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Arbitration Tech Toolbox: Training Arbitration Practitioners to Resist Cyber Attacks

Sun, 2022-10-02 01:24

“Dear Arbitrator,

This is your hacker.

You do not know me, but I already know you quite well. I am silently waiting for my opportunity to simply click and collapse your notebook.

I have nothing against you; it is simply that you are a keeper of gold: DATA. And not any type of data; it is actually information from a company that you know as “Claimant”. In fact, I have been trying for many months to build a supply-chain attack on Claimant… and guess what? I found that you are the weak spot into the company. Yes, you are the weak link in the chain as an external professional service provider.

I discovered on social media that your favourite city is Rotterdam, and after a few clicks and noting your dog’s birthday, I have your password! Unfortunately, you use almost the same password for your work devices too, so I already have access to your work notebook. You’ve also skipped the latest update of your operating system in your super interconnected phone – perfect, do not rush!

Last but not least, I am still deciding if I should claim a ransomware to you directly or to the company instead. I will see how you work on your group paper, or the document titled “Award”. Oh, and after checking your browser history, I see that you do not read or study anything about cybersecurity topics, suggesting that you are indeed my perfect target.

Again, it’s not personal – I just have to do my thing.

Best of luck with your concurring opinion, I hope you can finish it before your nephew’s wedding.

Apologies, but YOU HAVE JUST BEEN HACKED!”

Not all mail that you are surprised to see in your inbox results in a fairytale romance. To the contrary, the odds of that happening are likely to be quite low. Moving everything online, we have become perfect targets for hackers, increasing the risk of receiving a similar note. Such an email could indicate that you are actually hacked, or the email itself could be the beginning of the scam. As an arbitration community, we must get more resilient to cyber-threats.

Since the beginning of its activities in late 2020, CyberArb has aimed to provide practical tools and educational pieces, including its newly launched newsletter, to bridge the gap between theory and practice. To this end, CyberArb has partnered with ArbitrateUniversity.com to offer a new online training module on cybersecurity essentials in international arbitration, dedicated to all arbitration practitioners. The module begins with a brief introduction by Karina Albers (independent arbitrator, Chair of the London Branch of CIArb and member of CyberArb’s Executive Board), who explains that cyber-attacks are a growing threat worldwide. The Covid-19 pandemic has compelled us to move to a hybrid work environment, one that relies heavily on the Internet and that results in an escalation of cyber-attacks. The international arbitration community has pioneered virtual hearings, which, on the one hand, have put parties at ease but, on the other hand, have made arbitral institutions and law firms especially vulnerable to cyber-attacks.

 

Soft Law Instruments to Promote Cybersecurity in International Arbitrations

The module includes input from Shobana Iyer (independent arbitrator, founder of Swan Chambers and member of CyberArb’s Advisory Board), who shares her insights on the soft law of cybersecurity and international arbitration. The increase in the use of data, and advancements in technology such as videoconferencing and e-filing, have made cybersecurity a more pressing issue. The involvement of parties located in various jurisdictions using different technologies has created pressure on digital infrastructure, making it more vulnerable to cyber-attacks. Iyer highlights that any cybersecurity breach could result in reputational damage for the parties and arbitrators. This may also lead to issues in the enforcement of an award as such breaches would taint the data and confidentiality involved in the arbitral proceedings.

These risks have spurred the formulation of various soft laws in the form of guidelines and protocols in international arbitration. Such guidelines include the ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration (the latest version of which was recently presented during the 2022 ICCA Conference in Edinburgh), which aims to increase cybersecurity awareness in international arbitrations and provide a framework for incorporating cybersecurity measures in arbitral proceedings; the AAA-ICDR Best Practices Guide for Maintaining Cybersecurity and Privacy (2020), which offers useful guidance to parties, their representatives and arbitrators concerning cybersecurity measures they should consider adopting; the CIArb Framework Guideline on the Use of Technology in International Arbitration (2021), which covers a series of principles on technology use and introduces best practice to ensure cybersecurity in arbitration; and the ICC Arbitration and ADR Commission Report on Leveraging Technology for Fair, Effective and Efficient International Arbitration Proceedings (2022), which contains a variety of resources to promote the safe use of technology in arbitration, including sample procedural language relating to technology tools, checklists for virtual hearings etc.

 

Implications for Admissibility of Evidence

Cemre Kadıoğlu (Ph.D Candidate at University of Leicester and member of CyberArb’s Executive Board) discusses the consequences of cyber-attacks on arbitration. She analyses several important international arbitration cases to discuss the admissibility of evidence obtained through cyber-attacks. Kadıoğlu further touches upon the cost element of such breaches and the allocation of costs. Issues such as the role of arbitrators in cybersecurity challenges and the use of cybersecurity breaches as a guerilla tactic are addressed while relying upon existing international protocols and guidelines. These issues are not merely academic: in 2021, the defendant in a multibillion-dollar Brazilian ICC arbitration challenged the award on the grounds that the claimant had orchestrated a hacking of its servers and had thus gained access to confidential information during the arbitral proceeding.

 

Practical Tips to Enhance Cybersecurity Throughout Arbitrations

Uniquely, this module also includes the expertise of Tony Gee (an ethical hacker and Security Consultant at Pen Test Partners) who provides practical tips on how to be cyber secure at all stages of an arbitration. In particular, Gee recommends that arbitrators remain cautious and protect themselves from cyber-attack by, inter alia, using complex passwords with special characters and numbers; applying different passwords for different platforms; storing said passwords on a Password Manager; implementing multi-factor authentication; and keeping the systems and software of digital devices including computers and mobile-phones up to date. Gee also gives several tips on what to do if one experiences a real hack. For example, he advises that arbitrators should consider obtaining liability insurance for cybersecurity in advance, and should act rapidly to seek help from a service provider, such as an incident response company, if they experience a hack.

Any individual or institution involved in arbitral proceedings may become a target of cyber-attacks. Becoming aware of the threats and learning how to respond once faced with them is crucial not only to avoid cybersecurity-related problems but also to create a more robust arbitration community. The training course is a good first step to help practitioners get more knowledgeable about cybersecurity, build defenses against attack, and possibly avoid heartbreak along the way.

Readers wishing to learn more about CyberArb e-learning programs can contact CyberArb here.

 

Further posts on our Arbitration Tech Toolbox series can be found here.

The content of this post is intended for educational and general information. It is not intended for any promotional purposes. Kluwer Arbitration Blog, the Editorial Board, and this post’s authors make no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information in this post.

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International Law Talk Podcast and Arbitration: International Disputes and Digital Disruption, in Conversation with Claudia Salomon, President of the ICC International Court of Arbitration

Fri, 2022-09-30 01:37

International Law Talk is a series of podcasts through which Wolters Kluwer provides the latest news and industry insights from thought leaders and experts in the fields of International Arbitration, IP Law, International Tax Law and Competition Law. Here at Kluwer Arbitration Blog, we highlight the podcasts focused on international arbitration. In this latest episode, Kiran Nasir Gore, Associate Editor of Kluwer Arbitration Blog, interviews Claudia Salomon.

Claudia developed her expertise in international arbitration at leading global law firms before launching her practice as an independent arbitrator. She presently serves as President of the ICC International Court of Arbitration and is the first woman to hold this position in its nearly 100-year history. During her first year in the role, ICC has launched a series of initiatives to assure that its dispute resolution services continue to meet the needs of global business.

The podcast discussion centers on technology in arbitration and various disruptions and opportunities that are anticipated to shape the future of dispute resolution. As the world’s preferred arbitral institution, ICC is leading this charge.

http://arbitrationblog.kluwerarbitration.com/wp-content/uploads/sites/48/2022/09/KLI-afl-21-trailer-DEF.mp3

The conversation explores:

  • The recent evolution in international arbitration, beginning with the accelerated use of virtual and hybrid hearings due to COVID-related lockdowns and precautions, reflecting the adaptability of the international arbitration community, especially as compared to many courts around the world, and new expectations of in house counsel.
  • The need for increased consideration of data privacy and cybersecurity in international arbitration, especially as we increasingly exchange digital communications on platforms that may have not been designed or intended for such sustained use. Claudia urges us to read the updated Report of the ICC Commission on Arbitration and ADR Task Force on the Use of Information Technology in International Arbitration, which includes checklists, draft procedural orders, and template data privacy language that can be incorporated into procedural materials.
  • How the decentralization of web3, including blockchain technology, digital currencies, and tokenizations, will give rise to new and different kinds of disputes. Claudia comments that, at a basic level, ‘off-the-chain’ disputes that imply web3 will still need to engage with traditional dispute resolution methodologies, including contract interpretation and application of the law. Meanwhile, ‘on-the-chain’ disputes may lead to new modes of dispute resolution and new methodologies and solutions will need to be developed by thought leaders in law, business, and academia.
  • The nexus between access to information and the digital transformation of various industries. The decentralization of information has led to the prevalence of new tools, including for example Kluwer’s Profile Navigator and Relationship Indicator tools, which are informed by artificial intelligence and Kluwer Arbitration’s deep archives of legal materials and commentaries.
  • Hybrid dispute resolution, including the use of arbitration in conjunction with other methods of alternative dispute resolution (ADR), both on a phased and simultaneous basis. The ICC Task Force on ADR and Arbitration will issue a report later this year, reflecting ICC’s focus on assuring global business has access to all of the tools in the toolbox to resolve their disputes.

Throughout, the conversation touches upon the ICC Court’s upcoming 2023 centenary celebration and the institution’s leadership in the field of international arbitration.

Listen to the discussion: International Disputes and Digital Disruption, in Conversation with Claudia Salomon, President of the ICC International Court of Arbitration.

Follow the coverage of the International Law Talk arbitration podcasts on Kluwer Arbitration Blog here.

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Crypto Arbitration: A Survival Guide

Thu, 2022-09-29 01:46

As the Crypto Winter’s chilling effect continues to be felt across the crypto sector, with crypto assets having declined in value by approximately US$ 2 trillion since their 2021 peak, international arbitrations over disputes related to crypto assets (“Crypto Arbitrations”) look set to multiply in 2022. This post provides an introduction to the types of challenges, whether legal, practical or valuation related, that arise in Crypto Arbitrations.

 

Decrypting Crypto Disputes

Crypto disputes come in all shapes and sizes. Some may raise novel legal issues such as what law applies to a blockchain transaction in the absence of a governing law clause or whether a binding dispute resolution clause can be embedded in a smart contract.

However, where the disputing parties’ relationship is governed by a traditional contract, which will frequently be the case, lawyers will already be familiar with many classes of crypto disputes, and the legal issues they raise, because they also arise in the context of other types of disputes:

  • investment (e.g., seed capital and venture capital investments in crypto platforms; shareholder disputes associated with such investments);
  • financial transactions (e.g., margin calls against traders and/or forced close-outs of trades by crypto exchanges; failure of crypto platforms to return non-fungible tokens (‘NFTs’) or other crypto assets provided as collateral for loans of cryptocurrencies);
  • supply of services (e.g., service outage claims by crypto exchange users);
  • sale of goods (e.g., defective, or delayed supply of, bitcoin mining equipment);
  • fraud and mis-selling (e.g., misrepresentations as to the nature or value of reserve assets behind ‘stablecoins’);
  • outstanding debts (e.g., failure of crypto hedge funds to repay loaned crypto assets); and
  • intellectual property (e.g., use of artworks for NFTs without copyright licences).

Although the substantive legal issues that arise in crypto disputes may therefore be familiar to lawyers, the same will often not be true of disputed factual issues. For example, input from industry experts may be required for lawyers to understand how a DeFi platform’s risk management system operates and whether it is in line with market practice. Accordingly, like in construction disputes, lawyers may find it necessary to obtain expert advice to fully evaluate the merits of their client’s case.

 

Crypto Arbitration Challenges

Many crypto businesses include arbitration agreements in their contracts. This is unsurprising, both conceptually and practically. Conceptually, crypto’s decentralised ethos sits well with arbitration’s focus on party autonomy and (relative) freedom from national court interference. Practically, the features that make arbitration well-suited to resolving cross-border disputes apply equally to crypto disputes, including procedural flexibility, neutrality, confidentiality, the ability to appoint arbitrators with relevant experience and, subject to the public policy point described below, international enforceability of awards.

Crypto Arbitrations can nevertheless be challenging for lawyers and their clients. Examples of five challenges are set out below.

  1. Crypto Regulation, Arbitrability and Public Policy

Mainland China, Russia and Qatar, among other jurisdictions, have banned crypto assets or heavily regulated their use. If a Crypto Arbitration is seated in such a jurisdiction, or enforcement of an award is sought there, national courts may rule that crypto disputes are not arbitrable or deny enforcement of awards on public policy grounds. Indeed, in 2020, a court in Mainland China set aside an award concerning a cryptocurrency dispute on public policy grounds.1)Gao Zheyu v Shenzhen Yunsilu Innovation Development Fund Enterprise (LP) and Li Bin (2018) Yue 03 Min Te No. 719. jQuery('#footnote_plugin_tooltip_42695_9_1').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Similarly, in 2021, an appellate court in Greece confirmed a court of first instance’s judgment that had refused enforcement of an award denominated in bitcoin on public policy grounds.2)Western Continental Greece Court of Appeal, 27 September 2021, unreported; Court of First Instance Agrinio, 23 October 2018, unreported. jQuery('#footnote_plugin_tooltip_42695_9_2').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Sometimes such risks may be mitigated through careful drafting of a party’s request for relief. For example, depending on the jurisdiction, requesting an award of damages quantified in fiat currency of equivalent value to the crypto currency in dispute, rather than the crypto currency itself, may reduce the likelihood of enforcement being denied.

  1. Identifying the Correct Counterparty to the Arbitration

Crypto businesses are sometimes organised and operated in an opaque manner. It may not be apparent, based on publicly available information, whether a business uses a conventional corporate structure (e.g., parent company / subsidiary relationship) or even the jurisdiction(s) in which it is based.

This can create challenges for Crypto Arbitrations, including with respect to identifying the parties to the arbitration agreement and their role, if any, in the dispute. For example, Binance’s User Terms contain an arbitration agreement between the user and “Binance Operators”, explored further here. This open-ended definition includes but is “not limited to legal persons (including Binance UAB), unincorporated organizations and teams that provide Binance Services and are responsible for such services”. When a dispute arises, Binance’s User Terms make the claimant party responsible for determining the “counterparties” to the dispute “depending on the specific services you [the claimant] use and the particular actions that affect your rights or interests”. Absent joint and several liability, arbitrating against the wrong party could lead to a tribunal rejecting an otherwise valid claim.

Once the correct party or parties have been identified, thought should also be given to their ability to ultimately satisfy an award for damages since the Crypto Winter has negatively impacted many crypto businesses’ finances. Arbitrating against a party on the verge of financial collapse may be of limited use.

  1. Securing Interim Measures Over Crypto Assets

Crypto businesses’ main assets are generally not traditional assets, like real estate, but crypto assets. Interim measures can therefore be essential in Crypto Arbitrations given the potential for crypto assets to be dissipated in seconds, with only a few mouse-clicks.

While the legal issue of whether crypto assets are “property” remains controversial in many jurisdictions, this has not stopped courts in Hong Kong3)Yan Yu Ying v Leung Wing Hei [2022] HKCFI 1660; Nico Constantijn Antonius Samara v Stive Jean Paul Dan [2022] HKCFI 1254. jQuery('#footnote_plugin_tooltip_42695_9_3').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and Singapore4)CLM v CLN and others [2022] SGHC 46. jQuery('#footnote_plugin_tooltip_42695_9_4').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); from granting proprietary injunctions over crypto assets. English courts have also been prepared to grant injunctions over crypto assets.5)AA v Persons Unknown [2019] EWHC 3556 (Comm). jQuery('#footnote_plugin_tooltip_42695_9_5').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Indeed, the English courts have shown an admirable willingness to embrace technology in the context of crypto disputes, including by allowing proceedings to be served via an NFT on the blockchain.6)D’Aloia v Person Unknown & Others [2022] EWHC 1723 (Ch). jQuery('#footnote_plugin_tooltip_42695_9_6').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_6', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Emergency arbitration may also offer a viable method for obtaining interim measures over crypto assets, particularly where emergency arbitrators are prepared to grant urgent ‘preliminary orders’.7)See Prime Finance Arbitration Rules 2022, Article 25(7). jQuery('#footnote_plugin_tooltip_42695_9_7').tooltip({ tip: '#footnote_plugin_tooltip_text_42695_9_7', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

  1. Valuation Challenges

Valuing crypto currencies can be straightforward since there are frequently readily available quoted prices similar to observable commodity prices. However, difficult issues can arise where the crypto currency is illiquid, including with respect to the bid-ask spread and purchase price premium.

Valuing crypto businesses may also pose problems. One key challenge is the lack of comparable publicly listed companies with sufficient and robust financial information to conduct a market-based valuation. Taking the crypto exchange industry as an example, the only major publicly listed exchange is Coinbase and its market observed pricing data only goes back to 14 April 2021 when it was publicly listed.

Another key challenge is assessing a crypto business’ future prospects at the valuation date and identifying corresponding implications on the key value drivers. For example, in an exchange, higher trading volume will generate higher transaction revenue and profit, resulting in a higher valuation. Forecasting future trading volumes may not be straightforward where the valuation date falls in a period of significant market volatility as seen during the Crypto Winter.

Indeed, with the sharp decline in cryptocurrency values since 2021, the choice of valuation date can significantly impact the quantification of damages. Similarly, given this market volatility, the damages available under a tort claim may be very different from those under a contractual claim given the different measures of damages that can apply to such claims.

  1. Arbitration Rules and Class Actions

 Most institutional arbitration rules are already sufficiently flexible to allow arbitrators to adapt procedures suitable for Crypto Arbitrations. However, their limits are already being tested in certain respects, with one hot topic being class-action style disputes. For example, when a crypto exchange experiences an outage, there may be hundreds of impacted parties, each with a relatively small claim against the exchange. Class-actions could help address access to justice concerns in these situations since it would otherwise be uneconomical for each individual party to bring a separate arbitration. Whether the creative application of joinder and consolidation mechanisms in arbitration rules, for example, can accommodate class-actions remains to be seen.

 

Conclusion

Crypto Arbitration is still at an early stage of development. This post has identified several challenges but others will undoubtedly emerge over the coming months as arbitral tribunals and national courts are exposed to more crypto disputes. It will be interesting to see how these challenges are addressed and also how much traction competitors to traditional arbitration, like decentralized blockchain-based arbitration services such as Kleros (explored here), can gain in the burgeoning crypto dispute market.

References[+]

References ↑1 Gao Zheyu v Shenzhen Yunsilu Innovation Development Fund Enterprise (LP) and Li Bin (2018) Yue 03 Min Te No. 719. ↑2 Western Continental Greece Court of Appeal, 27 September 2021, unreported; Court of First Instance Agrinio, 23 October 2018, unreported. ↑3 Yan Yu Ying v Leung Wing Hei [2022] HKCFI 1660; Nico Constantijn Antonius Samara v Stive Jean Paul Dan [2022] HKCFI 1254. ↑4 CLM v CLN and others [2022] SGHC 46. ↑5 AA v Persons Unknown [2019] EWHC 3556 (Comm). ↑6 D’Aloia v Person Unknown & Others [2022] EWHC 1723 (Ch). ↑7 See Prime Finance Arbitration Rules 2022, Article 25(7). function footnote_expand_reference_container_42695_9() { jQuery('#footnote_references_container_42695_9').show(); jQuery('#footnote_reference_container_collapse_button_42695_9').text('−'); } function footnote_collapse_reference_container_42695_9() { jQuery('#footnote_references_container_42695_9').hide(); jQuery('#footnote_reference_container_collapse_button_42695_9').text('+'); } function footnote_expand_collapse_reference_container_42695_9() { if (jQuery('#footnote_references_container_42695_9').is(':hidden')) { footnote_expand_reference_container_42695_9(); } else { footnote_collapse_reference_container_42695_9(); } } function footnote_moveToReference_42695_9(p_str_TargetID) { footnote_expand_reference_container_42695_9(); 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_42695_9(p_str_TargetID) { footnote_expand_reference_container_42695_9(); 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 Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Poland to Withdraw from the ECT: Who Does It Benefit?

Tue, 2022-09-27 01:33

Poland surprised the world when on 25 August 2022 the Government submitted to the Polish Parliament a draft law authorizing the President of Poland to terminate the Energy Charter Treaty (ECT) and the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects. The idea of Poland terminating the ECT had not been floated in the media nor was it on Poland’s political parties’ agenda before the step was taken. This post presents Poland’s stated reasons for withdrawal of the ECT and explains why the actual motives behind this decision remain unclear.

 

Draft Law

The draft law and the termination instrument attached to the Polish Government’s decision are simple and succinct. They are limited to a plain vanilla authorization for the President to withdraw from the ECT unilaterally. Attached to them is an interpretative declaration to the ECT, which seeks to reflect Poland’s position that, following Komstroy, arbitral tribunals lack jurisdiction to hear intra-EU claims under the ECT.

As required by Polish law, the draft act is accompanied by a written statement of motives explaining the need for the new regulation, its basic concepts, anticipated social and economic impact, as well as the assessment of conformity of the proposed act with EU law.

 

Official Reasons for Poland to Leave the ECT

According to the statement of motives, Poland considers the withdrawal from the ECT to be necessary, primarily because the treaty is incompatible with EU law. Poland asserts that most ECT arbitral tribunals disrespect jurisdictional limitations resulting from EU law. It also perceives that the chances to accomplish a successful reform of the ECT in the current negotiations process are low. Thus, unilateral withdrawal is presented as the only way to achieve compliance with EU law.

Poland asserts that the negotiations mandate of the European Commission does not entail the amendment to Article 26 ECT. This statement does not address the fact that in accordance with draft Modernized ECT released in June 2022, the application of Article 26 ECT shall be excluded, as between Member States of the same Regional Economic Integration Organization.

Poland also maintains that while its nationals are reportedly uninterested in the investment protection options under the ECT, Poland has been a respondent state in numerous arbitrations under this treaty, incurring significant defence costs. These costs are now presented as the potential savings which Poland stands to gain upon its withdrawal from the ECT. The document also asserts that the “accelerating energy transformation” would be “impaired”, if Poland were obliged to pay “high damages based on vague treaty standards to fossil fuel investors” for “alleged breaches of their rights”. Again, no reference is made to the draft Modernized ECT, which seeks to address the risk of slowing down the climate change by fossil fuel industry investors.

The statement of motives maintains that there is no clear evidence to suggest that Poland remaining as a party to the ECT would attract new investments. It suggests that other legal mechanisms, including proceedings before domestic courts and international human rights bodies, offer comparable standards of protection to individuals and their investments. At the same time, the document underlines the reported vagueness of the ECT provisions and refers to the risk of ‘regulatory chill’ which the ECT is said to produce. Again, no reference is made to the way in which the Modernized ECT purports to address this problem.

 

Appraisal of Poland’s Stated Reasons for Withdrawing from the ECT

These reasons for withdrawal can, of course, be easily criticized. Poland pretends to be a defender of EU law, when it ostensibly violates EU law on various points, including judicial independence. Poland considers its domestic court system and the international human rights protection system as equivalent to investor-state dispute settlement mechanisms under the ECT, while it has spent the last six years dismantling the independence of its judiciary.  Indicatively, the Polish Constitutional Court even issued a politically-loaded judgment stating that Article 6(1) of the European Convention of Human Rights is inconsistent with the Polish Constitution (Case No. K 7/21 of 10 March 2022, in the aftermath of the ECtHR judgments in the case of Xero Flor v. Poland (application no. 4907/18), as well as in the case of Dolińska-Ficek and Ozimek v. Poland (applications nos. 49868/19 and 57511/19). Poland refers to the risk of from fossil fuel claims when it has promoted the coal and gas sectors in the past several years. None of these officially stated reasons is really convincing.

A closer reading of the statement of motives suggests the importance of Article 47(3) ECT for Polish Government. Poland invokes that provision to assert that once the withdrawal takes effect, no new extra-EU investments shall enjoy protection under the ECT in Poland, during the sunset period. In accordance with Article 47(2) ECT, the withdrawal shall take effect after one year after the date of the receipt of the notification by the depositary. The investments that shall exist on the date the withdrawal takes effect, shall be protected for 20 more years. In other words, the intention behind the withdrawal is to exclude protection in Poland of the investments from outside the EU, made in late 2023 or later.

With regard to intra-EU investments, Poland relies on the CJEU judgment in Komstroy, to conclude that such investments do not enjoy protection under the ECT even now. Upon withdrawal, Poland intends to make a unilateral declaration under Article 30(4) VCLT asserting that the arbitration clause contained in Article 26 ECT cannot be applied in intra-EU disputes. This declaration is unlikely to be accepted as binding by the arbitral tribunals. It is consistent, however, with the approach recently taken by Poland to terminate its intra-EU BITs invoking their incompatibility with EU law.

 

Question Marks

Two questions immediately spring to mind as a reaction to Poland’s proposed withdrawal from the ECT. Why now? And, which investors, if any, are targeted by the intended withdrawal?

The timing of the draft law is peculiar. If perfected, the withdrawal shall enter into force around the time of next parliamentary elections in Poland, which may be lost by the incumbent political party. In such case, any perceived benefits of the withdrawal would fall on the opposition.

On the other hand, the proposed withdrawal comes two months after an agreement in principle was reached in June 2022 on the draft Modernized ECT. As stated in the statement of motives, Poland believes that the final approval is unlikely and that the ratification process would take years. This pessimism can be linked with the recent initiative of several EU Member States, including Spain, Germany, and Belgium, to convince the European Commission about the need to collectively withdraw the EU from the ECT. It appears, however, that the European Commission has so far resisted these demands. Hence, either Poland’s skepticism is unwarranted, or more withdrawals may be expected to come.

Assuming that the purpose of the withdrawal is to deprive new investors of their protection, the question arises if any particular investor group is at risk. Although the statement of motives specifically refers to fossil fuel investors, this can be a red herring. In Poland, most of the fossil fuel industry is owned by the state who has increased its market share through recent acquisitions of privately-owned power plants and the construction of new power generation units. The largest claims currently pursued against Poland under the ECT, such as Prairie Mining (now GreenX Metals), are not concerned with climate-related decarbonization, but Claimants instead claim that Poland discriminates against them in comparison to state-owned companies regarding access to hard-coal exploitation concessions.

If new claims arise in the future against Poland in the energy sector, they will rather concern energy sectors other than fossil fuels. The dry reality is that the war in Ukraine and Russia’s energy blackmail deployed against Europe have mercilessly revealed deficiencies of Poland’s energy strategy. The country desperately needs to limit its overdependence on coal and gas. This means the return to renewable energy and an attempt to build nuclear power plants. In all such energy projects, Poland will have to rely on foreign equipment, know-how, capital, and technology. This can be clearly evidenced in the ongoing licensing processes of offshore wind farms on the Baltic Sea, which are expected to bring additional 10 GW to Poland’s generation capacity. In turn, Poland’s new nuclear project will be constructed in cooperation with a US company – Bechtel. These and similar, capital-intensive, high-tech investments carry an inherent risk of regulatory disputes against the state.

 

Conclusion

In summary, the proposed withdrawal from the ECT fits into Poland’s broader policy of limiting the access of foreign investors to international arbitration as well as curtailing external arbitral and judicial scrutiny. The financial impact assessment stops at the relatively low savings in arbitration costs or ECT membership fees, while ignoring the costs of raising capital for accelerated energy modernization under unfavorable market and geopolitical conditions. The timing of this move creates confusion, both in terms of the ongoing ECT renegotiations and the energy deficit created by the war. As a result, it raises concerns that the supposed benefits are purely political, and they increase the level of political risk of doing business in Poland.

 

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Arbitration and Mediation in Japan: Is the Sun Rising?

Mon, 2022-09-26 01:30

The dispute resolution landscape in Japan is almost unrecognisable from the position 20 years ago.  In that time, Japan has evolved into a significant market for cross-border contentious legal matters.  Sophisticated Japanese corporations with significant overseas business are comfortable using international arbitration and mediation as methods of dispute resolution. 86% of the case load of Japan Commercial Arbitration Association (JCAA) from 2017 to 2021 involved international cases although overall case numbers remained largely static in 2020 and 2021 with an average of around 17 cases per year.  The HKIAC and SIAC remain popular institutions in the region for Japanese parties to resolve their disputes with recent annual reports showing an increase in cases involving Japanese parties.

Some of these changes include the updating by the JCAA of its institutional rules and other practices, the successful launch of the Japan International Dispute Resolution Center (“JIDRC“) and the opening of the Japan International Mediation Center in Kyoto.  However, more changes are still on the horizon including important changes to the Japanese legislative framework governing arbitrations seated in Japan as well as legislation designed to promote Japan’s attractiveness as a centre for mediation.

 

Upcoming changes to the arbitration legislative framework in Japan

In late October 2021, the Japanese Ministry of Justice’s Legislative Council outlined its proposals to amend Japan’s Arbitration Act (Act No. 138 of 2003) (the “Arbitration Act“). The proposals largely reflect the integration into Japanese law of the provisions of the UNCITRAL Model Law 2006.

 

Interim measures

The proposed changes include:

  • clarifying the types of interim measures that can be granted by tribunals including, specifically, orders to maintain or restore the status quo of the subject-matter of the dispute (such as freezing orders), orders to preserve property necessary for the realisation of an arbitral award and orders to preserve evidence;
  • requirements that tribunals can impose before granting interim measures such as the provision of security;
  • the termination or modification of interim measures; and
  • the enforcement by the Japanese courts of interim measures granted by arbitral tribunals and limited grounds for refusing enforcement.

In addition, the Ministry of Justice’s proposals include empowering the Japanese court to order payment of a penalty fee where a party breaches an interim prohibitory injunction granted by a tribunal.  This provision is particularly noteworthy for two reasons.  First, such a power goes beyond the contents of the UNCITRAL Model Law 2006.  Secondly, it is a significant change given the absence of an equivalent power where a party ignores an interim prohibitory injunction granted by the Japanese courts

The proposals do not extend to the enforceability of interim measures granted by an emergency arbitrator. This reflects both the position under the UNCITRAL Model Law 2006, which equally does not address this issue, and some concerns as to whether enforcement of such interim measures should be granted before the tribunal has had a chance to review them.

The clarity brought by the proposed amendments is largely to be welcomed as they bring the Japanese legislative framework into line with that found in other leading international arbitration centres in the region, including Singapore and Hong Kong.

 

Proposed administrative changes to the Arbitration Act

A number of the other proposals are aimed at relieving the administrative or other burdens on arbitration users in line with modern practice, such as:

  • extending the jurisdiction of the Tokyo District Court and Osaka District Court to hear arbitration-related cases. Currently, arbitration-related proceedings must be brought in (i) the district court designated by the parties, (ii) the district court having jurisdiction over the seat of the arbitration, or (iii) the district court having jurisdiction over the counterparty. The Ministry of Justice wanted to make proposals to cater for circumstances where determining the district court with jurisdiction may not be straightforward e.g. if the parties failed to specify a city in Japan as the seat and neither of them was a Japanese entity.  The change should also help contribute to increased expertise in dealing with arbitration-related cases in these two District Courts;
  • waiving the requirement to provide Japanese translations of all or some of the evidence in arbitration-related cases. Some non-Japanese parties have been wary to agree to arbitrations seated in Japan in the event they need to engage with the Japanese courts and incur the costs of translating lengthy documents from English to Japanese such as the Award or key contracts.  The proposals will help reduce these costs burdens for international parties considering arbitrations seated in Japan by allowing the courts to dispense with translations of all or parts of documents where it considers it appropriate to do so having heard submissions from the parties; and
  • parties to oral or other types of less formal agreements will also be able to refer disputes to arbitration more readily. Currently, Article 13(2) of the Arbitration Act prescribes the format of a written arbitration agreement.  The proposed changes will mean that the Arbitration Act will reflect Article 7(3) of the UNCITRAL Model Law 2006 in that an arbitration agreement is deemed to be in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or other means. These changes will be welcomed by businesses where contracts are often made orally such as in ship salvage transactions.

 

Further proposed changes to enhance Japan as a destination for international mediation

On 4 February 2022, the Japanese Ministry of Justice’s Legislative Council published legislative proposals for the enforceability of settlement agreements arising out of mediations whether domestic or cross-border. The proposals include amendments to the Act on Promotion of Use of Alternative Dispute Resolution (Act No. 151 of 1 December 2004) (the “ADR Act“) which applies to domestic mediations, while a new law is proposed for those arising out of international mediation.

Japan is not yet a signatory to the Singapore Convention on Mediation but it has been examining whether signing up to it would require any amendments to domestic law. The new legislative proposals were made in that context with a view to future implementation of the Singapore Convention in Japan. This move is significant given the increasing prevalence of mediation in the toolkit for dispute resolution in Japan. Other significant developments in this regard are the launch of the Japan International Mediation Center in Kyoto (JIMC-Kyoto) in 2018 and the JCAA’s publication of its own Commercial Mediation Rules in 2020.

 

Concluding remarks

The proposed changes to the Arbitration Act would see Japan join the other leading arbitral jurisdictions in the region in modifying their legislation to conform with the UNCITRAL Model Law 2006.  The arbitral community in Japan welcomes these changes as well as those additional changes designed to increase the attractiveness of Japan as a seat for international arbitration.

It is hoped that the relevant changes will be passed into law in 2023.

Japan is also likely to take steps to enhance its position as the leading regional centre for mediation.  It seems likely that Japan will eventually ratify the Singapore Convention after it has adapted its domestic legislation to cater for its implementation.

Of course, the dispute resolution landscape does not remain static.  As soon as the proposals discussed in this article are implemented, the Japanese Ministry of Justice will need to address new topics such as the legal framework for third-party funding in international arbitration as well as whether any legislative changes are required to reflect the recent popularity of emergency arbitrator provisions. Nonetheless, this continues to be an exciting time for the Japanese arbitration community as it looks – albeit somewhat belatedly – to carve out its position in the Asia-Pacific international dispute resolution market.

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ICCA Edinburgh 2022: An Outside Perspective, the Renaissance Arbitrator and a ‘Great Debate’: the ICCA Congress 2022 in Edinburgh Comes to a Successful Close

Thu, 2022-09-22 09:37

After a gala evening at the National Museum of Scotland filled with Scottish gastronomy and ceilidh dancing, delegates returned to the conference centre for the last day of the ICCA Congress.

Renaissance Arbitrator

This panel asked: “what can lawyers and arbitrators learn from disciplines outside the law and arbitration?”. That question is particularly timely as the issues being decided by arbitration increasingly require an understanding of areas outside the law, including complex technical and scientific issues, forward-looking damages issues requiring the application of sophisticated economic and finance models, the application of cybersecurity and data protection principles during the proceedings, and the impact this may have on good case management.

Elie Kleiman moderated the session, addressing the concept of cross-fertilisation, picking up on Lucy Reed’s intervention on the first Congress day on the human advantage of adding reasoning to decisions as opposed to relying strictly on self-learning machines. The renaissance human being is associated with philosophers, painters, engineers and more; the renaissance arbitrator today embraces multiple disciplines.

Melanie van Leeuwen used Aristotle’s twelve virtues to explain the character of the renaissance arbitrator: courage, moderation, generosity, magnificence, magnanimity, ambition, patience, truthfulness, humour, kindness, modesty and justice. These come together to show the attributes an arbitrator should strive to possess: a desire to protect the equality of the parties, good humour in proceedings, patience for younger counsel, objectivity, integrity and more.

Kathleen Paisley spoke about how complex modern issues – such as technology, science, allocation of damages and complex regulatory frameworks – impact and influence arbitrators. She noted that many cases turn on a technical question these days, which means that we will all encounter these issues regardless of our own area of expertise. She suggested that we must embrace the law but also vary our skill sets to deal with cases concerning various subject-matters, or engage experts to provide detailed understanding. Members of tribunals with pre-existing experience or interest, she noted, are ideal. For example, the issue of damages today is complex and we have to build our knowledge in addition to relying on the expertise of others.

Janey Milligan provided a history of adjudication as a default and efficient way to resolve disputes, especially in construction, with the aim of illustrating how arbitration might learn and take some elements from adjudication in order to develop. Adjudication benefits from a fixed and expedited timeframe. Ms. Milligan suggested that this encourages succinct submissions and eliminates unnecessary productions. Adjudication is seen as robust, fair and fast-paced, and can address technical nuances of construction due to the expertise of the arbitrators. She accepted that all arbitrations couldn’t be conducted in this way but that it might be sensible if some parts of arbitrations were taken and dealt with expeditiously. Finally, she took heart from young practitioners and their enthusiasm – in her view, they are the renaissance arbitrator, and she concluded by saying “let’s not keep tradition for tradition’s sake”.

Elie spoke to Bruno Guandalini’s paper, as the latter was sadly unable to attend. His paper focuses on human error and the human tendency to rely instead on instinct, as well as on unconscious bias. He asks who, what, why, when, where in the scope of cognitive biases and discusses education and training, awareness, and the need for more empirical data.

 

Different Perspectives

The different perspectives offered in this panel, moderated by Chiann Bao, came from outsiders to arbitration: states, the courts, regulators and – somewhat paradoxically – users of arbitration. As Patrick Baeten pointed out, it is telling of how the “inside” thinks if users of arbitration are considered to be outsiders.

Drawing on data from the annual Queen Mary University of London International Arbitration Surveys, and his own experience as in-house counsel, Mr. Baeten gave the user’s perspective. A key finding is that users and parties do not tend to appoint diverse or junior arbitrators because they want the “sure bet” of naming a well-known, prestigious arbitrator. Users also find that arbitrations are too expensive, but that these costs are difficult for users to control. Rather, they think that counsel must commit to affordable and efficient arbitrations. The overarching theme of Mr Baeten’s presentation was that in arbitration, in-house counsel have the potential to be actors of change, but that external counsel are seen to be obstacles to change.

Alvaro Galindo followed with the state perspective. Governments are supportive, passing arbitration-friendly laws and creating arbitration centres and institutions. Mr. Galindo questioned if there is true demand for these organisations as many will never administer a single arbitration. Rather they act more as promotional bodies, indicating to investors that the state is supportive of private international arbitration proceedings and, by extension, a safe destination for FDI.

Finally, Lord Hodge, spoke about how national courts – or at least the UK courts – view arbitration. In the Arbitration Act 1996 and Arbitration (Scotland) Act 2010, the UK has modern, updated laws favourable to arbitration. As finality in arbitration is ostensibly more important than the right decision, the courts take the stance that they should not intervene in arbitral decisions except where absolutely necessary. The grounds for challenging an award in the UK are limited to points of jurisdiction, serious irregularity, and – very rarely – error of law. As a signatory of the New York Convention since 1975, the UK courts recognise foreign arbitral awards and enable their enforcement, though a mechanism allowing the courts to hear questions of unenforceability exists. Generally, the UK is supportive of arbitration, a position made clear by Lord Hodge’s repetition of Lord Dunedin’s words in Sanderson & Son v. Armour & Co 1922 SC (HL) 117: “If the parties have contracted to arbitrate, to arbitration they must go”.

 

The Great Debate: “A World Without Investment Arbitration?”

The institution of investor-state dispute settlement (ISDS) is under attack. As the world of arbitration reacts, it is not yet clear what reforms will ultimately look like – or whether we’ll see the extinction of the system as we know it today. This event took the form of a debate, with Prof. Dr. Jan Kleinheisterkamp posing to the panellists Carolyn Lamm and Toby Landau KC the question whether a world without investment arbitration would be better. He described the arguments as positions, not truths, and introduced the debate.

Toby Landau KC took the position that the world would indeed be better without investment arbitration and made three main criticisms. First, the economic rationales for the current ISDS system are flawed and do not support it. There is no historical or empirical support for the system as currently devised and there is no evidence that countries have had depoliticisation as an objective. Second, the system suffers from fundamental perceived flaws. These problems are not necessarily real or grounded, but perception in itself is the point. Third, viable alternatives exist, including dispute prevention or ombudsman type processes. He concluded by noting that the arbitration community, as users of the system, do not own it, and the current regime is not theirs to protect. States wanted it only recently and it was not called for by them or investors, and it has no impact on direct investment.

Carolyn Lamm argued the other side. What is depicted as a mass exodus is actually a healthy process, with some withdrawals balanced by some re-joining or renegotiating. The ISDS system needs a vision going forward, which should include focus on climate change and its impact, but eliminating the system is not the answer. Early intervention or an ombudsman can work well together with the system and amending the New York Convention or ICSID Convention would be a process taking many years. Investment arbitration, she concluded, is the past, present and future and it is a viable system, which contributes to job creation, rising living standards, transfer of technology and assurance of due process.

Ong Chin Heng summed up the debate, commentating from the perspective of states. He agreed an ideal world would be better without investment arbitration, but in the real world investment arbitration is a “necessary evil”. However, newer, better alternatives must be considered, taking into account matters such as the equality of arms, as well as issues regarding costs, consistency, independence and impartiality. There is a need for structural reform, he concluded. In this process, the arbitration community should be open minded in what the system might look like and prepared to accept that there is a lot of work to do, taking into special consideration issues such as enforceability and dispute avoidance.

The Congress was brought to a close with a keynote delivered by Lord Carloway, Lord President of the Court of Session and Lord Justice General of Scotland, on the role of the Scottish courts in arbitration, with references to the ideas shared by speakers throughout the various Congress panels.

 

As the 2022 ICCA Congress in Edinburgh comes to a close, we thank our gracious hosts, the Scottish Arbitration Centre, for welcoming us so warmly to Scotland.

On to Hong Kong from here! The 2024 Congress will be hosted by the Hong Kong International Arbitration Centre and held on May 5-8, 2024. Stay tuned for registration details. We hope to see you there!

 

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ICCA Edinburgh 2022: ISDS, Regional Perspectives, New Frontiers in International Arbitration and More: Some Highlights of the Second ICCA Congress Day

Wed, 2022-09-21 09:37

The second day of the ICCA Congress took place on Tuesday, September 20. Delegates gathered in the morning for the presentation of the inaugural ICCA Guillermo Aguilar-Alvarez Memorial Prize, established in honour of former ICCA Governing Board Member Guillermo Aguilar-Alvarez. Professor Stefano Azzali said a few words on the life and career of Guillermo, fondly remembered as ‘Memo’, and Dr. Louie Llamzon followed with an introduction to the prize, its selection committee, and its inaugural winner. Guillermo’s widow and son made the trip to Edinburgh to join in the ceremony.

State of the World in 2022 – New Developments and Reform in International Investment Arbitration

Delegates then took part in the plenary session entitled ‘State of the World in 2022 – New Developments and Reform in International Investment Arbitration’, moderated by Jean Kalicki. She asked each panellist to reflect on key updates since the Sydney Congress in 2018.

Meg Kinnear spoke about the amendment of ICSID Rules effective since July 2022. She noted six key areas addressed in the amended Rules: time and cost of proceedings, third party funding, increased transparency, conciliation, revision of additional facility rules and standalone mediation rules. She also flagged the developing Code of Conduct for Adjudicators in Investment Arbitration. Anna Joubin-Bret then discussed the work of UNCITRAL Working Group III. She summarized four main concerns in ISDS: consistency, legitimacy, cost and duration. Encouragingly, Ms. Joubin-Bret remarked that the two pandemic years were not lost: during that time, Working Group III has developed text with reform options and there is an agreed framework which will act as a vehicle for reform by 2026. Ms. Joubin-Bret also mentioned difficulties that may lie ahead relating to institutional reform. Whilst some elements of the current proposals are far from consensus there is still time, and the architecture of these proposals is now there.

Patience Okala talked about reform taking place multilaterally and looked at developments from a Nigerian perspective. She talked about a disconnect between Nigeria’s aspirations for development and the quality of treaties to meet these aspirations. Ms. Okala mentioned the importance of alignment at an international level and amendments to Nigerian legislation in this area, which is ongoing. She emphasized that substantive reform is essential and that those conversations should be ongoing. For his part, Tom Sikora discussed his involvement with UNCITRAL Working Group III and questioned whether concerns in ISDS can be alleviated by procedural reforms. He spoke on the crisis of legitimacy and the growth of investor claims against states. He talked about proposed reforms including a multilateral investment court where member states elect judges for a nine-year term as salaried staff. This is seen as desirable from a state perspective, but it could be seen to lack legitimacy as it tilts the balance against investors. In his view, this was a political issue.

The panel concluded with a discussion around the reach of investment protection, including with respect to climate change. “Investment law is not an island” and the field must take account of what is happening around it.

The day continued with delegates splitting into three sets of parallel sessions. The morning set of sessions addressed regional themes, taking a “round-the-world trip” into current trends and issues in each region of the world.

Regional Themes I: The Americas and Europe between Constitutionalism and Populism

In this first regional session, moderator Francisco Gonzalez de Cossio, was joined by panellists Julie Bedard, Markus Burgstaller, Sir David Edward, and Eduardo Zuleta to explore the cross-regional concept of constitutionality in the context of arbitration, and the constitutionality of arbitration itself.

Judge Edward adopted a two-pronged approach to his presentation, examining: (1) legal and constitutional considerations between jurisdiction of international arbitral tribunals and transnational courts; and (2) the attitudes of the public and government to arbitration, and what has often been labelled as populism. Judge Edward also spoke to the proposal of the European Commission to develop a multilateral investment court, and stated “I haven’t found any cost benefit analysis of the proposal or quantification of what it will involve in respect of financial/human resources”.

Mr. Burgstaller observed the extent to which arbitral tribunals find themselves bound by judgments of the CJEU, the modernisation of the ECT, and noted that, with one recent exception, international arbitral tribunals in intra-EU BIT and intra-EU ECT cases have not accepted jurisdictional objections by EU member states. Ms. Bedard delivered a ‘conflict of laws’ analysis; reviewing the complex European debate on how the future of international arbitration may be shaped by quasi-constitutional questions such as those raised in the case of Achmea. In conclusion, Ms. Bedard remarked that “we may not know all of the answers but have come to appreciate the level of complexity that we have reached in the interaction between EU law and international arbitration”. Finally, Mr. Zuleta addressed the constitutionalism of arbitration, the fallout of sharpening political populism in Latin America, and the challenges this may pose to international arbitration. Mr. Zuleta passionately recognised that “ICCA has a legitimate voice, and a key part to play”.

Regional Themes II: Asia, Africa and the Middle East: Dynamism and Consolidation

Though Paris and London may have historically dominated the dispute resolution world as seats of arbitration, moderator Shaneen Parikh opened this panel highlighting the rise of arbitration destinations outside of Europe. Most notably, Singapore and Hong Kong have emerged as preferred arbitral institutions, rivalling the LCIA in London and the Paris-based ICC.

This panel went further than Singapore and Hong Kong, however, and opened up the floor to four panellists who described the development of arbitration in China, India, and Africa. To a certain extent, this was a whistlestop tour of these countries and regions’ approaches to arbitration. Sun Wei’s enumeration of the four characteristics of Chinese arbitration showed the structure with which China aims to develop both domestic and international strands of arbitration. Darius Khambata SC made a compelling pitch for India as a seat of international arbitration, highlighting its over 140 years of common law tradition and the willingness of Indian legal scholars and lawmakers to adapt the country’s arbitration laws to meet the community’s needs. Ndanga Kamau focused on the instruments and key parties and dispute types that shape the current arbitral landscape in Africa.

But Ms. Kamau’s presentation was more than a description of arbitration with African features. She embarked from a point of lyricism and history, recounting how the Portuguese explorer Diogo Cão voyaged up the Congo River in the 15th century, making an early trade connection between Europe and Africa. The shape of that economic connection would change with colonial regimes and the legal institutions and frameworks that would, in the post-colonial era, remain or be rejected by African countries – and here, Kamau was sure to underline that the continent consists of 57 sovereign nations and that the continent and the future of arbitration there cannot be dealt with monolithically.

In the afternoon, delegates were invited to choose again between a set of parallel sessions.

The Sociology of Arbitration

There is perhaps no field that loves a dispute as much as arbitration. That this panel pitted two academics against each other to debate the sociology of arbitration therefore feels like a mise en abyme of the profession. But as far as abysses go, it was an instructive one, for Malcolm Langford and Florian Grisel examined in great depth the practice of double hatting in the arbitration community. To double hat is to act as both arbitrator and counsel to parties at the same time – although obviously not for the same arbitration. Langford and Grisel do not necessarily make moral judgments on the practice of wearing two hats. Rather, the dispute at hand is about whether double hatting is waxing (Grisel’s view) or – through industry self-regulation – waning (Langford’s stance). Armed with abundant data, critiques on methodology, and virtuous references to a seminal work by Dezalay & Garth, each scholar made a compelling case for their argument.

Most interesting in this panel though was the third perspective, offered by Janet Walker. For her, Langford and Grisel’s emphasis on quantitative measures is in line with an arbitral community that is, to a certain extent, innumerate and therefore in awe of the mastery of numbers. To impress the arbitral community, talk about the community in figures. She did not encourage a total departure from the quantitative, but to consider the qualitative aspects of the industry’s sociology. She covered its history, considered its debate between transparency and confidentiality, and cited instances like the ICCA Congress itself as opportunities to study and know the community from within.

Ultimately, the dispute – perhaps a quibble – was never resolved. And given that the practice of double hatting seems to be viewed by the community as more virtue than vice – the crowding out of junior talent by more established and esteemed practitioners notwithstanding – its decline or rise is probably unimportant. Critics will continue to criticise it, academics will continue to debate it, and the community’s elite will continue to give patronage to the milliner.

Young Practitioners and our Future

At this session, young practitioners from various jurisdictions came together to lead discussions on six key areas in a “speed-conferencing” format. Delegates were divided into small groups to share views on the latest developments in arbitration, before coming together to report back on their discussions. The session was moderated by Yuet Min Foo and facilitated by Julian Bordaçahar, Naomi Briercliffe, Elizabeth Chan, Valentine Chessa, Arie Eernisse, Iuliana Iancu, Jonathan Lim, Melissa Ordonez, Nesreen Osman, Naomi Tarawali, Siddharth Thacker and Nhu Hoang Tran Thang. Delegates discussed six key topics: the proliferation of young entrepreneurs; AI and digital technologies; climate change and arbitration; corruption in arbitration; geographical diversity; and transparency and confidentiality.

On the proliferation of young entrepreneurs, it was felt that there is no such thing as the “right” age to launch a business (unless launching exclusively as an arbitrator, which was agreed to be too risky without prior appointments). Regarding AI and digital technologies, the group looked at this through two lenses: AI’s contribution to efficiency, and the use of AI in rendering substantive decisions, the latter being more controversial. On the topic of the environment, the group agreed that disputes related to State action to combat climate change will undoubtedly increase. It discussed whether arbitration is fit for purpose, and whether it is a “force for good or evil”?

The group discussing corruption in arbitration wondered whether there was a need for regulation of arbitration. The wide consensus was no, thus favouring party autonomy. There was also a discussion on the role of soft law and the IBA guidelines, flagging the need to refer to and update these types of guidelines more regularly. In terms of geographical diversity, the group discussed the right to a diverse pool of arbitrators, some emphasizing that this was not a right but an expectation from clients. They raised the example of the arbitration involving Jay-Z and how the AAA addressed the lack of diversity in its pool of arbitrators, taking the issue seriously when raised. Finally, the group discussed transparency and confidentiality, including how different jurisdictions viewed the presumption of confidentiality in arbitration. In striking a balance between the two, there was suggestion of a middle ground where awards could be published with redactions if this would be in the public interest. Then again, others remarked that clients agree to publishing awards in principle but are generally reluctant to publish their own.

In the later part of the afternoon, the program offered to the delegates the last set of parallel sessions, looking at two types of legal frontiers: the new technological frontier, and various new substantive frontiers.

New Frontiers I: Arbitration in the Age of (Post-Pandemic) Technology 

International arbitration now operates in an age of accelerating technological advancement – particularly in the post-pandemic world. Professor Fabien Gelinas, moderator, was joined by Ji En Lee, Julie Raneda, Prof. Maxi Scherer, and Kathryn Khamsi. Prof. Gelinas observed that the stabilising objective of the law has meant that it is often resistant to change. He remarked that it is now time to move away from debating “whether” the legal community will keep pace with the tech evolution, but rather, “when and how”.

Mr. Lee analysed how the pandemic has altered the face of legal tech, particularly in relation to hearings, digitisation of documents, the creation of paperless environments, and business travel. Mr. Lee noted that lawyers may now be subject to additional client-scrutiny and may be required to further justify their chosen method of working, in respect of efficiency and cost. Finally, Mr. Lee stated that existing solutions should be integrated in the first instance, rather than reinventing the wheel.  Prof. Scherer explored the use of predictive tools, and the benefits to them. She noted that there are limitations to the use of AI, particularly its inability to provide satisfactory reasons – a crucial requirement of any arbitration, so that precedent can be set. In closing, she remarked: “If we accept AI-based legal decision making, we accept that we depart from known legal theory about decision making and refer to probability and statistics. Is this something that we wish for?”

Ms. Raneda focused on decentralised justice, and the main features of blockchain in practice. Ms. Raneda drew comparisons between current and potential methods of practice, and advanced the view that use of the blockchain in arbitration would make the process less cumbersome and expensive. Finally, Ms. Raneda advised that the use of the blockchain in arbitration must be firmly grounded in party autonomy. Finally, Ms. Khamsi made a case for the use of innovative data collection / analytic models. Ms. Khamsi observed that lawyers do not question the mechanisms behind more familiar tools – we only concern ourselves with the results. As such, Ms. Khamsi advocated for increased trust in new technologies, and encouraged the audience to tap into the “splendid creativity” in which we live.

New Frontiers II: The Subject Matters of the Disputes of Tomorrow

The last panel of the day looked at global issues emerging in the modern world including climate change and environmental protection, global data storage and the cloud, access to ever scarcer water resources, energy and mining transition, and human rights initiatives. The panel was moderated by Nigel Blackaby, who said a few words on the new types of disputes resulting from climate change and new technologies, and the need to balance the rights of investors with human rights and environmental factors.

Değer Boden discussed the reality and consequences of climate change, food insecurity and water scarcity, and the need to balance investment protection with public policy. There was discussion on treaties only protecting investors and the need to renegotiate, while acknowledging the fact that this will take time and that there may be an interim solution. Peter Cameron looked at what is meant by the energy transition, noting that approximately forty percent of ICISD arbitrations were related to energy. He touched on the strong public policy commitment from many governments to shift energy economies to net zero, as well as the disruption and disputes we can expect in this sector in the future, noting that the legal issues will be familiar even if the subject-matter of the dispute is new.

Next, Rodman Bundy centred his remarks on the water disputes likely to arise in the future and the balance that will need to be struck between the right to freshwater resources and the rights of investors. He spoke about the UN Watercourses Convention and settlement of disputes. Finally, Ginta Ahrel spoke about cloud computing and issues around crypto assets, AI and others. She listed the various components of this technology, including hardware, infrastructure, platforms, and applications. Services are intertwined and complex which will lead to disputes, including around the use of data, regulatory and intellectual property issues.

ICCA 2022 in Edinburgh is drawing to a close. Day 3, which wrapped up earlier this afternoon, welcomed delegates to two panels in the morning, followed by a debate on the future of ISDS and a closing keynote. A full report of the last Congress day will come tomorrow – stay tuned!

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ICCA Edinburgh 2022: Enlightenment, Adaptation, Classics Revisited and More: A Round-Up of the First ICCA Congress Day

Tue, 2022-09-20 02:36

The first full day of the ICCA Congress took place on Monday, September 19. Delegates gathered early in the morning for a keynote speech by Louise Arbour, prominent former Canadian diplomat, Judge, High Commissioner for Refugees and Chief Prosecutor for the Yugoslavia and Rwanda Tribunals. Ms. Arbour spoke of international arbitration from an outward perspective as an instrument of justice, which ‘participates in the larger enterprise of social stability, progress, prosperity and peace’.

After the morning’s welcome session, the Congress programming was paused to enable delegates to watch the official State funeral of H.M. Queen Elizabeth II.

Arbitration’s Age of Enlightenment … and Adaptation?

The Congress resumed with the first plenary of the Congress entitled ‘Arbitration’s Age of Enlightenment… and Adaptation?’, moderated by Loretta Malintoppi. The plenary addressed a variety of topics, namely the historic roots of international arbitration, the modern day impact of artificial intelligence on arbitration, and the submission of States to international arbitration. J. Christopher Thomas began by recounting a brief history of Andrew Carnegie’s contribution of significant funds for the Peace Palace that would later house the Permanent Court Arbitration, with a grander vision for the peaceful resolution of international disputes, a concept that resonates strongly in recent times.

Then, Professor Hi-Taek Shin commented on a wave of ‘nationalistic, protectionist and unilateral policies’ and questioned how international arbitration would fare in these circumstances, noting that international arbitration is premised on neutral, efficient and fair dispute resolution and, by default, seeks to be the opposite of what recent trends have reflected. Yet international arbitration itself is facing a legitimacy crisis, which Carole Malinvaud addressed, suggesting that the concept of procedural loyauté can be developed to act as a remedy for the new wave of legitimacy crises facing international arbitration. Broadly speaking, loyauté could be viewed as an all-encompassing term to capture due process, fairness, equality of arms, and so on. Its application could be as broad as its definition, spanning the entire arbitration procedure, but she cautioned against falling into ‘due process paranoia’.

Finally, Lucy Reed posed the question: ‘AI vs. IA: End of Enlightenment?’. She focused on the probable ability of AI to solve problems without the involvement or understanding of humans, and explored how excessive reliance on precedents in international arbitration (IA), without the application of genuine reasoning, can be seen as a low-tech and low-value type of AI.

Progress Made / Progress to be Made – Exploring the Ways Forward

In the first panel of the afternoon, entitled ‘Progress Made / Progress to be Made – Exploring the Ways Forward’ moderated by Professor Susan Franck, speakers assessed the current state of arbitration in the modern age and the fundamental challenges it will face in the world of tomorrow. Diamana Diawara, Lucy Greenwood and James Hope shared their personal list of “Top 3” issues in international arbitration where change would provide a vital benefit to practitioners and parties alike. The panel arrived at a collective list of challenges facing the discipline. These were (1) costs and efficiency, (2) the environment, and (3) legal culture and equality. The panellists also identified opportunities to implement the change needed to face these challenges.

In general, parties (i.e., clients) want (or say they want) an efficient dispute resolution process delivered at a reasonably low price. Meeting this demand, though not always easy or possible in complex or highly escalated disputes, is how arbitration practitioners stay relevant and desired by clients, according to Diamana Diawara. Some suggested methods to temper costs were to have junior-led teams for price-sensitive parties, keep pleadings short and filings small, eliminate unnecessary fees, and encourage parties to settle wherever possible.

Just as the impact of climate change on arbitration has increased over the past decade, Lucy Greenwood noted that we must be aware of the impact of arbitration on climate change. Here, virtual and paperless hearings and filings can help the industry do its part to avoid contributing to the climate crisis. Though in-person hearings will sometimes still be preferred, arbitration’s carbon footprint can be greatly reduced simply by flying less and printing less.

The arbitration community has seen an increase in women appointed as arbitrators, but there are still gains to be made in diversity and inclusion, notably along ethnic and geographic lines. The historical skew towards male, white, western arbitrators has an economic impact as it may prevent talent from developing outside of established arbitration centres and hamper parties’ faith in the system. Though constrained by party choice and the paramount concern for quality, institutions should advocate for greater diversity in arbitral appointments, perhaps even including clauses addressing diversity in their rules.

Acknowledging that implementing changes in these areas will be difficult, incremental, and sometime more up to the requests of the parties than the will of arbitration practitioners, Mr. Hope concluded the panel’s comments citing the Serenity Prayer, attributed to the Lutheran theologian Reinhold Niebuhr (1892–1971):

God, grant me the serenity to accept the things I cannot change,

the courage to change the things I can,

and the wisdom to know the difference.

Once Upon a Time in International Arbitration I: Three Classics Revisited

The afternoon then saw delegates split into two sets of parallel sessions. The first of these sets focused on revisiting the past and examining it through modern-day lenses.

Panel 2 was entitled ‘Once Upon a Time in International Arbitration I: Three Classics Revisited’. The panel moderator, Galina Zukova, encouraged the panellists to discuss why three cases, Barcelona Traction, Abu Dhabi Oil, and Mitsubishi Motors, have earned ‘classic’ status, and to analyse how each one may be decided today.

Dr. Nagla Nassar examined the Abu Dhabi Oil judgment. Dr. Nassar reviewed the evolution of the judgment’s relevance – and the advancements in the arbitration field since it was decided in the 1950s. Most poignantly, Dr. Nassar observed that the decision sought to establish fairness, and posed the following question to the audience: “are we expected to strive for fairness and justice, or be guided by a strict need to apply the law?”

Professor Jan Paulsson explored the Barcelona Traction case, analysing the impact of the judgment on the protection of foreign investment, and the risks posed by the objective to potentially resurrect the judgment, which has since been overturned. Professor Paulsson implored the critics who wish to prohibit shareholder claims “to point to awards which have resulted in unjust enrichment to the claimants” and expressed little sympathy towards those who want the Barcelona Traction case to overrule shareholder claims, warning that this will discourage foreign investment.

Finally, Professor George Bermann provided an overview of the Mitsubishi Motors case. Professor Bermann advised that the decision does not mention the relevant agreement’s choice of law clause (Swiss), but rather, states that “if this dispute falls within the scope of the arbitration agreement, then it is arbitrable, and is to be decided under the law from which the claim arose” which in that case, was U.S. antitrust law. As a corollary to this point, Professor Bermann queried whether today’s tribunals could take the same approach: where parties have selected their choice of law, can a tribunal apply a law alternative to the parties’ choice? Finally, Professor Bermann analysed the “second look principle”, and whether it is a benefit to arbitration for courts to reserve the right to review an arbitral decision, in order to analyse whether the right decision was reached.

Once Upon a Time in International Arbitration II: State Responsibility – Then and Now

Panel 3, moderated by Stephen Drymer, and titled ‘Once Upon a Time in International Arbitration II: State Responsibility – Then and Now’ explored an interesting interaction between the ILC’s Articles on State Responsibility and investment arbitration. The panel consisted of Judge Bruno Simma, Professor Christian J. Tams, and Chester Brown. The panellists observed that the ILC Articles have always centred upon inter-state relationships and issues, but there has been a growing trend for investment arbitrations to refer to them. Indeed, it was mentioned that 219 references were noted in publicly-available awards. Concerns have been raised in the past on investment arbitrations being able to correctly apply international law, and cases such as UPS v Canada provide a clear signal that the arbitration community is in fact moving in the right direction. From what may have appeared to be a disharmony between public international law and investment law decisions and arbitrations, panellists remarked that the relationship is shifting towards a more synergic and harmonious one.

Arbitration’s Printing Press

In the later part of the afternoon, delegates were invited to choose between the second set of parallel sessions.

Panel 4 was entitled ‘Arbitration’s Printing Press’. Moderated by Ziad Obeid, the panel was composed of Paula Hodges KC, Lilit Nagapetyan (winner of the Young ICCA Essay Competition) Anke Sessier, Mallory Silberman, and Caroline Simson. Ms. Hodges explored the history of privacy in arbitration, noting that it rested at the forefront of parties’ objectives at the commencement of the arbitration-age. She expressed that, in her view, this objective remains, and is supported by 87% of respondents to a recent study, who confirmed that confidentiality is of key importance to them. The discussion progressed on matters of party autonomy, company reputation, heightening the chances of settlement, the risk of copycat claims and exposing trade secrets. Ms. Nagapetyan analysed the concept of legitimacy, and the foundational question of whose interest confidentiality serves.

As the former General Counsel of a large company, Dr. Sessler answered Mr. Obeid’s question as to whether businesspeople assume that arbitration equals confidentiality as the default position. Dr. Sessler noted that confidentiality clauses are often entered into, and that there exists a notion that privacy is synonymous with the arbitration process. Ms. Simson explored the benefits of increased transparency, including the public interest, predictability, heightened accountability, and legitimacy. In contrast, Ms. Silberman advanced the idea that we cannot debate transparency. She suggested that it was now time to strike this topic from conference agendas arguing that the issue of access was up to the parties or tribunal, not conference delegates. Ms. Silberman observed that there was already extensive information available to the public, and that we are in fact attempting to debate a narrow issue – whether or not parties’ pleadings should be published (an issue that can be resolved to service both parties).

Post Pandemic Dispute Resolution Toolbox

Last but not least, Panel 5, entitled ‘Post Pandemic Dispute Resolution Toolbox’ and moderated by Lindy Patterson KC, delved into the future and optimisation of the international dispute resolution process, structured around five questions: (1) Has the ADR toolbox changed as a result of the pandemic or other factors?; (2) Is the use of mixed-mode DR processes the way ahead?; (3) What can you do upfront at the beginning of the contractual relationship to facilitate mixed-mode DR?; (4) How can stakeholders (neutrals, parties, outside counsel and institutions) best assist and when? (5) What about innovation – new tools?

With these questions in mind, the discussion centred on different models and approaches that could be used when managing disputes. Wolf von Kumberg was a proponent of a mixed-mode approach, wherein a mediation process would run in tandem with an arbitration. The idea is that instead of letting arbitration be seen as the ineluctable result of an escalating conflict, by running it in parallel with a mediation, the option of settlement via mediator is a more present option; should mediation fail, the parties will already have a jumpstart on arbitral proceedings, so no time will be wasted moving from mediation to arbitration.

Elina Mereminskaya suggested that “knowledge-based tools”, which include interdisciplinary, dispute-preventative approaches to projects need to be part of the ADR toolbox. An example of a knowledge-based dispute resolution mechanism is the Technical Panel for the concessions of public works that exists under Chilean law, which must be composed of two lawyers, two engineer, and an economist. In the course of operating a concession, disputes first go through the Panel, which offers a recommendation, which can be accepted by the parties or rejected should they wish to resort to arbitration.

The principle at the heart of such ADR tools was summed up by Justice Joyce Aluoch: Parties want a decision quickly and effectively. If a mixed-mode approach or recourse, knowledge-based tools, or simply encouraging the uptake of mediation over arbitration works for them, then that solution is fit for purpose.

On Day 2, which is now ongoing, delegates can expect another busy day of interesting panels and side events. Panels will touch upon ISDS reform, regional perspectives from all corners of the globe, the sociology of arbitration, and panels on young practitioners, technological innovations, and the subject-matters of the disputes of tomorrow.

 

Follow along and see all of Kluwer Arbitration Blog‘s coverage of ICCA Edinburgh 2022 here

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ICCA Edinburgh 2022: Haste Ye Back! Reasons to Return to Scotland

Mon, 2022-09-19 03:18

After a long, pandemic-induced delay, the ICCA Congress in Edinburgh is now in full swing.  Six and a half long years after winning the bid to host the XXVth ICCA Congress, I had almost forgotten why we, the Scottish Arbitration Centre, had made the bid in the first place, but as the international arbitration community descends upon Edinburgh, it is all coming back to me: we want you to come back, again and again.

With its rich history, beautiful scenery, wonderful food and drink, and warm hospitality, Scotland is a fantastic place to visit (and to live!), but how is it as a place to arbitrate?  Here are my top ten reasons to use Scotland as a seat and a venue for arbitration.

 

  1. Our Arbitration Law

Our arbitration law is set out in the Arbitration (Scotland) Act 2010.  It is a very modern arbitration statute, modelled on the Arbitration Act 1996 applicable in England and Wales.  Our Act will feel instantly familiar to anyone who knows the 1996 Act, and English authority is frequently referred to when interpreting the equivalent provisions in the Scottish Act.  There are a few differences with the 1996 Act.  For example, we have opt out confidentiality built into the legislation, and some of the lacunae in the 1996 Act have been addressed in the Scottish Act, but there are no surprises.

 

  1. Our Legal Culture

Scotland is generally regarded as a common law jurisdiction, because we have adversarial courts and a system of binding precedent.  It is also true to say that our commercial law is very similar and in some places identical to the law of England and Wales.  However, that is not the whole picture.  The Scots law is best described as a mixed system.  The origins of what might be regarded as the modern Scots law (from the late 1400s) are in Romano-Dutch law and the Canon law, and it is still possible to plead Roman law in certain cases.  Whilst none of that is likely to affect an arbitration, unless Scots law is chosen as the substantive law of the contract, Scottish legal culture is influenced by civilian systems.  A key procedural distinction is that we do not have a duty of disclosure, and we do not have the Anglo American system of document discovery.  In many ways, Scotland’s legal culture is a natural fit with international arbitration.

 

  1. Our Judiciary

The Court of Session, established in 1532, has an impeccable reputation for probity and fairness.  The judges of the Court of Session, known as Senators of the College of Justice, preside over a wide range of cases, with commercial and arbitration related cases being sent to dedicated commercial/arbitration judges.  The Court has developed a streamlined system of dealing with arbitration related applications.  Since the introduction of the 2010 Act, the approach of the arbitration judges has been one of consistent support for the arbitral process.

 

  1. Our Legal Expertise

It is fair to say that Scots law does not have the same currency as, for example, English law.  However, the advantage of this for the Scots lawyer is that in the commercial world we must be familiar with other legal systems as well as our own, and English law in particular.  It is a testament to the excellence of Scottish legal training that both the President and Vice President of the UK Supreme Court (Lord Reed and Lord Hodge) are Scottish lawyers.

 

  1. Our Openness

Scotland is an entirely open jurisdiction for arbitration.  There is no requirement to have a Scots law qualification to sit as an arbitrator, or represent a party in an arbitration seated in Scotland.  Parties are entirely free to appoint their representatives, who may be qualified in any jurisdiction, or none.

 

  1. Accessibility and Connectivity and Safety

There are direct flight to Scotland from airports all over Europe, from the Middle East, from the East coast of the US, and it is easy to reach Scotland from London airports, but also from hub airports like Amsterdam, Istanbul, Qatar and Dubai with connecting flights to Africa, and the far east. Scotland is a safe place, with low crime rates.

 

  1. Facilities

Scotland offers a wide range of venues in which to conduct arbitration: from the hearing rooms of the Scottish Arbitration Centre in central Edinburgh, to the grandeur of the historic hotels in our cities, or indeed the countryside, or the splendour of our time-honoured buildings, like the Signet Library.

 

  1. Enforceability

As part of the UK, Scotland is subject to the New York Convention, and other treaties and agreements governing the recognition and enforcement of foreign arbitration agreements, orders and awards. The situation is no different than it would be for a London seated arbitration.

 

  1. Immunity

The Arbitration (Scotland) Act 2010 makes it clear that neither the tribunal, nor any arbitrator is liable for anything done or omitted in performance of the tribunal’s functions, and extends that immunity to any clerk, agent, employee or other person assisting the tribunal to perform its functions.

 

  1. Our Rules

It is possible to seat an arbitration governed by any set of institutional rules (or none) in Scotland (and indeed we at the Scottish Arbitration Centre encourage you to do so).  The Scottish Arbitration Centre has now launched its own institutional rules.  These are light touch rules, backed by a state of the art online case management system developed with Opus 2, a legal technology company that has been developing digital solutions for courts and arbitration proceedings for over a decade.

 

So, in conclusion, Scotland is now the place to arbitrate!  Come back and see us soon.

Follow along and see all of Kluwer Arbitration Blog‘s coverage of ICCA Edinburgh 2022 here

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ICCA Edinburgh 2022: “Arbitration’s Age of Enlightenment”

Sun, 2022-09-18 04:26

The 2022 ICCA Congress kicks off today in Edinburgh. Together with our Host Committee, the Scottish Arbitration Centre, and my Congress co-chair and immediate past ICCA President Gabrielle Kaufmann-Kohler, it is an honor to declare the XXVth ICCA Congress officially open!


Arbitration’s Age of Enlightenment?

The XXVth ICCA Congress has been seven years in the making, starting in 2015 with the bidding process to host the 2020 ICCA Congress (as it was then scheduled). At the closing ceremony of the last Congress in Sydney, in 2018, our Scottish hosts invited us to “look to Scotland” and take part in spring 2020, in arbitration terms, in the “blossoming of a new Scottish enlightenment”. After three postponements due to the Covid-19 pandemic, we are thrilled to welcome over 1,300 delegates, some 80 speakers and moderators, and more than 50 exhibitors from every part of the globe. This looks to be the highest ICCA Congress attendance ever, proving just how important it is for us to see each other in person again.

The theme of this year’s Congress is “Arbitration’s Age of Enlightenment?”, an appropriate tribute to the host city of Edinburgh and the Scottish Enlightenment. Hailed as one of Scotland’s most innovative periods, the Scottish Enlightenment was an age in which the old order was challenged, and new ideas led to accelerated progress in numerous fields of human civilization. Similarly, albeit modestly, by raising the question of arbitration’s age of enlightenment, the Congress Program Co-Chairs Cavinder Bull, Loretta Malintoppi and Constantine Partasides invite us to discuss the progress made in the field of arbitration thus far and its role in the global system of law going forward.

The Congress program reflects this objective. The panels, adapted to keep up with events over the past two years, will touch upon questions such as the impact of new technologies on international arbitration, the state of our field and its most pressing issues, the cross-fertilization of international arbitration and other disciplines, regional perspectives from Africa, the Americas, Asia, Europe and the Middle East, and the future of investment arbitration. We also look forward to the opening keynote addresses by prominent former Canadian diplomat, Judge, High Commissioner for Refugees and Chief Prosecutor for the Yugoslavia and Rwanda Tribunals Louise Arbour, and the closing address by Lord Carloway, Lord President of the Court of Session and Lord Justice General of Scotland.

Importantly, ICCA and the Host Committee will mark the passing of Her Majesty Queen Elizabeth II, and have adjusted the programming to enable delegates to follow the official State Funeral on Monday, 19 September.

The next blog posts in this special ICCA Congress series will report on the highlights of each Congress Day and offer analyses of the cross-cutting issues addressed across panels during the Congress.

 

ICCA Congresses through the Years

ICCA is a global non-governmental organization devoted to promoting the use and improving the processes of arbitration, conciliation and other forms of international dispute resolution. Today, its main activities include Congresses, specialized publications, projects and judicial outreach. The ICCA Congresses are the largest regular gatherings on the international arbitration calendar. Held biennially (except in pandemics!), the Congresses are a time to reunite and connect with colleagues old and new. They also provide an opportunity to welcome emerging practitioners onto the arbitration scene.

ICCA was founded in 1961, the same year its first Congress was held in Paris. Since then, ICCA has held Congresses on every continent, striving for geographic diversity and representation. Today, ICCA Congresses aim to showcase their host countries as arbitration seats and stimulate the practice of international arbitration at the host venue. The four Congresses held in the last decade took place in Singapore (2012), Miami (2014), Mauritius (2016) and Sydney (2018), which are all increasingly recognized as emerging hubs for international arbitration.

 

ICCA Projects Featured in Edinburgh

ICCA Congresses are the ideal occasion to showcase ICCA’s latest initiatives. At ICCA Edinburgh, delegates can expect a series of project launches from ICCA’s task forces and working groups.

On the morning of the first Congress day (Monday 19 September), the ICCA-ASIL Task Force on Damages will present their Damages in International Arbitration (DIA) application. Launched in the fall of 2021, this web- and smartphone-based app provides practical guidance on the key legal, quantitative and procedural issues implicated in quantifying damages in international arbitration. The objective of the Task Force is to promote rigor and consistency in our field’s approach to this critical stage of an international arbitration. Delegates will have the chance to experiment with the app and take part in a discussion lead by Task Force Co-chairs Catherine Amirfar and Gabrielle Nater-Bass.

At a lunch symposium on Monday, the Working Group on Cybersecurity in International Arbitration will present its 2022 Protocol on Cybersecurity. The product of a collaboration between ICCA, the New York City Bar Association and the International Institute for Conflict Prevention and Resolution (CPR), the Protocol serves as a set of guidelines on reasonable security measures for users of arbitration, counsel, arbitrators and arbitral institutions. The Protocol was launched in November 2019 and has become even more necessary in the wake of the Covid-19 pandemic and the shift to virtual proceedings. Brandon Malone, Chair of the Working Group (and member of the Congress Host Committee) will host a lunch event and present delegates with the new features of the 2022 Protocol.

On Monday evening, the ICCA Task Force on Standards of Practice in International Arbitration and Co-chairs Abby Cohen Smutny and Guido Santiago Tawil will be hosting a small get-together to acknowledge the recent release of the Guidelines on Standards of Practice, meant to serve as guiding principles of civility, taking into account the many cultures and situations in which international arbitration is employed. Readers can also listen to Abby discuss the work of the Task Force in a prior episode of Kluwer’s International Law Talk podcast series.

On the second Congress Day (Tuesday 20 September), ICCA’s Diversity and Inclusiveness Committee, chaired by Sylvia Noury, will be hosting a breakfast with the Cross-Institutional Task Force on Gender Diversity in Arbitral Appointments and Proceedings, chaired by Carolyn Lamm. The Committee will discuss ICCA’s diversity policies and explore the way forward. The Task Force will also be presenting an updated version of its 2020 report on recent statistics on the appointment of female arbitrators in international arbitration, as well as best practices to promote gender diversity in our field.

At lunchtime on Tuesday, we will turn our attention to the topic of data protection. The ICCA-IBA Joint Task Force on Data Protection in International Arbitration, co-chaired by Kathleen Paisley and Melanie van Leeuwen, will release the official ICCA-IBA Roadmap to Data Protection in International Arbitration. Delegates will learn about key data security concerns in arbitral proceedings and contribute to a discussion on the practicalities of applying data protection rules during an arbitration, using practical examples from the Roadmap.

Finally, on the third Congress day (Wednesday 21 September), the co-editors of ICCA’s comparative research project “Does a Right to a Physical Hearing Exist in International Arbitration?”, Giacomo Rojas Elgueta, James Hosking and Yasmine Lahlou, will host a breakfast event to celebrate the release of their general report analysing the multi-jurisdictional survey conducted in 78 national jurisdictions on whether a right to a physical hearing exists in international arbitration. The general report will be published along with a set of essays exploring the interaction between remote hearings and fundamental conceptual issues in international arbitration.

 

A Renewed ICCA – Kluwer Arbitration Partnership

ICCA is proud to announce the renewal of its ongoing relationship with Kluwer Arbitration. Kluwer Arbitration has been the exclusive publisher of ICCA’s specialized arbitration publications for many years, namely: the ICCA Yearbook Commercial Arbitration, a key source of information concerning international arbitration jurisprudence; the ICCA International Handbook on Commercial Arbitration, a comprehensive guide to arbitral law and practice covering over 85 countries; and the ICCA Congress Series, a compendium of papers and keynotes presented at every ICCA Congress since 1982. The papers presented in Edinburgh will be published in the 21st edition of the Congress Series and distributed to all Congress delegates. These and other ICCA publications are prepared with the assistance of the Permanent Court of Arbitration.

 

Opening the Doors to International Arbitration

Diversity and inclusiveness are central ICCA values. ICCA’s branch of over 8,000 young practitioners worldwide, Young ICCA, will be hosting a mentorship lunch during the Congress and a Young ICCA event on Wednesday after the close of the official Congress. For the first time, the winner of the inaugural Young ICCA Essay Competition will be speaking at the Congress session on “Arbitration’s Printing Press”.

We have spearheaded initiatives to open Congress attendance to a broader audience of younger and diverse practitioners. For the first time, through the ICCA Inclusion Fund, twenty-three ICCA and Young ICCA members have received funding to travel to and attend the Congress. ICCA and the Scottish Host Committee have also supported the Karl-Heinz Böckstiegel Foundation to offer young academics the funding necessary to attend. Finally, ICCA has awarded delegate status to the recipient of the inaugural ICCA-Guillermo Aguilar-Alvarez Memorial Prize, the individual under 40 who wrote the best published work on international arbitration, to be announced at the Congress.

And that is not all.  I will have the pleasure of announcing the recent launch of the ICCA Johnny Veeder Fellowship Program at our gala dinner on Tuesday night. These new Fellowships will provide “micro-grants” to allow qualified recipients to pursue study, internships, research and writing projects or other one-off projects in the field of international arbitration.

Finally, in the spirit of maximizing inclusiveness, ICCA will be making all session recordings available shortly after the Congress free of charge on the ICCA website.

The road to Edinburgh has been filled with twists and turns, highs and lows.  But we made it! On behalf of ICCA, I welcome all who are here in person and invite you all to follow Congress coverage on the Kluwer Arbitration Blog over the next few days and weeks.

Follow along and see all of Kluwer Arbitration Blog‘s coverage of ICCA Edinburgh 2022 here

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Open Position: Assistant Editor of Kluwer Arbitration Blog

Thu, 2022-09-15 09:15

The Editorial Board of Kluwer Arbitration Blog announces the opening of the following position with Kluwer Arbitration Blog: Assistant Editor for Investment Arbitration. 

The Assistant Editor reports directly to the coordinating Associate Editor and is expected to (1) suggest, solicit, edit and review submissions related to investment arbitration for posting on the Blog, including by proactively identifying ways to ensure Blog coverage of developments related to investment arbitration; and (2) write blog posts as contributor. You have the opportunity to work with a dynamic and dedicated team and liaise with the best arbitration counsel in the world.

The Assistant Editor will work remotely. Please note that this is a non-remunerated position. If you are interested, please submit a resume and cover letter by email to Dr Crina Baltag, crinabaltag@gmail.com. Only shortlisted candidates will be contacted. The deadline for receiving applications is 7 October 2022.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
by Arif H. Ali & David L. Attanasio
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Arbitration in Egypt: A Practitioner\'s Guide
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Interviews with Our Editors: Lord Chief Justice Hon. Michael H. Whitten KC, Supreme Court of Tonga

Wed, 2022-09-14 01:48

Lord Chief Justice Hon. Michael H. Whitten KC has been the Lord Chief Justice of the Kingdom of Tonga since 2 September 2019. After gaining early broad experience in various areas of law, Chief Justice Whitten was called to the Queensland Bar in 1990 before moving to Victoria where he practised for more than 20 years in commercial litigation, specialising in building, construction, infrastructure and energy disputes. Chief Justice Whitten appeared in all jurisdictions and fora across Australia and took silk in 2015. He also appeared, as a barrister, in commercial arbitrations, both domestic and international, and expert determinations. Chief Justice Whitten is a Fellow of the Chartered Institute of Arbitrators and was a member of the Australian Bar Association’s Arbitration committee until his appointment to the judiciary.

Chief Justice Whitten’s work in Tonga has included consulting on the International Arbitration Bill, following Tonga’s accession to the New York Convention on 12 June 2020. Kluwer Arbitration Blog has previously published a post highlighting the key provisions of Tonga’s International Arbitration Act 21 of 2020 / Lao ki he Fakatonutonu Fakavaha’apule’anga – Lao Fika 21 ‘o e 2020 (the “Act”) as well as the first two decisions mentioning the Act, both of which were handed down by Chief Justice Whitten.

It is therefore an immense privilege to be joined by Lord Chief Justice Whitten on Kluwer Arbitration Blog!

 

  1. Could you please share with us some of the defining moments in your career to date that led you to develop a practice in international arbitration? Could you also share with us your journey to becoming Lord Chief Justice of Tonga?

At the start of my legal career in Queensland, I practised in all areas. When I moved to Victoria in 1996, where the Bar has a clerking system, I was fortunate enough to be accepted to List G, which was, and remains, one of Australia’s leading commercial lists. Within a relatively short time, the majority of cases in which I was briefed involved building and construction law. That area developed into an interest, and eventually participation, in domestic and international arbitration work. One of my first major briefs in the latter (as then one of a number of junior counsel led by George Golvan KC) was in 2004 for an arbitration hearing in Hong Kong involving the Cheung Kong Centre.

In 2015, I (along with, I suspect, most barristers in Australia, New Zealand and elsewhere in the region) received an email calling for expressions of interest in appointment as the Lord Chief Justice of the Kingdom of Tonga. I was immediately curious, but the timing wasn’t quite right. I felt I had ‘unfinished business’ in terms of work achievements at the Bar and my wife and I still had children at home. At that time, I was also avidly involved with both the Victorian and Australian Bar Association’s arbitration committees in developing the arbitration market and opportunities for Australian advocates and arbitrators in the region.

In early 2019, some years after having taken silk and having just completed a long running trial in Western Australia (final appeals from which are soon to be heard by the High Court), the same email appeared. I reactively pressed send with my expression of interest not thinking much would come of it. About 20 minutes later, I received a reply asking for my CV. After pressing send again, I told my wife what had happened. For both of us, a mildly excited but silent anticipation followed.

After what seemed like an eternity, and I had begun to believe my initial expectation, I received a call from the then Chief Justice, Owen Paulsen, advising that I had been ‘shortlisted’ and that the Judicial Appointments and Discipline Panel (a Tongan Constitutional body of advisors to the King) would like to interview me. The first questions during my interview with the Panel members in Auckland, and my first glimpse into Tonga, were about religion and my views on the death penalty. Of all the topics for which I had endeavoured to prepare, those were not among them. Towards the end, I was asked about something on which I had necessarily introspected for some time. In answer to Harry Waalkens KC, the then Lord Chancellor, about why I wanted the job, the short answer, I said, was: to serve.

About six weeks later, Harry sent an email commencing with the word “Congratulations”. Shortly after that, my wife and I flew to Tonga during the last week of Owen’s tenure for a ‘handover’. That week saw us emerge from the seeming romance of the looming adventure to the reality of the enormity of the task, including, not least, that under the Constitution, the Chief Justice is a multi-faceted role. We also realised that our understanding of the word ‘service’ was about to be redefined.

And so, after wrapping up my practice and our life in Melbourne, on 1 September 2019, I was sworn in before Cabinet. About 15 minutes later, I walked into court 1 and commenced my judicial experience as President of the Court of Appeal. Thankfully, I was accompanied by preeminent judges in the Hon. Ken Handley (New South Wales Court of Appeal, retired), Sir Peter Blanchard (Supreme Court of New Zealand, retired) and Richard White (New South Wales Court of Appeal, serving). For their example, wisdom and patience, I shall always be grateful.

 

  1. Aside from Fiji and the Cook Islands, Tonga is the only other Pacific Island country to enact legislation based on the UNCITRAL Model Law on International Commercial Arbitration. What has contributed to Tonga’s success as a leader in international arbitration reform in the Pacific?

While Tonga is among the first of the contracting States in the Pacific to manifest its accession to the New York Convention through enacting the International Arbitration Act 2020 (“the Act”), its true success in that initiative will be measured by the extent to which Government and the private sector engage in and with international arbitration. The catalyst, and indeed, imperative, for that engagement, is foreign investment. While I do not presume to speak for the Legislative or Executive branches of Government, or for His Majesty, it would appear self-evident that Tonga’s progress in this regard has been borne of the realisation that, like many developing countries in the region, attracting positive foreign investment is key to its economic future. Without that, Tonga will continue to be heavily dependent on the support of foreign development partners and remittances from family and friends throughout the Tongan diaspora. For a country whose population size is inverse to its apparent geopolitical significance in the Pacific, healthy development of its natural resources in areas such as tourism (where Fiji, among others, is a prime example), agriculture, seafood and subsea minerals, not to mention the extraordinarily high proportion of its population with tertiary qualifications, requires both domestic and foreign investment. Tonga’s engagement with, and implementation of, the Convention principles serves to enhance its attraction to those investors.

 

  1. What further steps can be taken to effectively implement the New York Convention in Tonga? In your view, what role does the judiciary play in this regard?

Firstly, the starting point for greater implementation must be the inclusion of arbitration agreements in relevant commercial and investment contracts. The terms of those provisions must either specify or at least reflect the UNCITRAL Model Law and Arbitration Rules to provide congruence with the Act.

Secondly, the facilitation of international arbitrations requires greater capacity-building both in terms of qualified and experienced arbitrators in the region and the establishment of institutional arbitration centres similar to SIAC, HKIAC and those in Korea, Japan and Shanghai. While the volume of arbitrations in Tonga are, at present, unlikely to necessitate or support the establishment of a dedicated centre for some time, a centre for Polynesia (with Suva being among the most obvious geographical candidates) is, in my view, demonstrably warranted.

The role of the judiciary in supporting international arbitration is prescribed by the Act (in Tonga and in comparable legislation elsewhere) as including giving effect to arbitration agreements, interim measures, assistance in taking evidence, appointment of arbitrators, determination of preliminary points of law, and, most importantly, setting aside or recognition and enforcement of awards. Further support has been demonstrated worldwide in jurisdictions where specialised arbitration courts, or at least, dedicated lists within existing superior courts, have been established.

 

  1. As covered in a previous blog post, we understand that the Asian Development Bank (“ADB”) in cooperation with UNCITRAL provided technical assistance to Tonga in implementing its legislative framework for arbitration. What role has such technical assistance had in boosting knowledge about arbitration and its popularity in the region? What support could other stakeholders such as arbitral institutions provide?

The ADB and UNCITRAL representatives were instrumental in the creation and passing of Tonga’s International Arbitration Act. Gary Born and his cohort of advisors deserve special recognition for their work with the Tongan Government and other stakeholders in the work leading to accession and enactment.

As mentioned above, the presence and commitment of arbitral institutions in this region is, in my view, an important element to ensuring that the legislative initiatives become manifest in attracting foreign investment and providing proven support in facilitating international dispute resolution through arbitration (and Med-Arb) procedures. Institutions are also likely to attract qualified and experienced arbitrators to the region as well as providing education on the advantages of party autonomy including choice of law, forum and arbitral tribunal.

 

  1. Are there any emerging trends in the adoption of arbitration among businesses in the Pacific Islands and international investors, such as in the energy, construction or climate finance sectors?

So far as Tonga is concerned, the first inklings of adoption (which, by definition, involves a confidential process and thus, in the absence of arbitral institutions, overt statistics are necessarily hard to come by) are by Government. A recent example was discussed in the decision of Kacific Broadband Satellites International Ltd v Registrar of Companies [2021] TOSC 93, involving an arbitration seated in Singapore between the Tongan Government and a satellite internet provider. I expect that the experience and outcome in that case, and others, either has, or will, inform the extent to which Government contracts with foreign suppliers will include arbitration agreements and their terms.

So far as matters coming before the Supreme Court would indicate, adoption of arbitration and therefore the application of the Act is still in its nascent stages. Where domestic arbitration agreements have been included, the general experience so far has been of the parties effectively waiving those agreements, mainly because of a perceived lack of any duly qualified and/or (truly) independent arbitrators in the Kingdom.

 

  1. In 2018, Justice Laki Niu became the first Tongan to be a member of the Supreme Court of Tonga in over a hundred years. Apex courts in many Pacific Island jurisdictions consist of a mix of foreign and local judges, in light of factors such as close family and community connections of local judges.1)See Rosalind Dixon & Vicki Jackson, ‘Hybrid Constitutional Courts: Foreign Judges on National Constitutional Courts’ (2019) 57(2) Columbia Journal of Transnational Law 283, 308. jQuery('#footnote_plugin_tooltip_42590_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_42590_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); In the context of domestic and international arbitration, how important is it to increase the pool of local arbitrators, especially as more Pacific Island parties become users of arbitration? How might this be achieved?

The answer to this question segues from the last. In any relatively small population, ensuring the independence of decision-makers (i.e. that he/she is not related in some way to anyone involved in the case) is often a challenge. It would appear to be part of the reason that successive Kings of Tonga have appointed foreign judges for over a century. For the same reason, any pool of arbitrators servicing Tonga and the Pacific will likely comprise a significant percentage of foreigners (or ‘palangi’). That does not mean, however, that local practitioners (who have invaluable insights and experience as to local customs and expectations) should be overlooked in terms of training and capacity building. It does mean that choice, which is inherent in arbitration, will be critical.

 

  1. In the case of Fe’ao Vunipola v Tonga Rugby Union, Your Honour observed (at para. 107) that changes to arbitration laws “insofar as they relate to domestic commercial arbitration, are yet to find their way into the Tongan legal framework.” Would the enactment of legislation on domestic arbitration be a desirable future step and what impact could this have on dispute resolution trends in Tonga domestically?

Absolutely. Domestic arbitration legislation is a natural concomitant to the now established international framework. In most jurisdictions, the order of adoption has been the other way. The fact that international arbitration legislation has been enacted first in Tonga is a reflection of Government consciousness of the need to attract foreign investment by ensuring modern, consistent and well-established means of dispute resolution.

Within the Tongan domestic arena, a consciousness of (or appetite for) the advantages of alternative dispute resolution, whether by way of mediation or arbitration, appears to also be in its nascent stages. At present, mediation cannot be ordered by the Court without the consent of all parties. In my time in Tonga, and despite enthusiastic encouragement from the Bench, that consent has rarely been forthcoming. So far as I have been able to fathom, there are cultural attitudes at play in litigation in Tonga, including a war like mentality (possessed by parties, most of their lawyers, or both) which often tends to preclude just about any possibility of resolution prior to judgment. Incentives for party driven resolution have been slowly introduced by measures such as preliminary determination of pivotal issues and more significance being given to effective offers of compromise on questions of costs. Beyond that, greater enforcement by the Courts of arbitration agreements, where they exist (compare Vunipola v Tonga Rugby Union Incorporated [2021] TOSC 141), will have a positive impact on domestic dispute resolution in Tonga.

 

  1. Finally, what, in your view, is the biggest challenge and opportunity for arbitration in the Pacific Islands region?

If the challenges (and there are many) can be ranked in order of magnitude, I think education is probably the ‘biggest’. The advantages of arbitration must be known, and realised, before greater adoption can be expected.

A related requirement is trust. For that, enabling legislation (as per Fiji, the Cook Islands, and now, Tonga) is essential. So too is demonstrated preparedness by the Courts to enforce (where appropriate) foreign arbitral awards. The support of arbitration institutions and availability of experienced, independent arbitrators are also critical to developing confidence amongst stakeholders.

The opportunities for arbitration in the Pacific are untold and, so far, relatively untapped. That potential, however, is dependent upon, and will be measured by, the extent to which the above challenges are addressed. The inclusion of ADR regimes in contracts between trading parties engaging in and with the Pacific will be heavily informed by their level of confidence that, for instance, arbitration processes and outcomes will be efficient, effective and enforceable in the region.

 

Thank you, Lord Chief Justice Whitten, for taking the time to share your invaluable perspectives with our readers.

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

References[+]

References ↑1 See Rosalind Dixon & Vicki Jackson, ‘Hybrid Constitutional Courts: Foreign Judges on National Constitutional Courts’ (2019) 57(2) Columbia Journal of Transnational Law 283, 308. function footnote_expand_reference_container_42590_30() { jQuery('#footnote_references_container_42590_30').show(); jQuery('#footnote_reference_container_collapse_button_42590_30').text('−'); } function footnote_collapse_reference_container_42590_30() { jQuery('#footnote_references_container_42590_30').hide(); jQuery('#footnote_reference_container_collapse_button_42590_30').text('+'); } function footnote_expand_collapse_reference_container_42590_30() { if (jQuery('#footnote_references_container_42590_30').is(':hidden')) { footnote_expand_reference_container_42590_30(); } else { footnote_collapse_reference_container_42590_30(); } } function footnote_moveToReference_42590_30(p_str_TargetID) { footnote_expand_reference_container_42590_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_42590_30(p_str_TargetID) { footnote_expand_reference_container_42590_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 Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Same Proposition, Different Outcome? Need for Harmonization for Evidentiary Standards

Tue, 2022-09-13 01:27

As set out in our last blog post on evidentiary issues in international arbitrations, the treatment of evidence within the field of international arbitration is oftentimes inconsistent and even unpredictable from one arbitral tribunal to another, a divide which becomes even more pronounced when considering the different approaches that may be adopted due to a decisionmaker’s backgrounds in common law versus civil law. Our blog post argued that more uniformity in evidentiary rules—and ultimately in the interpretation of admissible evidence—in international arbitrations would reduce the subjectivity and seeming randomness of evidentiary decisions and in outcomes in different cases, leading to less arbitrariness in the system as a whole.

In this post, we highlight three evidentiary issues—the matters of legal privilege, hearsay, and illegally obtained evidence—on which there is significant divergence between (and even within) the common law and civil law traditions. In light of these variations across jurisdictions, we recommend that arbitral centers devise their own set of optional evidentiary rules bridging the evidentiary differences between civil law and common law traditions and reducing arbitrator discretion. The authors’ expectation is that this would ultimately increase predictability for parties that opt to use such rules.

 

Legal Privilege or Impediment

It is a maxim in most jurisdictions that relevant evidence is admissible unless it falls into an exception or exclusion. One exclusionary ground common in both civil law and common law systems is that of privilege, arising, like its twin concept of confidentiality, from the inherent need for open and frank communication and trust between clients and their attorneys.

In civil law systems, this link between privilege and confidentiality is very close. Both concepts are regularly treated in tandem, encapsulated in secrecy obligations imposed on lawyers to ensure that their clients’ communications or documents are safe from disclosure to third parties, and are usually regulated by ethical codes and/or national criminal laws. (See French National Internal Regs., art. 2; Deontological Code of the Spanish Legal Profession, art. 5.) There is, thus, often no delineation among different types of privilege; rather, civil law jurisdictions tend to focus on the role or activity of the lawyer as to when their professional obligation to keep secrets can act as a privilege against producing certain documents. For instance, Switzerland protects “typical professional activities” of an attorney, i.e., legal counsel or legal representation (Swiss Civ. Pro. Code, arts. 160-163), and does not protect, e.g., commercial activities such as corporate administration, brokerage, or asset management, as those are activities deemed not to be typical for an attorney. While Swiss secrecy protections belong to the client, who may release the lawyer to disclose information (BGFA, art. 13), secrecy obligations remain in perpetuity for a Swiss attorney, so the attorney may refuse to disclose such information despite a release or waiver by the client.

It must also be recognized that in the civil law inquisitorial system, a party’s obligation to disclose documents during litigation is itself limited, drastically reducing if not eliminating discovery proceedings, so there is already a comparatively low risk of publicly disclosing confidential information. Professional secrecy obligations, exercised by a simple refusal to produce documents or refusal to testify, are thus understood to be sufficient protection in civil law jurisdictions.

In common law jurisdictions, the concept of privilege is often bifurcated into litigation privilege or work-product privilege on the one hand, and legal advice privilege or attorney-client privilege on the other. When so bifurcated, the former generally excludes from discovery documents and “tangible things” prepared in anticipation or reasonable contemplation of adversarial litigation or for trial by a party or its representative. The attorney-client privilege under the common law generally extends to confidential communications between a client and their lawyer sent for the purpose of giving or procuring legal advice. (See NY CPLR § 4503; R. v. Derby Magistrates’ Court, [1996] A.C. 487 (H.L.).)

On the international level, while specific rules will always depend on the arbitration in question, legal impediment or privilege is a recognized basis for the exclusion of a document before an arbitral body under the IBA Rules on the Taking of Evidence. (IBA Rules, art. 9(2)(b).) The UNCITRAL Model Law, ICC Rules, LCIA Rules, and Prague Rules (which generally avoid document production, see art. 4.2) are all silent as to privilege. None of these rules, including the IBA Rules, specify what is to happen when party expectations, or those of their counsel, as to privilege diverge; when certain evidence may be admissible in one jurisdiction but privileged and withheld in another; or when there are generally conflicting legal or ethical rules on a state level.

The most-favored-nation approach of the ICDR Rules may be among the sounder solutions available considering the potentially substantial divergence in the domestic approaches to privilege. Under Article 22 of the ICDR Rules, the arbitral tribunal is to take into account “applicable principles of privilege,” and when differences in the rules arise, the tribunal should “apply the same rule to all parties, giving preference to the rule that provides the highest level of protection.” This has been understood to uphold a tribunal’s duty to treat parties fairly and equally and, if this rule were adopted wide-scale as a baseline, it would provide greater predictability and ideally less tribunal discretion in international arbitrations.

 

Hearsay

The divergence between the evidentiary approaches of common law and civil law systems becomes perhaps most apparent—and thus disputes are likely to arise—on the subject of hearsay. In the United States and many common law systems, hearsay is an out-of-court statement offered to prove the truth of the matter asserted. (NY Rules of Evidence, art. 8; US Fed. Rules of Evidence, Rule 801 et seq.). Hearsay is generally inadmissible in the US and other common law courts (see e.g., Singapore Evidence Act rev. 1997), though the Civil Evidence Act of 1995 in the UK changed its rules to allow the admission of hearsay evidence provided it conforms to the other rules of admissibility. Due to the many exceptions to the rule against hearsay and exclusions as to what does and does not constitute hearsay, common law hearsay rules often appear intricate and daunting to navigate for both the foreign-trained lawyer and law student alike.

In civil law systems, generally, the opposite is true as to hearsay: it is admissible. This is essentially a product of the trial procedure in civil systems being “far more receptive to derivative evidence … leading to a more informal trial that is less geared toward surprising or discrediting witnesses or toward dramatic rhetoric designed to impress a jury.” In France, for instance, where the juge d’instruction (an inquisitorial judge) possesses broad discretion in both investigating and then weighing evidence, there are simply no rules, exclusionary or otherwise, as to hearsay or opinion evidence in either criminal or civil proceedings.

It is notable that the European Court of Human Rights, which itself has no formal evidentiary rules, generally “sees no fundamental objection from the perspective of the European Convention to the use of indirect evidence,” including hearsay, but does “closely scrutinize” such evidence in assessing alleged violations of the right to a fair trial. The European Court has thus seemingly sought to incorporate both trends, siding with UK judges in its 2011 holding in the criminal context that hearsay evidence can be used as the sole means of securing a conviction where no other evidence is available, and then eight years later holding that Finnish national competition authorities could “use hearsay to the extent their findings do not solely depend on it”. This is similar to the approach taken in many international arbitrations, where arbitral rules are generally silent but where hearsay, and double hearsay, are generally deemed to be admissible but require additional confirmatory evidence.

 

Illegally Obtained Evidence

Evidence obtained illegally, such as that obtained through a cyberattack or from a WikiLeaks post—commonly known in the US as the “fruit of the poisonous tree doctrine”—is also dealt with differently depending on the legal tradition in question. Here, neither the common law nor the civil law is a monolith unto itself, encapsulating just one major trend; there are clear divergences on the state level from one civil-law country to another and from one common-law country to another. Further complexities still may arise when considering the challenges posed by hybrid evidence, such as illegally obtained evidence that is also hearsay and/or privileged.

For instance, among the civil-law countries, Spain treats illegally obtained evidence as inadmissible as a matter of law (Spanish Civil Procedure Act, arts. 283(3), 287), whereas the trend in France has been to nullify judgments in which the record has been “tainted by illegality.” Germany, despite excluding statements obtained through prohibited means of interrogation (German Code of Civ. Pro., sec. 136a), focuses more on a balancing test between the individual constitutional rights at stake—human dignity, privacy, and personality rights, e.g.—and the interests of justice in having all available evidence. The theory there is that despite the potential unfairness to one party as to the use of evidence against it, the exclusion of any evidence at all “implies that the court must base its judgment on something less than the whole truth.”

Illegally obtained evidence is admissible in UK and Indian courts: in the UK, courts have discretion on whether to admit or exclude such evidence on public interest and human rights (fair trial) grounds, though courts in England and Wales have routinely admitted a wide variety of evidence, including evidence acquired through both unlawful hacking of emails and covert recordings of medical examinations.

As can be expected, there is also no set, unified approach to illegally obtained evidence in international arbitration practices. The IBA Rules, for instance, leave it to the discretion of the tribunal to exclude evidence obtained illegally (art. 9(3)). However, if there has been one overarching trend by arbitral tribunals—albeit with some exceptions such as the Methanex case, where the “dumpster-diving” was yet found to be of “marginal evidential significance” ineffective in discrediting the witnesses as intended—it would mirror that seen throughout international adjudication in its various forms: tribunals have relied on illegally obtained evidence without offering guidance as to its admissibility more generally.

 

Concluding Thoughts

Among the evidentiary rule sets currently available in international arbitration, there are broad divergences regarding key evidentiary issues that remain. In essence, there is still not a clear consensus approach to handling evidence on the international level, which in turn invites the large degree of discretion that judges and arbitrators continue to enjoy, or are at least perceived to enjoy, across systems. The surveyed approaches above suggest that there may be areas in which these categories of rules in international arbitration can be harmonized or rendered more internally consistent.

Table 1. Summary of divergences under the common law and civil law.

Issue “Representative” Common Law Approach “Representative” Civil Law Approach Privilege Attorney-client: confidential communications between client and lawyer for purpose of legal advice are privileged.

Work-product: documents prepared for litigation are privileged. Secrecy obligations: “typical professional activities” of a lawyer are generally privileged. Hearsay Inadmissible in the USA and Singapore.

Admissible in the UK. Generally admissible or not subject to extensive rules. Illegally Obtained Evidence Admissible in the UK and India. Spain and France: generally inadmissible.

Germany: balancing approach between justice and constitutional rights.

Given the potentially unwieldy nature of yet another proposed set of (non-binding) international rules, we believe it may be worthwhile for arbitral centers to themselves proactively establish clearer standards on these evidentiary issues, bridging common-law and civil-law trends, or require that their tribunals clearly articulate the chosen standard and not simply exclude evidence on a matter which should be more broadly determined. In particular, centers could consider putting forth harmonized evidentiary rules which would be optional for parties to include in their arbitration clauses. It is the view of the authors that this would lead to increased efficiency, fairness, notice, and predictability from the parties’ standpoint.

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UAE Court Rejects Enforcement of Foreign Arbitral Award for Irregularity in the Placement of the Arbitrator’s Signature and Confirms the Period for Appealing an Order to Execute Foreign Arbitral Awards

Mon, 2022-09-12 01:56

On 21 April 2022, the Dubai Court of Cassation (the “Cassation Court”) issued a judgment in respect of an application for the recognition and enforcement of foreign arbitration award in case no. 109 of 2022 (the “Judgment”, available in Arabic-only on the Court’s website). In the Judgment, the Cassation Court considered whether an arbitration award issued by a sole arbitrator in a New York Convention country should be ratified and executed in circumstances where the award had only been signed on one page, being the operative section at the end of the award, rather than on every page of the award. The Cassation Court affirmed that arbitrators must sign not only the operative part of the arbitral award, but also the reasons, in order for it to be enforceable.

 

Procedural Background

The arbitration award, which was issued under the ICDR-AAA Rules, arose from a dispute under a non-disclosure agreement (the “Award”). The judgment does not specify the seat of the arbitration where the award was issued but does refer to various provisions of the New York Convention, thus confirming that it was issued in a New York Convention country.

The Award creditor filed a petition with the Execution Judge1)Pursuant to the new procedure set out in Cabinet Decision No. 57 of 2018 on the Regulation of Federal Law No. 11 of 1992 concerning the Civil Procedures Law, as amended (“Cabinet Decision No. 57”). Article 85(2) of Cabinet Decision No. 57 provides that, in order for a judgment/award creditor to obtain a court order for execution of a foreign judgment/award, a petition may now be submitted directly to the execution judge who is required to determine the application within 5 days. This new process allows for a significant streamlining of the process for execution of foreign judgment/awards, which previously were required to be submitted to the Court of First Instance and which applications were considerably more susceptible to technical defences raised by judgment/award debtors. The execution order may however be appealed in accordance with the rules and procedures prescribed for filing an appeal. jQuery('#footnote_plugin_tooltip_42566_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); in the Dubai Courts for an order that the Award be ratified and executed. On 20 June 2021, the Execution Judge ordered that the Award be executed and that an execution file be opened. The Award debtor appealed this order to the Court of Appeal. The Court of Appeal rejected the appeal on the basis that the Award debtor’s appeal was filed out of time and the right to appeal had therefore lapsed. The Award debtor further appealed to the Court of Cassation on the grounds that the Court of Appeal’s decision to reject the appeal as being out of time was an error in the application, and therefore in violation of the law, as recognition and enforcement of a foreign award is a substantive matter (rather than a summary matter) that requires full deliberation by the court rather than summary determination.

On 11 November 2021, the Cassation Court accepted the Award debtor’s appeal and overturned the Court of Appeal’s rejection of the appeal on the basis that the Court of Appeal Judge had erred by relying on Article 159 of the Civil Procedures Law,2)Federal Law No. 11 of 1992 concerning the Civil Procedures Law, as amended. jQuery('#footnote_plugin_tooltip_42566_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); which states that the “time limit shall be 10 days for summary matters”, in determining that the Award debtor’s right to appeal has lapsed. The Cassation Court confirmed that the period for appealing an order to execute arbitration awards issued in foreign countries is, in fact, 30 days pursuant to Article 57 of the UAE Arbitration Law.3)Federal Law No. 6 of 2018 on Arbitration. jQuery('#footnote_plugin_tooltip_42566_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The Cassation Court thus referred the matter back to the Court of Appeal for reconsideration.

Following reconsideration, the Court of Appeal upheld the first instance Execution Judge’s original order. However, the Award debtor appealed again to the Cassation Court on a different ground, namely that the Execution Judge’s decision erred in its application of law and therefore contravened it, arguing that that Article 3 of the New York Convention4)The UAE acceded to the New York Convention pursuant to Federal Decree No. 43 of 2006. jQuery('#footnote_plugin_tooltip_42566_30_4').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); stipulates that enforcement of arbitration awards is to be carried out in accordance with the procedures applicable in the state in which enforcement is to take place. In particular, the Award debtor contended that: (i) the arbitrator had only signed the last page of the Award in question, which included the operative section only; and (ii) this is not compliant with Article 41(3) of the Arbitration Law, which it claimed should be interpreted as requiring both the reasons and the operative parts of the arbitration award to be signed by the arbitrator.5)Article 41(3) of the Arbitration Law provides: “The arbitrators shall sign the award, or otherwise the reason for any omitted signature shall be stated. The award shall be valid if signed by the majority of the arbitrators” and thus does not expressly require that every page of an arbitral award must be signed. jQuery('#footnote_plugin_tooltip_42566_30_5').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

 

The Court of Cassation’s Judgment

The Cassation Court accepted the Award debtor’s second appeal and found that the Execution Judge had erred in the application of the law. The Cassation Court held that: (i) pursuant to Article 41(3) of the Arbitration Law, an arbitral award must include the arbitrator’s signature as without it, the award cannot be attributed to the arbitrator; and (ii) what is meant by an “arbitral award” is both the reasons and operative parts of the award, such that it is necessary for arbitrators to sign both these parts, otherwise the award is rendered void.

The Cassation Court also held that a nullity on such ground is a matter of public policy and is therefore capable of being raised for the first time before the Court of Cassation. Accordingly, the Court determined that the Award did not comply with the execution requirements set out in the law and therefore could not be executed.

 

Comments

This is not the first occasion on which the UAE courts have rejected enforcement of a foreign arbitral award based on the placement of the arbitrators’ signatures (or lack thereof). For instance, in 2020, the Dubai Court of Cassation6)Dubai Court of Cassation case no. 1083 of 2019. jQuery('#footnote_plugin_tooltip_42566_30_6').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_6', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); already stated that the arbitrators’ signature is one of the “essential details” that must be included in an arbitral award, and that the arbitrators must sign both the operative and reasons sections of the award. In that case, however, the Court held that there is an exception to that rule, which applies when some of the reasons fall on the same page as the operative section of the award and the arbitrators sign that page only. The rationale behind this is that that signature extends to all the reasons of the award, which would be in line with the legislator’s intention of having the arbitrators sign the arbitral award. The Court also found that the requirements of Article 41 of the Arbitration Law are similar to that of the now repealed Article 212 of the Civil Procedures Law,7)Article 212 was repealed by the Arbitration Law. jQuery('#footnote_plugin_tooltip_42566_30_7').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_7', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and are thus subject to the same interpretation.

Even prior to the promulgation of the Arbitration Law, the Dubai Court of Cassation8)Dubai Court of Cassation case no. 252 of 2011. jQuery('#footnote_plugin_tooltip_42566_30_8').tooltip({ tip: '#footnote_plugin_tooltip_text_42566_30_8', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); had also held in 2011 that it is not sufficient for the arbitrators to sign the operative section of the arbitral award only, as both the reasons and operative sections must include the arbitrators’ signatures. The Court’s finding, at that time, was based on Article 212(5) of the Civil Procedures Law, which (like Article 41 of the Arbitration Law) provided that an arbitral award must be signed but did not expressly specify where on the award the arbitrators’ signatures were required to be affixed. The Court found that an arbitral award is comprised not only of the operative section, but also the tribunal’s reasoning.

Accordingly, the Court of Cassation’s latest judgment on this issue is not necessarily new and serves as a reminder that the UAE courts are likely to take a narrow and stringent approach when considering whether the technical requirements of a foreign arbitral award have been met for enforcement purposes. Thus, where parties anticipate that enforcement procedures may need to be undertaken in the UAE, it is important that they request their arbitral tribunals to ensure that each arbitrator signs each and every page of the award.

The Court of Cassation’s judgment is also important for at least three further reasons. First, it provides clear confirmation as to the relevant time period for appealing decisions of the Execution Judge in the context of applications for the recognition and enforcement of foreign arbitral awards (as opposed to judgments issued by foreign courts). Second, it serves as a caution that, what may have been thought to be a historical and largely redundant issue when it comes to enforcement of foreign arbitral awards being rejected on (arguably overly) technical grounds, may still prove a real barrier to enforcement even under the recently revamped and more streamlined Civil Procedures Law. Third and finally, it serves as a reminder that new grounds of appeal may be introduced at the Court of Cassation stage and that what amounts to a public policy ground may be construed widely.

References[+]

References ↑1 Pursuant to the new procedure set out in Cabinet Decision No. 57 of 2018 on the Regulation of Federal Law No. 11 of 1992 concerning the Civil Procedures Law, as amended (“Cabinet Decision No. 57”). Article 85(2) of Cabinet Decision No. 57 provides that, in order for a judgment/award creditor to obtain a court order for execution of a foreign judgment/award, a petition may now be submitted directly to the execution judge who is required to determine the application within 5 days. This new process allows for a significant streamlining of the process for execution of foreign judgment/awards, which previously were required to be submitted to the Court of First Instance and which applications were considerably more susceptible to technical defences raised by judgment/award debtors. The execution order may however be appealed in accordance with the rules and procedures prescribed for filing an appeal. ↑2 Federal Law No. 11 of 1992 concerning the Civil Procedures Law, as amended. ↑3 Federal Law No. 6 of 2018 on Arbitration. ↑4 The UAE acceded to the New York Convention pursuant to Federal Decree No. 43 of 2006. ↑5 Article 41(3) of the Arbitration Law provides: “The arbitrators shall sign the award, or otherwise the reason for any omitted signature shall be stated. The award shall be valid if signed by the majority of the arbitrators” and thus does not expressly require that every page of an arbitral award must be signed. ↑6 Dubai Court of Cassation case no. 1083 of 2019. ↑7 Article 212 was repealed by the Arbitration Law. ↑8 Dubai Court of Cassation case no. 252 of 2011. function footnote_expand_reference_container_42566_30() { jQuery('#footnote_references_container_42566_30').show(); jQuery('#footnote_reference_container_collapse_button_42566_30').text('−'); } function footnote_collapse_reference_container_42566_30() { jQuery('#footnote_references_container_42566_30').hide(); jQuery('#footnote_reference_container_collapse_button_42566_30').text('+'); } function footnote_expand_collapse_reference_container_42566_30() { if (jQuery('#footnote_references_container_42566_30').is(':hidden')) { footnote_expand_reference_container_42566_30(); } else { footnote_collapse_reference_container_42566_30(); } } function footnote_moveToReference_42566_30(p_str_TargetID) { footnote_expand_reference_container_42566_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_42566_30(p_str_TargetID) { footnote_expand_reference_container_42566_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 Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Join us in Edinburgh on 19 September for the Live Version of the Kluwer Arbitration Quiz … And while you are in Town, Make Sure to Attend the ICCA Conference!

Sun, 2022-09-11 02:28

Looking for a fun night out with your arbitration friends now that the holidays are over? Then you will be happy to learn that International Arbitration finally has a game show!  It will be held in Edinburgh on Monday, 19 September 2022.

Join our live version of the Kluwer Arbitration Blog Quiz! in Edinburgh, at The Voodoo Rooms, 19a West Register Street, Edinburgh. The event is free.

 

How to plan a fun night out with your international arbitration friends?

Step 1: Register for the Pub Quiz

Step 2: Share this invite with your network

Step 3: On Monday 19 September at 5:30 pm, start walking to the pub: The Voodoo Rooms

Step 4: At 6pm, be the first to witness the Big Reveal, the exciting launch of the new Kluwer Arbitration, followed immediately by the Kluwer Arbitration Blog Quiz, led by moderators Crina Baltag and Michael McIlwrath, commentators Annette Magnusson, Baiju Vasani, and Saadia Bhatty, and illustrious scorekeeper Abhinav Bhushan

Step 5: Participate in the quiz and win prizes! Or just enjoy the show.  Drinks & snacks are included! Esteemed colleagues from the Arbitration Station and My Arbitration will be present, so make sure to say ‘hello’ to them, too!

Step 6: If you are coming to Edinburgh for the Kluwer Arbitration Blog Quiz, consider also attending the ICCA Congress which has been scheduled to take place during the same week as the Quiz.

Step 7: After the Kluwer Arbitration Blog Quiz ends at around 8:30 pm, continue to enjoy the night life in Edinburgh!

In the meantime, make sure to train vigorously! Here are some oldies but goodies from previously published Kluwer Quizzes:

The procedural device known in the USA as “depositions”, oral testimony taken in advance of a hearing, is routinely used in the domestic arbitration of which other countries?

  1. England and Wales
  2. Germany
  3. Australia
  4. Singapore
  5. Brazil
  6. None of the above

Answer: F, none of the above. The almost complete absence of deposition practice from legal systems outside of North America often comes as a surprise to domestic US litigators, who may fail to appreciate that cases can be concluded without the need (or cost) of witness testimony taken well in advance of any hearing in front of the arbitrators (or judges).

 

Which of the following arbitration institutions once had the practice of publishing on the stock exchange the name of any party that failed to comply with an arbitral award?

  1. The American Arbitration Association in New York (AAA)
  2. The Hong Kong International Arbitration Centre (HKIAC)
  3. The Court of Arbitration of the Finnish Chamber of Commerce in Helsinki (FCC)D. Arbitration Centre of Lisbon (ACL) of the Portuguese Chamber of Commerce and Industry

Answer: C, The Finnish Chamber of Commerce. This “name and shame” was usual practice in Helsinki in the early part of the 20th century, and was said to be effective in encouraging compliance.

 

The “Singapore Convention” for the enforcement of mediated settlements was introduced at the 2014 UNCITRAL Working Group II session by which country?

  1. Singapore
  2. The United States of America
  3. Ecuador
  4. Australia
  5. The Netherlands

Answer: E, The United States of America submitted a proposal for the enforcement of mediated settlements at the end of the UNCITRAL Working Group II’s 62nd Session in New York, in July 2014. (Ecuador was the first country to endorse the USA’s proposal when it was subsequently introduced for discussion in Vienna.) At the UNCITRAL working group session in June 2018, 27 countries spoke in favour of Singapore hosting the signing ceremony and naming the convention after the country. The UN General Assembly passed a resolution to this effect on 20 December 2018. The broad support for this name may also have been influenced by the successful chairing of the working group sessions conducted by Singaporean Natalie Yu-Lin Morris-Sharma.  The Convention was opened for signature on 7 August 2019.

 

Which jurisdiction has enacted legislation to empower arbitrators to impose “exemplary costs” on parties seeking adjournments? 

  1. Myanmar
  2. Vietnam
  3. India
  4. South Africa

Answer: C, Article 24(1) of the Indian Arbitration Act provides that, with respect to hearings, “the arbitral tribunal….may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.”

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Contractual Disputes between the International Seabed Authority and Deep Seabed Mining Contractors: an International Investment Law of the Sea?

Sat, 2022-09-10 01:13

To a large extent, the UN Convention on the Law of the Sea (“UNCLOS”) shields the contractual rights of deep seabed miners from the regulatory powers yielded by the International Seabed Authority (“ISA”). Exploration and exploitation contracts concluded between the ISA and deep seabed mining operators are afforded security of tenure: their unilateral suspension or termination is allowed only in very limited circumstances. Furthermore, rules of uniform treatment, reasonableness, and proportionality constrain the ISA’s powers.

This blog post will assess the interplay between the ISA’s regulatory powers and the private rights held by deep seabed miners, considering the precedents set by previous investment arbitrations. Just like various investment treaties, Part XI of UNCLOS combines the protection of private rights with the recognition that regulatory action is required to achieve certain public purposes. Because analogous norms have already been applied to onshore mining disputes as part of international investment law, it may be useful to look at those precedents when interpreting and applying the rights of deep seabed mining operators under UNCLOS.

The ISA and Security of Tenure

UNCLOS and its 1994 Implementing Agreement designate the Area and its resources as the common heritage of mankind (“CHM”). Having prohibited the unilateral appropriation of the Area and its resources, the CHM principle tasks the ISA with ensuring the equitable sharing of benefits and with managing natural resources in a sustainable way (see UNCLOS, articles 137, 140, and 145). To achieve these different goals, the ISA is granted extensive regulatory powers. In addition of adopting binding regulations on the exploration and exploitation of deep seabed minerals, it has the power to enforce these regulations directly against contractors (see Jaeckel, p. 147).

In fact, the exploration and exploitation of mineral deposits in the international seabed (“the Area”) require approval by the ISA. Such approval takes the form of a contract between the ISA and the deep seabed mining operator. However, pursuant to article 153(6) of UNCLOS, contracts enjoy security of tenure. Therefore, they cannot be revised, suspended, or terminated except in accordance with articles 18 and 19 of Annex III. Under the latter provision, the renegotiation of a contract is always possible when either party considers that there are circumstances which “would render the contract inequitable or make it impracticable or impossible to achieve the objectives [therein].” As there is no obligation for the parties to consent to such changes, the result is that various versions of the ISA regulations may be applicable to different contracts.

The ISA’s practice confirms that the contractor’s acquired rights are not affected by the approval of new rules. In 2011, the ISA modified substantially the location of a proposed network of marine protected areas to avoid conflicts with existing contracts. In 2013, after deciding to create an overhead charge to cover its costs of administration and supervision of contracts, the ISA initiated the renegotiation of existing contracts in line with the changes it had approved. It even considered that it was necessary to obtain the consent of applicants who had applied for a contract prior to the entry in force of the amended regulations.

Suspension and Termination of Contracts

Under article 18 of Annex III, suspension or termination of contracts is only possible in case of “serious, persistent and willful violations” by the contractor of the “fundamental terms” of the “applicable international legal framework.” Neither “serious, persistent and willful” nor “fundamental terms” are defined in Annex III of UNCLOS. In fact, very few provisions specify whether they constitute fundamental terms; for example, regulation 36(3) of the draft exploitation regulations stipulates that “the obligation under an exploitation contract to maintain insurance as specified in the Guidelines is a fundamental term of the contract.”

For all other provisions, an enquiry must be made based on their wording, context, and place within the CHM principle. For instance, a fundamental restatement of the CHM principle can be found in article 137 UNCLOS – titled “Legal status of the Area and its resources” – which bans exploration and exploitation activities not authorized by the ISA. National mining laws generally hold that the conduct of unauthorized mining activities is a ground for suspension or termination of mining rights. It may also be expedient to inquire on which terms are regarded by national mining laws as being “fundamental”, interpreting the relevant UNCLOS provisions in light of national practice. A cursory look at national mining laws confirms that conducting extractive activities in zones or for resources other than those indicated in a mining title are considered grounds for unilateral suspension or termination (e.g. Mexico’s Mining Law, article 55(IX-XI); France’s Nouveau Code Minier, article L. 173-5, 3° and 4°; and Kazakhstan’s Code on Subsoil Use, article 221(3)).

Equally, as only persons authorized by the ISA may carry out activities in the Area, the transfer of mining rights from the contractor to other persons without authorization by the ISA would constitute a serious violation of a fundamental term. Indeed, section 22 of the “Standard clauses for exploration contract” (see here at Annex IV) requires ISA consent for any transfer of rights and obligations under the exploration contract. Here too, the UNCLOS provisions on unilateral suspension and termination should be interpreted in light of national practice whereby the transfer of mining titles without prior authorization constitutes a ground for unilateral suspension or termination (e.g. Senegal’s Loi n° 2016-32 portant Code Minier, article 22; Kazakhstan’s Code on Subsoil Use, article 221(3)(1)).

The “fundamental” nature of environmental disciplines in the ISA’s exploration regulations and recommendations – for instance the duty to gather accurate environmental baseline data during exploration – is less clear. Arguably, for the contractor, environmental monitoring is a crucial obligation which undergirds the full environmental impact assessment required before commencing exploitation activities (see draft exploitation regulations 7, 47). Hence, such duty is inherent to the object of exploration contracts and may be considered as a fundamental term.

Outside those limited cases, the ISA does not have the power to suspend, terminate, or alter the contracts it granted to deep seabed mining operators. Rather, to bypass the rigours of security of tenure, exploration and exploitation contracts may be drafted so to authorize the evolution of rules applicable to individual contractors. Exploration contracts already require contractors to “observe, as far as reasonably practical” the recommendations issued “from time-to-time”  by the ISA (see standard clauses section 13.2(b). ISA recommendations play an important role because they give a greater level of detail (see for example here) to contractors’ obligations pursuant to the ISA regulations. Secondly, section 3.3(a) of the current draft exploitation contract standard clauses binds contractors to “comply with the regulations, as well as other Rules of the Authority, as amended from time to time…” If approved, such formulation would enable the automatic incorporation of new ISA rules into the contractual framework.

Reasonableness, and Non-Arbitrariness: An International Investment Law of the Sea?   

Evolving contract terms may very well limit the reach of security of tenure, but this would not entail a boundless discretion for the ISA. Aside from security of tenure, there are other rules governing the ISA’s powers. For instance, article 18 of Annex III authorizes the imposition of “proportionate” monetary penalties to sanction contractors’ breaches. More generally, article 145 of UNCLOS speaks of “necessary” measures to ensure effective protection for the marine environment. In addition, article 154 requires the ISA to “avoid discrimination in the exercise of its powers and functions”, and article 17 of Annex III obliges it to “adopt and uniformly apply” its regulations, rules, and procedures. All these terms introduce a level of constraint on the exercise of regulatory powers. Furthermore, the Seabed Disputes Chamber stated in its 2011 Advisory Opinion that “reasonableness and non-arbitrariness must remain the hallmarks of any action taken by the sponsoring state [of deep seabed mining in the Area]” (para 230).

Interestingly, there are striking similarities between such law of the sea rules and norms of international investment law: standards of reasonableness, and non-arbitrariness have been applied as part of treaty standards on fair and equitable treatment and expropriation. A comparison with rules of international investment law could be apt, because mining disputes have been frequent in investment arbitration and because international investment law also protect private rights vis-à-vis regulatory action (see Dingwall’s exhaustive analysis).

The ISA’s obligation to “uniformly apply” its rules has been compared to the doctrine of legitimate expectations under international investment law, which seeks to hold authorities to their word and prevent “arbitrary changes in policy or practice” (see Harrison, p. 161). Arbitral jurisprudence has already held that the inconsistent application of existing mining rules may constitute an international wrong. For instance, in Eco Oro v. Colombia, the tribunal chastised the inconsistent behaviour of state authorities, which took twenty years to delimit the areas concerned by a mining ban while continuing to award exploration rights for those same areas (see Eco Oro v. Colombia, para 803). In Bilcon v. Canada, the tribunal held that the denial of mining rights violated the international minimum standard of treatment because state authorities had departed from existing interpretations of the legally accepted level of environmental harm (see Bilcon v. Canada, para 531).

Equally, there is a certain similarity between reasonableness in the law of the sea and in international investment law. Investment tribunals have recognized that states are bound to principles of reasonableness and proportionality “requiring an appropriate correlation between the state’s public policy objective and the measure adopted” (AES v. Hungary, para 10.3.9). A relevant example is that of Infinito Gold v. Costa Rica: the tribunal ruled that a ban on open pit mining which retroactively affected a project had “no reasonable correlation” with the aim it sought because “the only project caught by its provisions was the [investor’s] project” and “the Constitutional Chamber had already ruled that the Project was environmentally sound” (Infinito Gold v. Costa Rica, para 562). Such precedents touch on the interplay between the investor’s acquired rights and the state’s regulatory powers and provide us with some guidance on which kind of action by the ISA may be considered arbitrary and thus violative of UNCLOS.

Some Conclusions

Security of tenure provides strong protections for contractual rights held by deep seabed mining operators. Arguably, the ISA is allowed to unilaterally suspend or terminate contracts only in certain limited cases: for example, when the contractor transfers its title to a third person without prior authorization, or where it does not gather accurate environmental baseline data during exploration. In practice, the rigours of security of tenure may be stemmed if contracts are drafted in sufficiently flexible terms. In such case, the ISA would still be bound by rules of reasonableness, non-arbitrariness, and proportionality. Analogous norms have already been interpreted and applied as part of international investment law: the arbitral case law shows that arbitrary changes in mining policy or practice may constitute an international wrong.

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The Jordanian Court of Cassation Upholds the Validity of an Arbitration Clause in a Distribution Agreement

Fri, 2022-09-09 01:55

In many Arab countries, including Jordan, special legislative and regulatory instruments are in place to provide certain protections for local commercial agents and distributors. The relevant laws regularly vest the local courts with exclusive jurisdiction to rule on disputes between agents/distributors and principals. Such exclusive jurisdiction rules prevent derogation from the jurisdiction of local state courts in favor of foreign state courts in order to protect the local agent/distributor from having to pursue their claims abroad.

There is, however, controversy as to whether such clauses also prohibit conferring jurisdiction on arbitral tribunals, i.e. in such jurisdictions, others have questioned, whether disputes arising from commercial agency agreements and distribution agreements arbitrable at all. In practice, the answer is decisive as to (i) whether a terminated distributor can bring claims before local courts despite a previously agreed arbitration clause and (ii) whether a principal can successfully enforce an arbitral award against the distributor in the distributor’s country under the regime of the New York Convention of 1958.

While some Arab countries have opted to amend their commercial agency laws stipulating explicitly that referring disputes arising from commercial agency and distribution agreements to arbitration is permissible (for instance Kuwait, Article 20 of Law 13/2016) some other did not. In these countries the question of arbitrability of disputes arising from distribution agreements remain controversial. Jordan belongs to the latter set of countries. Indeed, the substantive validity of arbitration clauses in distribution agreements has been debated for decades now.

The remainder of this post focuses on the Jordanian position on these issues and, in particular, discusses a landmark decision, issued on 14 June 2022, in which the Jordanian Court of Cassation upheld the substantive validity of an arbitration clause in a distribution agreement (Decision in case no. 916 of 2022). This decision hopefully ends controversy over whether the sole jurisdiction of Jordanian courts under the Commercial Agency Law over distribution disputes invalidates arbitration clauses in distribution agreements.

 

Background on the Jordanian Commercial Agency Law

Distribution agreements – understood under Jordanian law to comprise commercial agency, dealership, and franchise agreements –  are governed by Law 28/2001 on Commercial Agents and Intermediaries (Commercial Agency Law). The term commercial agent encompasses also distributors (Article 2 [4] Commercial Agency Law).

Article 16 (a) Commercial Agency Law reads “Jordanian courts have jurisdiction over any dispute or disagreement arising from commercial agency contracts or from applying the provisions of this law”. The old Commercial Agency Law contained a similar provision stating, “Notwithstanding any agreement to the contrary, the courts at the place in which the agent perform its activity have jurisdiction over disputes arising from a commercial agency contract” (Article 20 of Law 44/1985 on Agents and Intermediaries).

Legal scholars have often taken the view that disputes arising out of distribution agreements are not arbitrable because, as a matter of public order, they are subject to the mandatory jurisdiction of Jordanian state courts.

Adversaries of this opinion tried fiercely to establish that disputes arising from arbitration agreements are indeed arbitrable. Their main arguments include: (i) Article 16 (a) of the Commercial Agency Law does invalidate prorogation clauses conferring jurisdiction on foreign state courts over Jordanian courts, this however does not extend to conferring jurisdiction on arbitral tribunals. (ii) Article 16 (a) of the Commercial Agency Law is not a mandatory provision given that in contrast to its predecessor under the old commercial agency Law it does not include the wording “Notwithstanding any agreement to the contrary”. (iii) Given that Jordan is a contracting state to the New York Convention, Jordanian courts are obligated pursuant to Article II of the New York Convention to refer disputes arising from distribution agreements which contain arbitration clause to arbitration. This obligation supersedes Article 16 (a) Commercial Agency Law.

 

Contradictory Case Law of the Court of Cassation

Contradictory case law of the Court of Cassation further contributed to this controversy.

The Court of Cassation repeatedly has ruled that arbitration clauses in distribution agreements are invalid because the jurisdiction of Jordanian courts over disputes arising from distribution agreements cannot be derogated. However, over the last 20 years there are at least two decisions issued by the Court of Cassation in which the court upheld arbitration clauses in distribution agreements. Yet, in these two decisions the Court of Cassation either did not provide reasoning for its ruling or provided faulty reasoning.

In both decisions the Court of Cassation was required to decide challenges lodged by distributors against decisions of lower courts which referred a dispute arising from a distribution agreement to arbitration in accordance with arbitration clauses agreed therein. The distributors in both cases challenged the decisions claiming among others that the arbitration agreement in the distribution agreement is substantially invalid because Article 16 (a) Commercial Agency Law (and Article 20 of the Old Commercial Agency Law) confers the jurisdiction solely to Jordanian state courts and that it is a matter of public policy in Jordan that disputes arising from distribution agreements are not arbitrable.

The Jordanian Court of Cassation rejected the challenges and confirmed the decisions of lower courts.

However, in the decision issued on 2 August 2011 (Decision in case no. 2002 of 2011) the Court of Cassation neither responded to the merits of the challenge nor did it rule on whether Article 16 (a) Commercial Agency Law renders arbitration clauses in arbitration agreements invalid.

In the second decision issued on 26 May 2000 (Decision in case no. 2486 of 1999) the Court of Cassation based its decision on the argument that the arbitration clause does not deprive Jordanian courts of their jurisdiction. This means the Court of Cassation mistakenly assumed that a valid arbitration agreement does not exclude state courts’ jurisdiction on that matter.

The arbitrability of disputes arising from distribution agreements thus remained controversial.

The latest decision issued this year, which is discussed below, is the first upholding the validity of the arbitration clause in a distribution agreement and thereby confirming that Article 16 (a) Commercial Agency Law does not render an arbitration clause invalid.

 

The Background to the Latest Decision

In the underlying dispute, a Jordanian distributor brought compensation claims against a German supplier before the courts in Amman, Jordan, alleging that the supplier unlawfully terminated their long-standing sole distribution agreement that had lasted approximately forty years.

As of 2011 the relationship between the parties was governed by annual condition agreements which, in addition to setting prices, referred to the supplier’s general terms and conditions retrievable on the supplier’s website. These general terms and conditions superseded all previous agreements and contained an arbitration clause which referred all disputes arising from or relating to agreements with buyers outside the EU to arbitration in Germany under the German Arbitration Institute (DIS).

As a reaction to the proceedings initiated in Jordan, the supplier – in addition to initiating arbitration proceedings in Germany – successfully argued before the Jordanian Court of First Instance and Court of Appeal that the arbitration clause in the agreement exclusively provided jurisdiction to the arbitral tribunal.

The distributor challenged the decisions before the Court of Cassation arguing, among other things, that pursuant to Article 16 (a) of the Commercial Agency Law, disputes arising out of distribution agreements cannot be submitted to arbitration.

 

The Decision of the Court of Cassation

The Court of Cassation dismissed the appeal and upheld the decisions of the lower courts. It rejected the distributor’s grounds of challenge. In terms of the arbitrability of disputes arising from distribution agreements the court argued that Article 16 (a) Commercial Agency Law does not render the arbitration agreement invalid because of the following two reasons:

First, Article II of the New York Convention obligates the contracting states to recognize a written agreement under which the parties undertake to submit to arbitration any disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not. And in case of an action initiated before a court of the contracting state concerning an agreement that included an arbitration clause, the court must refer the dispute to arbitration. The Court then goes on to conclude “given that an international treaty overrides national law” regulations of the New York Convention should be applied and not Article 16 of the Commercial Agency Law.

Second, the arbitration clause referring disputes to the DIS does not contradict laws or public order in Jordan. This arbitration clause that deprives Jordanian courts of their jurisdiction does not grant jurisdiction to a foreign (state) court but rather to an arbitration institution as agreed upon between the parties.

 

Concluding Observations

While I concur with the ruling of the Court of Cassation, the first reason is not convincing.

It is true that under Jordanian law an international treaty, once ratified, overrides national laws. However, under the New York Convention, in particular Article II (1), national courts are obliged to recognize an arbitration agreement only if the court found that the subject matter is capable of settlement by arbitration.  If the Court of Cassation in this case were to conclude that based on Article 16 (a) Commercial Agency Law disputes arising from distribution agreements are, as a matter of public order, not arbitrable, it would be free not to recognize the arbitration clause. Such outcome would not have been in violation of the New York Convention.

Notwithstanding the above, the Decision is a positive development illustrating the arbitration friendly tendency of the Jordanian courts. It is hoped that it will bring the long-standing dispute on the arbitrability of distribution disputes to an end.

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Open Position: Assistant Editor of Kluwer Arbitration Blog

Wed, 2022-09-07 02:23

The Editorial Board of Kluwer Arbitration Blog announces the opening of the following position with Kluwer Arbitration Blog: Assistant Editor for East and Central Asia.

The Assistant Editor reports directly to the coordinating Associate Editor and is expected to (1) collect, edit and review guest submissions from the designated region for posting on the Blog, while actively being involved in the coverage of the assigned region; and (2) write blog posts as contributor. You have the opportunity to work with a dynamic and dedicated team and liaise with the best arbitration counsel in the world.

The Assistant Editor will work remotely. Please note that this is a non-remunerated position. If you are interested, please submit a resume and cover letter by email to Dr Crina Baltag, crinabaltag@gmail.com.

Only shortlisted candidates will be contacted. The deadline for receiving the applications is 23 September 2022.

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Document Production Outside the Seat: Looking Beyond SCOTUS’s Interpretation of 28 U.S.C. § 1782

Tue, 2022-09-06 02:47

In June of this year, the Supreme Court of the United States issued a unanimous opinion (ZF Automotive US, Inc. v. Luxshare, Ltd., available here) settling a circuit-split regarding the interpretation of 28 U.S.C. § 1782. The provision grants U.S. federal courts the authority to compel testimony or the production of documents to aid “foreign or international tribunals”. The question before the Court was whether private adjudicative bodies, such as arbitral tribunals, qualified as “foreign or international tribunals” or not. Having held that the provision only applies to adjudicative bodies somehow embodied with the authority of one or more governments, the Court decided that the provision is not applicable to foreign seated private arbitrations. The ruling has been discussed widely, not the least on this blog (see, for example, the posts by Dana MacGrath and Eric van Ginkel). Rather than revisiting the subject matter of the ruling at hand, this post seeks to briefly explore other options available to arbitral tribunals and the parties that appear before them to support the collection of evidence outside the country where the arbitration is seated.

The issue of gathering evidence outside the seat-country is not a novel one. Some jurisdictions address it explicitly. For example, the Swedish Arbitration Act (SAA) provides that its provisions on courts’ assistance to tribunals and parties in collecting evidence also be applied to foreign seated arbitrations, provided such arbitrations are conducted based on an arbitration agreement and their subject matter is considered arbitrable under Swedish law, SAA § 50. The English Arbitration Act provides that parties may, with the permission of either the arbitration agreement or the tribunal, seek court assistance to compel witnesses in the U.K., § 43(3)(a). On the other hand, other jurisdictions do not bless users with such clarity. The UNCITRAL Model Law provides a provision on court aid in evidence taking, Article 27. However, the aforementioned provision is not applicable to foreign-seated arbitrations, Article 1(2). Jurisdictions that have implemented the Model Law “as is” will thus not allow parties to foreign-seated arbitrations to seek assistance. Some Model Law jurisdictions have, however, amended Article 1(2), providing the scope of the law, as to also include the provision on court assistance in taking evidence in the enumeration of provisions that are also applicable to foreign-seated proceedings, e.g. Section 1025(2) of the German Code on Civil Procedure providing that Section 1050 on court aid in taking evidence also be applicable to foreign seated arbitrations.

In light of this, one might ask what options are available to parties seeking to obtain evidence from adverse or third parties in these, let’s say a bit trickier, jurisdictions? One option could be having a court at the seat send a letter of request (also known as letter rogatory). Such letters are often used when the question of obtaining evidence abroad is presented in court litigation rather than arbitration. Letters of request are sent by a court usually upon motion or application from a litigant, sometimes by diplomatic means, to a foreign court, requesting the foreign court’s aid in collecting evidence or performing certain other judicial acts.

The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (1970) (“Hague Convention”), or in intra-EU scenarios, the EU Taking of Evidence Regulation (“the EU Regulation”), provide provisions governing the procedure of requesting and collecting evidence in cross-border scenarios and the exchange of such requests between signatory jurisdictions may be more straight forward than between non-signatory (or non-EU) jurisdictions. Below, I first elaborate on the prerequisites for the application of the two instruments, the practical application of the instruments to parties in international arbitrations and what obstacles may arise if this path is chosen.

 

The Hague Convention

The Hague Convention sets out a framework for the procedure for courts of one state requesting that another state take evidence on its behalf, upon the request of a litigant.  The Convention is adopted by 64 nations, with the U.S. being among them.

One of the most central prerequisites for the requesting court to transmit a letter of request is that the evidence requested is to be used in a commenced or contemplated judicial proceeding, Article 1. It is this requirement that is of special interest to parties to arbitration.

For the sake of argument, I present the following scenario. Two parties, A and B, belonging in states outside the EU and with arbitration laws not permitting their courts to directly aid foreign arbitral tribunals nor their parties, conduct an arbitration in Stockholm, Sweden. Party A files a motion to the Stockholm District Court to aid in collecting written evidence from Party B, with the consent of the tribunal. The court, being of competence to aid in this matter, orders Party B under threat of administrative penalty, to produce the documents in question. Party B refuses the order and does not pay the administrative fines subsequently ordered by the court. As Party B lacks any assets in Sweden, the fine cannot be enforced. The documents cannot be gathered through execution of the court order since the documents are kept in Party B’s home jurisdiction. Party A now motions the court to transmit a letter of request under the Hague Convention to the competent authorities in Party B’s domicile to aid the collection of evidence.

The now relevant question is whether or not the evidence is to be used in a “judicial proceeding”. The proceeding before the Stockholm District Court is indeed a judicial proceeding. But is the evidence to be used in said proceeding? The question can of course be answered in different ways. The evidence is to be used in said proceedings in the sense that the evidence will be sent to the court and added to its case docket and furthermore the receipt of the evidence and its forwarding to Party A (probably) marks the end of the court proceedings. On the other hand, the evidence is not be used as evidence in the court proceedings. I leave this question of whether the Stockholm court proceedings themselves satisfy the requirement of the evidence to be used, open.

As to the arbitration proceeding, which is commenced, the answer to the question of whether the evidence is to be used is more apparent; yes, it is. What now remains to be answered is whether the arbitration is a judicial proceeding. As to this question, the answer is not as clear. Arbitration is not a judicial proceeding in the sense that an arbitral tribunal is not a court of law. It is not endowed with the sovereign powers of the state (or of the sovereign), nor is it considered a part of the judiciary. However, arbitration is a judicial proceeding in the sense that it constitutes a binding way to adjudicate a dispute, it is administered by independent and impartial arbitrators deriving their powers not only from the parties’ agreement, but also the state’s recognition of said powers. Some scholars argue that arbitrations are judicial in character, e.g. Gary Born.1) Gary Born, International Commercial Arbitration § 1.05[A] (3rd ed. 2021), Kluwer Law International jQuery('#footnote_plugin_tooltip_42571_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_42571_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The English text of the Hague Convention offers no indication as to what sense the proceeding must be judicial. To further complicate matters, the French text of the Hague Convention, which is of equal validity, does not mention “judicial proceedings” but rather just the word “procédure” (proceeding). Applying only the French text, it would probably be clear that the requirement is satisfied by the arbitration proceeding in Stockholm.

 

The EU Regulation

In regard to the EU Regulation – and in such case Party B had its domicile in another EU country– it can first be noted that it is based on the same principles as the Hague Convention and that the language is similar. Like the Convention, the English version of the EU Regulation stipulates that a request for evidence may not be made if the evidence is not to be used in a judicial proceeding, Article 1.2. However, the French version of the regulation also uses the same wording, “procédure judiciaire”, as opposed to just “procédure” as in the Convention. The Swedish language version uses the words “rättsligt förfarande”, meaning legal proceeding. The Danish language version simply uses the word “trial”. The European Court of Justice has issued no ruling explaining the proper application of the article in question and the preamble of the regulation is equally silent on the issue. In light of this, it is unclear whether Party A’s intention to use the evidence in the arbitration proceedings would be enough to satisfy the requirement for the evidence to be used in a judicial proceeding. And, as is the case with the Hague Convention, the question of whether the Stockholm court proceedings themselves satisfy the requirement of the evidence to be used, is left open.

 

Finishing Remarks

To further complicate matters, some of these jurisdictions previously categorized as “a bit trickier” have national legislation differing from the Hague Convention. These differences can both mean further opportunities for parties to obtain evidence, but they can also be of a restrictive kind. First of all, the Hague Convention does not shut the door on countries wishing to enact laws and rules that are more favorable for foreign parties seeking evidence, as it only sets a minimum standard. On the other hand, some jurisdictions may have stricter rules than others for allowing their own courts to request foreign judicial assistance. Furthermore, the Hague Convention is a convention, more often than not meaning that its application is dependent on the way it was implemented into the national legislation of each signatory state. To circle back to the start of this post, let’s have another look at 28 U.S.C. § 1782(a). The provision goes beyond what is required by the Hague Convention in that it allows litigants in foreign courts to directly make an application to the court. In our fictional scenario, Party A is a litigant before a foreign court of law and would as such generally be within its rights to make an application under this provision. It can however be questioned, as in the case with the Hague Convention, whether Party A is to use the evidence in a proceeding before said court. In light of the recent June ruling by SCOTUS, it is evident that the proceeding in which the evidence is to be for use cannot be an arbitration proceeding. The now remaining question is whether evidence is “intended for use” in the court proceeding in Stockholm.

As a finishing note, the example of the 2013 Austrian Arbitration Act is of great interest. Section 602 of the Act provides that courts may provide arbitral tribunals (and the parties, given the tribunal’s permission) aid by conducting “judicial acts” and that such acts may include “the court requesting a foreign court or administrative authority to conduct such acts”. This is, in my view, a good example showing that the options presented in this post are plausible. That being said, the success of taking the route through the courts at the seat to obtain foreign evidence is ultimately subject to the laws and procedural rules of the foreign jurisdiction.

As a matter of policy, one could only assume that choosing to accept letters of request from foreign courts aiding arbitrations, is generally beneficial for the state in question. Many forms of judicial assistance and cooperation are based on reciprocity, something that is not helped by being restrictive in providing assistance in these cases. With these final remarks, I finish this post hoping that arbitration practitioners worldwide keep contributing to the legal development in this area of law.

References[+]

References ↑1 Gary Born, International Commercial Arbitration § 1.05[A] (3rd ed. 2021), Kluwer Law International function footnote_expand_reference_container_42571_30() { jQuery('#footnote_references_container_42571_30').show(); jQuery('#footnote_reference_container_collapse_button_42571_30').text('−'); } function footnote_collapse_reference_container_42571_30() { jQuery('#footnote_references_container_42571_30').hide(); jQuery('#footnote_reference_container_collapse_button_42571_30').text('+'); } function footnote_expand_collapse_reference_container_42571_30() { if (jQuery('#footnote_references_container_42571_30').is(':hidden')) { footnote_expand_reference_container_42571_30(); } else { footnote_collapse_reference_container_42571_30(); } } function footnote_moveToReference_42571_30(p_str_TargetID) { footnote_expand_reference_container_42571_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_42571_30(p_str_TargetID) { footnote_expand_reference_container_42571_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 Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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The Contents of the ASA Bulletin, Volume 40, Issue 2 (June 2022) – and a glimpse at Volume 40, Issue 3 (September 2022)

Mon, 2022-09-05 01:26

We are happy to report that the latest issue of the ASA Bulletin is now available and includes the following articles and cases; we also add a brief glimpse of the articles of the next issue:

 

ARTICLES

Felix DASSER, Choosing a Seat? Ten Questions to Ask (on Setting-Aside Proceedings)

In his message, ASA President Felix DASSER identifies the issues that really matter when assessing how arbitration-friendly seats are in relation to annulment proceedings.

 

Julia JUNG, Investor-State Mediation – A Third Lane on the ISDS Highway?

Julia JUNG examines the proposition of investor-State mediation, recent developments in the field as well as a number of related practical aspects.

 

Bernard HANOTIAU, Leonardo OHLROGGE, 40th Year Anniversary of the Dow Chemical Award

Bernard HANOTIAU and Leonardo OHLROGGE look back at the Dow Chemical award, which is said to be at the origin of the so-called “group of companies doctrine”, and its implications.

 

Johannes LANDBRECHT, Andreas WEHOWSKY, Arbitrating Blockchain and Smart Contract Disputes – Lessons to be Learnt from Commodities and Shipping Arbitration?

Johannes LANDBRECHT and Andreas WEHOWSKY explain why arbitration is well suited for resolving disputes arising out of blockchain technology and smart contracts and recommend mechanisms to accommodate for the specific needs of blockchain and smart contract disputes.

 

Irma AMBAUEN, Awarding More or Different Than Claimed by the Parties: Arbitral Awards Ultra or Extra Petita

Irma AMBAUEN focuses on the three only successful challenges of arbitral awards brought before the Swiss Federal Supreme Court on the ground of ultra petita since 1989 and whether awarding a sum of money in a currency other than that requested by claimant violates the principle of ne ultra petita.

 

Charles T. KOTUBY Jr, Alberto POMARI, Do the 2021 Reforms of the Italian Code of Civil Procedure Make Italy a Favorable Seat for International Arbitration?

Charles T. KOTUBY Jr and Alberto POMARI highlight some of the key features of the 2021 reform of Italy’s arbitration law and analyses whether they bring Italy in line with other, preferred arbitral seats.

 

Nicolas CURCHOD, Judicial Involvement in Arbitration: Towards a Collaborative Approach

Nicolas CURCHOD examines the relationship between arbitration and litigation and argues in favor of an alternative, collaborative approach under which domestic courts and arbitral tribunal work together as partners.

 

Alexander LAUTE, The Arbitration Rules of the Nordic Offshore and Maritime Arbitration Association – A Swiss Perspective

Alexandre LAUTE offers a “Swiss” perspective on the arbitration rules of the 2021 Nordic Offshore and Maritime Arbitration Association by comparing these rules with the arbitration rules of the Swiss Arbitration Centre.

 

Süheylâ BALKAR, Law No. 805’s Effect on Arbitration Agreements

Süheylâ BALKAR analyses the applicability of Turkish Law No. 805, which requires mandatory use of Turkish in economic enterprises to agreements, particularly arbitration agreements.

 

DECISIONS OF THE SWISS FEDERAL SUPREME COURT

  • 4A_464/2021 of 31.01.2022 [New fact – Allegedly forged document – Public policy]
  • 4A_406/2021 of 14 02.2022 [Sun Yang doping ban – Allegedly missed deadline for appeal against CAS award goes to admissibility, not jurisdiction – Replacement arbitrators not required to allow new pleadings or evidence – Page limitations]
  • 4A_476/2020 of 5.01.2021 [Denial of justice v. res judicata – ECHR not directly applicable]
  • 4A_348/2020 of 4.01.2021 [Award upheld after two previous annulments – Discretionary contract termination found to be valid but triggering damages for abuse of right]
  • 4A_292/2019 of 16.10.2019 [Permissible contacts between counsel and arbitrator – IBA Guidelines on Conflicts, and on Party Representation]
  • 4A_167/2021 of 19.07.2021 [Pacta sunt servanda – Binding force of contracts – Good faith, expropriation without compensation]

 

A GLIMPSE AHEAD

The third issue of 2022 will contain, among others, the following contributions:

  • Marlena HARUTYUNYAN, The Revised ICSID Rules: A Further Step Towards Transparency and Efficiency
  • Hansjörg STUTZER, The Ongoing Duty to Disclose and the Taciturn Chairwoman. Case Note on Swiss Federal Supreme Court Decision 4A_462/2021
  • Emilie MCCONAUGHEY, Nicole CHALIKOPOULOU, Space Law and Arbitration. A Not-So-Outlandish Space Odyssey

 

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