and the Seoul Protocol – see the blog coverage here). Although the area of virtual hearings is developing dynamically, a close collaboration between the arbitral tribunal and technology firms may be of the greatest importance.


The obligation to disclose the third-party funder

Similar to the ICC rules for 2021, the WIPO Rules 2021 recognise the growing popularity of financing arbitral disputes through third-party funders. Under the 2020 WIPO Rules, the issue of third-party funders was not addressed. However, under the new rules, the obligation to disclose third-party funders’ arrangement with a party is required at the time when a request for arbitration is filed. If a funding agreement is concluded at a later stage of the proceedings, the identity of the third-party funder shall be disclosed promptly to the parties, the WIPO, and the tribunal. The third-party funder disclosure must also be made by the respondent, in its answer to the request for arbitration (Article 9(vii) and 11(b) of the 2021 WIPO Rules).

The proposed changes reflect a trend in international arbitration to address conflicts of interest between parties to the proceedings. The trend is visible not only in the recent amendment to the arbitration rules in Europe (see blog coverage here), but is also an emerging topic in East – Asia region (see blog coverage here). Moreover, not only commercial arbitration is full of TPF standards. Recent work undertaken by the UNCITRAL Working Group III covers the issue of third party funding in investor-state disputes (see blog coverage here).


Fees reduction by 25%

Together with the amendments made to the 2021 WIPO Rules, WIPO has updated its Schedule of Fees and Costs and introduced a 25 % reduction to the WIPO Centre’s administrative fees that apply if one or both parties to a dispute is a small or medium-sized enterprise (SME). This solution may attract entrepreneurs to submit their cases to WIPO ADR.

Although WIPO’s fees have increased, they remain lower compared to the fees offered by other arbitration centres. For example, when the amount in dispute is $2 million, the administrative fees at WIPO are $3,000.00, while the administrative fees required by the Swiss Arbitration Centre for a dispute of the same value are $9,815.00.


Amendments of the 2021 WIPO Rules could have gone further – proposals for future consideration

Surprisingly, the 2021 WIPO Rules do not include certain amendments that could make arbitration proceedings conducted at the WIPO Centre potentially more attractive.

Firstly, the time limit set for the appointment of an arbitral tribunal under the 2021 WIPO Rules is 50 days when appointed by the parties (Article 16) and 45 days when the appointment is made by the WIPO Centre (Article 15b). In contrast, under the revised LCIA rules for 2021, the deadline for convening a tribunal is 28 days (down from 35).

Secondly, the time limit to render the final award in the case of the 2021 WIPO Rules is 12 months (Article 65a), while under the ICC rules for 2021 the time limit for the final award is 6 months (Article 31). Moreover, the recent amendments made by the LCIA to the LCIA rules for 2021 cover this issue and specify the deadline of “as soon as possible”, but no later than 3 months.

The length of arbitral proceedings has often been touted as a principal advantage of arbitration compared to state court proceedings. Given WIPO’s competition with other arbitral centres (and state courts), it would behove the WIPO to consider solutions to reduce the length of arbitral proceedings, as has been achieved by other centres with much success. Coupled with reduced fees and the other added features of the 2021 WIPO Rules, reducing the length of arbitral proceedings could be advantageous for many entrepreneurs who may be deciding to bring a case to the WIPO Centre instead of a court.




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Moldovan Supreme Court: Execution of Enforcement Title Falls Outside the Scope of the New York Convention

Sun, 2021-09-26 01:00

On 26 May 2021, the Supreme Court of the Republic of Moldova (the “Supreme Court”) decided that the procedure for execution of an enforcement title, after recognition and enforcement of a foreign arbitral award, falls outside the scope of the New York Convention. Instead, it is subject to municipal law.


Factual Background

The request for recognition and enforcement of the foreign arbitral award on the territory of the Republic of Moldova was submitted by a limited liability company incorporated in Ukraine (the “Claimant”) against a private individual (Ukrainian citizen) (the “Respondent”). The award was issued by the arbitral tribunal in the arbitration administered by the Permanent Court of Arbitration at the Public Organization of Ukraine “Union of Investors of Ukraine” based in Kiev (the “Arbitral Institution”).

The dispute arose out of a guarantee contract concluded between the parties. According to the contract, settlement of any disputes arising from the implementation of the contract or in connection with it falls within the jurisdiction of the Arbitral Institution.

On 12 March 2020, the arbitral tribunal issued Decision no. 06/20 awarding the Claimant approximately 75 million EUR (the “Arbitral Award”). The Claimant initiated proceedings for the recognition and enforcement of the Arbitral Award, including on the territory of the Republic of Moldova. The Claimant sought to freeze and then to levy execution in Moldova against the Respondent’s shares held in a Moldovan company (the “Company”).

The main issue discussed before the Supreme Court was whether the New York Convention applies to the execution phase, and where are the boundaries between the recognition and enforcement of foreign arbitral awards, and the execution of those awards against assets. In this context, the Supreme Court also analysed whether the Moldovan legislation and the New York Convention require the creditor to first levy execution against the bank accounts, the movable or immovable property and then the shares in the company.


Respondent’s Arguments

The Respondent argued that the Claimant could not seek execution against the shares held by him in the Company in the first instance. He argued that the Claimant had to, under Art. 90 of the Moldovan Enforcement Code, successively execute the Arbitral Award against funds, settlement accounts, movable / immovable assets he had in Ukraine, and only then it could seek seizure of and execution against shares in Moldova.

Moreover, the Respondent maintained that the Claimant might pursue recognition and enforcement of the Arbitral Award in Moldova, only after presenting indisputable evidence confirming the impossibility of its execution on the territory of Ukraine.


Supreme Court’s Findings

The Supreme Court emphasized that Art. 3 of the New York Convention and Art. 4753 of the Moldovan Code of Civil Procedure, contain rules on the recognition of a foreign arbitral award and the granting of its execution on the territory of Moldova. This involves ascertaining the enforceability of the foreign arbitral award and authorizing its enforcement. Accordingly, the examination of the application for recognition and enforcement does not imply any evaluation of the subsequent execution, the latter falling under the jurisdiction of the bailiff acting in accordance with the provisions of the Moldovan Enforcement Code.

Moreover, the provisions of Art. 4751 of the Moldovan Code of Civil Procedure, do not require the award creditor to first apply for recognition and enforcement in another jurisdiction prior to initiating proceedings in Moldova.

The execution against the debtor’s assets is governed by Art. 90 of the Moldovan Enforcement Code. It provides that the sequence of the execution may be established by a mutual agreement of the parties to the enforcement procedure. If the parties have not agreed, the sequence of the execution against assets is determined by the creditor and the bailiff, according to the following order:

  • first of all, the debtor’s personal assets will be pursued free of collateral or mortgage and funds;
  • secondly, the debtor’s assets will be pursued, which are in common ownership in shares or in debasement, free of pledge or mortgage;
  • thirdly, the pledged or mortgaged goods will be pursued;
  • lastly, the real estate in which the debtor resides will be pursued.

In the Supreme Court’s opinion, the notion of enforcement in Art. 1(3) of the New York Convention has the exclusive meaning of the procedure of “recognition and enforcement”. This consists in the procedure of the assessment of the conditions of international regularity, provided in Art. 476 of the Code of Civil Procedure, regarding the invoked arbitral award. However, the execution procedure, based on an executory title issued by the State Court (i.e. Moldovan court) where the enforcement is recognized, shall be performed under the conditions of the Enforcement Code. Therefore, the Respondent’s argument that, as a shareholder of the Company, he cannot from the beginning be financially liable with the amount of the share capital, until his assets from the state where it resides are pursued, was irrelevant. This is because the Respondent’s argument refers to the enforcement procedure in which the debtor’s assets can be pursued. However, the subject matter of the Claimant’s request concerned the phase after the approval of the enforcement procedure in accordance with the Enforcement Code of the Republic of Moldova. Therefore, the execution against the assets, based on a foreign arbitral award, is performed at the stage where the arbitral award was already recognized, and the judgement recognizing the foreign arbitral award was already issued.


Concluding Remarks

Although the Supreme Court’s decision may be unsurprising for international arbitration community, it is one of the first decisions in Moldova clarifying the aspects related to recognition and enforcement of foreign arbitral awards, and the execution against the debtor’s assets. This decision seems to clarify the boundaries between the applicability of the New York Convention and the internal norms applicable to recognition and enforcement of foreign arbitral awards, and the execution against the assets based on such awards. Thus, the Supreme Court clarified that, once a creditor identified the debtor’s assets in Moldova, it should be aware that the New York Convention is applicable to the procedure of recognition of the arbitral award, and the “approval for enforcement” (încunviințarea executării) only, and not to the execution procedure itself. According to the Supreme Court, once the competent national court issued the judgement recognizing and approving the enforcement of a foreign arbitral award, and that judgement remained final and irrevocable, the procedure for execution of the debtor’s assets is entirely governed by domestic law (i.e. Enforcement Code).

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Paris Arbitration Week: Protecting Your Interest Through Interim Relief From Mainland Chinese Courts

Sat, 2021-09-25 01:00

During the Paris Arbitration Week, HKIAC held a webinar on “Protecting your interest through interim relief from Mainland Chinese courts”, two years after the unprecedented Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region (the Arrangement) came into effect.

Dr Ling Yang (Deputy Secretary-General and Chief Representative of the Shanghai Office at HKIAC) delivered welcoming remarks and Anton Ware (Partner, Arnold & Porter) moderated the discussion. The panellists were Chungang Dong (Partner at Jingtian & Gongcheng), Dr Nils Eliasson (Partner at Shearman & Sterling; HKIAC Vice Chairperson), Sarah Grimmer (Secretary-General at HKIAC) and Karl Hennessee (Senior Vice-President of Litigation, Investigations & Regulatory Affairs at Airbus; HKIAC Council Member).


The Arrangement

The event kicked off with a presentation by Dr Yang on the Arrangement.

The instrument was signed on 2 April 2019 and came into effect on 1 October 2019. On 25 September 2019, six arbitral institutions in Hong Kong were approved as the eligible institutions under the Arrangement. The Arrangement allowed Hong Kong to become the first and only arbitral seat outside of Mainland China, where parties can apply for interim measures in Mainland Chinese courts to preserve assets, evidence or conduct.


HKIAC’s experience with the Arrangement

Ms Grimmer addressed the role of HKIAC in applications for interim measures to Mainland Chinese courts, which is to certify that HKIAC is administering the case. Within 24 hours upon receipt of complete applications from the parties, HKIAC will issue a letter to Mainland Chinese courts confirming that the arbitration is administered by HKIAC.

She then provided a statistical analysis of the implementation of the Arrangement. HKIAC has so far processed 50 applications under the Arrangement. The Mainland Chinese courts have issued 32 decisions, 30 of which granted interim measures upon the applicants’ provision of security. The total value of assets preserved amounted to RMB 10.9 billion (approximately USD 1.7 billion), which, according to Ms Grimmer, showcases the significant commercial advantage of choosing Hong Kong as an arbitral seat.

To date, applications have been made to 23 different courts across China. In terms of nationalities, the Arrangement has an impact on both Chinese and foreign entities – applicants comprise around 25% Mainland Chinese parties and 75% foreign parties, while respondents are split between 53% Mainland Chinese entities and 47% foreign parties. The median time taken by Mainland Chinese courts to issue a decision was 8 days.

In practice, around 2/3 of the cases were submitted by the applicants to the courts, whereas 1/3 of the applications were transferred to the courts by HKIAC.


Benefits of the Arrangement

The panellists then discussed the impact of the Arrangement on parties’ business dealing, negotiation and choice of dispute resolution clause in a China-related contract. Mr Hennessee considered the benefits to be two-fold: first, the Arrangement helps to preserve the relationship between the parties and minimise the disruption of supply chain when a dispute arises; second, the existence of the instrument also provides assurance to both parties and encourages the parties to act in good faith. In a nutshell, the Arrangement balances the playing field between parties and decreases the possibility of one party leveraging a supply or payment situation.

Dr Eliasson commented that the Arrangement has proven to be a game-changer for several reasons: first, Hong Kong is the only jurisdiction outside of Mainland China where parties can obtain interim measures from Mainland Chinese courts; second, interim relief obtained from an arbitral tribunal is unenforceable in Mainland China, rendering an application under the Arrangement the only viable solution; third, interim measures can also be ordered ex parte; lastly, the Arrangement has a broad scope that also captures foreign parties that are not based but have assets in Mainland China. In addition, Dr Eliasson also observed a shifting choice‑of‑seat landscape after the adoption of the Arrangement – foreign companies either are more committed to Hong Kong as an arbitral seat, or have chosen to switch to Hong Kong to come within the ambit of the Arrangement.


Practical issues in seeking interim relief from a PRC court

Mr Dong then shared his previous experience with successfully obtaining a freezing order from an intermediate court in Guangdong province in aid of a HKIAC arbitration. He noted that the application was off to a rocky start – the initial request for a pre‑arbitration freezing order was rejected. Although a pre-arbitration freezing order is allowed under Article 3 of the Arrangement, in practice it is common for Mainland Chinese courts to dismiss such applications, even for domestic arbitration cases. The applicant subsequently commenced arbitration and filed the HKIAC confirmation letter with the court. The application for a freezing order was then approved and the security requirement was satisfied by a litigation preservation insurance policy.

Mr Dong commended HKIAC’s experience in handling such applications. From a procedural perspective, he noted that there was barely any practical difference from seeking interim relief for domestic arbitration cases.


Preservation of conduct

The panel then turned to a unique concept under Chinese law – “preservation of conduct”.  Mr Dong explained that this is analogous to preliminary injunction under common law. Introduced in Articles 100 and 101 of the Civil Procedure Law of the People’s Republic of China in 2013, preservation of conduct refers to interim measures requiring or prohibiting a party from acting in a certain manner. The legal threshold is high – the applicant must show urgency, irreparable harm and furnish security.

Mr Hennessee added that the legal standard of preservation of conduct may be higher than that of a preliminary injunction in common law courts. He noted it is similar to an ex parte injunction, which also requires proof of urgency and irreparable harm, as well as provision of security. He then illustrated the high threshold of urgency with an example – in practice, parties often invoke a clause in the contract that requires both parties to continue to perform in the event of a dispute. In his experience, the existence of similar clauses can be an important piece of evidence to show urgency.

Mr Eliasson encouraged parties to consider preservation of conduct despite the stringent legal criteria. In this regard, it is helpful that the power of the courts to grant such preservation is formulated broadly under Article 100 of the Chinese Civil Procedure Law. Mr Eliasson found this particularly helpful in private equity investment and other types of investment disputes, which are prevalent in Hong Kong. For instance, in 2020, a court in Shenzhen issued an order prohibiting shareholders who allegedly obtained shares in an invalid manner from registering the purchase with the relevant authorities in China. In this context, interim relief granted under the Arrangement can be a very important supplement to the measures that parties typically seek in Hong Kong or other offshore jurisdictions in these types of cases.

Ms Grimmer described HKIAC’s experience with one unusual conduct preservation case that arose out of a professional services contract, under which the claimant claimed unpaid fees from the respondent for services rendered in respect of a third-party Mainland Chinese entity. The claimant applied for an order restraining the third party from allocating any assets to the respondent. Interestingly, instead of a conduct preservation order, the Mainland Chinese court issued an order preserving the assets of the respondent for the arbitration.


Proposed amendments to Chinese arbitration law

The last topic of discussion concerned the recent publication of the Revised Draft of Arbitration Law of the People’s Republic of China (the Revised Draft) in July 2021, and whether the reform would boost Mainland Chinese cities to become the “future centres of international arbitration”.

Mr Eliasson recognised the importance of the ongoing reforms to Chinese arbitration law, as well as the increasing popularity of Mainland China as an arbitral seat. He found that these changes, however, will not undermine the competitiveness of Hong Kong as an arbitral seat, considering that Hong Kong has developed its arbitration-friendly regime over decades.

Mr Dong agreed that the Revised Draft is progressive and inspiring, but also pointed out that there is still a long way ahead before it can be adopted. He raised concerns about the amendment in the Revised Draft that empowers arbitral tribunals to grant interim measures (a power that currently rests with the courts), stating that this may lead to an influx of applications from over 200 arbitration institutions in China. Hence, the reform would also require corresponding amendments to the Chinese Civil Procedure Law and robust support from the Mainland Chinese court system.



Drawing upon their own experiences as well as the implementation of the Arrangement, the panellists agreed that Hong Kong continues to have a significant competitive edge over other arbitration hubs for Mainland China-related arbitrations, and will remain an attractive arbitral seat in the future.

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Paris Arbitration Week: Arbitration in the BVI, an up-and-coming hub in the Caribbean

Fri, 2021-09-24 01:00

When you think about the British Virgin Islands (BVI), you probably have a very good image of the sea, sand, beautiful views and maybe some very much needed vacation. There is however more to the BVI, particularly as relates to arbitration. It is possible that in the coming years, the BVI will be one of the preferred seats for arbitrations.

One of the sessions at the Paris Arbitration Week 2021 dealt with this topic. The event was moderated by Raphael Kaminsky (Vice President, Paris Arbitration Week and Partner, Teynier Pic) and Hana Doumal (Registrar at BVI International Arbitration Centre), who also wore the hat of a panellist. The other panellists were Shan Greer (Partner, Spencer West LLP), Angeline Welsh (Barrister, Essex Court Chambers) and Nicholas Burkill (Partner, Ogier).

The session focused on a general overview of the framework for arbitration in the BVI, the BVI International Arbitration Centre (BVI IAC), what advantages the BVI offers as a seat, and a discussion on confidentiality under the BVI Arbitration Act.


Overview of the framework for arbitration in the BVI

The 2013 BVI Arbitration Act, which entered into force in 2014, is the principal legislation on arbitration in the BVI. The Act is based on the UNCITRAL Model Law and establishes the BVI International Arbitration Centre. To ensure the enforcement of awards obtained in proceedings seated in the BVI, the BVI acceded to the New York Convention in May 2014.

The 2016 BVI IAC Rules, which are modern UNCITRAL-based Rules, are the extant arbitration rules in the BVI. The BVI IAC is, however, working to amend the rules and is scheduled to release the updated rules during the BVI IAC Week in November 2021. The amended rules will introduce new provisions on pertinent issues including emergency arbitrators, expedited procedures, tribunal secretaries, joinder, and consolidation. They will also introduce an Arbitration Committee to ensure the application of the Rules.

The BVI as a seat also enjoys unwavering support from the judiciary. The courts in the BVI take a non-interventionist approach to arbitration and relying on the BVI Arbitration Act, provide the necessary support for arbitral proceedings – interim reliefs, enforcement of awards, and privacy of hearings. The court proceedings are also very quick. For instance, Mr Burkill shared the experience of a proceeding that was commenced in October 2020, went to trial at the end of January, the trial concluded at the end of February, and the judgment was ready two days later.



The BVI IAC is an independent not-for-profit institution established in 2013 by the BVI Arbitration Act to meet the demands of the international business community for a neutral, impartial, efficient and reliable dispute resolution institution in the Caribbean and Latin America. The centre officially opened for hearings in January 2017. It is a well-equipped state of the art centre that benefits from the acknowledged quality of the BVI legal framework and the stable political environment offered by a British Overseas Territory. The goal is to become a leading arbitration hub in the Caribbean and beyond.

It is expected that the BVI would be home to different disputes but more particularly those relating to tourism, M&A, joint venture, and oil & gas disputes. With the geographical consideration, the BVI is well placed as a neutral venue for disputes from South and Central America, North America, Europe, Russia, and neighbouring states. It is also possible that the BVI will see disputes from Asia since many companies set up corporate vehicles in the BVI.


What advantages does the BVI offer?

The White & Case and Queen Mary 2021 International Arbitration Survey identifies ‘greater support for arbitration by local courts and judiciary’, ‘increased neutrality and impartiality of the local legal system’, and ‘better track record in enforcing agreements to arbitrate and arbitral awards’ as the key adaptations that would make arbitral seats more attractive. In 2015, the Chartered Institute of Arbitrators also introduced the CIArb London Centenary Principles – 10 principles for an effective, efficient and ‘safe’ seat for the conduct of international arbitration. The panellists agreed that the BVI meets these criteria and goes beyond them to provide additional advantages.

Firstly, even though the BVI is a new seat, the BVI piggybacks off the wealth of authority and experience of established jurisdictions, particularly England. It is a UK overseas territory and enjoys the political stability of the UK.

Secondly, the BVI has a dedicated commercial court and bar, very familiar with arbitration. The courts have taken an unflinching stance in support of arbitration, as noted by the court in the case of Retribution Limited v L Capital KTD Limited BVIHC(COM) 2015/0078 where the BVI High Court confirmed that the BVI Arbitration Act signals the BVI’s commitment to create and provide a modern and comprehensive legal framework for attracting and dealing with arbitral disputes and, save only in limited circumstances, the court will not allow parties who have agreed to arbitrate their disputes to by-pass an arbitration agreement through the draconian threat of liquidation.

Thirdly, while the BVI is guided by its specific statutory provisions which may sometimes differ from the English statutory provisions, the BVI draws on the deep reservoir of English case law as the common law of the BVI derives from English common law and English cases. The approach adopted by the English courts generally guides the approach in the BVI.

With specific reference to the CIArb London Centenary Principles, the BVI IAC continues to show commitment to the education of arbitration practitioners, safeguards the right of the parties to be represented by legal counsel of their choice whether from within or outside the BVI, guarantees the immunity of arbitral tribunal for acts done in the performance of its functions, and respects international treaties and agreements including the UNCITRAL Model Law and the New York Convention.

Another imperative point to note is the ease of enforcement in the BVI. As noted earlier, the BVI acceded to the New York Convention which ensures the enforcement of the awards worldwide. More so, as a practical matter, where there is no challenge, enforcement proceedings could be concluded in a couple of weeks.


Confidentiality under the 2013 BVI Arbitration Act

Of the pertinent points that make the BVI stand out are the provisions of the BVI Arbitration Act relating to confidentiality of court related proceedings. One of the oxymorons that have bedevilled arbitration practice is how parties usually lose every shred of confidentiality when any portion of the arbitral proceeding is referred to the courts – whether for interim reliefs, enforcement etc. Unlike other jurisdictions including the UK, the BVI Arbitration Act sets out a robust regime for maintaining confidentiality of court proceedings relating to arbitration. Specifically, the BVI Arbitration Act prohibits disclosure of information relating to arbitral proceedings and awards, subject to limited exceptions. The Court is required to not make an order for publication of a judgment unless the parties agree that it can or publication would not reveal information which the parties would reasonably consider to be confidential. The Court can still depart from this regime, but only where there is major legal interest or it is in the public interest to do so.  But even then, the parties can apply for parts of the judgment to be redacted on the grounds of confidentiality.


Initiatives in the BVI: Caribbean ADR Initiative (CADRIn)

CADRIn is an independent non-profit initiative co-founded by Ms Greer with a vision to establish a mechanism by which regional practitioners, ADR centres and potential users are brought to a discursive platform where international best practice can be analysed, distilled and appropriately disseminated in light of these domestic, regional, legal, cultural, and other dynamics.  This vision is expansive and relies on significant engagement with a wide audience of stakeholders, and thus requires a well-structured methodology and approach. Its focus has been on SMEs and the initiative will be holding meetings in the next few months to discuss ways in which ADR can support the effective resolution of regional disputes with SMEs.



The BVI is certainly an up-and-coming arbitration hub in the Caribbean. Its development is supported by legislation, the judiciary, and institutional infrastructure. The 2013 BVI Arbitration Act is the principal legislative instrument, supported by the 2016 BVI IAC Rules which will be amended with the new rules to be released in November 2021. Institutionally, the BVI IAC provides the very much needed support for the BVI. It administers arbitration in the BVI and provides state-of-the-art facilities for arbitration hearings. The BVI courts, without a doubt, support arbitration in the BVI and appear to have shown that they will continue doing so in the future. The panellists agreed that arbitration practitioners may therefore want to consider the BVI when negotiating their arbitration clauses. On a final note, Mr Burkill who chairs the BVI Arbitration Group invited persons with interest in international arbitration to join the BVI Arbitration Group.

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Paris Arbitration Week: Is There an App for That? Arbitration of Smaller Commercial Disputes in the Technology Sector

Thu, 2021-09-23 01:03

On 20 September 2021, a panel of arbitration and dispute resolution experts discussed the topic of technological disruption in commercial arbitration and online dispute resolution (ODR) with a specific focus on smaller disputes. Moderated by Ms Myriam Seers (Partner, Savoie Laporte), the panel included Ms Sophie Nappert (Independent Arbitrator, 3 Verulam Buildings, and Co-Founder, ArbTech), Prof Amy Schmitz (Professor of Law, Centre for Dispute Resolution, University of Missouri), and Mr Colin Rule (CEO of Arbitrate.com and former director of ODR at PayPal and eBay).

With the advent of the COVID-19 pandemic, arbitration experienced an unprecedented degree of digitalisation. However, this has been limited so far to using tools that replicate offline arbitration in an online setting, with the most common example being virtual hearings. But could technology become instrumental to adjudicating commercial disputes beyond only aiding practitioners to carry out their business as usual? According to the speakers, only then will we begin experiencing a true technological disruption of arbitration.


Disruption of arbitration

The discussion kickstarted with a conversation on whether and to what extent arbitration could be disrupted by technology, similar to other industries. Ms Nappert pointed out that arbitration has already become a target for disruption without realising it. Thus far, arbitration has offered many benefits for large, international claims that need tailored proceedings and expert arbitrators. However, e-commerce, exacerbated by the current state of the world, became a source of instantaneous, albeit smaller, disputes that nevertheless need instantaneous resolution. The panel agreed that arbitration at this point has not offered much to address this new demand.

The current state of arbitration may be acceptable for claimants with enough resources to endure long proceedings, but now that everyone can take part in immediate cross-jurisdictional transactions, a need for faster dispute resolution will need to be addressed. Mr Rule noted that the “incumbent players” of the dispute resolution ecosystem, i.e. arbitral institutions, practitioners, and overall stakeholders, may need to reformulate basic notions of arbitration and procedure or otherwise risk that new players overtake this untapped market. Ultimately, disruption means making a service much cheaper, faster, and simpler. The redesigning of cross-border dispute resolution by new players, as Mr Rule warned, can only be ignored at each own’s peril.

One key notion that may need rethinking is due process. Ms Nappert stressed the fact that as long as offline enforcement and court oversight are present, due process will continue to be interpreted as we know it, i.e. having your day in court and being able to ventilate every detail of the dispute. However, as a more confident view on technology consolidates, the notion of due process may change. Although human oversight will continue to be important, novel ways of partnering with technology will optimise dispute resolution.


A forum for high volume, low value disputes

The digital economy has revolutionised commerce, and in the process, it has exacerbated the number of disputes over commercial transactions. Although online disputes tend to be of lower economic value, they still need an adequate forum where users can resolve them. This is even more evident, considering that these disputes often refer to cross-jurisdictional transactions between different business cultures and jurisdictions that have different expectations about commercial transactions, which radically expands their complexity.

ODR services aim to provide access to justice to millions of users of e-commerce through user friendly platforms. Prof Schmitz highlighted that consumers usually give up on online disputes as they find that there is no adequate forum where they can bring their claims. To address this issue, mechanisms that allow to honour commitments agreed upon on an online business-to-business basis and to amicably settle disputes arising thereof are necessary, and ODR may become that adequate forum.

However, to design an adequate forum it is also necessary to delineate the disputes apt to be settled therein. In this sense, it was noted that “small disputes” is a relative term. What may be a small claim for some may not be for others. In the current arbitration status quo, disputes as high as USD 10 million may still be too uneconomic to pursue, or too time consuming, so the market for these claims remains untapped.

As smaller disputes will often arise from almost immediate transactions, the panel suggested that only through almost immediate dispute resolution can we keep up with the pace. Luckily for practitioners, this will not mean the end of arbitration practice as we know it. Mr Rule reassured attendees that fears of losing jobs are not warranted. To the contrary, the development of new ODR techniques will prove beneficial for all stakeholders, as technology will continue to assist practitioners, who will also develop new skills to adapt and perform their jobs in novel ways. Overall, the panel encouraged the community to embrace these ideas with a sense of creativity and entrepreneurship.


The widths of ODR

Although ODR is sometimes regarded simply as “arbitration over Zoom”, or as using tech tools to make practitioners’ work lives easier, this is not exactly the case. ODR indeed started by replicating offline dispute resolution features in an online environment, but nowadays it creates a much broader range of opportunities for the untapped market of smaller claims.

High value claimants have the time and resources to engage in long, mostly in-person arbitrations, but smaller parties do not. At the same time, Mr Rule predicts that at least half of dispute resolution procedures will be online even if the Covid-19 pandemic is fully controlled. Therefore, as part of creating an adequate forum for these left-out parties, ODR has developed technology-based mechanisms for faster, fully digital dispute resolution. Among them are dispute resolution software solutions that rely on blockchain technology, such as crowdsourced arbitration, or artificial intelligence and machine learning. A wide list of providers of ODR services was shared during the event and can be accessed here.

As an example, the panel discussed Kleros, an ODR platform where users can act as jurors and settle online disputes. The platform relies on blockchain technology, and jurors can stake their virtual currencies and be rewarded after the conclusion of a dispute. Interestingly, the legitimacy of these decisions arises from the trust that the virtual currency community share amongst themselves, which is not necessarily too different from the legitimacy traditional arbitrators receive from the parties to an arbitration agreement. Nevertheless, several doubts and concerns also arise. The panelists questioned whether and how this new notion of legitimacy can be scaled up to other less niche and more regulated, traditional fields. Furthermore, the danger of dishonest online jurors calls into question the alleged incorruptible nature of the blockchain technology.


UNCITRAL Working Group III

Efforts to promote ODR have not come only from private parties and potential service providers. The speakers noted that there has also been an interest from governmental and institutional platforms. The UNCITRAL Working Group III’s work on ODR is an example. However, this project ended in 2016 without consensus. Prof Schmitz, who took part in the initiative, pointed out that from a political perspective, ODR faces a few more challenges.

The first challenge is the different regulatory treatment that jurisdictions give to arbitration. The issue of enforcement of pre-dispute arbitration agreements in consumer transactions represented the main problem. These are not enforceable in most jurisdictions – notably the EU – but are a normal practice in others, such as the US. The disruptive nature of technology itself is also a challenge, considering that any agreed-upon framework on ODR could be rendered insufficient as technology continues to evolve at a much faster pace than regulation.

The panel concluded that this, however, did not mean the end of institutional efforts to embrace ODR. To the contrary, as Prof Schmitz emphasised, institutional embracement is key for the development of ODR, and we are now seeing efforts migrating from global platforms as UNCITRAL to regional initiatives or projects focused solely on one economic sector of interest, which would allow to better fit the ODR forum to a specific context.



The fascinating discussion ended with each panelist issuing a call to action in line with their backgrounds. Ms Nappert encouraged young practitioners to get involved in the ODR universe and try out platforms to become arbitrators of online disputes. Prof Schmitz encouraged students to learn about ODR technology and stressed how this can help in improving their profile in the job market. Finally, Mr Rule encouraged attendees to enter the ODR world with an entrepreneurial mindset and to build businesses where the highway is going, not where it is right now.

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Paris Arbitration Week: Harmonization through Arbitration – the Arbitrators’ Role and Function

Wed, 2021-09-22 01:28

The 2021 Paris Arbitration Week (PAW), which kicked off on Monday 20 September 2021, brings the arbitration community together in a hybrid format with participants and speakers attending in person and online from all over the globe, following a fully virtual edition in 2020.

One of Monday’s sessions involved a series of Oxford-style debates on harmonization through arbitration and focused on the arbitrators’ role and function in that regard. The session was hosted by Sciences Po Law School, Queen Mary University of London, the Sciences Po Arbitration Society and Latham & Watkins LLP.

The first half of the session was moderated by Dr Constance Castres Saint-Martin of Sciences Po Law School and addressed the topic from the perspective of commercial arbitration.

The first topic of debate related to the question of whether the arbitration community is witnessing a harmonization of arbitrators’ profiles.

In support of the motion, Audley Sheppard QC of Clifford Chance argued that there is overwhelming evidence that arbitrators’ profiles are undergoing a process of harmonization. He highlighted 10 contributing factors to that effect:

  1. the majority of arbitrators are lawyers;
  2. these lawyers are arbitration specialists;
  3. prominent arbitrators are involved in the same organizations and attend the same events discussing similar themes;
  4. the trend currently gaining momentum is for arbitrators to have studied arbitration during their undergraduate or LLM studies;
  5. most arbitrators work as practitioners, while fewer of them are academics;
  6. only a few former in-house counsel become arbitrators;
  7. there is regrettably slow progression on the topics of regional and ethnic diversity among arbitrators (at least in Europe);
  8. while gender diversity has improved, this has mainly been driven by arbitral institutions rather than by clients, who tend to act more conservatively;
  9. the harmonization of arbitral proceedings leads arbitrators to approach cases and conduct proceedings in a similar manner;
  10. by its very nature, arbitration nudges members of the arbitral tribunal to compromise with one another when drafting awards and does not reward those arbitrators who endorse uncompromising legal reasoning.

Mr Sheppard concluded that arbitrators’ profiles undergo harmonization and that this is desirable as it answers the parties’ need for predictability.

Against the motion, Marina Matousekova of CastaldiPartners argued that arbitrators’ profiles are not homogeneous and that competition in the market now requires arbitrators to stand out from the crowd. She described how, over the past 20 years, a very concentrated club of white male individuals acting only occasionally as arbitrators evolved into a large and global pool of diverse professional and specialized candidates. Ms Matousekova suggested that the increased diversity driven by arbitral institutions, advocacy groups and mentorship programs by law firms and law schools creates a moral imperative for parties when selecting their arbitrator. In that regard, she added that clients now select their arbitrators according to a range of criteria, including prior experience as arbitrator, specialist knowledge of the relevant sector, familiarity with the cultural context and language as well as an understanding of applicable law. According to Ms Matousekova, technological innovation allows sophisticated parties to assess candidates against these criteria by analyzing available online data when prospecting for arbitrators. She concluded by advising aspiring arbitrators to be proactive in controlling their public profile when participating in conferences, building their network and acquiring visibility in specific sectors.

The second topic under debate concerned the issue of whether the arbitration community is witnessing a harmonization of arbitral awards.

For the motion, Jose Ricardo Feris of Squire Patton Boggs argued that harmonization of arbitral awards is desirable because it creates legal certainty, a key client concern. According to him, it is due to this need that the arbitration community has put great effort to devise institutional rules and soft law guidelines for arbitrators to follow during the proceedings leading to the issuance of the award.

Against the motion, Eleonora Coelho of Eleonora Coelho Advogados, argued that, on the contrary, parties choose arbitration because of party-autonomy and flexibility, which allows them to design tailor-made proceedings culminating in an award.

Mr Feris suggested that the rule of precedent was virtually already a reality in arbitration, in light of widespread reliance by counsel and arbitrators alike on earlier published arbitral awards. Ms Coelho countered that the arbitrator’s mandate is distinct from that of a judge: arbitrators are not part of a single legal system in which the law needs to be applied homogeneously under the control of a supreme court, but owe a duty only to the parties that appointed them. She also underlined that confidentiality hindered any rule of precedent from efficiently taking hold in arbitration.

Finally, Mr Feris endorsed the practice of some arbitral institutions (such as the ICC) to scrutinize awards, thus improving their overall quality. According to him, a third party with less granular knowledge of the case could impartially advise arbitrators to detail the reasons of their award, thus ensuring the parties are satisfied that their case had been heard, whatever its outcome, and reducing the risk of a challenge being brought against the award. Ms Coelho disagreed: she first reminded the audience that the process of scrutinising awards delays the proceedings and increases their cost, and concluded that grounds for annulment often relate to substantive issues, which is why institutional scrutiny is of little help to prevent the annulment of awards.

The second half of the session, chaired by Dr Diego P. Fernandez Arroyo of Sciences Po Law School, dealt with the question of whether arbitrators could contribute to the harmonization of international investment law.

In support of the motion, Ina Popova of Debevoise & Plimpton distinguished the rule of precedent from harmonization. According to Ms Popova, harmonization is the process of achieving consistent and complementary decisions by investment arbitral tribunals, which requires deliberate and conscious participation of arbitrators. She argued that harmonization in this area is possible as arbitral tribunals derive their authority from treaties, interpreted and applied according to the same principles of international law. Arbitral tribunals participate in an iterative process of harmonization together with other international adjudicators such as the Court of Justice of the European Union and the International Court of Justice that nowadays sometimes refer to or even review investment arbitral awards. Ms Popova was joined by Andres Jana of BMAJ, who described how harmonization safeguards the legitimacy of investor-state dispute settlement (ISDS) because it provides legal certainty and predictability, easing business planning for foreign investors and ensuring host states remain safe for FDI. According to Mr Jana, those who rely on ISDS expect a harmonious application of concepts of investment law and arbitrators should strive to meet this expectation. He concluded that, in any event, the practice of parties and arbitral tribunals makes the harmonization of investment law unavoidable, as the demands for transparency lead to more and more awards being publicly available which are, in turn, quoted and debated in subsequent proceedings or by state representatives negotiating treaty revisions.

Against the motion, Fernando Mantilla-Serrano of Latham & Watkins submitted that the arbitral tribunals’ primary mandate is to resolve the parties’ dispute rather than to contribute to the creation or development of investment law, and that their duty is to the parties that appointed them rather than the legal community. He argued that there is no justification to distinguish investment arbitration from commercial arbitration in that regard: commercial arbitration tribunals regularly interpret standard construction or oil and gas contracts, just as investment arbitration tribunals routinely interpret investment treaties offering similar protections to foreign investments or investors.

Mr Mantilla-Serrano then turned to the typical practice of investment arbitration tribunals quoting and discussing prior awards in their own decisions. He argued that the large number of inconsistent awards on a given issue allows arbitral tribunals to find comfort or support for any proposition and concluded this shows there has been no successful harmonization on the interpretation of the substantive protections provided under investment law.

Giuditta Cordero-Moss of the University of Oslo reached a similar conclusion regarding the procedural aspects of investment arbitration. According to her, arbitral practice on procedural issues is fragmented even within the self-contained ICSID regime. Ms Cordero-Moss then reminded the audience that approximately 35% of investment arbitrations were not conducted within the ICSID regime and were subject to other arbitration rules (e.g. the UNCITRAL, SCC or ICC rules) and to the mandatory procedural principles of the seat. Non-ICSID tribunals have to bear such principles in mind or risk having their award annulled at the seat or its enforcement refused under the principles set out in the New York Convention. She provided three examples where that risk arose:

  1. national laws diverge on the principle iura novit curia, and an arbitral tribunal that applies a legal principle without hearing the parties on it could risk having its award annulled for excess of power or breach of due process in some jurisdictions;
  2. the power of an arbitral tribunal to impose a virtual hearing on the parties is not recognized in all legal systems, and an award issued following a contested virtual hearing could be challenged for breach of due process;
  3. national laws do not impose identical formal requirements for arbitration agreements to be valid, and an award upholding jurisdiction in breach of these requirements is likely to be challenged.

Ms Cordero-Moss concluded that there is an irreducible core of procedural issues in investment arbitration for which harmonization is structurally impossible.

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Cross-Disclosure In Parallel Investment Arbitrations: Perspectives For States

Tue, 2021-09-21 01:21

The recent Singapore Court of Appeal judgment in Republic of India v. Vedanta Resources PLC provides a relevant backdrop for revisiting the often-competing themes of confidentiality and consistency in investment arbitrations and their effect on cross-disclosure of evidence (witness statements or documentary exhibits) and pleadings in parallel arbitral proceedings over a common substantive issue-in-dispute. Cross-disclosure of pleadings and written submissions particularly help a tribunal to appreciate the overall case theory since it gains access to all the legal arguments submitted by parties in connected parallel proceedings. Thus, cross-disclosure may be of assistance in the tribunal’s decision-making process.

The Vedanta decision arose out of an application by India for cross-disclosure of documents in two parallel and related investment-treaty arbitrations with the Cairn Group (“Cairn Arbitration”), on one hand, and Vedanta Resources plc (“Vedanta Arbitration”) on the other. Both arbitrations emanated out of the same taxation measures taken by the Indian government with respect to the restructuring of Cairn Group’s India business (which was subsequently acquired by Vedanta Group). The Cairn Arbitration has been discussed on this blog previously here and here. Moreover, both arbitrations were invoked under the India-UK BIT, conducted in accordance with UNCITRAL Arbitration Rules 1976, and administered by the PCA. The Cairn Arbitration was seated in the Netherlands, while the Vedanta Arbitration was seated in Singapore.

In view of the potential overlap between the two separate but related arbitrations and the possible risk of inconsistent positions on questions of law and/or inconsistent presentations or accounts of the facts, taken by counsel in both the arbitrations, in-turn leading to inconsistent awards, India made cross-disclosure applications before both the tribunals. Although, the relevant procedural orders (“POs”) issued by the Cairn and Vedanta tribunals eventually permitted cross-disclosure of documents with the consent of the opposing party or with the permission of the tribunal, there was significant departure between the underlying premise of the two POs.

The key premise of the Cairn PO was that the parties to an investment-treaty arbitration were not subject to a general obligation of confidentiality under Dutch law. The Cairn PO was, therefore, based on a regime of open document disclosure, and expressly stated that the Cairn tribunal would uphold objections to disclosure only rarely. 1)Republic of India v. Vedanta Resources PLC [2020] SGHC 208, para. 20 jQuery('#footnote_plugin_tooltip_38789_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_38789_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); On the other hand, the Vedanta PO was premised on the notion that parties to an investment-treaty arbitration are subject to a general obligation of confidentiality under Singapore law. 2)Republic of India v. Vedanta Resources PLC [2020] SGHC 208, para. 22 jQuery('#footnote_plugin_tooltip_38789_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_38789_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Thus, the Vedanta tribunal declined to grant the parties a general license to make cross-disclosures, in favour of a case-by-case approach.

Subsequently, India pursued applications before the Singapore High Court and the Singapore Court of Appeal seeking declaratory relief that India would not be in breach of any obligation of confidentiality or privacy if it discloses Vedanta Arbitration documents in the Cairn Arbitration.


Confidentiality, Transparency and Cross-Disclosure – States’ Probable Concerns

Irrespective of the merits of these Singapore court decisions, they provide useful context to discuss the practical issues that States face due to strict confidentiality requirements in arbitrations and potential issues that may arise therefrom in parallel investment arbitrations.

Parallel investment arbitrations are essentially multiple arbitrations between States and investors of the same constructive identity, which concern a State-measure’s compliance with the State’s international investment law obligations. There can be several variants of parallel proceedings. For instance, different shareholders may raise separate disputes arising out of a single factual scenario due to the existence of different treaties based on the shareholders’ home States. Similarly, a claimant may raise the same dispute under different treaties because differences in treaty-texts mean that substantive protections thereunder may vary.

If we adhere to strict confidentiality norms (as held by the Singapore courts) in such arbitrations, we may face the prospect of inconsistent decisions from different tribunals. CME Czech Republic B.V. v. The Czech Republic and Ronald S. Lauder v. Czech Republic are illustrative in this regard. Conflicting awards of this nature are undesirable not only because they raise concerns about the legitimacy of the investment arbitration system, but because they may cause difficulties at the enforcement stage and encourage future litigants to forum-shop. For instance, where it is open to an investor to bring a claim under more than one treaty, an investor may initiate proceedings under one treaty, assess how its legal arguments are being received and strategize accordingly before initiating a second proceeding under another treaty in the hope that it will succeed in at least one proceeding. This creates inequity from a State’s perspective, but also leaves open the possibility of several inconsistent and conflicting decisions. Inconsistent decisions, in turn, may lead to several issues at the stage of enforcement. Where there are two inconsistent awards, the enforcement of one decision would invariably lead to an implicit violation of the other. These issues may undercut the finality of awards and significantly delay the resolution of disputes. The potential for inconsistent decisions is also a feature of the larger ongoing debate concerning the so-called ‘legitimacy crisis’ in ISDS. Minimising the risk of inconsistent decisions is therefore of broader systemic importance and has a key role to play in enhancing the overall effectiveness of the ISDS mechanism.

Issues of confidentiality and consistency are more acute for States such as India, that have not yet adopted the ICSID Arbitration Rules (which have an in-built transparency mechanism, e.g., in the form of Rule 48(4) dealing with publication of awards) – and instead participate in ad-hoc investment arbitrations., mostly under UNCITRAL Arbitration Rules. Nevertheless, even outside the ICSID framework, some States have ratified the UN Convention on Transparency in Treaty-based Investor-State Arbitration, also known as the Mauritius Convention, which extends the application of the UNCITRAL Rules on Transparency to arbitration proceedings commenced under treaties concluded after 1 April 2014. The Mauritius Convention requires, among other things, the publication of information regarding the names of disputing parties, economic sector involved and treaty under which the claim is being made, the potential for a “third person” to file a written submission with the arbitral tribunal regarding a matter within the scope of the dispute, and that hearings for the presentation of evidence or for oral argument be made to the public.

Considering the issues with parallel proceedings, it is relevant to note that the Singapore High Court, in its judgment, stated that investment-treaty arbitrations concern crucial issues of public interest and public policy involving a sovereign which is accountable to its people and “considerations which apply to a private arbitration do not apply with equal force to investment-treaty arbitrations.” According to the Singapore High Court, “a different approach may well be warranted in investment-treaty arbitration, given the different stakeholders and the sovereign and public interests implicated.” Whilst there may, therefore, be a general obligation of confidentiality under common law, that obligation may not extend to investment-treaty arbitration, which requires consideration of broader issues of public policy and sovereignty. A similar view has also been taken by other investment arbitration tribunals. For example, the tribunal in Vivendi v. Argentina, noted that nearly all investment treaty arbitrations involve matters of public interest because the international legal responsibility of a State is in question.

However, given the lack of a uniform global standard of confidentiality in investment arbitrations, States should carefully consider taking adequate steps before or at the stage of initiation of an investor-State arbitration to ensure that they would be able to obtain cross-disclosure of documents if required at a subsequent stage.


Practical Steps for States seeking Cross-Disclosure

States should ideally consider addressing this issue at a treaty-level, for instance by ratifying the Mauritius Convention (or incorporating similar provisions into the BITs) and/or administering arbitrations under the ICSID framework – both of which have enhanced transparency and disclosure provisions, as opposed to usual ad-hoc arbitrations. This would obviate the need to have a separate cross-disclosure regime, given that the main submissions of the parties would anyway be in the public domain. Ratifying such treaties would also build a positive perception in favour of the States as it would indicate they are committed to the broader idea of transparency and full disclosure of ISDS proceedings, rather than being perceived as taking a selective approach to cross-disclosure only when it advances their case theory in a subsequent arbitration.

Given that treaty adoption is a time-taking process (which requires wider consensus building), States should also explore means to ensure cross-disclosure on a case-by-case basis for its existing ISDS proceedings. For instance, in the case of UNCITRAL Arbitration Rules governed and/or other forms of non-ICSID arbitrations, States should give considerable thought in agreeing to a specific seat of the arbitration. Although multiple strategic factors would inform this choice, for the purpose of enhancing the possibility of the tribunal granting cross-disclosure, States would be better placed opting for civil law jurisdictions (eg, the Netherlands, Germany, France, etc.) which do not impose a rigid duty of confidentiality in arbitrations compared to common law jurisdictions like England & Wales, Singapore and India. This is because Claimants usually resist cross-disclosure by stating that it breaches the inherent duty of confidentiality in arbitrations. As can be observed from the Vedanta and Cairn POs, the difference in the standards of confidentiality under the Dutch and Singapore legal systems led to significantly different scales of cross-disclosure permitted in the Vedanta and Cairn arbitrations.


References ↑1 Republic of India v. Vedanta Resources PLC [2020] SGHC 208, para. 20 ↑2 Republic of India v. Vedanta Resources PLC [2020] SGHC 208, para. 22 function footnote_expand_reference_container_38789_30() { jQuery('#footnote_references_container_38789_30').show(); jQuery('#footnote_reference_container_collapse_button_38789_30').text('−'); } function footnote_collapse_reference_container_38789_30() { jQuery('#footnote_references_container_38789_30').hide(); jQuery('#footnote_reference_container_collapse_button_38789_30').text('+'); } function footnote_expand_collapse_reference_container_38789_30() { if (jQuery('#footnote_references_container_38789_30').is(':hidden')) { footnote_expand_reference_container_38789_30(); } else { footnote_collapse_reference_container_38789_30(); } } function footnote_moveToReference_38789_30(p_str_TargetID) { footnote_expand_reference_container_38789_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_38789_30(p_str_TargetID) { footnote_expand_reference_container_38789_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Wolters Kluwer Expands Practical Insights Topic Module for Kluwer Arbitration Practice Plus

Sun, 2021-09-19 23:37

Wolters Kluwer Legal & Regulatory U.S. recently announced the inclusion of additional topics to the Practical Insights module in Kluwer Arbitration Practice Plus (KAPP). The 23 topics expand Kluwer Arbitration’s capabilities to guide practitioners through the most important steps of the arbitral process.

Launched in December 2019, KAPP is a practical extension to Kluwer Arbitration, the world’s leading research solution for international arbitration. With the extended coverage of Practical Insights, KAPP will support arbitration practitioners at all levels of experience in delivering actionable guidance for key decisions. The topics, which by end of this month will comprise 23 topics, and then will be expanded to around 40 by November 2021, guide users through the arbitral process to drive efficiency, mitigate risk and optimize case strategy. This kind of practical guidance is especially useful in complex, real-world scenarios, including those arising in the early stages of arbitral proceedings, the conduct of the proceedings, evidentiary issues, and multi-party arbitrations.

The Practical Insights by topic offer a gateway to users into Kluwer Arbitration’s deep archives of commentaries, decisions, rules, and other important research materials. Practical Insights by topic are overseen by four General Editors, who are globally-based: Prof. Joshua Karton (Queen’s University, Canada), Simon Greenberg (Clifford Chance, Paris), Dr. Fan Yang (Stephenson Harwood, London), and Kiran Nasir Gore (The George Washington University Law School, Washington, DC).

“Practical Insights by topic offer a combination of real-world guidance, deep domain expertise and trustworthy resources for arbitration practitioners,” said David Bartolone, Vice President and General Manager for the International Group within Wolters Kluwer Legal & Regulatory U.S. “With the addition of further topics, we enhance KAPP, and we are continuing to expand Kluwer Arbitration’s capabilities as a full-service solution that provides our customers with the right tools to drive to the best possible outcomes during the arbitral process. More enhancements will be announced before the end of the year.”

Cindy Ko, Registered Foreign Lawyer (Singapore), Stephenson Harwood noted “I am very impressed with Practical Insights which was prepared by practitioners for practitioners. The design and set-up shows real attention was given to the needs of a practicing arbitration lawyer. The section on ‘Practical Steps’ sets this apart from a regular commentary text. The ‘Country and Institution Comparison’ tab provides easy cross-referencing and comparison of laws in different jurisdictions and arbitral institutional rules at a single glance. It is a very useful tool for any arbitration lawyer given the increasingly international and multi-jurisdictional nature of arbitration work.”

Practical Insights, while targeting law firm-based users, also offers superb guidance to a wide range of other users requiring practical guidance, including academics, research institutions, government and corporate legal departments. It is intended to aid the user in:

  • Quickly locating salient information;
  • Recognizing nuances and understanding non-standard issues;
  • Raising ‘red flags’ and highlighting high impact factors;
  • Comparing differences in approach across jurisdictions and institutions; and
  • Proceeding to recommended reading for more in-depth analysis.

To learn more, visit  the Kluwer Arbitration Practice Plus webpage.

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Validity of Arbitration Agreement: A New Relaxed Approach in the Draft Amendment to PRC Arbitration Law

Sun, 2021-09-19 01:00

On 30 July 2021, the PRC Ministry of Justice issued the Amendment to the Arbitration Law (Consultation Draft) (the “Draft Amendment”), which is the first substantial amendment of the existing PRC Arbitration Law (the “Arbitration Law”) in more than two decades. (See previous posts on the PRC Arbitration Law here and here.) Of the changes made, this article discusses the Draft Amendment’s relaxed approach towards the validity of the arbitration agreement and competence-competence.


Stringent Requirements under the Existing Arbitration Law

Under Article 16 of the existing Arbitration Law, an arbitration agreement refers to an arbitration clause contained in a contract or an agreement to arbitrate reached in writing either before or after the occurrence of a dispute. It must contain three elements to be effective: first, the parties’ intention to arbitrate; second, the specific matter for arbitration; and third, a designated arbitration commission.

The third requirement that there must be a designated arbitration commission has been heavily criticized for being inconsistent with the international trend as embodied in the UNCITRAL Model Law (the “Model Law”). (See, e.g., here and here.) This statutory requirement alone has led numerous arbitration agreements to be rendered invalid. For instance, the Supreme People’s Court of PR China (the “SPC”) decided in an appeal that the arbitration agreement, which provided that “any unresolved matter should be submitted to local arbitration agencies for arbitration,” was invalid because the parties did not reach a supplemental agreement or make a choice on the “local arbitration agencies.”1)SPC (2006) Min Yi Zhong Zi Di No.11. jQuery('#footnote_plugin_tooltip_38677_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_38677_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); In another case where the parties agreed on the application of ICC arbitration rules, the SPC decided that the arbitration agreement was invalid because the parties had failed to designate an arbitration commission.2)SPC (2007) Min Si Zhong Zi No.15. jQuery('#footnote_plugin_tooltip_38677_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_38677_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Despite the foregoing, in judicial practices, the SPC has for a long time realized the value and importance of respecting the parties’ choice of arbitration as the dispute resolution mechanism. For instance, in a case where a defendant argued that the arbitration agreement providing that “the arbitration shall take place at CIETAC Beijing, P. R. China” was invalid because it provided the place of the arbitration but did not designate the arbitration commission, the SPC found the agreement to be valid on the ground that “take place at CIETAC” could be interpreted as the parties designating CIETAC as the arbitration commission.3)SPC (2012) Zhe Yong Zhong Zi Que Zi No.4. jQuery('#footnote_plugin_tooltip_38677_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_38677_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

To further improve the situation caused by the stringent requirements in the Arbitration Law concerning the validity of arbitration agreement, in 2006, the SPC issued its Interpretation on Several Issues concerning the Application of the Arbitration Law (the “SPC’s Interpretation”). The SPC’s Interpretation clarified that, as long as the arbitration commission can be ascertained or the parties could reach a supplemental agreement or make a choice when filing the arbitration, the arbitration agreement shall still be regarded as valid for having designated an arbitration commission—even if the name of the commission was inaccurate, the parties only agreed on the rules of the arbitration commission, or they have agreed on more than one commission.   

Subsequent to the SPC’s Interpretation, in a similar case where the parties agreed on the application of the ICC arbitration rules, the Beijing Dongcheng District Court found the arbitration agreement to be valid because the arbitration commission (viz. ICC) could be ascertained from the parties’ agreement on the arbitration rules.4)Beijing Dongcheng District Court (2018) Jing 0101 Min Chu No.6973. jQuery('#footnote_plugin_tooltip_38677_30_4').tooltip({ tip: '#footnote_plugin_tooltip_text_38677_30_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

The SPC’s Interpretation was indeed helpful but did not resolve the matter from its source—it could not amend the Arbitration Law. Hence, the third requirement for the validity of the arbitration agreement remains. After the SPC’s Interpretation, there were still plenty of arbitration agreements found invalid for failing to designate an arbitration commission.


The Relaxed Approach in the Draft Amendment

The Draft Amendment adopted a different approach to this issue.

According to Article 21 of the Draft Amendment, the arbitration agreement “includes the arbitration clause contained in a contract and parties’ agreement to arbitrate reached in other written form before or after the occurrence of the dispute.” Notably, the new definition only contains a substantive requirement (the parties’ intention to arbitrate) and a formality requirement (that the agreement shall be in writing). It has deleted the other two statutory requirements: the specific matter for arbitration and a designated arbitration commission.

Adding to the liberal approach, the Draft Amendment also incorporated a waiver clause similar to Article 7(5) of the Model Law and provides that, if one party in the arbitration asserts that there is an arbitration agreement and the other party does not deny it, then the arbitration agreement shall be regarded as in existence between the parties (see Article 21 of the Draft Amendment).

The Draft Amendment has clearly taken a leap forward from the existing law and is much more in line with the “presumptive validity” approach in the New York Convention and the Model Law. One can reasonably expect that more arbitration agreements will be given effect by the PRC courts applying the new law (if the Draft Amendment stands as it is).


Comparative Study

The reforms undertaken in the Draft Amendment follow the prevailing international practices. The Model Law and some national legislation akin to the Model Law treat the validity of the arbitration agreement quite liberally, and the tests applied are simply whether the parties had the clear intention to arbitrate and whether the parties’ agreement to arbitrate was put “in writing.”

For example, the Hong Kong Arbitration Ordinance incorporates Option I, Article 7 of the Model Law in whole, which defines “arbitration agreement” as “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not” and requires that the “arbitration agreement shall be in writing” (Section 19). The Singapore International Arbitration Act contains the same definition of “arbitration agreement” and the requirement that the “arbitration agreement shall be in writing” (Sections 2A.(1) & 2A.(3)).

English law goes further. According to Section 6 of the English Arbitration Act 1996, an “arbitration agreement” means “an agreement to submit to arbitration present or future disputes (whether they are contractual or not).” English law does not require the agreement to be necessarily done in writing, although oral agreement could be problematic. The French Law could perhaps be seen as the ceiling of liberalism. Pursuant to the amended Code of Civil Procedure, for domestic arbitration, an arbitration agreement shall be in writing to be valid, and for international arbitration, “an arbitration agreement shall not be subject to any requirements as to its form” (Article 1507).

The Draft Amendment appears similar to the requirements for the validity of the arbitration agreement under Singapore and Hong Kong law, i.e., the parties’ intention to arbitrate and an agreement in writing.



The existing Arbitration Law does not recognize the competence-competence doctrine (see also past article on competence-competence in PRC courts). In this respect, both the judicial courts and the arbitration commissions, rather than the arbitral tribunal, have the power to rule on the validity of an arbitration agreement. The arbitration commission’s power is secondary to the court’s power, i.e., if a request for confirmation on the validity of an arbitration agreement has been submitted to both the arbitration commission and the court, then the court shall decide the matter.

By contrast, the Draft Amendment embraces the competence-competence doctrine. It empowers the arbitral tribunal to rule on its own jurisdiction and to decide on issues including the existence and validity of the arbitration agreement. In the meantime, it allows the arbitration institutions to decide on the said issue on a prima facie basis before constitution of the tribunal. Further, it delays a court’s intervention by providing that—without submitting the issue to be decided by an arbitral tribunal or by an arbitration institution—a court shall not accept a party’s request on confirmation of the existence or validity of an arbitration agreement (see Article 28 of the Draft Amendment).

These changes are indeed positive and encouraging. For a long time, PRC arbitration reflected a strongly “administrative” color,5) See, e.g., CHEN Fuyong, Unfinished Transformation: An Empirical Study of the Current Status and Future Trends of China’s Arbitration Institutions (Law Press 2010). jQuery('#footnote_plugin_tooltip_38677_30_5').tooltip({ tip: '#footnote_plugin_tooltip_text_38677_30_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and PRC arbitration institutions were criticized for being quasi-governmental organs rather than private dispute resolution service-providers. By handing over the power to rule on the validity of an arbitration agreement to the arbitral tribunal and by delaying the judicial courts’ intervention in this respect, the Draft Amendment appears aimed at correcting this erroneous image of the institutions and better represents the feature of arbitration as a private and voluntary dispute resolution process.



An amendment to the Arbitration Law has long been called for. By simplifying the statutory requirements on validity of arbitration agreement and recognizing arbitral tribunal’s power to rule on their own jurisdiction, China is aligning itself with international standards and norms, striding ahead towards arbitration-friendly jurisdictions such as Singapore and Hong Kong. The arbitration community has high hopes for the new Arbitration Law in this respect.


References ↑1 SPC (2006) Min Yi Zhong Zi Di No.11. ↑2 SPC (2007) Min Si Zhong Zi No.15. ↑3 SPC (2012) Zhe Yong Zhong Zi Que Zi No.4. ↑4 Beijing Dongcheng District Court (2018) Jing 0101 Min Chu No.6973. ↑5 See, e.g., CHEN Fuyong, Unfinished Transformation: An Empirical Study of the Current Status and Future Trends of China’s Arbitration Institutions (Law Press 2010). function footnote_expand_reference_container_38677_30() { jQuery('#footnote_references_container_38677_30').show(); jQuery('#footnote_reference_container_collapse_button_38677_30').text('−'); } function footnote_collapse_reference_container_38677_30() { jQuery('#footnote_references_container_38677_30').hide(); jQuery('#footnote_reference_container_collapse_button_38677_30').text('+'); } function footnote_expand_collapse_reference_container_38677_30() { if (jQuery('#footnote_references_container_38677_30').is(':hidden')) { footnote_expand_reference_container_38677_30(); } else { footnote_collapse_reference_container_38677_30(); } } function footnote_moveToReference_38677_30(p_str_TargetID) { footnote_expand_reference_container_38677_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_38677_30(p_str_TargetID) { footnote_expand_reference_container_38677_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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Can the Egyptian Government Vest A Municipal Court With The Power To Review ICSID Awards?

Fri, 2021-09-17 01:00

On 6 January 2021, the Egyptian Government introduced a draft law for parliament’s approval, seeking to expand the Egyptian Supreme Constitutional Court’s (“ESCC”) jurisdiction to scrutinize international arbitration awards rendered against the Egyptian State and acts of international organizations affecting the Egyptian State. The legislative amendment is in line with previous legislative measures designed to control arbitration proceedings involving the public sector. After a controversial discussion and some last-minute modifications, the draft law entered into force on 16 August 2021.



Since 2011, Egypt has been facing a significant increase in investor-state disputes. Most of the cases concern so-called “post-Arab Spring disputes” that are related to investments which failed or were put on hold after the Egyptian revolution. Egypt has been a party to the ICSID Convention since 1972. According to the ICSID database, a total of 37 ICSID cases were filed against Egypt, out of which 27 were filed after January 2011. The Egyptian Government managed to settle a good deal of these cases and is generally endeavoring to amicably settle pending investor-state disputes. At the same time, the Government has taken measures to prevent further negative arbitral awards. In line with this objective, the Egyptian Government has resorted to introducing legislative measures. Notably, the Government pursued to vest the ESCC with the power to review international arbitration awards rendered against the Egyptian State, including ICSID awards, against the backdrop of the Egyptian Constitution.


Amending the Supreme Constitutional Court’s Law

Legal basis

Article 192 of the Egyptian Constitution sets out the main competences of the ESCC. According to the said Article, the ESCC is inter alia exclusively competent to examine the constitutionality of laws and regulations, to interpret legislative texts and adjudicate disputes pertaining to the implementation of two contradictory final rulings. Article 192 then allows the legislator to further regulate the competences of the ESCC through laws as it states “[..] The law defines the Court’s other competencies and regulates the procedures that are to be followed before the Court.”

On this basis, the Government introduced a draft law (the “Draft Law”) to amend Law No. 48 of 1979 on the Supreme Constitutional Court (the “ESCC Law”), the law regulating the structure, competences, and procedures of the ESCC. Under the Egyptian Constitution, the laws regulating the judiciary are deemed “complementing laws to the constitution” and require a two-third majority of the Members of Parliament (“MPs”) to be approved in Parliament. Furthermore, the ESCC must be consulted on draft laws pertaining to the ESCC.


The Draft Law

The Draft Law introduced two amendments to the ESCC Law, specifically Articles 27 bis and 33 bis. According to Article 27 bis, ESCC shall have the power “to control the constitutionality of the decisions of international organizations and bodies and rulings of foreign courts and foreign arbitration bodies that shall be enforced against the state”.

Article 37 bis of the Draft Law thereby grants the Government a tool to challenge these decisions and rulings before the ESCC and grants the ESCC, in turn, the competence to rule on decisions and awards to be disregarded if found to be in violation with the Egyptian Constitution.

The Egyptian Government argued, in its explanatory note on the Draft Law, that the amendments are necessary given that the constitution and the ESCC Law lack provisions granting the ESCC jurisdiction to examine international decisions that can affect the “national security” of Egypt.

On 14 June 2021, the legislative committee in the Egyptian Parliament approved the Draft Law as introduced and reported that the ESCC expressed its approval of the Draft Law. MPs in favour of the Draft Law argued therefore that there should be no doubt in respect of the constitutionality of the Draft Law. They considered the amendments necessary to safeguard Egypt’s strategic economic interests, arguing that many of the awards in investor-state disputes obtained against the Egyptian state in recent years were “politicized.”


Review of International Arbitration Awards by the ESCC

The proposed amendments, of course, were not without controversy. Adversaries of the Draft Law argued that the proposed changes might harm the country’s investment climate and jeopardize the Government’s efforts to encourage foreign investment. In addition, there are concerns that the proposed constitutional review of ICSID awards falls afoul of Egypt’s obligations under international law.

Among the most vocal critics of the Draft Law is prominent Egyptian arbitrator Prof. Abdel Moneem Zamzam who published a legal opinion arguing the unconformity of the Draft Law with international law and urging Parliament not to approve it. He argued, amongst other things, that the Draft Law violates (i) the Egyptian Constitution and (ii) Egypt’s international obligation under the ICSID Convention, the New York Convention (the “NYC”) and BITs concluded between Egypt and many other states.

Indeed, by providing the Government with a tool to challenge an ICSID awards, the Draft Law falls afoul of Egypt’s obligations under ICSID Convention which explicitly provides for the finality and binding force of the ICSID Awards and parties’ obligation to comply with it.

It is also questionable whether the Draft Law is compliant with the NYC. In contrast to the ICSID Convention, Article V(2)(b) of the NYC does permit national courts to review an arbitral award on the basis of public order before granting a writ of execution. However, this review is concentrated in the civil courts (which in case of international commercial arbitration would be the Cairo Court of Appeal and the Court of Cassation). The additional tool provided by the Draft Law and the proposed dual system of review is at odds with the NYC, as it arguably violates the “non-discrimination rule” under Article III NYC. NYC, which aims to facilitate the recognition and enforcement of arbitral awards at the international level, prohibits imposing substantially more onerous conditions on the recognition or enforcement of arbitral awards to which NYC applies than are imposed on the recognition or enforcement of domestic arbitral awards.  While it is true that the Draft Law only targets arbitral awards rendered against the state and not all foreign arbitral awards, it however specifically refers to “rulings of foreign arbitration bodies” as opposed to domestic arbitral awards rendered against the state.


Constitution–treaty Relationship

In spite of these objections from the perspective of international and municipal constitutional law, the ESCC explicitly condoned the Draft Law. The approval of the ESCC was a heavy setback to the adversaries of the Draft Law. Yet, it is consistent with ESCC’s stance as to the qualification of international treaties and their order of priority in relation to the Constitution.The ESCC previously ruled that a treaty once ratified has the status of a law in Egypt and as such is subjected to the supremacy of the Constitution. A national law that conflicts with a treaty is not necessarily unconstitutional (Case no. 7 of 2 JY). Furthermore, the ESCC is of the position that it is competent to scrutize  ratified treaties a posteriori based on Article 151 (3) of the Constitution which states “In all cases, no treaty may be concluded which is contrary to the provisions of the Constitution” (Case no. 12 of 39 JY).

However, even by following this position, the constitutionality of the Draft Law appears to be questionable as it does not grant the ESCC the power to scrutinize international treaties per se, but rather decisions and rulings issued by bodies established on the basis of such treaties.

From an international law perspective, the constitutionality of the Draft Law and the Constitution itself is irrelevant. Once a treaty is ratified, all state authorities, including in this case its supreme courts, are bound by these treaties regardless of conflicting domestic laws. Article 27 of the Vienna Convention on the Law of Treaties (1969), to which Egypt acceded in 1982, clearly regulates that states cannot invoke a domestic law as a justification for its failure to enforce a treaty. Consequently, any law or act in Egypt that undermines the finality and binding force of an ICSID award violates Article 53 (1) of the ICSID Convention and constitutes a breach of Egypt’s obligation under the Convention.


Last Minute Amendments: Egyptian Government Carves out Arbitral Awards from the Draft Law

Shortly before the vote to pass the Draft Law in the parliamentary sessions of 27 and 28 June 2021, upon the Government’s request the words “arbitration bodies” were deleted from the proposed wording of Article 27 bis of the Draft Law. The Draft Law subsequently was passed and enacted into law, Law 137/2021 on Amending the Supreme Constitutional Law 48/1979, in force as of 16 August 2021 (the “Law”). Article 27 bis now reads, “The ESCC shall undertake the control of the constitutionality of the decisions of international organizations and bodies and rulings of foreign courts that shall be enforced against the state”.

According to the minutes of the debate in the Parliament, the last-minute amendment was meant to exclude investment arbitral awards from the review by the ESCC, thereby acknowledging the criticism made against this mechanism from the perspective of international and municipal law. This means the ESCC jurisdiction, as amended, only permits ESCC to review the decisions of international organizations and of foreign courts. Its jurisdiction does not extend to scrutinizing arbitral awards. Yet, the vague wording that remains, in particular the reference to “decisions of international organizations and bodies”, bears the risk of the Government instrumentalizing this Law towards challenging the enforcement of international arbitral awards rendered against Egypt. Furthermore, the Law remains controversial as it may be used to undermine binding resolutions or recommendations of inter-governmental bodies rendered against Egypt, in particular in the field of the protection of human rights.



The Law is part of a general arbitration sceptic tendency in Egypt, where in particular investment arbitration is seen as contravening the national interest. It conforms to a global trend critical towards investment arbitration. Since the start of this millennium, several countries have already resorted to constitutional arguments to prohibit submitting to international arbitration or to support the possibility of reviewing international arbitration awards against the backdrop of their constitutions. A recent example is the introduction of Article 125 (5)(b) of the Russian Constitution, which came into force on 4 July 2020, granting the Russian Supreme Court the competence to declare an international arbitral award unenforceable, if it finds it to be in violation of the Russian public policy.

This tendency is a serious challenge to the international system of investment arbitration (as it puts municipal law above the international laws under which the ICSID system operates). The rewording of the Draft Law before the adoption by Parliament is welcome, however ambiguities remain. The practical implications of the application of the Law remain to be seen.

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New Concession Arbitration Court in Hungary: An Uneven Playing Field

Thu, 2021-09-16 01:47

Would you agree to arbitrate in a forum where the opposing party has the last word about the tribunal’s composition? This is what the new Hungarian Concession Arbitration Court, scheduled to start operation in October 2021, proposes.


The Name of the Game

The Hungarian government loves playing with arbitration. In 2012, they prohibited arbitration in matters relating to national assets (that is, assets in the exclusive ownership of the central government or the local municipalities). In 2015, they abolished the prohibition for the sake of a controversial transaction with Russia relating to the expansion of Hungary’s nuclear plant. In 2017, they revamped the entire Hungarian arbitration law by adopting a new Act on Arbitration, merging the three well-established commercial arbitration institutions. More precisely, the Permanent Arbitration Court for Money and Capital Markets and the Permanent Arbitration Court for Energy Matters were merged into the Permanent Arbitration Court Attached to the Hungarian Chamber of Commerce and Industry, which was renamed as Commercial Arbitration Court and it is generally referred to as the HCCI Arbitration Court. The official reasoning of the bill laconically mentions that the change was intended to ensure efficiency and professionality by merging matters in the institution with the largest caseload. To give some perspective, note that, under Hungarian law, permanent arbitration institutions can only be set up by a legislative act.


The Concession Arbitration Court

In May 2021, the government decided to establish a new arbitration institution – the Concession Arbitration Court (“CAC”) – to arbitrate disputes relating to concessions. In other words, the primary task of this institution will be to resolve disputes arising out of or in relation to contracts for the exercise of activities in the exclusive competence of the state and typically relating to national assets.

The new institution is set up within the framework of a substantial amendment of the Hungarian concession laws (primarily by the enactment of Act XXXII of 2021 on the Supervisory Authority of Regulated Activities and some additional amendments). They include the extension of activities that can only be exercised as a concession and the creation of a new government authority, the Supervisory Authority of Regulated Activities (“Authority”). The Authority is tasked with the exclusive, centralized tendering and supervising of concessions. Its president is appointed by the prime minister for a term of 9 years.

The legislative changes are conspicuously timed together with the issuance of two widely criticized mega tenders for 35-year concessions (renewable for another 35 years) for the operation, maintenance, and development of the entire Hungarian motorway network and for the operation of the entire Hungarian waste management infrastructure.

Chapter IV of the Act XXXII of 2021 on the Supervisory Authority of Regulated Activities, scheduled to enter into force as of 1 October 2021, establishes the CAC, operated by the Authority. To the best of this author’s knowledge, the regulation was introduced without any public discussion, consultation or providing at least some information either to the general public or to the arbitration community. In fact, it went largely unnoticed.


Flimsy Official Reasoning

The official reasoning for the establishment of the CAC is short and surprisingly similar to the stated reasons behind the previous elimination of the well-established arbitration institutions – the promotion of efficiency and expertise. However, it fails to give any specifics as to why the recently set up mega-institution – the HCCI Arbitration Court – could not ensure the required expertise and efficiency. Indeed, it is difficult to see why the new institution would be more efficient or professional than the existing HCCI Arbitration Court. The differences between the organizational rules of the two institutions are minor; the wording of the relevant part of Chapter IV of Act XXXII of 2021 on the Supervisory Authority of Regulated Activities is largely a copy/paste of the relevant rules of Chapter XII of Act LX of 2017 on Arbitration setting up the HCCI Arbitration Court. The conditions to be listed in the roll of recommended arbitrators are the same with the exception of the requirement of the Hungarian bar exam or public administration exam.


A Tilted Playing Field

There are, however, some small but crucial differences between CAC and the HCCI Arbitration Court. In case of both institutions, it is their respective boards that act as appointing authority if the parties or the party-appointed arbitrators cannot agree on the chair of the tribunal (see Article 27 (1) c) of the Act XXXII of 2021 on the Supervisory Authority of Regulated Activities, and Section 62 (1) c) of the Act LX of 2017 on Arbitration respectively). The board of the HCCI Arbitration Court is appointed by different stakeholders with a majority of board members appointed by organizations independent from the government (three board members, including the president, are appointed by the Hungarian Chamber of Commerce and Industry, while the Hungarian Energy and Public Utility Regulatory Authority, the Budapest Stock Exchange, the Hungarian Banking Association and the Hungarian Bar Association each appoint one member). The board members of the CAC, on the other hand, will be appointed without exception by the Authority. Furthermore, while the board members of the HCCI Arbitration Court can only be removed by the appointing body for unworthiness and upon the reasoned motion of 4 of the 7 board members, the Authority can remove the members of the board of the CAC any time, without cause.

Thus, if the parties or the party appointed arbitrators cannot agree on the chair of the tribunal in a concession arbitration before the CAC, the freely removable appointees of an organ of the Hungarian government – that is (directly or through another organ or entity) necessarily one of the parties to any dispute relating to a concession agreement – will decide upon the chair of the tribunal.

In the light of the above rules, it is only a minor detail that board members of the CAC do not even need to have arbitration experience. Anyone with only 5 years of experience of (amongst other requirements) “regularly acting as representative in concession related or arbitration matters” can be appointed to the board of the CAC.

Equally troubling is that the employees of the secretariat of the CAC are public servants employed by the Authority, according to Section 27 (4) of the Act XXXII of 2021 on the Supervisory Authority of Regulated Activities. As public servants, the employees of the Secretariat shall comply with the instructions of their employer – which in this case is an organ of one of the parties to the dispute.

The CAC will, of course, only have jurisdiction if the parties agree to it in the concession agreement. The names of the board members, the procedural rules, and the arbitrators on the CAC’s list are also not yet known. The enforceability of awards rendered by panels chaired by appointees of the board of the CAC may nevertheless appear questionable. Even if the composition of such a panel was formally in accordance with the parties’ agreement and Hungarian law (as required by Article V (1) d) of the New York Convention), the right to an independent tribunal should not be a waivable right.

In any case, it is unfortunate that after facing criticism for weakening the independence of the judiciary, instead of reversing its policies, the Hungarian government appears to have chosen to create an arbitration institution for concession contracts with questionable independence, outside of the spotlight focused on state courts.

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Court Discretion in Indian Setting-aside Proceedings: Modification v. Doing “Complete Justice”

Wed, 2021-09-15 01:00

Proceedings for setting-aside arbitral awards in India have been the subject of controversy since time immemorial. Recent trends indicate that the tendency of courts to set-aside awards has been on the wane. However, on many occasions, courts have been sympathetic to the losing party on issues of quantum, costs and interest, and have undertaken a balancing exercise, while refusing to set-aside an award completely.

The Supreme Court of India (‘Supreme Court’) has finally decided the scope of an Indian court’s power to modify awards under the (Indian) Arbitration and Conciliation Act, 1996 (‘Act’) when adjudicating setting-aside applications. In The Project Director, NH No. 45E and 220, NHAI v M. Hakeem & Anr. SLP (C) No. 13020/2020 (NHAI v. Hakeem), the Supreme Court found that the Act does not provide any power of modification of arbitral awards, although such discretion may be used in rare circumstances by the Supreme Court as discussed below.


Scope of a reviewing court’s power in setting aside proceedings

The Act provides for setting aside as the only recourse against an arbitral award. An award can therefore usually only be wholly set-aside where the grounds for the same stand established.  A partial set-aside is possible when the award deals with ultra petita matters (i.e. issues beyond the scope of submission to arbitration). In all cases however, the scope of the reviewing court’s decision is binary, either to confirm or set-aside the award.

On this basis, the Supreme Court held that there was neither any right to seek a modification, nor any power of the reviewing court to modify the award. This reasoning draws support from the fact that the setting-aside provision under the Act is closely modelled on Article 34 of the UNCITRAL Model Law, which uses a clearer title “Application for setting aside as exclusive recourse against arbitral award”.

While the words “exclusive recourse” are not used in the title to Section 34 of the Act, the remainder of this provision follows Article 34 of the Model Law word-for-word, except for a deviation in language regarding burden of proof. While the Model Law requires that the party assailing the award “furnishes proof that” the grounds under Article 34 are met, the Act requires the party assailing the award to demonstrate these grounds “on the basis of the record of the Arbitral Tribunal”. This deviation in language was made by an amendment in 2019 to reinforce the principle that setting aside proceedings must be very limited in nature and not involve consideration of evidence and issues afresh.

The Supreme Court also referred to various judgments holding that the reviewing court in setting-aside applications cannot review the merits of arbitral decisions. Accordingly, the reviewing court cannot modify the award since this would effectively be based on a review of the reliefs granted by the arbitral tribunal.

This is a relatively straightforward proposition and is in consonance with global arbitral jurisprudence on the meaning of “setting-aside” proceedings. For instance, under arbitral legislation in the United Kingdom and Singapore, the reviewing court’s power to set-aside has been specifically distinguished from the power to ‘vary’ the award. The limited power to ‘vary’ has therefore been separately incorporated in these legislations, under Section 66, English Arbitration Act, 1996 and Section 49(8)(b) of the Singapore Arbitration Act, 2001.


Statutory power of modification v. Constitutional power of rendering “complete justice”

In practice however, several setting-aside applications in India do result in a modification or concession to the losing side in the arbitration (particularly where the losing side happens to be a state entity). For instance, issues of legal costs or interest on damages in India heavily depend on subjective ‘reasonableness’ in the minds of the arbitral tribunal, and subsequently the reviewing judge. While refusing to set-aside arbitral awards, reviewing courts frequently end up applying their own ‘reasonableness’ standard and reducing amounts awarded under these heads. This also emanates from the fact that costs jurisprudence in India, unlike some other jurisdictions, does not usually favour the grant of actual legal expenses, given that counsel fees are extremely variable in the Indian legal market.

This observation was brought to the notice of the Supreme Court in NHAI v. Hakeem, citing an earlier decision where the Supreme Court, in setting-aside proceedings, had changed the date from which interest would apply, thereby reducing the overall interest payable. The Supreme Court readily accepted that this was indeed a modification of the award. However, it held that this was not a modification pursuant to the setting-aside mechanism under the Act, but under the Supreme Court’s constitutional power to do “complete justice” under Article 142 of the Constitution of India.

This implies that various High Courts in India, which deal with the bulk of setting-aside applications, cannot modify awards, on any of its terms, including legal costs or interest, as only the Supreme Court can exercise power under Article 142 of the Indian Constitution . This is a positive step towards removing discretion in dealing with such applications and should lead to a trend of recovery of full legal costs as awarded and interest as awarded by an arbitral tribunal (see a previous post on legal costs here).

On the flipside, this may result in parties appealing against the rejection of their setting aside applications all the way to the Supreme Court, hoping to secure some modification under Article 142. While the Supreme Court has very rarely used its discretion under Article 142, in-principle, it is evident that some element of discretionary relief does remain to be explored before a losing party finally accepts the verdict under an arbitral award.


The application of the Supreme Court’s constitutional discretion

One of such instances, was in Ssangyong v. NHAI where in exercise of discretion under Article 142, an arbitral award which had been made by 2-1 majority, was set-aside and the separate opinion of the minority arbitrator was effectively converted into the final award (see a previous blog on this case here). Incidentally, this decision was also authored by Justice Nariman who authored NHAI v. Hakeem. Despite the anti-modification stance, the discretion under Article 142 was in fact ultimately applied by the Supreme Court in NHAI v. Hakeem to uphold a decision of a lower court which had modified the quantum under the award.

The awards in question in this case had been passed under the statutory arbitral mechanism provided under the National Highways Act read with the Act. These awards dealt with disputes on the quantum of compensation paid to private land owners whose properties were acquired by the NHAI (a government agency) for the purpose of construction of highways.

The arbitral mechanism under the NHAI Act provided for an arbitration on this issue, with the appointment of a sole arbitrator by the Indian Government. This appointment procedure is at odds with the decisions of the Supreme Court in TRF Limited v. Energo Engineering Projects Ltd. and Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. (see a previous blog on this case here). It is now settled that one of the parties to an arbitration agreement cannot reserve a unilateral right to nominate a sole arbitrator. The NHAI being a state entity under the operation and control of the Indian Government, this unilateral reservation of appointment of the sole arbitrator was clearly bad in law.

However, the proceedings before the Supreme Court in NHAI v. Hakeem were only in relation to setting-aside of the awards in question, and there had been no constitutional challenge to the statutory provision under the NHAI Act allowing for such an appointment procedure. The Supreme Court thus held that it would cause “grave injustice” if the awards were set-aside only for fresh arbitral proceedings to be re-initiated under the defective appointment process. The Supreme Court had in any case found that the compensation awarded for acquisition of land by the government-appointed arbitrator in an arbitration against the government (NHAI) was perverse and not commensurate with the market value of the land acquired. Consequently, it upheld the effect of the lower court’s decision, which had been to modify and enhance the quantum of compensation under the awards.



Ultimately, despite the Supreme Court’s effort to reduce the scope of a reviewing court’s discretion under the Act, it would appear that this decision adds to the weight of precedent on the discretionary power under the Indian Constitution. The Supreme Court was evidently grappling with multiple policy objectives in this decision, viz. (i) reducing scope of a reviewing court’s discretion to modify, (ii) a defective appointment procedure under a statute that had itself not been challenged, and (iii) arbitral awards providing less than adequate compensation to persons whose properties were compulsorily acquired by the NHAI for the construction of highways.

What is certain is that this judgment does not close the chapter on modifications of arbitral awards by reviewing courts in India – effectively replacing one source of discretion with another, although perhaps less reachable than the former.

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The Circuit Split on the Scope of Section 1782 Discovery in the United States: Will it Ever Get Resolved?

Tue, 2021-09-14 01:18

Much has been written about the U.S. Supreme Court case Servotronics Inc. v. Rolls-Royce PLC, which concerns the scope of 28 U.S.C. § 1782 (“Section 1782”). This interest is not surprising given this was set to be the first time in 17 years that the U.S. Supreme Court (the “Court”) would consider the scope of discovery permitted under Section 1782, a U.S. statute allowing parties to obtain discovery from those in the U.S. for use in a proceeding “in a foreign or international tribunal.” The case was expected to resolve a 3-2 split (discussed in several prior posts) amongst the United States Courts of Appeals regarding whether Section 1782 could be used to obtain discovery in connection with international commercial arbitrations. It was scheduled to be one of the first cases argued in the Court’s upcoming term, with a hearing scheduled for October 5, 2021.

That all changed last week, when Servotronics filed a notice of its intention to dismiss the case and the Court subsequently dropped the case from its oral argument calendar. While the dismissal resolves this particular case, it leaves unresolved the fundamental question the Court was set to answer. What impact will this uncertainty have on the growing use of Section 1782—particularly in connection with private international arbitrations? And can or will the circuit split ever be resolved?


The Unanswered Question

The question before the Court in Servotronics was whether Section 1782 extends to international commercial arbitral tribunals. The issue comes down to the construction of the term “foreign or international tribunal” contained in the text of the statute itself.

The underlying commercial arbitration in Servotronics arose out of a dispute between Servotronics and Rolls-Royce regarding liability for an engine fire during a Boeing test flight. Servotronics sought discovery from Boeing in two different circuit courts in aid of that commercial arbitration, but the two circuit courts issued diverging rulings on Servotronics’ separate requests. The Seventh Circuit barred the discovery, holding that Section 1782 “does not authorize the district court to compel discovery for use in a private foreign arbitration.” Meanwhile, the Fourth Circuit allowed the discovery, reasoning that the “private” arbitral tribunal was indeed a “foreign tribunal” within the meaning of Section 1782.

Some courts have tried to draw a distinction between so-called “private” and “state-sponsored” arbitral tribunals—based on the apparent theory that Section 1782 was designed to assist foreign governments with their state-sponsored legal processes, and Section 1782 thus extends to investment arbitral tribunals (as being “state-sponsored”) and perhaps to some commercial tribunals if they are clearly state-sponsored, but that Section 1782 does not extend to the majority of commercial arbitral tribunals (which they say are “private”). This issue was not directly relevant in Servotronics. Indeed, Servotronics concerned the same underlying commercial arbitration, with the same “private” arbitral tribunal. Yet, the two Circuit courts reached divergent results.

This divergence illustrates the existing 3-2 Circuit split on this issue. The Second, Fifth and Seventh Circuit have held that Section 1782 does not allow for the taking of discovery in aid of private commercial arbitrations taking place abroad; meanwhile—for the first time at a circuit court level—the Sixth Circuit held in 2019 in ALJ v. Federal Express (litigated on behalf of ALJ by our firm, and some of this post’s authors) that Section 1782 does apply to private arbitrations. The Fourth Circuit later reached the same result.


The Circuit Split Endures

The uncertainty created by that divergence exists—and now endures—amidst an explosive increase in the number of Section 1782 applications being filed. Based on our quick search of electronic dockets, applications have increased 6-fold in the last fifteen years: from 55 in 2004, to almost 330 in 2020. And the 2020 number represents a more than 50% single-year increase over the approximately 215 applications filed in 2019. Certainly not all of those applications (or even the vast majority) seek discovery for use in private international arbitrations, but the number that do has not been insignificant.

It also is clear that because of the existing split, some Circuit courts have held off on answering the question. Both the Third and Ninth Circuit have pending cases on this very issue. The Ninth Circuit explicitly stated in March of this year that it was holding in abeyance its case on this issue pending the resolution of Servotronics (after a September 2020 oral argument, followed by a round of supplemental briefing on the issue). In re Application of HRC-Hainan Holding Co., LLC, Case No. 20-15371 (9th Cir.). The Third Circuit also has a case pending on this issue, with the question fully briefed and oral argument held in December 2020. In re Application of EWE Gasspeicher GmbH, Case No. 20-1830 (3d Cir.). Both courts will now need to decide their cases without the guidance of the Court, potentially deepening the Circuit split.

The split and the accompanying uncertainty could endure for years. It’s possible that once the Third and Ninth Circuit cases are decided, they could make their way to the Court. But that will take time, and there is no certainty any case will ever make it back to the Court on this issue.

First, litigants need an appetite to see a case all the way through to a Supreme Court decision. But if the underlying arbitration is resolved, either via settlement or a final award, the parties may not wish to continue litigating about discovery that is no longer needed. This may be what happened in Servotronics, as the arbitration hearing took place in May and a decision apparently was expected in August. (The parties to the Ninth Circuit case mentioned above appear willing to continue litigating the issue even though the underlying arbitration has concluded).

Second, even if the parties to an underlying arbitration that has ended wish to continue litigating a Section 1782 case, courts may consider the case to be moot and refuse to decide it on the merits. We believe courts still could decide the issue based on an exception to the mootness doctrine for cases that are “capable of repetition, yet evading review.”


What Question Will Be At Issue When The Court Next Addresses Section 1782?

Not only are we unsure when the Court will next address Section 1782, we also don’t know exactly what the Court will address. The question presented to the Court in Servotronics was, as phrased in Servotronics’ petition, whether Section 1782 “should be…applied to evidence sought in connection with proceedings before foreign and international private commercial arbitral tribunals.” It did not directly include whether Section 1782 should be applied to investment arbitral tribunals.

That could change, especially if the Servotronics briefing is any indication. A total of 11 amici (i.e., friends of the court) filed briefs, including professors, arbitrators, arbitral institutions, trade associations and a private company. Some of them were in support of one of the parties; others remained neutral. Our firm submitted briefs on behalf of Professor George Bermann and the International Court of Arbitration of the International Chamber of Commerce.

A quite notable amicus was filed by the U.S. government, which had also been allotted fifteen minutes of oral argument time. Significantly, the U.S. appeared to try to expand the scope of the question before the Court—contending not only that Section 1782 should not apply to commercial arbitral tribunals, but also that it should not apply to investment arbitral tribunals, including those administered by ICSID.

The U.S. acknowledged that Servotronics did not directly address the investment arbitration context but argued that the logic of Servotronics’ position would extend Section 1782 to encompass investment arbitration, which it says is “problematic and would raise significant policy concerns.” Therefore, the U.S. expressly asked the Court to reject the conclusion that Section 1782 extends to investment arbitration or, at a minimum, expressly reserve judgment on that question.

Prior to this briefing, there was consensus among federal courts that have decided the issue that Section 1782 discovery is available in aid of investment treaty arbitrations. Even the Second Circuit—which on multiple occasions has expressly refused to grant 1782 applications in aid of international commercial arbitrations—has stated that a different rule applies for investment treaty arbitrations. See In re Application of Fund for Prot. of Inv. Rts. In Foreign States v. AlixPartners, LLP, 5 F.4th 216 (2d Cir. 2021) (holding investor-state arbitration before an arbitral panel established pursuant to a BIT constituted a “proceeding in a foreign or international tribunal” under Section 1782), petition for reh’g en banc denied.

Interestingly, amici who otherwise took very different positions agreed on one issue: there is no meaningful distinction between commercial and investment arbitration for purposes of Section 1782. Of the five amici that discussed investment arbitrations—including two in favor of Servotronics (Professor Bermann, and Federal Arbitration, Inc.), two in favor of Rolls-Royce and Boeing (the U.S., and the International Arbitration Centre in Tokyo) and one neutral amicus (Professor Yanbai Andrea Wang) —all argued that the distinction between “state-sponsored” and “private” arbitral tribunals is flawed since commercial arbitrations share many of the salient features of investment arbitrations.

Given the briefing on this issue, it is possible that the next time the Court takes up Section 1782 it will not be limited to the question of commercial arbitration.

Hopefully, we will not have to wait another 17 years before the Supreme Court (or possibly even our legislative branch?) takes another crack at Section 1782. Until then, stay tuned!


As disclosed above, the authors’ firm submitted two amicus briefs in Servotronics Inc. v. Rolls-Royce PLC, on behalf of Professor George Bermann and the International Court of Arbitration of the International Chamber of Commerce.

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The Missing Link in Progress to Greater Diversity: YOUR Feedback about Diverse Arbitrators – Arbitrator Intelligence 2021 Diversity Campaign

Mon, 2021-09-13 01:34

In recent years, a range of organizations have sprung up to challenge the existing hegemony in arbitrator appointments. As an opening gambit, ArbitralWomen pushed to have arbitral institutions publish statistics regarding the gender of arbitrators sitting in their cases. Then, with clearer understanding of gender deficits, ArbitralWomen together with the ERA Pledge urged parties and counsel to work toward fair gender representation in appointments. Numerous other organizations and initiatives soon followed, including R.E.A.L, the Rising Arbitrators Initiative, and numerous other regional initiatives, too many to count.1) Beyond those mentioned, there are: Careers in Arbitration, Mute-Off Thursdays, the Diversity Checklist, Women Way in Arbitration LATAM, Victoria Pernt’s myArbitration, breaking.through, the African Promise, SWAN (the Swedish Women in Arbitration Network), the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings, the African Arbitration Association and many more. jQuery('#footnote_plugin_tooltip_38339_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_38339_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); With these new organizations and initiatives came calls to commit to a more comprehensive diversity that includes not only gender, but also race, ethnicity, nationality, age, and more recently LGBTQ and disability rights.

These groups and initiatives have brought tremendous energy and creativity to the diversity challenges in international arbitration. They are to be credited with three major accomplishments.

First, they have raised awareness about the nature of the diversity problem and its causes.

Second, they have boosted diverse arbitrators and would-be arbitrators by giving them better resources and tools, such as speaking opportunities, training, publicity, mentors, sponsors, and other resources.

Third, they have appealed to and indeed created palpable pressure on parties, counsel, and institutions to “do the right thing” by appointing more diverse arbitrators.

The missing link between good intentions and actual appointments of diverse arbitrators is the kind of information counsel and parties consider most crucial—objective feedback and data from parties and counsel regarding the arbitrators’ past rulings and decisionmaking. This information is what propels arbitrators off a short list and onto a tribunal.


From the Shortlist to the Tribunal

To illustrate the importance of party and counsel feedback, let’s take a hypothetical.

It is often said that getting the first appointment is the hardest. To address this problem, and thanks to many of the organizations identified above, we have witnessed impressive efforts by institutions to give rising stars their first appointments.

These first appointments are often based on arbitrators’ CVs, their reputations in the field mostly through experience as counsel, but most importantly because they are on the radar of the relevant institutions.

For example, imagine a young Ghanaian woman has been appointed as a co-arbitrator by an arbitral institution in a sizable and complex arbitration. And imagine she was simply AWESOME. The parties were wowed. Her co-arbitrators were impressed. And the institution was of course delighted. The institution may appoint her again, precisely because it now has specific information about how well she performed as an arbitrator in an actual arbitration.

But outside the institution, her performance is a well-kept secret. Outside the institution, only about the dozen lawyers and parties involved in that case know anything about her performance as an arbitrator.

Now flash forward a year or two and imagine that that Ghanaian arbitrator has made a party’s shortlist in a new case. In other words, she was picked to be on a long list, perhaps with the aid of lists available through ArbitralWomen, R.E.A.L. – Racial Equality for Arbitration Lawyers, the Rising Arbitrators Initiative, or others.

Our Ghanaian arbitrator made it to the parties’ short list as they found some well written book chapters, an article, and a few blog posts – but certainly not the award she wrote or excerpts of it. Now, to evaluate their shortlist and determine which of the finalists to appoint, the parties want feedback from parties and counsel who actually had her as an arbitrator. They want to know about her soft skills, her decisional proclivities, and her actual performance.

Take that example and amplify it significantly for highly reputable female arbitrators who have handled hundreds of arbitrations but simply do not have publicly available information on their performance.

Without that feedback, counsel report having a much harder time convincing even progressive minded parties let alone their own counsel teams to appoint a diverse or newer arbitrator, especially if they have significant feedback regarding another non-diverse arbitrator. In our discussions with leading arbitral institutions, we heard from them that appointing diverse arbitrators is “really hard work” as they are also limited to the same sources of information when appointing a chairperson or members of the tribunal. Because institutions are appointing the amazing “diverse” arbitrators that they know, as one institutional representative put it, “the same ‘diverse arbitrators’ are continually appointed”.

In sum, if we want to close the diversity gap, we need to change the way we share objective feedback and data about arbitrators.


Facilitated Exchange of Feedback

More feedback about diverse arbitrators means more diverse arbitrators getting off well-meaning shortlists and onto tribunals. To make this crucial information both more plentiful and more readily available, the traditional person-to-person referral process must be replaced with a broad-based, technology-facilitated exchange of information. An online platform can facilitate the exchange of such information with a broad range of strangers, but with protections for confidentiality and reliability that ensure the value of the information.

Consider other industries where online platforms have facilitated similar types of exchange.

UBER connects people who need a ride with people who have cars, even though they are otherwise strangers on the road who would otherwise not share a ride. Airbnb connects people who need a room with people who have space to rent, even though they would not ordinarily be able to find each other just by knocking on doors. In a similar vein, our feedback questionnaire –-the Arbitrator Intelligence Questionnaire or AIQ–connects people who have information about arbitrators with people who need information about arbitrators. The benefit of such a community of persons seeking and providing information is that, sooner or later, the information is there when parties need concrete feedback on an arbitrator.

Through our platform, parties and counsel submit detailed, non-confidential information about an arbitrator’s procedural decisions and case management in a recent past case. We then process that information, distilling feedback into easy-to-use Reports that are available to anyone. Our Reports, in other words, give parties and counsel seeking to appoint newer and more diverse arbitrators ready access to actual feedback about newer and more diverse arbitrators that can otherwise be difficult if not impossible to find.

Parties or counsel who provide feedback through our questionnaire have seen the arbitrators “in action” and the information they provide can help fill in the information gaps that remain after examining case summaries or the CV of the arbitrator.

In addition to feedback, Arbitrator Intelligence is also developing a library of video interviews of arbitrators. In these video interviews, our talented Ambassadors ask arbitrators the kinds of questions parties and counsel might want to ask during the appointment process, but that would be prohibited if asked by parties and counsel during the selection process for a particular case.

We will also soon be launching our new Survey for Arbitrators. This specially-designed survey will enable arbitrators to themselves identify their procedural approaches and case management preferences.

All these sources of information come together in our unique Reports on individual arbitrators.

We build our Reports from the “bottom up,” meaning we start with feedback provided by counsel and parties, we add interviews, and (soon) survey responses by arbitrators. We do not pick the arbitrators for our Reports or predetermine how extensive or detailed their Reports should be. In this respect, our Reports can be a great equalizer—the most robust, detailed Reports are not necessarily on the most experienced arbitrators. Our most robust Reports are on those arbitrators for whom we have the most information, and that brings us to our request to YOU!


A Call to Action

From September 12 through October 4, our Campaign aims to collect feedback that will make it easier for parties, counsel, and institutions to appoint diverse and newer arbitrators.  Our goal is to collect 100 AIQs on newer and diverse arbitrators!

We are asking YOU to contribute YOUR feedback from your experiences through our AIQ. It only takes about 15 minutes. Enough good intentions. Do something concrete!



References ↑1 Beyond those mentioned, there are: Careers in Arbitration, Mute-Off Thursdays, the Diversity Checklist, Women Way in Arbitration LATAM, Victoria Pernt’s myArbitration, breaking.through, the African Promise, SWAN (the Swedish Women in Arbitration Network), the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings, the African Arbitration Association and many more. function footnote_expand_reference_container_38339_30() { jQuery('#footnote_references_container_38339_30').show(); jQuery('#footnote_reference_container_collapse_button_38339_30').text('−'); } function footnote_collapse_reference_container_38339_30() { jQuery('#footnote_references_container_38339_30').hide(); jQuery('#footnote_reference_container_collapse_button_38339_30').text('+'); } function footnote_expand_collapse_reference_container_38339_30() { if (jQuery('#footnote_references_container_38339_30').is(':hidden')) { footnote_expand_reference_container_38339_30(); } else { footnote_collapse_reference_container_38339_30(); } } function footnote_moveToReference_38339_30(p_str_TargetID) { footnote_expand_reference_container_38339_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_38339_30(p_str_TargetID) { footnote_expand_reference_container_38339_30(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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SIAC Congress Recap: The Multi-Million Dollar Question – Will the Pandemic and Governments’ Response to it Lead to a Spike in Investor-State Arbitrations?

Sun, 2021-09-12 01:00

The 2021 SIAC Congress held virtually on 10 September 2021 drew arbitration aspirants and practitioners from all over the globe, and sought to grapple with the key challenges of the day within the realm of arbitration. The second panel session, on “The Multi-Dollar Question: Will the Pandemic and Governments’ Responses to it Lead to a Spike in Investor-State Arbitrations?”, delved into the vexing question of the potential impact of the COVID-19 pandemic on investor-state arbitrations.

The panel was moderated by Mr Luke Sobota (SIAC Board of Directors, Three Crowns LLP) and comprised a diverse range of voices: Ms Shwetha Bidhuri (SIAC), Dr Tai-Heng Cheng (Sidley Austin LLP), Professor Manjiao Chi (UIBE Law School, China), Mr Greg Harman (BRG), Professor Hi-Taek Shin (KCAB International, Twenty Essex Chambers) and Professor. Dr. Guido Santiago Tawil (SIAC Court of Arbitration, Independent Arbitrator).



Mr Sobota opened the session with a discussion on the impact of the COVID-19 pandemic on the types of potential claims that may be brought against states.

Dr Cheng observed that the typology of claims might be as follows: (1) bad faith actions by governments to use the pandemic to target foreign investors, (2) measures taken in good faith to combat the pandemic, but which are disproportionate, and (3) measures taken in good faith to combat the pandemic, which are implemented well and fairly. Dr Cheng noted that the second category would be complex, as it would bring into collision the “old” view of investor-state arbitration, which recognised the state’s freedom to enact legitimacy policy subject to compensation being provided to injured investors, and a more sympathetic view to governments arising from an understanding that it may be unfair to require compensation from developing nations which cannot afford it.

Ms Bidhuri noted that the impact of the pandemic on the number of investor-state arbitrations would take time to unfold and would depend on the success of early cases. On the flipside, Dr Cheng observed that sympathy for governments taking up public policy measures to combat national crises may increase in line with ESG (Environmental, Social and Governance) rising as a global macro-trend. A one-off investor with fewer reputational concerns may have the appetite to commence an investor-state arbitration, whereas a large multinational company invested in ESG may have to grapple with public relations concerns if it files a claim.



Turning to the various types of defences that may be advanced, Ms Bidhuri observed that it may not be easy for states to make out the defence of necessity or defences under treaties that do not have specific exceptions for public order or public health. Professor Chi took the audience through the broad defences that a state may employ in such investor-state arbitrations, namely: (a) force majeure, and (b) investment treaty-specific exceptions. He cautioned that even if COVID-19 could be argued as an unforeseen or irresistible event, this assessment may change as states become more accustomed to the situation, and this may affect their ability to meet the high threshold of force majeure.


The principle of proportionality

Naturally, the topic turned to the various counterarguments that investors may employ to rebut the defences put up by states. Professor Chi observed that proportionality would be a major argument, and this would depend heavily on the state, the kind of measures taken, and the intensity of those measures. Professor Tawil observed that, in all crises, there will be an incentive for states to concentrate power, and the means by which this is done can be assessed only on a case-by-case basis. Professor Shin observed that there may be a change in perspective or general consensus on social and community values, which may also affect the assessment of proportionality.

All in all, the panelists shared the view that in the case of the COVID-19 pandemic, it must be appreciated that this is a global pandemic affecting all nations, and a balancing approach must be taken.



Mr Harman, given his expertise in valuation, was asked about the assessment of damages in claims brought against pandemic-related measures. He noted that the pandemic has unlikely changed the fundamental principles governing the measure of damages, which aims to put the innocent party back in the same position it would have been had the wrong not been done, but additional complexity may arise in identifying the appropriate counterfactual as this requires consideration of what a proportionate response would have been.

While the extent to which the pandemic complicates the damages assessment will be case-specific, Mr Harman considered that there may be added complications with factors such as the valuation date and the valuation method. While the discounted cash flow (DCF) method is often used, one big issue is the level of certainty at which cash flow can be forecasted, and the pandemic has increased the level of uncertainty even for stable businesses. Another complication is the need to distinguish between the impact of the pandemic itself, and the impact of the illegal act. There is also a further question of whether the DCF method can fully capture the risk of such “Black Swan” events.


Future trends in ISDS

Mr Sobota queried Professor Shin on whether the COVID-19 pandemic has impacted the deliberations of the UNCITRAL Working Group III on reforms to Investor-State Dispute Settlement (ISDS). Professor Shin noted that the impact of COVID-19 would be more severe in both absolute and relative terms for developing nations as opposed to developed nations. The ability of developing nations to defend ISDS claims and to make payment would result in a significant strain on their ability to fight the pandemic, and could inflame sensitivities between foreign investors and populist governments. While the current Working Group III discussions relate mainly to procedural reforms, there are calls for reform of substantive protection standards to tilt the balance in favour of the host state, such as by introducing temporary moratoria on claims arising from pandemic-related measures.



Mr Sobota then directed the panel to the topic of alternative dispute resolution, such as mediation, and whether the COVID-19 pandemic would make parties more amenable to it. The panelists offered varying perspectives. Professor Shin observed that large multinational companies may have an incentive to mediate if they are concerned about public reaction on a global level. Dr Cheng offered the example of a company whose factory has been requisitioned for the production of masks. In such a case, the company might be attracted to a mediated outcome where it is compensated for the fair services of the factory or given new contracts for the manufacture of more masks. On the other hand, Professor Tawil’s view was that states would likely want to defend themselves instead of mediating, due to their internal regulations or concerns with mediating specific claims against the backdrop of a whole host of other similar claims.



The last topic of the session dealt with enforcement difficulties that may be faced by investors. Dr Cheng, Professor Tawil and Ms Bidhuri raised concerns about the differing standards of review in the enforcement or setting aside of arbitral awards, particularly in non-ICSID cases. Professor Shin observed that one measure available for investors is to obtain security from respondent nations in precarious financial positions. However, such measures need to be approached with caution as they may inflame sentiments against ISDS.


Closing remarks

In closing remarks, the panelists reaffirmed their views that the resolution of pandemic-related disputes will require a case-specific approach. Mr Sobota raised the issue of supply chain disruptions, where losses suffered by an investor may arise as a result of COVID-19 measures implemented in more than one state. Both Dr Cheng and Ms Bidhuri observed that this could create complications in establishing the causative link between the loss and quantifying the damages. Professor Shin noted that such cases could become trade disputes under the World Trade Organisation, with Dr Cheng adding that a private company may fund a dispute using the state as a proxy.

Finally, Mr Sobota asked the panelists whether they considered the current legal or procedural framework well-equipped to deal with the pandemic, or whether the pandemic has exposed gaps in the present framework. Professor Shin thought that the current ISDS framework may take too much time to resolve disputes, and one suggestion could be a special global commission to deal with COVID-related investor-state claims which can resolve such disputes within a specific timeframe. Ms Bidhuri thought that joint interpretative statements could be useful in assisting tribunals in the application of the law.



The session was an enlivening discussion on the various ways in which the pandemic may affect investor-state arbitration. The panelists were percipient in identifying the complications that the COVID-19 pandemic may present at each stage of an investor-state arbitration, and in advocating a sensitised approach to addressing these complications. It is perhaps only fitting that the session ended with the panelists expressing a measuredly optimistic view that international investment law, as a dynamic and ever-changing body of rules, will adapt to meet the demands of its time.

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SIAC Congress Recap: SIAC Virtual Congress 2021 Plenary Session on Interplay between International Arbitration and International Commercial Courts

Sat, 2021-09-11 01:00

The Singapore International Arbitration Centre (“SIAC”) hosted its annual Congress virtually for the second consecutive year on 10 September 2021.  2021 also marks the 30th anniversary of the SIAC.  In his keynote speech Mr K Shanmugam SC, Minister for Home Affairs and Minister for Law, Singapore, congratulated SIAC on successfully completing 30 years.  He commended SIAC for keeping pace with the requirements of international businesses by introducing various innovative mechanisms over the last 30 years, like emergency arbitration and early dismissal provisions.  However, he predicted that the next 30 years will be challenging as (i) the issues involved in disputes are becoming more complex, especially with the world reeling under Covid-19; (ii) new areas of disputes are coming up, like climate change; and (iii) new fora for dispute resolution will continue to emerge, giving parties more choices.  SIAC released video presentations commemorating the milestone, which can be accessed here (part 1, part 2, part 3and part 4).


Plenary Session | International Commercial Courts and International Arbitration – Friends or Rivals?

In the 2021 Queen Mary International Arbitration Survey, 90% of the respondents preferred international arbitration as the method for resolving cross-border disputes.  However, in recent times, specialised international commercial courts have also been established across the globe for a similar purpose.  The prominent examples include the Dubai International Financial Centre Courts (“DIFCC”), the Singapore International Commercial Court (“SICC”) and the China International Commercial Court.  In this context, the co-moderators, Professor Lawrence Boo and Dr Michael Pryles sought to explore:

  • first, whether the international commercial courts play a complementary role or compete with international arbitration; and
  • second, the appropriateness of international commercial court judges acting as arbitrators.

This post provides an overview of the discussion.

Dr Pryles set the stage by remarking that while arbitration works in conjunction with the courts, it would be naïve to ignore the fact that there is, at least, a perceived element of competition between the two systems.  Mr Geoffrey Tao Li Ma opined that the two systems complement each other.  He observed that most jurisdictions have a statutory leaning towards courts having a complementary role with arbitration – in terms of courts granting interlocutory reliefs and enforcing arbitral awards.  There is no competition between the two systems as the courts are not vying for a greater share of litigation.  However, Justice Ma explained that seen in a broader context, both courts and arbitration are part of the same system of administration of justice i.e. both provide the parties with the ability to resolve disputes properly and justly.  This is where litigants will have a choice to make between the two systems.  In this sense, the two systems could be seen to be competing with each other.

Professor Boo distinguished between a domestic court’s supportive function and the dispute resolution function of the international commercial courts.  Justice Judith Prakash, who is also a Judge of the SICC, explained that SICC was set up because it was perceived that there was a need for a court institution specialising in international commercial dispute resolution, which could complement dispute resolution by arbitration.  She noted that in dealing with international disputes, domestic courts are limited by their jurisdictional requirements and also by the fact that they deal with domestic law.  To fill these lacunae, the SICC was set up, which borrows certain best practises from arbitration.  The SICC has an international panel of judges hailing from both the common and civil law jurisdictions.  Before the SICC, unlike a domestic court, matters of foreign law are decided as a matter of law by way of counsel submissions and not as a matter of fact.  The parties have the freedom to use counsel of their choice – foreign counsels can represent their clients before the SICC.  Lastly, she also highlighted that there are some disputes which are not arbitrable, like insolvency.  In such instances, SICC may be available as an option.  She concluded that both systems are complementary but there may be some competition.  However, in her view, the field of international commercial relations is so vast that it is a question of “providing a buffet” i.e. ultimately, it is up to the parties to choose between arbitration and international commercial courts.

Justice Beverley McLachlin opined that there is no competition between the two systems.  She commented that arbitration is set within the context of rule of law.  Every agreement specifies the applicable law to that agreement.  So, in a substantive way, arbitration is dependent on the laws that have been formulated by judges in courts.

Like Justice Prakash, Dr Michael Hwang also viewed the two systems as competitors as well as complementary.  He elaborated that these two systems are competitors because both aim to solve disputes arising from the same cross-border transactions.  Like international arbitration, SICC also offers a neutral slate of judges hailing from different systems of law, confidentiality and flexibility of procedure.


International Commercial Court Judges acting as Arbitrators – A New Take on Double Hatting?

In the second part of the session, the panellists discussed a more nuanced aspect of the interplay between international commercial courts and arbitration.  The discussion focussed on whether it is appropriate for a member of an international commercial court (“International Judge”) to act as an arbitrator in the jurisdiction of that court.  For context, Dr Pryles set out the following two scenarios:

  • first, when co-arbitrators are looking to appoint a presiding arbitrator, then is it appropriate for the co-arbitrators to approach an International Judge when they know that the court is considering an appeal from an award made by one of the co-arbitrators?
  • second, would an International Judge be embarrassed to accept appointment in that court’s jurisdiction knowing that that court could entertain a set-aside application of any decision / award made by the judge in the arbitration proceedings?

Justice Ma referred to the tenets of conflict of interest, actual or perceived and concluded that, in principle, there is no reason why an International Judge cannot sit as an arbitrator within the jurisdiction of that international court.  But, he explained that when a non-permanent International Judge takes up an arbitrator appointment and owing to his court commitments, if he / she sits as an arbitrator after the court hours, this would appear improper.  This situation, according to him, is actually a perception issue and not really a matter of conflict of interest.

On the aspect of embarrassment for an International Judge in accepting arbitral appointments, Justice McLachlin reminisced that earlier in Canada there were no separate courts of appeal.  In case of an appeal, the judges would sit enbanc to determine that appeal.  So, it was usual for judges to sit in appeal and overrule decisions made by their fellow judges, and this system was never viewed from the prism of embarrassment.

Dr Hwang, who was formerly the Chief Justice of DIFCC, explained the DIFCC policy which enjoined the judges from accepting appointments in arbitrations where the seat was in DIFC.  The reason for this policy inter alia was to avoid any embarrassment as well as the theoretical possibility that in case of a challenge to an award seated in DIFC, one of the parties might object to the DIFCC hearing that challenge on the ground of possible conflict.  Dr Hwang added that since the International Judges frequently act as arbitrators, the chance of such a challenge is quite high.

As a possible solution, Professor Boo suggested that in the Singapore context, perhaps, the judges of the domestic courts may refrain from acting as an International Judge of the SICC.

On this point, Justice Prakash clarified that it is beneficial to have International Judges bring in the additional experience, which is useful while dealing with matters of international disputes.

With more international commercial courts coming into existence, inevitably, there will be a corresponding increase in instances when International Judges end up acting as arbitrators.  While this particular practice does not strictly come within the ambit of double hatting but, as articulated by the panellists, it may lead to a new discussion on double hatting in the future.



SIAC turned 30 in 2021.  It also emerged as the most preferred arbitral institution in Asia and achieved its highest ever case load.  Concurrently, Covid-19 brought the world to a grinding halt – throwing up new challenges for dispute resolution, like virtual hearings.  The verdict of the plenary session is clear that arbitration is not the default mechanism for resolving all cross-border disputes.  There is certainly room for international commercial courts to co-exist and flourish.  Given the rapidly changing world around us, SIAC has its work cut out in order to maintain its position as a leading global arbitral institution.



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Multi-tiered Clauses in China: How Courts Navigate the “Dismal Swamp”

Fri, 2021-09-10 01:00

Multi-tiered dispute resolution clauses – which typically require negotiation, mediation, and/or other form(s) of alternative dispute resolution (“ADR”) prior to submitting the dispute to binding arbitration – are ubiquitous, and a standard feature of complex construction contracts.

Contrary to their intended function of promoting efficiency and preserving business relationships, as observed by Gary Born, they form a “Dismal Swamp” of legal inconsistency, uncertainty, and disputes.1)Gary Born and Marija Scekic. Chapter 14: Pre-Arbitration Procedural Requirements. ‘A Dismal Swamp‘ in Caron, d. David. Practising Virtue Inside International Arbitration. Oxford University Press, November 2015, at page 243. jQuery('#footnote_plugin_tooltip_38444_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_38444_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Previous blogposts explored the variability of approaches to multi-tiered clause across national courts in leading European jurisdictions, Croatia, Singapore, Pakistan, India, and Switzerland.

Although multi-tiered clauses have yet to be comprehensively tested in Chinese courts, the March 2021 decision of the influential Beijing Fourth Intermediate People’s Court (“Beijing 4th IPC”), Chen Ya v. Yan Wenbo ((2021) Jing 04 Min Te 186 Hao) provides an occasion to survey emerging Chinese jurisprudence. Consistent with the general state of jurisprudence world-wide,2)See, e.g., Hamish Lal, Brendan Casey, et al., ‘Multi­Tiered Dispute Resolution Clauses in International Arbitration – The Need for Coherence’, in Matthias Scherer (ed), ASA Bulletin, Kluwer Law International 2020, Volume 38 Issue 4) pp. 796 – 820. jQuery('#footnote_plugin_tooltip_38444_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_38444_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Chinese courts do not rigidly assess multi-tiered clauses as matters of “admissibility” or “jurisdiction” or “procedure”. Despite occasionally conflating legal theories, they appear to navigate these murky waters cautiously, demonstrating a predilection for respecting arbitral jurisdiction and upholding awards.


Emerging Rules and Principles

It may be argued that fulfillment of pre-arbitration procedural requirements is condition precedent to formation of the parties’ agreement to arbitrate. In practice, however, Chinese courts are reluctant to entertain jurisdictional challenges involving failure to negotiate, suggesting they view this as a matter of admissibility, not jurisdiction. On this point, an April 2021 study of pre-arbitration procedural requirements by the Wuhan Arbitration Commission found that courts declined to support petitions to invalidate arbitration agreements on grounds the parties’ failed to conduct requisite negotiations in all twelve cases identified.

The more interesting analysis is found in domestic annulment decisions (and an occasional foreign-related case), from which various principles and rules are beginning to emerge:


Pre-conditions stated “in principle” are treated as procedural formalities.

The 2008 SPC Reply Letter in Wan Run He Development Co. Ltd. ((2008) Min Si Ta Zi Di 1Hao), which rejected the proposed non-enforcement of a “foreign-related” award, provides an example of early guidance to lower courts.

The clause at issue contained two pre-conditions to arbitration: (i) the parties “should” resolve disputes through “friendly negotiations”, and (ii) such negotiations are unsuccessful.  The SPC rejected the petitioner’s challenge to the tribunal’s jurisdiction, and found the first condition to have been stated “in principle” and without any time limitation, and accordingly opined that there would likely be divergent interpretations as to its performance and scope.

Under the circumstances, the court characterized the first condition as merely a “procedure requiring the formality of negotiation” and deemed the second condition as readily fulfilled by the act of filing for arbitration. This approach has been followed by the Beijing 4th IPC in the domestic annulment proceedings in Chen Ya v. Yan Wenbo, supra, involving a similar tiered clause, where portions of the Wan Run He decision were quoted verbatim.

These cases suggest that while performance of pre-conditions is a matter of jurisdiction (if so pleaded by petitioners), absent clear definition and time limits, courts will be satisfied with de minimus evidence of their fulfilment, in effect treating them as procedural formalities to be reviewed by the tribunal.


In search of bright lines.

Far from clearly defined are the criteria for determining whether a tiered clause is sufficiently detailed, and whether the pre-conditions are clear enough to be enforced by the courts.

In one case, Beijing Cheng Jian Wuye Guanli v.Beijing Shi Chongwenqu Yi Long Bieshu Yezhu Weiyuan Hui ((2018) Jing 04 Min Te 135 Hao), which is also noteworthy for its inclusion in the Beijing No. 4 IPC [2019] Standardization Guide for Adjudication of Cases Involving Judicial Review of Arbitration discussed in a previous blogpost, it was held inter alia that a tiered clause specifying institutional mediation was “clear”. The court also noted that the respondent had satisfied the pre-condition by submitting the dispute to mediation before the competent “real estate administration bureau”.


Do time limits matter?

In practice, Chinese courts also appear to treat time limits as procedural formalities without jurisdictional consequences.

The court’s view on this point evolved over time. In a 2005 decision,3)(2005)成民初字第912 (subsequently withdrawn from on-line publication) jQuery('#footnote_plugin_tooltip_38444_27_3').tooltip({ tip: '#footnote_plugin_tooltip_text_38444_27_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); the Chengdu Intermediate Court denied recognition and enforcement of an SCC award, finding that the respondent, Pepsi Co., failed to provide evidence that it had complied with the requisite 45-day negotiation period pre-condition. This is a rare example of a court denying recognition and enforcement of an arbitral award on the ground that a pre-arbitration negotiation requirement was not satisfied. In most of the published cases, courts tend to decide that the requirement for negotiation was satisfied based on prima facie evidence.

The tiered clause addressed in Shanghai Xuandu Entertainment Co. Ltd. v. Shanghai Nanshi Development Sports Business Department (2018) Jing 04 Min Te 408 Hao) required the parties to first “do their utmost to resolve the dispute within 30 days through friendly negotiations”. The court rejected the petitioner’s assertion that the award should be annulled on the ground that respondent failed to proffer evidence of performing this pre-condition, and endorsed the tribunal’s findings that the lapse of 30 days from receipt of respondent’s demand letter to filing of the arbitration was sufficient to satisfy the pre-condition, without need to examine the nature and substance of the negotiations.

The Beijing 4th IPC expressed a similar view in the 2019 decision, Jiang Qingfeng v. Li Zhenyu ((2019) Jing 04 Min Te 310 Hao), finding that the passage of two months from delivery of a demand letter to the filing of arbitration was sufficient to satisfy the 30-day negotiation period pre-condition. Another case, Shandong Hongqingyuan Foodstuffs (discussed below), demonstrates the court’s reluctance to invalidate an arbitration agreement on grounds of failure to file an arbitration within a specified time limit.

The courts may, however, require at least de minimis evidence that requisite negotiations have occurred.


Pre-arbitration requirements are not “mandatory procedures”.

In Jiang Qingfeng, discussed above, the court rejected the petitioner’s argument that the award should be annulled because of failure to perform pre-conditions of negotiation which constituted violation of “legally mandated procedures” under Article 58(3) of the PRC Arbitration Law (“CAL”). It was held that the required pre-filing negotiations did not constitute agreement on different “arbitration procedures” under the Beijing Arbitration Commission Rules at Art. 2(1) and was therefore not mandatory.

The Shanghai 1st Intermediate People’s Court took a similar position on a comparable tiered clause in the 2019 decision, Cui Ming v. Shanghai Guo Chun Venture Investment Co. Ltd. ((2019) Hu 01 Min Te 250 Hao), holding that such pre-conditions were outside the scope of “arbitral procedure violating legally mandated procedure”.


Grounds for invalidity of arbitration agreements?

In Jiang Qingfeng (discussed above), although validity of the arbitration agreement was not properly at issue, the court observed that pre-arbitration procedures “are in substance the agreement of the parties on choice of method to resolve disputes, and the free choice of the parties should be respected”. In Cui Ming (also discussed above), the court noted in dicta that failure to strictly observe the 30-day pre-filing negotiation period was an issue of validity of the arbitration agreement.  That said, courts are in practice reluctant to give effect to time limits potentially invalidating arbitration agreements.

In Shandong Hongqingyuan Foodstuffs Co. Ltd., et al v. Su Qian Zhong Shan Tian Rui Li Ding Enterprise Investment Center (LP) ((2018) Jing 04 Min Te 146 Hao Zhi Yi), which involved a tiered clause requiring negotiations as well as a time limit of 60 days from occurrence of the dispute to filing for arbitration, the Beijing 4th IPC in dicta rejected the petitioner’s argument that the award should be annulled under Article 58(1) of the CAL, since the respondent’s failure to file an arbitration within 60 days invalidated the arbitration agreement.  In the court’s view, the original intent of the tiered clause was to encourage expeditious resolution of disputes, not to create a mechanism that contemplates invalidation of the arbitration agreement.


In Search of a Clearer Path

If multi-tiered clauses prove to a be a chronic source of controversy in China, the SPC may in due course provide clear guidance in a formal Judicial Interpretation. In the meantime, published decisions of influential courts warrant continuing attention.


References ↑1 Gary Born and Marija Scekic. Chapter 14: Pre-Arbitration Procedural Requirements. ‘A Dismal Swamp‘ in Caron, d. David. Practising Virtue Inside International Arbitration. Oxford University Press, November 2015, at page 243. ↑2 See, e.g., Hamish Lal, Brendan Casey, et al., ‘Multi­Tiered Dispute Resolution Clauses in International Arbitration – The Need for Coherence’, in Matthias Scherer (ed), ASA Bulletin, Kluwer Law International 2020, Volume 38 Issue 4) pp. 796 – 820. ↑3 (2005)成民初字第912 (subsequently withdrawn from on-line publication) function footnote_expand_reference_container_38444_27() { jQuery('#footnote_references_container_38444_27').show(); jQuery('#footnote_reference_container_collapse_button_38444_27').text('−'); } function footnote_collapse_reference_container_38444_27() { jQuery('#footnote_references_container_38444_27').hide(); jQuery('#footnote_reference_container_collapse_button_38444_27').text('+'); } function footnote_expand_collapse_reference_container_38444_27() { if (jQuery('#footnote_references_container_38444_27').is(':hidden')) { footnote_expand_reference_container_38444_27(); } else { footnote_collapse_reference_container_38444_27(); } } function footnote_moveToReference_38444_27(p_str_TargetID) { footnote_expand_reference_container_38444_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_38444_27(p_str_TargetID) { footnote_expand_reference_container_38444_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Arbitration and the COVID-19 Revolution
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