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LIDW 2022: London: Leading or Lessons to be Learned?

Kluwer Arbitration Blog - Fri, 2022-05-13 08:18

The last session of LIDW’s two-day main conference saw a panel of world-renowned international dispute resolution experts turn the spotlight on London as a leading centre for international dispute resolution.

The panel was composed of Sylvia Noury QC (Freshfields Bruckhaus Deringer), David Falkenstern (Kroll), Michelle MacPhee (BP), Poonam Melwani QC, (Quadrant Chambers), and Laurence Shore (BonelliErede).

The panellists offered a very rich debate. They examined London’s strengths and weaknesses (perceived and factual), reflected on any viable long-term threats to the city’s leading position on the global stage, and considered the available opportunities for London to continue to thrive and ensure future success in all forms of dispute resolution, including litigation.

 

London – From a Diversity of Expertise to a Diversity of Experts

All members of the panel agreed that London is a hotspot for legal and technical expertise (i.e., inclusive of engineers, accountants, and scientists).

In particular, there is a real “diversity of specialist skillset”, from full-time arbitrators to specialised judges, maritime engineers, architects, specialized societies, counsels, accountants, and mediators. This diversity offers a great asset to litigants, who can draw upon these experts while also relying on a system of courts and arbitration institutions that are both of an excellent level and highly responsive.

Two examples of London’s excellence were given by a panel member:

  1. First, the special court system was deemed unique. For instance, the technology and construction courts are capable of adjudicating technical and complex cases in record-time. The example of a highly complex compensation case was given, in which English judges were required to apply a foreign law in a highly technical case. The court rendered a 600 pages judgement, reflecting an incredible feat and an attention to fairness that only London could offer.
  2. Second, the flexibility of the LCIA rules was considered unique. In an arbitration case in which resolution of a contract dispute was extremely time sensitive, the parties agreed to have an expedited arbitration under LCIA rules. The parties set out a timetable for a five-month full arbitration on liability. Thanks to the flexibility of the LCIA rules, an arbitral panel was constituted within 5 days, memorials and counter-memorials were exchanged, experts heard, and the award was rendered in time.

To that panel member, these two examples constituted clear evidence of the diversity and quality of services litigants find in London.

The panel then addressed the diversity of gender, ethnicity and socio-economic background of London’s disputes environment.

One panel member noted that the presence of women on panels and talks did not reflect the reality of the legal profession. While it was important to set an example, there were still important inequalities in the profession, which are showcased by recent reports on gender and ethnic diversity. Statistically, women and ethnic minorities still face a “glass ceiling” in their careers. In particular, the lack of inclusion of black and black British students was criticized. Significant hurdles and obstacles were pointed out. It was argued that law firms and the pool of experts had to work towards greater diversity at three stages: (1) outreach in schools and universities, (2) recruitment and (3) retention and progress.

The panel welcomed London’s improvements on diversity issues but recommended that the legal profession aim to avoid exclusionary behaviours, create more demand for ethnic minorities in university degrees and maintain career momentum for professionals who are also balancing family obligations.

In short, a diverse pool of legal and technical experts is not sufficient. It is essential to developing gender and ethnic diversity to attract and retain talents and for London to continue to be a leader in international dispute resolution.

 

London – Costly but Worth It?

Another topic was the cost of legal proceedings in London. According to a panel member, when asked if the city was expensive, the litigants’ answer is a clear ‘yes’. The reason why London is expensive was twofold: experts’ costs are high and English law is expert-intensive, and London is expensive for physical hearings.

However, the panel members recognised that the cost reflected the general quality of service offered in London. They also acknowledged that, compared to the laws of other jurisdictions, London courts offered the possibility to recover costs. The possibility to obtain summary judgement and the English cost regime were thus seen as decisive factors for London maintain its place as a leading venue for litigation and arbitration.

Similarly, the panel members emphasised the speed at which English courts were capable of adapting to unforeseen circumstances, such as the Covid-19 lockdowns. They also praised the technological culture of English courts and cited the example of paperless proceedings. They expressed the view that the judiciary was very proactive in London – for example, devising novel ideas on how to improve litigation procedures and finding ways to make them faster, modern and global.

 

London – The Flexibility of Precedence

One panel member expressed the view that “English law is our greatest export and asset”. Since it is not based on a code, but on principles, and methods, it was argued that judges were well equipped to adapt to the changing conditions of the commercial world.

Another panel member argued that litigants, often opt for a “global package”, meaning that they often adopted London as a seat when choosing English as the substantive law. In this sense, London, as a seat, profits from English law’s “certainty and commercial flexibility”.

Another panel member argued that English law had a better approach to the good-faith principle than many other  continental or North American jurisdictions. Citing the traditional debate between “textualism” and “conceptualism”, the panel member argued that successful arbitration spots adopt a textualist approach to the interpretation of contracts. A “deal is a deal” and with no possibility of appeal in arbitration, litigants preferred an arbitrator who clearly interprets the text rather than tries to interpret the commercial reasonableness of the parties.

A note of caution came at the end with panel members citing the major investments in the dispute centres of Singapore or Hong Kong. To them, London would need to keep up with the pace to maintain its leading position.

 

Conclusion

The 2021 survey on arbitration by Queen Mary University of London demonstrates that London is the favourite seat of international arbitration users. The panel members agreed that English law retains its importance and dominance among common law jurisdictions. Alongside the 1996 Arbitration Act, the judges and the court system in London are highly trustworthy and knowledgeable. Nevertheless, London may remain the leading centre for international dispute resolution, only if it continues to challenge itself – by leading on inclusion, expertise and quality of service delivered to the parties.

 

More coverage from LIDW is available here.

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LIDW 2022: Changes in Construction and Infrastructure Disputes: 2022 and Beyond

Kluwer Arbitration Blog - Fri, 2022-05-13 08:01

On the fourth day of the LIDW22, the session on “Changes in construction and infrastructure disputes: 2022 and beyond” looked at how construction contractors and employers have found ways to either avoid liability or impose extended liability on their counterparties. It also examined how English law has responded to these new developments.

The conference was hosted by Atkin Chambers, HKA, Jones Day, Keating Chambers, and White & Case. The speakers were Julian Bailey (White & Case), Franco Mastrandrea (HKA), James Pickavance (Jones Day), and Jennifer Wild (Keating Chambers). The moderator was Fiona Parkin QC (Atkin Chambers).

The conference started with Jennifer Wild discussing fiduciary duties in construction disputes. It was indicated that fiduciary duties arise in relationships of trust and confidence under English law. There are two types of relationships implying these duties: 1) established categories, such as solicitors and clients, and 2) relationships on which facts might impose such duties. In short, the core duty imposed under the concept of fiduciary duties is that of loyalty, which can be understood as not putting yourself in a position where conflicts of interest may arise.

She highlighted the case Secretariat Consulting Pte Ltd, Secretariat International UK Ltd, and Secretariat Advisors LLC v A Company and its reflection of three recent developments in fiduciary duties:

  1. Fiduciary duties owed by the expert to their clients, where she argued that experts or any professional in a similar position might have an obligation to avoid conflicts. However, it is still unclear in which cases the law would impose such duties.
  2. More certainty in English law in cases where it is necessary to separate fiduciary duties and their remedies from other kinds of duties, such as good faith or expert duties to the court.
  3. Finally, the judgment’s reasoning suggests that, under English law, parties to a construction agreement could include clauses that exclude or limit the liability for breach of fiduciary duties.

James Pickavance addressed the concept of good faith in English law. Even though he recognised that English courts are still reluctant to accept good faith as an overarching duty, it is evident that the notion of good faith is becoming more relevant. In that regard, he explored five circumstances that prompted this discussion: 1) the pandemic has triggered the search for extracontractual remedies, 2) commonly, both bespoke and standard form construction contracts contain provisions of good faith, 3) parties to construction disputes are increasingly pleading a duty of good faith, 4) the concept of good faith is not settled under English law, and sometimes it is confused with other doctrines, and 5) some senior members of the judiciary are advocating for a more prominent role of the notion of good faith.

Julian Bailey discussed economic duress in renegotiated construction contracts. Current circumstances such as Brexit, Covid, supply chain deadlocks, and international conflicts have caused the widespread need to renegotiate construction contracts. He argued that there is no general contractual right for a party to seek the agreement’s renegotiation under English law. However, parties could pressure their counterparties to agree to  renegotiate the contract.

Therefore, he discussed a recent UK Supreme Court ruling in which the court analysed whether lawful acts could constitute economic duress and what implications this may have on construction contracts. Although the facts of the case are not related to construction projects, it offers some guidance applying such a concept. In short, the Supreme Court established that economic duress exists under English law. It arises in rare exceptional cases where one party is making an illegitimate threat, and the other party does not have any other alternative than to give in to the threat.

Franco Mastrandrea addressed current trends in the evaluation of delay analysis. Firstly, he discussed the application of liquidated damages before and after the termination of the construction contract. After that, regarding delay analysis, he concluded that where the agreement does not provide a method for running such analysis, English law favours the retrospective analysis over the prospective approach. Additionally, he talked about the 2021 FIDIC Green Book and how it addresses liquidated damages for prolongation costs associated with a compensable extension of time.

Finally, Fiona Parkin QC raised the issue of whether these changes will impact on the choice of English law to govern construction contracts. The panel concluded that there are no fundamental adjustments to English law as recent developments represents only subtle variations to the law within the common law framework. Therefore, English law continues to be a choice of law that offers certainty to parties operating in the construction industry.

 

More coverage from LIDW is available here.

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LIDW 2022: The Green LIDW: Keynote Address and Conference on Climate Change as a New Disputes Landscape

Kluwer Arbitration Blog - Thu, 2022-05-12 00:30

On the second day of the 2022 LIDW, LIDW members gathered in the Westminster Hall Center to discuss this year’s topics: Dispute Resolution – Global, Sustainable, Ethical?

 

The Keynote Address

The keynote address was given by Lucy Greenwood, (Greenwood Arbitration, Campaign for Greener Arbitration), Jenny Hindley, (Mishcon de Reya, Greener Litigation) and John Sturrock QC, (Core Solutions, World Mediators Alliance on Climate Change). The speakers represented dispute resolution in all its modern forms – arbitration, litigation, and mediation.

The speakers boldly addressed the hot topic of climate change and the sustainability of the arbitration practice.

Lucy Greenwood started by citing John Fitzgerald Kennedy: “For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future”. She called for an essential rethinking of the arbitration practice and its impact on climate change. To her, the arbitration community is part of the global problem and has not sufficiently changed how it runs its practices since the 1990s. While the average carbon footprint of citizens in the UK is 12 tons of CO2 per year, one return flight to New York in business class is equivalent to 7 tons of CO2.

When unnecessary to resolve the dispute, one should avoid travelling, printing, taxis, or even disposable coffee cups. While the pandemic has been a major temporary change, climate change is here to stay. To avoid the catastrophe, we do not have any other alternative than adapting and reducing our carbon footprint. Whatever the reason to change, whether to be more relevant, modern, attract new clients, or be more efficient, making the change is essential.

Jenny Hindley gave striking examples of simple steps to reduce the impact of the litigation practice significantly. For instance, she mentioned a study that showed that a medium-sized arbitration would need to plant 20 000 trees to cover the CO2 emissions it produces. One of the major factors is hearings. According to the speaker, international physical hearings produce 19 times higher emissions than virtual ones. Another example was that one single arbitration wasted, on average, 3000 disposable cups of coffee, equivalent to one ton of CO2. She called the audience to take a step back and consider how we work. Signing the Green Pledge and committing to producing less CO2 emissions is a good way to start, while remaining flexible enough to tailor the lawyer’s service to the clients’ needs.

John Sturrock asked the audience how they felt when called to change their habits. He wondered whether the keynote made the audience uncomfortable and whether “we should bother at all?” Reminding the audience of the facts of climate change and the now very clear science, he asked where it would leave us and others on the planet if we did not change. “If not us, then who?” he asked. After all, “people like us” need to change; and think beyond reusable bottles, towards a complete redesign of the legal practice. He mentioned that World Mediators Alliance on Climate Change had attracted 600 signatories from 50 countries. To him, mediation could be a greener forum in the net-zero transition. It is quick, less resource intensive, worked online during the pandemic, and provides a useful route to explore commercial and non-legal options.

 

Conference on Climate Change as a New Disputes Landscape

In the afternoon, the LIDW turned to disputes arising out of the energy transition and climate change or environmental-related measures. The panel was composed of Luiz Aboim (Mayer Brown), Annette Magnusson (Consultant and Co-Founder, Climate Change Counsel), Piers Rake (FTI Consulting), Thanasi Trantas (HSBC – Litigation and Regulatory Enforcement).

The panel focused on disputes that may arise from climate change and energy transition challenges, including:

  • Investor-State Disputes on climate issues, including those arising from “green” measures affecting investments in fossil fuels;
  • Climate change and the board: corporates managing ‘greenwashing’, directors’ duties, and challenging environmental policies.

First, Annette Magnusson addressed the relationship between international investment law and climate change measures.

It was argued that the most critical goal for states in fighting climate change is to reduce emissions to the lowest level possible, which requires a major energy transformation. States have one carrot and a stick to achieve the objective: incentivising low emissions energy industries is the carrot, restricting and phasing out high emission industries is the stick.

The question was whether it allows states to enact the green transition without being penalised under international investment law.

Under the current international investment law, investors in the energy sector are equally protected whether fossil-fuel based or renewable-energy based. Indeed, the goal of Bilateral Investment Treaties (BITs) is to protect foreign investors and ensure they will economically thrive in the host state. BITs thus raise the question of whether they limit or chill regulatory changes, preventing governments from undertaking the necessary action towards the energy transition.

The two recent claims against the Netherlands for its phasing-out policy demonstrate that ambitious climate regulations adopted by states can be subject to international review. This may reinforce the idea of regulatory chill.

Nevertheless, she argued that the main reason the energy transition is slow is not primarily because of BITs but because the energy transition is uncomfortable and requires immense work and efforts.

Despite potential damages under BITs, not taking regulatory action to curb climate change will be more expensive for everyone. In that regard, it was advocated that while adopting new treaties and amending others is a necessary task, it requires time, which we do not have under the current climate circumstances.

Magnusson was concerned that the Energy Charter Treaty protects all sources of energy equally, a “clear misalignment between legal systems”. In the Climate Change Counsel’s report on climate change and the ECT, the striking finding was that no arbitral award had included climate change law and objectives (Paris Agreement, Tokyo Protocol) in its legal reasoning. However, she noted that those tackling climate change must use imperfect tools as best they can.

The panel then moved to the corporate perspective on environmental regulations.

Thanasi Trantas argued that companies are increasingly being required to disclose key information on their carbon footprint and sustainability level. This information can be crucial to stakeholders, showcasing the impact of climate change concerns on business.

He argued that the increase in environmental disclosures is driven by several factors, including:

  1. Climate change is now recognised as an existential threat and, thus, a material risk for companies, particularly the ones with long-term business structures.
  2. Private companies play a crucial role in the energy transition, with key financial means, expertise, and investment-capacity.
  3. Environmental disclosures are shifting from a voluntary regime to a mandatory one. It is becoming necessary to disclose how climate change impacts the company and what steps are being taken by the company to prevent climate change.

It was argued that accurate disclosures are of the essence to avoid risks. Otherwise, they might lead to litigations related to misinformation or misrepresentations. For example, in some jurisdictions, such as the US, the accuracy of environmental disclosures can be subject to class action litigation.

Additionally, the importance of avoiding greenwashing was underscored. Greenwashing can be understood as the practice of misrepresenting green credentials. As public society is increasingly interested in greener and more sustainable products and services, businesses risk litigation for misleading representations to customers regarding the sustainability of specific services or products. Nevertheless, this area is still developing because the taxonomies of what is a “sustainable” product or service are not yet finalised.

Thanasi Trantas emphasised that corporate directors may also face risks from climate litigation. Climate cases against directors could be filed in connection with their fiduciary duties. Shareholders are increasingly threatening claims against company directors for failing to address climate change. Therefore, litigation could be used by shareholders to force directors to undertake further environmental actions.

Piers Rake reminded the audience that the present circumstances presented features of “a perfect storm”. It is difficult to imagine governments focusing sufficiently on the Net-zero strategy with global economic stress, striking inflation, governmental debt, drop in economic growth, food crisis, or Covid-19 lockdowns. In that context, it was emphasized that trust is an essential element of the energy transition. The public must have confidence in the actions and investments undertaken by states and companies to curb climate change.

At the end of the session, the panel was divided as to whether arbitration could offer an appropriate forum for climate change disputes. While arbitration generally provides the possibility of having the expertise and – arguably – the speed necessary to address these types of disputes, it is important to note that climate change disputes have been historically driven by public litigation and public pressure. Thus, confidentiality in arbitration might not yield good results in bringing about a change to the general protection of the environment by states and private companies.

 

Conclusion

The keynote speech was all about sustainability. The thought-provoking discussion underscored that every little change in the legal practice could help curb climate change. The following discussion on climate change-related disputes showed the array of complex litigations that may arise from environmental regulations. Both panels agreed that the legal practice had to adapt to combat climate change. In John Sturrock’s words, “we have no other choice.”

 

More coverage from LIDW is available here.

More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Meet your friendly neighbourhood arbitration practitioners: key takeaways from YCAP’s 2022 Spring Symposium

International Arbitration Blog - Wed, 2022-05-11 17:23

On May 2, 2022, the Young Canadian Arbitration Practitioners (“YCAP”) hosted its 2022 Spring Symposium in Calgary, Alberta. YCAP is an organization with an interest in promoting international arbitration in Canada and around the world.

LIDW 2022: Key Global Trends: The New Frontiers of Business Ethics and Corporate Accountability

Kluwer Arbitration Blog - Wed, 2022-05-11 09:29

London International Disputes Week continued on 11 May 2022, with a session focused on ESG – regulatory, practice, and risks.

 

First Panel Discussion:  Key global trends: The new frontiers of business ethics and corporate accountability

The first panel, moderated by Heather Gagen, Chair, Partner, Travers Smith, focused on discussing the contours of business ethics and corporate accountability globally and underscored the key ESG risk trends. The speakers – Adam Heppinstall QC, Barrister, Henderson Chambers; Brooke Hopkins, Managing director, Alix Partners; Dan Lambeth, Partner, ESG, Brunswick – shared their insights on strategies of effective navigation in ESG risks landscape.

The chair kicked off the discussion by noting that ESG is increasingly going up the radar as it presents lots of positive opportunities for growth for companies. Though at the same time, it also brings risks to corporate organizations. She proceeded by mentioning litigation, regulatory, interventions, and reputational communications as examples of what can happen when ESG regulations are not satisfied. Hence, this panel discussed what ESG looks like, what drives it, and whether it is proven to be effective.

The panelists approached the topic by limiting the scope of their discussion to the following three sub-topics.

First, Adam Heppinstall QC elaborated on what ESG litigation risk looks like and how it will develop in the coming years by highlighting the judicial practice in several jurisdictions. In the Netherlands, for example, he mentioned the prominent case of Royal Dutch Shell as an example of how soft law, namely UN Guiding Principles on Business and Human Rights (UNGP), can lead to a potential change made to the EU derivatives. He proceeded to mention the tendencies in Germany and Norway, in particular why the parent companies may be liable for violations of ESG policies and not just their subsidiaries. Adam Heppinstall QC highlighted that it is mostly due to the legislative innovations in the named jurisdictions. Dan Lambeth picked up on that point and mentioned that the reputational aspect can outstrip the litigation timetable process. He noted that it is important to take the materiality analysis first. He emphasized that under the categories of “E”, “S”, and “G”, there is a wide range of issues which might be relevant for a certain company depending on the sector. He continued that for most companies, it is not enough to simply produce a report, they have to tell the story around it and set the narrative. He jokingly noted that if a client talks about its aspiration to invest in education in sub-Saharan Africa and in the meantime is involved in oil exploration in the Northern hemisphere, that is what the conversation about the narrative truly is about for that company. Brooke Hopkins weighed in on the role of ESG in the US, which has been highly politicized. She noted that the Department of Justice has introduced proposals around regulation with ESG, which, as she noted, will probably not be implemented in the nearest time; though, even with it, the US takes a principle-based approach. Brooke Hopkins underscored that most of the aspiration to implement better ESG practices comes from investors and consumers. She concluded this thought by stating that clients worrying about litigation or wanting to create ESG values comes not so much from the regulatory but more from the investors saying “If you want to continue to have funding – you must show us how you are moving in that direction of sustainability”. And, she continued, in the US there is currently a wide practice of companies taking advantage of publishing sustainability reports, which are visually pleasing, but nothing more as usually lack the data to back up the reports.

Second, the panel addressed the correlation between business ethics and human rights. Dan Lambeth mentioned that there are three triggers of ESG, being legal and regulatory disclosures; expectations from the financial community; and NGOs who are increasingly partnering with the private sector. As an example, Dan Lambeth noted that some NGOs are questioning companies’ presence in Russia, their assets, and contributions to humanitarian aid, as Ukraine has a strong impact on ESG and human rights. Brooke Hopkins emphasized that in the US one of the things they are attempting to transition from is that the purpose of a corporation is to create a shareholder value, which, as she noted, is very short-term; while ESG plays in it to create a stakeholder value, which is a much longer-term.

Third, the panelists elaborated on ESG activist litigations and the role of the courts in enforcing business ethics. Brooke Hopkins mentioned that when it comes to activism in the US, the consumers are using it in a way to demonstrate their power, while some companies are using it to simply show that they are “green”. As per the role of the courts, Adam Heppinstall QC referred to the Dutch and New Zealand judiciary as examples of societal pressure and the need to take some action. Even more, when the Human Rights Act has been ratified in New Zealand, the society put pressure on the judiciary to create a tort through Article 8. He proceeded by mentioning that NGOs have a new place in this litigation landscape, and there is now a “triangle” between NGOs, lawyers, and funders. He commented on an interesting case before the French courts where the Casino supermarket chain is litigating with the assistance of an NGO which found a way to monetize the claim to the actual loss. Adam Heppinstall QC then summed up that currently, lawyers are trying to catch up with the developments in ESG regulations.

The panelists concluded by stating that there are a variety of directions to follow in terms of being sustainable, and it is important and needed to build a harmonized framework of policies. Brook Hopkins emphasized that ESG shall be tailored for the company, as it is not useful to build a “cookie-cutter” in the long run. While a “cookie-cutter” will give a direction of development, it will not necessarily be the best option as a long-lasting policy for the company.

 

Second Panel Discussion: The growth of ESG: the future for in-house and private practice litigators

In the second panel, Michael Fletcher, Pinsent Masons, chaired a discussion between Holly Gavaghan, Head of Arbitration, BD, Opus 2; Kay Majid, Group Legal Services Director, Tesco; Melissa Strong, Head of Insurance & Wealth Litigation, Lloyds Banking Group; James Thorne, Associate General Counsel, Associated British Foods.

The chair started by asking the speakers what are the big ESG issues that are keeping them awake at night.

James Thorne commenced by noting that ESG is a very broad concept and the short answer to the question would be – supply-chain is a big issue. While a longer answer would be some issues related to social and human rights matters, what is the scope of the carbon footprint, and how climate change can impact the suppliers in the future. He noted that on the one hand, it is ESG issues that are connected to the changing regulatory framework, and on the other hand, the practice. Melissa Strong proceeded by stating that greenwashing is a major issue. She further mentioned Sections 90 and 172 of the Companies Act which are very “uncomfortable” types of claims. Holly Gavaghan thereafter emphasized that the carbon footprint is very relevant within the ESG policies. From OPUS2 perspective, data security is the key risk in this context as it is sometimes included in the “G”. Notably, OPUS2 has recently launched an investigations platform with Linklaters and data security is enshrined in their policies. She further mentioned the Greener Litigation Pledge and the Arbitration Pledge as very relevant to the “S” of ESG. Holly Gavaghan emphasized that these pledges not only raised awareness about the issues but also addressed them. As per the Greener Litigation Pledge, virtual hearings and electronic bundles are some examples of how the carbon footprint can be minimized. And as per the Arbitration Pledge, she noted that in 2015 female arbitral appointments were at 12.2% while in 2019 they increased to 21.3%.

The panelists concluded by stating that in terms of innovation and aspiring practitioners, it is important not to go backwards. Melissa Strong noted that although there is environmental diversity at the moment, it is not necessarily compatible with a lawyer’s private life. In particular, it may not always be the easiest to travel to attend a hearing when it otherwise can be held remotely. She proceeded by noting that it has not been easy to adapt to the innovations as there is a whole training process to cope before it becomes a natural environment. Kay Majid noted that it would be refreshing to have new ideas and approaches toward ESG. James Thorne highlighted that the skillset of the users is also important; lawyers must be more contentious, and the junior lawyers should be getting such training as well. Holly Gavaghan concluded that we all are on a journey and there are certainly positive changes.

 

More coverage from LIDW is available here.

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LIDW 2022: Latin America – Delivering Sustainable and Ethical Infrastructure Across Key Sectors – A Disputes Perspective

Kluwer Arbitration Blog - Wed, 2022-05-11 01:35

On the first day of the 2022 London International Disputes Week, Herbert Smith Freehills, HFW, HKA, King & Spalding, and Twenty Essex organised a panel on “Latin America: delivering sustainable and ethical infrastructure across key sectors – a disputes perspective”. The panel was composed of Richard Caldwell (Brattle), Dr Francisco González De Cossío (Gonzales de Cossio Abogados, S.C), Manuel Casas (Twenty Essex), Jose Ricardo Feris (Squire Patton Boggs), Cristina Ferraro (Miranda & Amado), Erica Franzetti (King & Spalding), Felipe Ossa (Claro & Cia), Daniela Paez, (Herbert Smith Freehills). The moderators were Chris Cardona (HFW) and Michael Laming (HKA).

 

The winds of change in Latin America: has the region become riskier for foreign investments?

The first part of the conference focused on the recent political instability in Latin America. Felipe Ossa highlighted the uncertainties raised by the Chilean Constitutional Convention, which is currently drafting a new constitution. The Constitutional Convention has approved a number of provisions that may pose significant risks to foreign investment, including amendments to the mining regulatory framework and natural resources concessions. However, some polls suggest that the new constitution will not be ratified in the referendum scheduled for next September. This could prompt further political unrest and cast doubts over the country’s future stability.

Cristina Ferraro expressed concerns over the institutional stability in Peru and how it has disrupted several important investment projects in the country, particularly in the energy sector. Likewise, Francisco González discussed the reforms to energy regulations that the government of Andrés Manuel López Obrador has tried to implement in México. According to him, the new measures have had negative impacts on the country’s clean energy market and have discouraged investments in the industry.

Richard Caldwell addressed the economic implications of the changes in the various Latin American jurisdictions. From the perspective of damages calculation, this regional uncertainty produces valuation discounts because the risks are higher. However, he insisted that the actual impact may vary between economic sectors since some markets, such as exports, might be able to navigate in a better way the current political landscape.
In general, the panel agreed that Latin America is currently undergoing turbulent times and political instability. From an investor’s perspective, the region has become riskier as there are newly elected governments vowing to amend the constitutional framework.

 

How could London be more attractive for Latin American disputes?

The second part of the conference focused on the question of whether London is the next Latin American dispute hotspot.

The panel discussed how London is perceived internationally and whether there is room for improvement when looking at attracting Latin American disputes.

Daniela Paez and Erica Franzetti acknowledged that London is perceived as a very strong arbitration hub, with a sophisticated arbitration framework, competent practitioners, and a solid judiciary well-versed in international arbitration.

Be that as it may, Jose Ricardo Feris argued that London is not regarded as the leading jurisdiction for Latin American disputes. He claimed that Paris had done better work in attracting disputes from the region thanks to the efforts of the ICC, which has established a presence in Latin America over the last years. In that regard, arbitration institutions such as the LCIA could benefit from engaging in the region.

Manuel Casas agreed that London needs to promote itself in order to be closer to Latin America. However, it underscored that some steps had been taken in that direction. For instance, the Law Society has been marketing English law in the region, and a number of London-based law firms have been establishing offices or partnerships in Latin America.

Erica Franzetti considered that even though London continues to be a big arbitration hub worldwide, Miami and Sao Paulo remain more natural forums to resolve Latin American disputes due to their proximity to the region and their common background between them. This idea is in line with the 2021 International Arbitration Survey, which found that London was not a top pick for survey respondents based in the Caribbean/Latin America.

The panel concluded that London, as a potential hub for disputes, offers sophistication, predictability, and expertise in international arbitration. However, London faces strong competition from very strong seats in the US and Paris regarding Latin American disputes. Therefore, London arbitration institutions require a more aggressive campaign to promote the seat and English law if they want to grow in the Latin American market.

 

More coverage from LIDW is available here.

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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LIDW 2022: What is the Role of London for North American Disputes? A North American Perspective on London as an International Dispute Hub

Kluwer Arbitration Blog - Wed, 2022-05-11 00:48

As part of the 2022 London International Disputes Week, McCarthy Tetrault, Queen Mary University London, Clyde & Co, Hughes Hubbard, and Fountain Court Chambers organized a conference on “What is the role of London for North American disputes? A North American perspective on London as an international dispute hub.”

The panel was composed of Remy Gerbay (QMUL, Hughes Hubbard), Domenico Di Pietro (GST), Miranda Lam (Acuitas Therapeutics), Robin Lööf (Fountain Court), Junior Sirivar (McCarthy Tetrault), and Jamie Spotswood (Clyde & Co).

The panellists discussed London’s role in arbitral disputes from the US and Canadian perspectives. The session focused on a few key topics particularly relevant to North American disputes, especially: (1) the choice of US and Canadian parties of London as a seat of arbitration; and (2) London as a sustainable, ethical and global spot for North American disputes.

 

London as an arbitration hub for North American disputes

Remy Gerbay kick-started the event by asking the panel whether it was common for North American parties to resolve disputes in foreign seated arbitrations and whether London was a preferred choice.

The panelists agreed that dispute resolution regularly takes place outside North America, and English courts and arbitral institutions as forums provide the best choice for international disputes. According to the panellists, London is a very reliable spot for three main reasons:

  1. Traditionally, the UK courts are widely considered reliable and a predictable place to settle disputes. Historically, the UK is one of the first jurisdictions to embrace alternative dispute resolution.
  2. London provides an extremely varied pool of professional expertise in the world, as shown by the composition of the panel.
  3. The English courts are naturally international, as 70% of commercial cases before them had an international nexus, with over 70 countries worldwide using London as a seat. A panellist described London as a commercial “World Court” and a major arbitration hub.

Moving to substantive law, the panellists emphasized the close ties between North American and the English & Welsh legal systems, as they are built upon common law principles. One member said that parties would refer to commercial decisions adopted in English courts even in Canadian-based litigations. London also appears as a “fairly easy and neutral ground” for Canadian parties who do not wish to opt for Canadian courts. Similarly, the members emphasized the culture of cooperation between Canadian and UK courts on topics ranging from freezing orders to enforcement of arbitral awards. A panellist expressed that the recent wave of sanctions against Russia – which was much more coordinated among G7 leaders – might also result in a rise in US sanctions enforcement, driving in turn greater UK sanctions enforcement.

Moving to the advantages of London as an arbitration seat, the panel praised the culture of procedural efficiency the city had to offer compared to prospective venues in Canada or the US. As one of the panellists underlined, the “English Arbitration Act is old but aging very well.” According to the experience of the panel members, the LCIA “came out 9 times out of 10” as the preferred arbitration center when there is an international component to a contract. It was the panel’s view that when London is chosen as a seat, the parties tend to adopt English law as governing law.

Finally, the panellists pondered whether London was a competitor to American or Canadian arbitration forums. New York and Singapore are given as other popular destinations for both litigants and arbitrators from the region. One member expressed the view that Canada is quickly developing a high-standard system able to welcome arbitral activities founded on a well-established judiciary. Others recognized that London presented competitive advantages, particularly for certain types of disputes, such as banking, maritime, shipping, and new types of technological disputes. This ascendency seems not to be undermined by Brexit, as US companies are planning to increase their presence in England. London remains a very attractive place for business – anecdotal evidence for this is that (most) major international law firms have an office in London.

 

London: global, sustainable and ethical?

The panel also addressed the theme of this year’s LIDW, namely “Dispute Resolution – Global, Sustainable, Ethical?”

On sustainability, a panellist admitted that he had to look up the notion in the dictionary before the session, expressing a favourable opinion on developing best practices that reduce our environmental impact. The panel showed consensus that efforts could be made to better allocate budgets and resources for environmental benefits – i.e., reducing the amount of paper and the amount of travel to prepare for hearings and arbitration proceedings. However, it seemed that, in practice, the driving factor for change was not environmental protection but cost-savings, convenience, and efficiency – even though the benefits were intertwined. . The panellists agreed that virtual hearings could dramatically increase efficiency compared to physical venues.

Diversity was considered a topic related to sustainability that is becoming increasingly significant. According to a panellist, external counsel is increasingly chosen according to values, with the team’s diversity being one of the major elements when in-house counsel chooses an outside law firm.

On the global importance of London, the perception was that England provided excellent legal education, deriving great value from training in England, with well-established foundations to practice. This might be reflected in the appointment of arbitrators. A member of the audience raised a question on the cooperation between the US and UK, mentioning that English arbitrators are particularly appreciated in the US and Canada, while US and Canadian arbitrators are often appointed in the UK.

Finally, the panel addressed the topic of ethics and whether the high ethical standard could be an impediment to London as an arbitration seat. The panel was divided on the issue of witness preparation and coaching. Some expressed the view that while Canadian lawyers are subject to high ethical standards, it would be considered negligence not to coach the witness in Canada. What is considered appropriate is to prepare the witness in the best possible way without misleading the court. On the contrary, in England, the line between preparation and coaching – the latter being prohibited – is blurred. This may raise concerns in international disputes. However, the panel agreed that high ethical standards were a long-term asset rather than an obstacle.

 

Conclusion

The panel’s main subject turned out to be the quality of service London may offer to North American parties. Overall, the panellists agreed that the excellence of the legal system, education, and arbitration institutions in England constituted vital reasons why a London seat was preferred over some continental seats. Reflecting on the last 20 to 30 years, the panel agreed on the exponential development of London as an international arbitration hub, rising as a result of resourcefulness, to one of the top three arbitration spots in the world, if not the first.

 

More coverage from LIDW is available here.

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Stacie Strong Receives ABA Dispute Resolution Section Scholarship Award

ADR Prof Blog - Tue, 2022-05-10 12:05
This is a belated announcement of this year’s ABA Dispute Resolution Award for Outstanding Scholarly Work given to Stacie Strong.  She now teaches at the University of Sydney Law School, where she is the co-director of the Sydney Centre for International Law.  In her remarks accepting the award, she generously credited help from colleagues at … Continue reading Stacie Strong Receives ABA Dispute Resolution Section Scholarship Award →

LIDW 2022: “If You’re Going through Hell, Keep on Going”

Kluwer Arbitration Blog - Tue, 2022-05-10 10:03

The first day of the LIDW main conference began with a short introduction by Richard Bamforth, Chair of the LIDW Strategy Group, and partner at CMS. Bamforth reiterated the theme of LIDW 2022 reminding those in attendance that there is a question mark at the end of theme: “Dispute Resolution-Global, Sustainable, Ethical?This means, as explained by Bamforth, that it is essential that we ask questions: Is dispute resolution indeed global, sustainable and ethical? If it is, why? And, how are these goals achieved in practice?

 

First Panel Discussion:  Examining the Lives of Dispute Resolution Professionals 

Along these lines, the first panel discussion, “If you’re going through hell, keep on going” – a motivational statement for its time from Winston Churchill, but how sustainable is that approach for the modern-day disputes professional?, examined the life of a commercial disputes lawyer and of those practising in litigation and arbitration, asking whether “winning at all costs” is sustainable in the long term, given our enhanced awareness of the toll that being a dispute resolution professional may take on those involved in our profession.

The panel was moderated by Ed Crosse, Partner, Simmons & Simmons, and included distinguished speakers, each representing different aspects of the industry.: The Rt. Hon. Lady Justice Carr DBE; Simon Davis, Past President, the Law Society of England & Wales; Anya George, Partner, Schellenberg Witmer; Maryann McMahon, Head of Litigation, EMEA, Morgan Stanley; Stuart Ritchie QC, Fountain Court.

As explained by Ed Crosse, in 2021, LawCare published its “Life in the Law Survey”, which showed that 42% of lawyers in the UK identified as being at a high risk of burn out, with 69% reporting that they had experienced mental ill-health in the previous 12 months. While our raison d’etre is the resolution of disputes, are the practices and procedures we use and deploy fit for purpose in today’s environment? Also it is important to note that the panel highlighted that only 24% of the survey respondents were men, which, in itself is an important aspect of the survey.

The panel first focused on the reasons why one makes the choice to practice in dispute resolution, for solicitors, barrister, judges, and arbitrators, invariably, the answer lies in the variety of matters that one comes across. At the same time the speakers confirmed that there is some awareness that this work comes with stress and challenges. Speaking of challenges, Maryann McMahon emphasized that, as disputes are emerging, they already come to lawyers with a ‘domino’ of stress, given the complexity of the relations, negotiations, performance of contracts etc., and as such, practitioners should be careful not to become a conduit of stress, meaning that practitioners must absorb a lot of stress without passing it on. Simon Davis pointed out that great challenges might come from the lawyers themselves: many talented lawyers are highly sensitive to any criticism, while some are so immersed in the matter that the clients’ problems become their burden. Stuart Ritchie QC emphasized that, for barristers, another challenge is that of the solitary profession and, as such, one must realize when help is needed.

Anya George concluded that the challenges for arbitration practitioners come from the fact that there are no common standards in arbitration proceedings and conducts, which can affect the schedule of a case and burden the work-life balance of arbitrators and arbitration practitioners. Lady Justice Carr emphasized that the court sees the complexity of the profession and the challenges faced by practitioners. In particular, these aspects are visible at the end of a trial when responsibility shifts from the parties’ counsel to the judge so that the decision may be rendered.

The panel discussion concluded with top tips for dispute resolution practitioners, highlighting that it is time to address this topic more often and in a proper manner. The main recommendation was to speak up about the challenges as a dispute resolution lawyer, judge or arbitrator, and also ask for help when that is necessary.

 

Second Panel Discussion: The In-house Counsel Perspective on Dispute Resolution

The second panel of the first day of the main LIDW 2022 conference focused on the in-house counsel experience in settlement and the resolution of disputes: Settlement and risk management for businesses: an in-house counsel roundtable. The panel asked various questions: Do business use mediation, or arbitration (or something else?). Do they also seek settlement after they have obtained an award rather than seek enforcement before courts? How do they gain stakeholder engagement for a different course of action? And once decided, how do they prepare?

The panel was moderated by Artem Doudko, Partner, Osborne Clarke, and Rebecca Clark, IPOS Mediation, and included as speakers: Kai-Uwe Karl, Global Chief Litigation Counsel, GE Renewable Energy; Fiona Meany, Head of Litigation, JLL; and Abhijit Mukhopadhyay, President (Legal) and General Counsel, Hinduja Group. The speakers were unanimous in emphasizing that one has to look at the business interests of users in choosing the adequate dispute resolution mechanism. Kai-Uwe Karl noted that in the case of GE, the vast majority of disputes settle, while a minority, not necessarily represented by high value claims, proceed with litigation or arbitration. Furthermore, the speakers mentioned that for in-house counsel, the primary focus is to first negotiate and try to settle disputes. And in doing so, while legal arguments play an important role, the focus should be on the business driven factors. For this, as Fiona Meany emphasized, in a negotiation, one must have the right persons at the table: not only those with the power to decide and commit the parties, but also the in-house counsel who is familiar with the business. In speaking about settlement, Abhijit Mukhopadhyay stressed the importance of the drafting of the contracts: most disputes arise out from poorly drafted contracts, and for this reason the collaboration between internal and external counsel is of utmost importance: the external counsel must be the extended arm of the legal department of the client.

 

More coverage from LIDW is available here.

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LIDW 2022: London as an International Disputes Hub for East Asia Disputes – the Challenges and Opportunities of East Asia’s Evolving Dispute Resolution Ecosystem

Kluwer Arbitration Blog - Mon, 2022-05-09 20:30

London International Disputes Week 2022 (LIDW) 2022 kicked off yesterday with outstanding sessions and panellists in a hybrid format all around the city, centred around this year’s theme: Dispute Resolution: Global, Sustainable, Ethical?. Each year, the LIDW concentrates on several hot topics and controversial issues in international dispute resolution from all over the world. Yesterday’s conference addressed key developments for the arbitration market in East Asia, covering the legal and practical consequences of Covid-19 policies to new trends of disputes and the parties’ favourite seats for arbitration.

One of the first sessions of LIDW 2022, “London as an international disputes hub for East Asia disputes: the challenges and opportunities of East Asia’s evolving dispute resolution ecosystem” took place at Herbert Smith Freehills’ London office and focused on a range of topics including navigating Belt and Road disputes; the introduction of adjudication in Hong Kong; and the potential cost of meeting zero-carbon commitments in Asia – with a specific focus on London’s role as an arbitral seat and English law as governing law.

The organisers of the member-hosted event were Herbert Smith Freehills, Morrison Foerster, Penningtons Manches Cooper LLP and Twenty Essex Chambers. The panel was composed of Mathias Cheung (Barrister, Atkin Chambers), Simon C. Milnes QC (Barrister, Twenty Essex); Mark Sachs (Partner, Penningtons Manches Cooper LLP); Sarah Thomas (Partner, Morrison Foerster) and Helen Tang (Partner, Herbert Smith Freehills).

The panel was chaired by Mathias Cheung, who raised questions on emerging trends in the arbitration market, current dispute types and client demands within the dispute resolution realm in the East Asia market – mainly in Hong Kong and Mainland China. Helen Tang stressed that the vast majority of disputes in Mainland China relate to joint venture and trade matters. She observed that a specific trend in the East Asian arbitration market was the growing number of arbitrations arising from bail-out projects in mega construction projects. She argued that the effects of the Chinese Government’s Covid-19 policies would cause several disputes in the region as they affect the global supply chain. In line with these statements, a panel member highlighted that disputes stemming from private equity and merger & acquisitions transactions are highly trendy in Mainland China, as are licencing disputes where arbitration is preferred as a dispute resolution method.

Asked about the most preferred dispute resolution methods for disputes in the East Asia market, Sarah Thomas stressed that Chinese parties often prefer multi-tiered dispute resolution while their counterparties would favour arbitration outright. She also added that despite the controversial jurisdictional problems in Hong Kong on set-aside and enforcement proceedings, arbitration remains the most preferred mechanism as a dispute resolution method in the East Asia ecosystem.

Helen Tang analysed the pros and cons of Hong Kong, Singapore and Mainland China as arbitration seats. Ms. Tang emphasized that Technology, Media, and Telecommunication companies strongly prefer Hong Kong as a seat, whereas Mainland China is becoming a more popular seat for International Investment Banks. Ms. Tang concluded her remarks by stating that Chinese parties insist on selecting mainland China as a seat and China International Economic and Trade Arbitration Commission (CIETAC) as an institution.

Sarah Thomas argued that Hong Kong remains the most preferred seat for “sensitive contracts”, while closely tied as preferred seat with Singapore – according to the Queen Mary University Survey. The tendency to see Singapore as a top spot seems to grow. Given the extremely strict pandemic restrictions, she shared her practical concerns about Hong Kong. She expressed concerns that entire court proceedings, including in-person hearings, are negatively affected. The panellists agreed that Hong Kong remained the preferred seat, given its arbitration friendly ecosystem and ease in granting enforceable interim measures in Mainland China – as Chinese courts are very inclined to enforce those provisional measures.

On the enforceability of arbitral awards, the panellists discussed China’s enforcement system and problematic supervisory authority’s decisions, with focus on anti-suit injunctions. For example, Simon C. Milnes QC advised that granting an antisuit injunction from UK Courts requires initiating the proceedings before them as soon as possible. Otherwise, the “delay” for application itself would probably be a countervailing issue in the UK courts’ eyes. After highlighting English law’s importance as governing law and London’s dominance as a seat, Mr. Milnes argued that establishing an institutional body for commodities arbitration in London would expand London’s role in international arbitration and reinforce its position as a powerful seat.

 

Conclusion

The panellists concluded their valuable and stimulating remarks by arguing that English law as governing law and London as a seat of arbitration are “safe ports” in resolving East Asia disputes. London retains vital assets, with its ad-hoc and institutional arbitration at the London Court of International Arbitration (LCIA) and sector-specific specialised counsel, judges and the entire legal community.

 

More coverage from LIDW is available here.

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LIDW 2022: London as a Dispute Resolution Hub for Disputes Involving Parties from Ukraine and Kazakhstan – Disputes in Turbulent Times

Kluwer Arbitration Blog - Mon, 2022-05-09 09:00

Since the first edition in 2019, Kluwer Arbitration Blog has partnered with London International Disputes Week (LIDW) for the live coverage of an exceptional week addressing topical issues related to the resolution of commercial disputes.

The first panel on 9 May 2022, on London as a dispute resolution hub for disputes involving parties from Ukraine and Kazakhstan: disputes in turbulent times, was also the one to open the first edition of the International Day at the London International Disputes Week. It was hosted by LK Law, QMUL, Quadrant Chambers, Quinn Emanuel Urquhart & Sullivan LLP, RPC, and in person attended at RPC’s beautiful office opposite the Tower of London. The panel was moderated by Prof. Loukas Mistelis, QMUL and Clyde and Co., and with panellists representing both the jurisdictions discussed, as well as London and the London based law firms advising clients from these jurisdictions: Adam Greaves, LK Law; Askar Konysbayev, GRATA international; Tatiana Minaeva, RPC; Olena Perepelynska, Integrites; Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan LLP; and Alexander Uff, Quadrant Chambers.

This session addressed disputes involving parties from Ukraine and Kazakhstan in the current turbulent environment and it broadly considered the role of London arbitration and London courts, the role of English law and how lawyers have been adapting their work in these challenging times.

Loukas Mistelis introduced the panel by framing the discussion being focused on the post-pandemic developments in the face of the ongoing war in Ukraine and the turbulent times in Kazakhstan in January 2022. The discussion comes naturally, as Mistelis explained, as Ukraine and Kazakhstan are frequent litigants before the English courts and the arbitrations seated in London frequently have parties from both jurisdictions. The panellists addressed the effects of the sanctions in connection with the war in Ukraine on the conduct of arbitration proceedings, the recognition and enforcement of arbitral awards in Ukraine and Kazakhstan, respectively, and lastly on the possible proliferation of Crimea-like arbitration cases in the face of the new developments in Ukraine.

Alexander Uff addressed the impact of the economic sanctions imposed by the EU, US, UK, and Switzerland and other countries, on Russia in light of the war in Ukraine, by focusing the discussion from the perspective of arbitrators and counsel. First, Uff mentioned the consequences on the independence and impartially of arbitrators, highlighting that the standard under English law is the absence of appearance of bias, which implies, in light of the sanctions regime, the disclosure of any situations likely to affect the arbitrator’s independence and impartiality. This resulted, Uff added, in some arbitrators having to resign during the arbitration proceedings, while others were prevented from accepting appointments. Further, the imposition of sanctions also raised the concern of eventual conflicts between arbitrators and counsel of parties. Uff clarified that while this situation is covered by the IBA Guidelines on Conflicts of Interest in International Arbitration 2014 when there is enmity between arbitrators and counsel, in practice this mainly concerned situations of conflicts arising because of previous arbitrations involving the same counsel and arbitrators, and not as a result of economic sanctions. Of course, Uff added, arbitrators also have the possibility to exercise their powers to exclude counsel from the proceedings if that affects the constitution of the arbitral tribunal, under the IBA Guidelines on Party Representation in International Arbitration. Uff also mentioned other implications of the war more broadly and the economic sanctions in particular. For example, the smaller pool of arbitrators, less availability of arbitrators and counsel from Ukraine, inability of arbitrators and counsel from Ukraine to travel and for arbitrators to sign their awards etc. Adam Greaves added to Uff’s insightful comments that, from the perspective of counsel, the war in Ukraine put a lot of pressure on law firms in making a choice on whether to continue representing Russian clients or even to continue to take more work involving Ukrainian clients given the screening requirements currently in place. In Greaves’ view, there will be a shift in how law firms will approach these disputes, a specialisation of counsel in these matters involving Russian and Ukrainian clients, and even an increase in the number of smaller law firms which would accept these matters. In any case, in Greaves’ opinion, matters involving Russian and Ukrainian clients will continue to come to London. Tatiana Minaeva explained that law firms are increasingly making their risk compliance processes more thorough and complex, given the implications of the economic sanctions. As such, Minaeva, added, it is not only for potential Russian involvement, but also equally applicable to potential Ukrainian clients. Because these processes are elaborate, they are taking longer than in normal circumstances; this, in turn, has an impact on the appetite of law firms to accept these clients. Epaminontas Triantafilou raised the question whether all these concerns raised are justified. In his opinion, there has been significant market pressure on counsel which ultimately is multifaceted. For example, for large law firms there can also be internal pressure to not accept certain clients because of the position of existing clients towards the war in Ukraine. To this, Loukas Mistelis asked the question – which is the theme of this year’s LIDW – whether London is becoming ‘Global, Sustainable, Ethical?’, and rather ethical in this sense.

Moving to the jurisdiction-specific discussion, Olena Perepelynska, connected remotely from Ukraine, has highlighted the significance of keeping the work flowing for Ukrainian arbitrators and counsel, also mentioning that ICAC Ukraine is currently operational and hearings are taking place, albeit remotely. On the recognition and enforcement of arbitral awards in Ukraine, Perepelynska highlighted the excellent track record of the Ukrainian courts, with a pro-arbitration stance and 90% enforcement rate of foreign arbitral awards. At the same time, Perepelynska emphasized that for arbitrations seated in Ukraine, only 1% of the ICAC awards are set aside by the Ukrainian courts. Askar Konysbayev addressed the recognition and enforcement of arbitral awards in Kazakhstan. While Kazakhstan is a contracting state to the New York Convention 1958, it is only recently that courts have become more familiar with the Convention and its application. The procedure is fairly straightforward and the Kazakh courts routinely enforce foreign arbitral awards. However, as mentioned by Konysbayev, Kazakh courts are still prone to influence and put administrative pressure on the judiciary. As to recognition and enforcement of court judgments, Konysbayev highlighted that this is not that straightforward, as Kazakh courts are not familiar yet with the reciprocity principle, which is not tested in Kazakh courts and, thus, the question remains open.

To conclude the panel discussion, Loukas Mistelis inquired whether we will witness a boom of Crimea-like cases in the near future. Epaminontas Triantafilou mentioned that, indeed the cases based on the 2014 invasion of Crimea may offer hope for future like disputes. However, one must be careful and observe how the situation is evolving, as the current situation is a dynamic one. The war is still ongoing and the effective control, which was upheld in the Crimea cases, is fluid in the present circumstances.

The panel concluded that, indeed, we live in interesting times for the legal profession, dynamic and with significant consequences.

 

More coverage from LIDW is available here.

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LIDW 2022: London as an International Disputes Hub for Dubai, UAE and Region Disputes: is it Still Safe to Arbitrate in Dubai, and Other Hot Topics

Kluwer Arbitration Blog - Mon, 2022-05-09 07:57

As part of the 2022 London International Disputes Week, Arbitration Chambers, Clyde & Co, Hausfeld, Jones Day and LexisNexis organized a conference on “London as an international disputes hub for Dubai, UAE and region disputes: arbitration and the courts – is it still safe to arbitrate in Dubai, and other hot topics”.

The panel was composed of Hussain Hadi (LexisNexis), Ned Beale (Hausfeld), Philip Devenish (Jones Day), Sara Koleilat-Aranjo (Al Tamimi & Co), Alexandra Lester (Clyde & Co) and Niels Schiersing (Arbitration Chambers).

The session focused on key topics from the world of dispute resolution that are particularly relevant to Dubai, UAE and Middle East region disputes. In particular, the panel engaged in a fruitful conversation on: (1) the attractiveness of Dubai since Decree No. 34 of 2021 from the perspective of international arbitration users – either counsel, arbitrators, or parties; and (2) the development of commercial and investment arbitration in the Middle East region.

 

Dubai’s Decree No. 34 – One bump in a long road?

The panel expressed mixed views on the most significant transformation in the region in 2021, namely Dubai’s 2021 Decree No. 34 Concerning the Dubai International Arbitration Centre (“Decree”, previously discussed on the Blog here and here).

To recall, the Decree came into force on 20 September 2021 and essentially reformed the arbitration framework in the UAE. The Decree abolished the Dubai International Finance Centre’s Arbitration Institution (i.e., the DIFC-LCIA Arbitration Centre) and the Emirates Maritime Arbitration Centre.  It transferred the responsibility of other institutions, including all of their assets, employees, financial allocations, and lists of arbitrators to the Dubai International Arbitration Centre (“DIAC”).

Some members of the panel expressed concerns over the Decree. They criticized the way it came into force, without prior consultation with the arbitration community, a certain lack of transparency concerning its promulgation, and its impact on ongoing arbitration cases, including challenges those related to arbitral costs.

Other members adopted a long-term approach to the Decree, emphasizing the much-needed clarity it brings to the UAE jurisdiction. They view the unification of Dubai’s different arbitral institutions under the umbrella of an improved DIAC with a revised set of arbitral rules and the clarity on the supervisory court as essential developments in the long run for the attractiveness of the seat.

Regarding whether Dubai could retain its top-10 position as an international arbitration hub (as ranked according to the 2021 Arbitration Survey by the School of International Arbitration at Queen Mary University), the panel members were cautiously optimistic.

Dubai is a unique jurisdiction, with its confluence of common and civil law and its position in a thriving region with strong arbitral development – all natural reasons which suggest Dubai remains an attractive seat. The panel members nevertheless emphasized the need for greater transparency, outstanding level of case management and service to the parties, and a strong autonomy for the arbitral tribunals as conditions for the attractiveness of the seat, particularly for foreign nationals or entities that are not registered in the seat of the arbitration.

From a historical perspective, the Decree was seen as a “hiccup” on the long road of UAE and the Middle East region in their relationship with arbitration. A member of the panel reminded the audience those 75 to 80 years back, UAE was not a welcoming arbitration environment, especially for disputes concerning the oil & gas industry. In hindsight, the 21st century has seen a spectacular effort from an institutional perspective, with significant investments put in place to support arbitration in the region.

Nevertheless, for users of international arbitration in Dubai, the Decree came as a surprise, if not a shock. The agreement between LCIA and DIAC on ongoing cases provides that the LCIA will continue to administer all existing cases under DIFC-LCIA rules from its London offices. However, the main issue remains the interpretation of arbitration clauses that mention the DFILC-LCIA rules and the present circumstance’s challenge to party autonomy. Similarly, some considered that the Decree might create windows of opportunity for other arbitral seats, either in the region or in globally well-established arbitration jurisdictions. For example, London would be a natural choice for users of international arbitration that seek as a stable and transparent seat.

 

The Middle East – An Arab Spring for commercial arbitration and investor-state arbitration?

The panel agreed that the Middle East region saw a spectacular increase in arbitral institutions and laws across the last decade, if not in the last five years – for instance, the addition in 2018 of the Oman Commercial Arbitration Centre.

In the investor-state arbitration space, there has been a spectacular growth in investment arbitration in the Middle East, with increasing opportunities for the seat of Dubai. The data shows a growth in the number of investment treaties and cases across the region. While 500 investment treaties are in force across the Middle East, one third have been ratified in the last decade only. Similarly, it was put forward that over 50% of the known arbitration proceedings have been launched in the last five years – reflecting that there has been no backlash for investment arbitration in the Middle East, which is alive and well.

One panel member mentioned the recent Israel-UAE BIT and referred to it as a token of appeased relationships, reflecting developments in the region more broadly. This growth in investment arbitration was comparable to a sort of Arab spring, i.e. a response to corruption and economic stagnation – two ills that investment treaties seek to cure by securing the rule of law.

In the region, most ad hoc cases are pursued under UNCITRAL rules, suggesting that the DIAC could be a neutral institution for administration, and one that could be more popular than other options, particularly for Russian parties.

 

Conclusion

The Middle East region is a space to watch with its significant developments both in commercial and investment arbitration. Some panel members expressed concerns about the immediate and middle term outcome of the latest Decree, particularly regarding the transparency and stability of the arbitration framework in the UAE – making London perhaps appealing to some users. They were nevertheless cautiously optimistic about the long-term potential of the region and UAE for arbitration.

 

More coverage from LIDW is available here.

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Bregant, Robbennolt, and Winship – Perceptions on Settlement

ADR Prof Blog - Fri, 2022-05-06 14:32
We don’t post a lot of scholarship updates here as there are many better outlets for that, but once and a while something comes out that catches our attention – such as this.  Excellent empiricists Jessica Bregant (Houston), Jennifer Robbennolt (Illinois), and Verity Winship (Illinois) have a very interesting paper up on SSRN titled Perceptions … Continue reading Bregant, Robbennolt, and Winship – Perceptions on Settlement →

New Arbitration Rules For The Economic And Monetary Community of Central Africa (CEMAC)

Kluwer Arbitration Blog - Fri, 2022-05-06 01:00

The Economic and Monetary Community of Central Africa, also known as the Central African Economic and Monetary Community (CEMAC),1)CEMAC is the French acronym for “Communauté Economique et Monétaire de l’Afrique Centrale” jQuery('#footnote_plugin_tooltip_41479_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41479_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); has recently enacted a Supplementary Act N° 01/21-CEMAC-CJ-CCE-15 establishing the Statute of the Arbitration Center of the Community Court of Justice (Supplementary Act No 01) and a Supplementary Act N° 02/21-CEMAC-CJ-CCE-15 on the Arbitration Rules of the Court of Justice of the CEMAC (CEMAC Arbitration Rules). The Supplementary Act No 01 became enforceable upon its signing by the President of the Conference of Heads of States of the CEMAC on October 5, 2021. This post provides an overview of and commentary on the Supplementary Act No 01, the CEMAC Arbitration and related issues/developments.

 

Structure of the Newly Created Arbitration Center and Highlights of the Supplementary Act No 01

The institutions of the CEMAC include a Community Court of Justice (Court of Justice). Like the Common Court of Justice and Arbitration under the OHADA Treaty (which encompasses seventeen African countries including the six member States of the CEMAC) the Court of Justice has been entrusted with three main functions: judicial, advisory and administration of arbitration proceedings. The Arbitration Center which is established by Supplementary Act No 01 forms part of the Court of Justice and by virtue of Article 35 §1 of the Convention governing the Court of Justice, arbitration cases can be referred to the Center by any of the CEMAC Member States, and Institutions and Bodies of the CEMAC, pursuant to an arbitration agreement.

The Center is responsible for organizing and administering arbitration proceedings as provided under Article 1 of the Supplementary Act No 01. Article 13 of the Supplementary Act No 01 further provides that the bylaw of the Arbitration Center is expected to set its functions. However, the bylaw is yet to be enacted by the Conference of Heads of States which, under Article 36 of Convention governing the Court of Justice, is competent and no information is publicly available on the date of its enactment. The Center’s jurisdiction is derived from Article 5 of Supplementary Act N°01 which states that ‘[t]he Center is competent to hear disputes arising from an agreement stipulating a clause conferring on it the right to rule in the case regardless of the domicile or usual place of residence of the parties concerned’.

There are three main bodies that make up the Center:

  • the Case Management Committee;
  • the Secretariat General; and
  • the Arbitral Awards Review Committee (Appellate Body).

Each is discussed in more detail in the following sections.

  1. The Case Management Committee

The Case Management Committee has a broad mandate spanning from appointing authority to supporting judges via scrutiny of arbitral awards, among others. As an appointing authority, it appoints and confirms arbitrators, assesses their performance, and contributes to the renewal of the roster of arbitrators. It ensures that arbitral proceedings run smoothly and that the rules on procedural incidents and arbitrator misconduct are in compliance with the ethics of the Center. Additional tasks of the Case Management Committee include suggesting amendments to the CEMAC Arbitration Rules and contributing, along with the Court of Justice, to the research, training, and promotion of the Arbitration Center. These functions are similar to the courts of arbitration in some arbtiraiton centers. However, unlike the general practice within most arbitration centers, where each arbitral tribunal has the power to draft their terms of reference in consultation with parties to the proceedings, it is noteworthy that the Case Management Committee, and not the arbitral panel, is entrusted with the task of drafting the terms of reference of arbitral tribunals per Article 6 of Supplementary Act No 01. Given the importance of the terms of reference in any arbitration proceedings, an arbitral tribunal acting under the CEMAC Arbitration Rules should pay close attention to the phase during which the terms of reference are drafted, since they do not have the upper hand.

  1. The Secretariat General

The Secretariat General assumes the tasks usually reserved for the secretary general of arbitration centers such as the one of the CCJA or the ICC. Additionally, it proposes amendments on the arbitrators’ schedule of fees to the Case Management Committee. The Secretariat General is solely authorized by Article 7 of the Supplementary Act No 01 to receive and transfer all communications during arbitral proceedings. Such practice can be potentially risky as there may be instances where the Secretariat fails to forward all communications simultaneously or fails to do so within the required time. This may lead to a violation of due process and a detrimental risk to the arbitration.

  1. The Arbitral Awards Review Committee

The Arbitral Awards Review Committee functions as an appellate body. It is chaired by the President of the Court of Justice assisted with two Justices of the Court. It handles exequatur requests and hears challenges to arbitral awards rendered under the CEMAC Arbitration Rules.

It is pertinent to point out the provisions dealing with appointment and sanctions of arbitrators under the Supplementary Act No 01, the reason for which will be seen shortly. Article 9 §1 of the Supplementary Act No 01 suggests that only citizens of Member States can be appointed as arbitrator under the CEMAC Arbitration Rules, however Section 9 §2 allows the appointment of arbitrators outside the list, after they are confirmed by the Case Management Committee. In addition to this, under Article 9 §3(2), arbitrators can be removed by a ¾ majority ruling of the Court of Justice. This provision seems to be in conflict with Article 6 §1 of the Supplementary Act No 01 which authorizes the Case Management Committee to rule on any violation of the ethical code of arbitrators. It is unclear the type of sanctions the Case Management Committee can issue while handling disciplinary matters involving an arbitrator, since as mentioned above, only the Court of Justice has the power to remove an arbitrator. The Court of Justice may provide more clarity on this in due time when a related issue arises.

 

Highlights of the CEMAC Arbitration Rules

The Rules entered into force upon their signature by the President of the Conference of Heads of State of the CEMAC on October 5, 2021. This section highlights some noteworthy aspects.

Interim measures: Under Article 7 §1 and 7 §2 of the CEMAC Arbitration Rules, the Arbitration Center can order provisional measures where it deems necessary. Such measures may be ordered in the form of an interim arbitral award or provisional arbitral award for which enforcement can be sought.

Representation of parties: Contrary to the rules applicable in several African countries which do not require any licensed attorney appearing on behalf of a party in judicial or quasi-judicial proceedings to display a special power of attorney, anyone appearing on behalf of a party to arbitral proceedings under the CEMAC Arbitration Rules must be given, by their client, a duly signed special power of attorney (“Mandat special”), which must specify whether representation, assistance or both are contemplated (Article 9 of the Supplementary Act No 02).

Appointment and confirmation of arbitrators: It is noteworthy that under Article 10 of the Rules, any arbitrator appointed by a party must be approved by the other party. The wording of the rule seems to suggest that, contrary to the CCJA or ICC Rules, each party appointed arbitrator must be approved by the other party before confirmation by the Center. Under the CCJA and ICC Rules, a party appointed arbitrator does not have to be approved by the opposing party, who may only challenge the party-appointed arbitrator by raising a reasoned objection to their confirmation. There is a difference between allowing a party to object to the appointment of an arbitrator by the opposing party, as is the case under the CCJA and ICC Rules on one hand, and requiring that a party-appointed arbitrator must be approved by the opposing party, which seems to result in joint appointment of all arbitrators by parties, under the the CEMAC Arbitration Rules.

Case management conference: The case management conference is convened by the Case Management Committee (Article 18 of the CEMAC Arbitration Rules), which is also different from the pattern in the majority of other arbitration rules. For instance, under Article 15 of the Arbitration Rules of the OHADA Common Court of Justice and Arbitration, the case management conrefence is to be convened by the arbitral tribunal. So is the case under Article 24 of the ICC Arbitration Rules currently in force.

Post hearing submissions: Under Article 24 of the CEMAC Arbitration Rules, after the closure of debates, and before the issuance of the award, any party can take the initiative of a post-hearing submission (“Note en cours de délibéré”) and send it to the tribunal after having submitted a copy to the opposing party. This practice is contrary to the practice under the majority of arbitration rules, under which a post hearing submission must be authorized, unless requested by the tribunal itself. See for example, Article 27 §4 of the ICC Arbitration Rules 2021 and Article 19 §1 of the Arbitration Rules of the OHADA Common Court of Justice and Arbitration (2017). This majority rule ensures avoidance of dilatory tactics by parties that may be acting in bad faith. It also limits the risk of proceedings being dragged over the time allowed.

Drafting of awards: Under Article 27 of the CEMAC Arbitration Rules, an arbitral award must be drafted in full after it has been read to the parties. It remains unclear how the scrutiny will be made if the award is not already drafted at that stage.

Dissenting opinions: Where an arbitrator dissents and refuses to sign an arbitral award, the reason of refusal must be indicated in the award (Article 27, § 4 of the CEMAC Arbitration Rules).

Publication of awards: The publication of arbitral awards is allowed, subject to prior and written consent of the parties (Article 11, § 2 of the Supplementary Act No 01).

Liquidation of costs: Under Article 34 of the CEMAC Arbitration Rules, costs of an arbitration proceedings are liquidated by the Case Management Committee, not by the arbitral tribunal; however, it is still the tribunal that allocates cost among the parties.

 

Concluding Remarks

The new arbitration rules of the CEMAC have been enacted to comply with the revised Treaty establishing the CEMAC. Since the new arbitration center of the CEMAC has been created inside the Court of Justice, its jurisdiction is limited to the matters governed by the CEMAC Treaty and its subsequent legal instruments (pursuant to Article 22 and 35 of the Convention governing the Court of Justice), there is no risk of conflict between the OHADA Arbitration Rules which are enforceable in all the six member States of the CEMAC. The innovations reflected in the newly enacted CEMAC Arbitration Rules bring CEMAC’s procedures and practices in line with the latest global best practices.

 

Dr. Mahutodji Jimmy Vital Kodo, FCIArb, is a lawyer.

References[+]

References ↑1 CEMAC is the French acronym for “Communauté Economique et Monétaire de l’Afrique Centrale” function footnote_expand_reference_container_41479_27() { jQuery('#footnote_references_container_41479_27').show(); jQuery('#footnote_reference_container_collapse_button_41479_27').text('−'); } function footnote_collapse_reference_container_41479_27() { jQuery('#footnote_references_container_41479_27').hide(); jQuery('#footnote_reference_container_collapse_button_41479_27').text('+'); } function footnote_expand_collapse_reference_container_41479_27() { if (jQuery('#footnote_references_container_41479_27').is(':hidden')) { footnote_expand_reference_container_41479_27(); } else { footnote_collapse_reference_container_41479_27(); } } function footnote_moveToReference_41479_27(p_str_TargetID) { footnote_expand_reference_container_41479_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_41479_27(p_str_TargetID) { footnote_expand_reference_container_41479_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Fine line? A New Case on Arbitrators’ Power to Impose Sanctions

Kluwer Arbitration Blog - Thu, 2022-05-05 05:35

It is not uncommon in arbitration proceedings for interim measures to be necessary to avoid the relief intended on the merits from being frustrated. Interim measures in support of arbitration can now fortunately be ordered not only by national courts but also by arbitrators in most jurisdictions. In most instances, interim measures granted by arbitral tribunals are usually observed voluntarily by the parties.1) A 2012 survey found that 62% of interim measures granted by arbitral tribunals were observed voluntarily. International Arbitration Survey: Current and Preferred Practices in the Arbitral Process (2012), p. 17. jQuery('#footnote_plugin_tooltip_41520_30_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41520_30_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); But what happens when they are not? Indeed, do arbitrators have any power to compel a party to comply with an interim measure? This is precisely the question that arose in an ICC case in which we were recently involved and that we discuss in this article.

 

Case summary

The claimant was a construction company that entered into an agreement to refurbish infrastructure with a public entity, which was ultimately the respondent. The contract was terminated by the claimant due to breaches by the respondent. However, the respondent refused to pay the claimant the amounts triggered by termination of the contract and also refused to return the bank guarantee that the claimant had furnished to secure the fulfilment of its obligations while the contract was in force. After the claimant had started the arbitration proceedings, the respondent continued to refuse to return the bank guarantee and, ultimately, called on that guarantee.

As a result, the claimant requested that the arbitral tribunal grant interim relief ordering that the respondent deposit the amount of the bank guarantee into an escrow account. Although the arbitral tribunal granted the request, the respondent did not comply for more than six months. As a result, the claimant requested that a pecuniary sanction be imposed on the respondent for its continued refusal to comply with the arbitral tribunal’s order.

In deciding on whether to grant the requested sanction, the arbitral tribunal asked the parties to comment on three key issues: (i) the power of the tribunal to impose coercive economic sanctions under the potentially applicable laws (i.e. law of the seat and law of the respondent’s jurisdiction, where the sanction was expected to be enforced); (ii) the criteria for determining the amount of the sanction; and (iii) how the sanction should be paid and to whom. We break down below the response given by the claimant in relation to each of these issues and the arbitral tribunal’s conclusions.

 

Issue 1: Arbitral tribunals’ power to impose sanctions

Neither the law of the seat nor the law of the respondent’s jurisdiction explicitly establish that arbitral tribunals have the power to impose pecuniary sanctions, but they do not include a prohibition to that effect either. Moreover, the parties in the present case had not made any agreement limiting or confirming the tribunal’s power to do so.

In support of its request, the claimant argued that the power to impose pecuniary sanctions on parties is implicit in the powers granted to arbitrators. The claimant relied on a number of authorities,2) Alexis Mourre, “Multas coercitivas y ejecución en especie en arbitraje internacional“, Spain Arbitration Review 10, 2011, p. 25. jQuery('#footnote_plugin_tooltip_41520_30_2').tooltip({ tip: '#footnote_plugin_tooltip_text_41520_30_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); in particular citing ICC case No. 7895, which concluded that, under the ICC Rules, in the absence of an agreement by the parties to the contrary, the arbitral tribunal has the power to impose sanctions.3) See, for example, Final Award in Case 7895 (Extract), ICC International Court of Arbitration Bulletin, Vol. 11. No. 1, 64, 2000. jQuery('#footnote_plugin_tooltip_41520_30_3').tooltip({ tip: '#footnote_plugin_tooltip_text_41520_30_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The claimant also relied on Hamstein v Williams, a US case decided by the Court of Appeals for the Fifth Circuit, which noted that the inherent powers of arbitrators include the power to sanction parties and, therefore, arbitrators do not exceed their authority when imposing sanctions on a party.4) Hamstein Cumberland Music Group; Howlin Hits Music INC; Hamstein Cumberland Music Co; BH Associates INC, d/b/a Hamstein Music co; Bill Ham v Jerry Lynn Williams and Robert S Farris, 10 May 2013, Nos. 05-51666, pp. 8-9. jQuery('#footnote_plugin_tooltip_41520_30_4').tooltip({ tip: '#footnote_plugin_tooltip_text_41520_30_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Further, the claimant pointed out that the two potentially relevant laws permitted the imposition of sanctions by judges in civil proceedings and, therefore, sanctions were not alien to those legal systems. The claimant also mentioned that the UNIDROIT Principles on International Commercial Contracts provide in article 7.2.4 that courts shall be able to order the payment of a penalty to force a party to comply with a specific order and indicated that those principles could be considered by the arbitral tribunal pursuant to the terms of reference and the ICC Rules.

The arbitral tribunal concluded that it had power to impose a pecuniary sanction on the respondent in this case considering in particular (i) the authorities and precedents submitted by the claimant; (ii) that neither the parties had explicitly excluded the aforesaid power and no provision had been identified under the law of the seat or the law of the respondent’s jurisdiction which excluded that power; and (iii) that the imposition of pecuniary sanctions was in line with public policy in the two relevant jurisdictions given that such sanctions were permitted in civil proceedings.

 

Issue 2: Quantifying the sanction

The second question raised by the arbitral tribunal was how the amount of the sanction should be determined. The claimant argued that sanctions must afford an incentive for the misbehaving party to comply and, therefore, that the amount should be set at a level that was high enough to encourage that behaviour.

In our case, the claimant requested a sanction that would accrue per day of non-compliance and proposed as a benchmark the amount provided in the contract for delays to the completion of the works (0.1% per day of delay). In particular, the claimant suggested applying that percentage to the amount of the bank guarantee cashed by the respondent and for the sanction to accrue with that amount as a cap.

The arbitral tribunal concluded that the claimant’s proposal was reasonable as it imposed sufficient financial pressure on the respondent to make it comply with the order to deposit the amounts in escrow.

 

Issue 3: How and to whom?

The third and final issue was how the sanction should be paid and who should be the beneficiary of the pecuniary sanction.

In relation to the latter point, the claimant explained that the general rule in judicial proceedings is for sanctions to be paid to the courts themselves as they are to some extent responsible for protecting the integrity of the judicial system. However, sanctions in arbitration cannot have that purpose and, therefore, as suggested by a number of authorities, the beneficiary should be the party suffering the consequences of the non-compliance (i.e. the claimant).

As for how the sanction should be paid, the claimant proposed that any amount accrued as a sanction be granted in the award and be paid as established by the tribunal in the award.

The tribunal accepted the claimant’s proposals on both points.

 

Conclusion

Despite the pecuniary sanction, the respondent did not comply with the interim measure and the pecuniary sanction thus continued to accrue until the award was rendered. As ruled by the tribunal in its decision on the pecuniary sanction, the award granted the claimant the entire amount accrued as a result of the sanction and added that amount to the payment order contained in the award for the damages suffered due to breach of contract.

 

To further deepen your knowledge on interim measures in international arbitration, including a summary introduction, important considerations, practical guidance, suggested reading and more, please consult the Wolters Kluwer Practical Insights page, available here.

References[+]

References ↑1 A 2012 survey found that 62% of interim measures granted by arbitral tribunals were observed voluntarily. International Arbitration Survey: Current and Preferred Practices in the Arbitral Process (2012), p. 17. ↑2 Alexis Mourre, “Multas coercitivas y ejecución en especie en arbitraje internacional“, Spain Arbitration Review 10, 2011, p. 25. ↑3 See, for example, Final Award in Case 7895 (Extract), ICC International Court of Arbitration Bulletin, Vol. 11. No. 1, 64, 2000. ↑4 Hamstein Cumberland Music Group; Howlin Hits Music INC; Hamstein Cumberland Music Co; BH Associates INC, d/b/a Hamstein Music co; Bill Ham v Jerry Lynn Williams and Robert S Farris, 10 May 2013, Nos. 05-51666, pp. 8-9. function footnote_expand_reference_container_41520_30() { jQuery('#footnote_references_container_41520_30').show(); jQuery('#footnote_reference_container_collapse_button_41520_30').text('−'); } function footnote_collapse_reference_container_41520_30() { jQuery('#footnote_references_container_41520_30').hide(); jQuery('#footnote_reference_container_collapse_button_41520_30').text('+'); } function footnote_expand_collapse_reference_container_41520_30() { if (jQuery('#footnote_references_container_41520_30').is(':hidden')) { footnote_expand_reference_container_41520_30(); } else { footnote_collapse_reference_container_41520_30(); } } function footnote_moveToReference_41520_30(p_str_TargetID) { footnote_expand_reference_container_41520_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_41520_30(p_str_TargetID) { footnote_expand_reference_container_41520_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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When an Unplanned Flight to Canada Lands You in the Paris International Court of Arbitration

Kluwer Arbitration Blog - Wed, 2022-05-04 01:00

Aircraft seizures tend to come up at the enforcement stage, oftentimes in relation to investment arbitration awards (see, e.g., proceedings against Tanzania or Equatorial Guinea). In Specter Aviation v. Laprade, however, the seizure of the Beechcraft Super King Air 300 (the “Aircraft”) is what triggered proceedings before the courts of the Canadian province of Québec, the US State of Oklahoma and Guinea, as well as an arbitration tribunal under the auspices of the Paris International Court of Arbitration (the “CAIP”). The main point of contention is the ownership of the Aircraft. In late 2020 the Superior Court of Québec (the “SC”) ruled that this issue belonged in court (2020 QCCS 4392), however a year later the Québec Court of Appeal (the “CA”) referred the parties to arbitration (2021 QCCA 1811). Such disparate conclusions stemmed from, among other things, different takes on separability and arbitrability. In addition to clarifying the interplay between the various provisions of the Civil Code of Québec (the “CCQ”) which regulate the international jurisdiction of Québec authorities, and shining the light on the enforceability of multi-tiered dispute resolution clauses (of which there were two in this case), the CA’s judgment reaffirms the province’s pro-arbitration stance.

 

How it started

The Parties’ 2012 joint venture aimed to develop air transportation services in Africa and came to an end when in 2019 they decided to part ways, formalizing the terms of their break-up in an Addendum to the original Agreement. The Addendum regulated the division of property, including the Aircraft in dispute. In the summer of 2019, the Aircraft left Guinea to undergo maintenance in France. Thereafter, instead of returning to Guinea, one of the Defendants illegally flew the Aircraft to Canada. Upon landing in Canada, the Plaintiffs seized it and requested the SC to: (i) recognize such seizure as valid; (ii) order the Defendants to pay legal costs related to the seizure in the amount of $100K; (iii) acknowledge that one of the Plaintiffs was the registered owner of the Aircraft; and (iv) acknowledge the Plaintiffs’ right to take immediate possession of the Aircraft. After the Defendants filed their defense and counterclaim asking the SC to declare them as Aircraft’s owners, Plaintiffs filed a motion to dismiss or, alternatively, to suspend on grounds of international lis pendens. By this point, Plaintiffs had sought to have their ownership recognized in Guinea (where the court ultimately referred the Parties to arbitration at the Defendants’ request) and Oklahoma. While the status of the latter proceeding is omitted from the CA’s judgment, in the judgment granting leave to appeal (paras. 2, 27-28), the CA had refused to issue an anti-suit injunction to prevent Plaintiffs from taking further steps before the Oklahoma court.

 

How it evolved in the Québec courts

The SC refused to refer the Parties to arbitration because the Plaintiffs had attorned to the jurisdiction of Québec authorities, the dispute was not arbitrable and neither of the two dispute resolution clauses was applicable. The CA reversed all these findings, referring the Parties to arbitration pursuant to the 2019 dispute resolution clause.

 

Tacit renunciation to arbitrate

The SC briefly concluded that Plaintiffs’ numerous procedural steps and failure to request referral to arbitration for 10 months demonstrated its attornment to Québec jurisdiction. The CA, conversely, considered Plaintiffs’ actions more closely, noting the distinction between steps related to the Aircraft’s seizure (for which Québec authorities undisputedly have jurisdiction under Art. 623 of the Code of Civil Procedure, “CCP”) and submissions on the merits (i.e. the Aircraft’s ownership). According to the CA, Plaintiffs’ early actions did not concern the merits of the dispute, but only the seizure’s validity (paras. 38, 40). It was only after the Defendants filed their written defense and counterclaim, i.e. the first submission on the merits, that the 90-day deadline for requesting referral to arbitration under Art. 622 CCP was triggered. As the Plaintiffs made their request within this timeframe, they could not be considered to have waived their right to arbitration (paras. 42, 44).

 

Arbitrability and international jurisdiction of Québec courts

The parties’ dispute does not fall into any of the non-arbitrable categories listed in Art. 2639 CCQ: disputes over the status and capacity of persons, family matters or other matters of public order. Nonetheless, according to the SC, the parties’ dispute could not be resolved through arbitration because of the interplay of  three provisions of the CCQ: (i) 3139 which provides that a court’s jurisdiction over the principal demand entitles it to rule on an incidental or cross demand; (ii) 3148(2) which provides that in personal actions of patrimonial nature courts have no jurisdiction if the parties have agreed to arbitrate their differences; (iii) 3152 which grants Québec authorities jurisdiction over real actions if the disputed property is located in the province.

While acknowledging the Supreme Court of Canada’s judgment in GreCon Dimter Inc. v. J.R. Normand Inc. (previously discussed here) which held that Art. 3148(2) trumped Art. 3139 CCQ, the SC found it had jurisdiction under Art. 3152 CCQ because this was a real action and the Aircraft was in the province (paras. 38-42).

The CA opposed this view, noting that Art. 3152 CCQ merely defined the limits of international jurisdiction of Québec authorities and could not be used to bring real actions within the realm of non-arbitrable matters which are clearly identified in the CCQ and must be interpreted narrowly (paras. 14, 22, 48-51). In his concurring reasons Justice Frédéric Bachand emphasized that arbitrability was the rule and, relying on Gary Born’s treatise, pointed to the prevailing view that disputes related to real rights are arbitrable.

 

Separability

Plaintiffs sought to rely on the dispute resolution clause contained in the 2019 Addendum, albeit arguing that their consent to this Addendum had been vitiated by fraud. The SC held Plaintiffs could not have their cake and eat it too. While acknowledging that, in principle, this clause would be presumed valid and any decision as to its nullity would be deferred to the arbitrator (para. 55), the SC concluded that logic did not apply here because the Plaintiffs themselves denied having consented to the Addendum that contained the dispute resolution clause they themselves sought to apply. Emphasizing the separability of arbitration agreements (enshrined in Art. 2642 CCQ) and echoing the findings of the arbitral tribunal which had rendered a partial award on jurisdiction in the meantime, the CA held that Plaintiffs’ reliance on the 2019 dispute resolution clause was well-founded.

 

A closer look at the multiple multi-tiered dispute resolution clauses

Considering the SC’s dismissal of the 2019 clause, it only analyzed the one contained in the 2012 Agreement.1) See para. 12: “Toute litige sera réglé à l’amiable. À défaut de règlement à l’amiable, le cabinet d’audit PWC sera désigné comme arbitre. À défaut de résolution du litige par l’arbitre, le litige sera porté devant le tribunal arbitral de Paris.” jQuery('#footnote_plugin_tooltip_41481_27_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41481_27_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); This clause required all disputes to be resolved amicably, failing which Price Waterhouse Coopers would act as arbitrator. This clause further provided that, should the arbitrator fail to resolve the parties’ dispute, the matter would be brought before the “tribunal arbitral de Paris”. Since that clause lacked clarity and imperativeness, and Plaintiffs never felt bound by it, as manifested by their actions before the courts of Québec and Guinea, the SC concluded it was competent to decide which party owned the Aircraft (paras. 60-73).

One can hardly disagree that this clause is flawed or, at best, rather ambiguous. First, it names a legal person as an arbitrator, which is rarely seen nowadays2) Gary B. Born, International Commercial Arbitration (2021), pp. 1875-1876. jQuery('#footnote_plugin_tooltip_41481_27_2').tooltip({ tip: '#footnote_plugin_tooltip_text_41481_27_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); and even excluded in some countries.3) See, e.g. Art. 1450 of the French Code of Civil Procedure which applies to domestic matters, or Art. 19 of the Serbian Arbitration Act. jQuery('#footnote_plugin_tooltip_41481_27_3').tooltip({ tip: '#footnote_plugin_tooltip_text_41481_27_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Though the issue of legal persons acting as arbitrators is not expressly dealt with in Québec legislation, when commenting on the previous CCP the Supreme Court of Canada in Sport Maska Inc. v. Zittrer noted that its provisions “suggest that only a natural person can act as an arbitrator” (para. 127). Second, it omits to clarify at what point arbitration will be considered to have failed. Finally, “tribunal arbitral de Paris” could mean a multitude of things.

Without commenting on the 2012 clause and while acknowledging that the ultimate decision as to which provision applies rested with the arbitrator under the competence-competence principle, the CA opined that it was rather the 2019 clause that governed. In the CA’s view this clause clearly and imperatively conferred exclusive jurisdiction upon an arbitrator (paras. 17-19).

Again, one cannot deny that this is a better provision. However, this is true only if one considers the clause as it was reproduced by the CA:

Any dispute arising in connection with this addendum and its consequences shall be subject to a prior mediation procedure conducted under the auspices of PriceWaterhouseCoopers.

If the mediation fails, the dispute shall be resolved by arbitration under the auspices of the CHAMBRE ARBITRALE INTERNATIONALE DE PARIS, in accordance with its Rules, which the parties declare that they know and accept.4)See para. 17 : “Toute contestation survenant à l’occasion du présent avenant et de ses suites fera l’objet d’une procédure de médiation préalable conduite sous l’égide de Price WaterhouseCoopers. En cas d’échec de la médiation, le différend sera résolu par arbitrage sous l’égide de la CHAMBRE ARBITRALE INTERNATIONALE DE PARIS, conformément à son Règlement que les parties déclarent connaître et accepter.” jQuery('#footnote_plugin_tooltip_41481_27_4').tooltip({ tip: '#footnote_plugin_tooltip_text_41481_27_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

For reasons unknown, the 2019 clause considered by the SC was slightly, yet sufficiently different to make it ambiguous. In particular, the second paragraph stated:

If the mediation fails, the dispute shall be resolved under the auspices of the CHAMBRE ARBITRALE INTERNATIONALE DE PARIS, in accordance with its Rules, which the parties declare that they know and accept, without however identifying the mediator.5) See para. 13 :  “[…] En cas d’échec de la médiation, le différend sera résolu sous l’égide de la Chambre Arbitrale Internationale de Paris, conformément à son règlement que les parties déclarent connaître et accepter, sans toutefois identifier le médiateur.” jQuery('#footnote_plugin_tooltip_41481_27_5').tooltip({ tip: '#footnote_plugin_tooltip_text_41481_27_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

Considering that CAIP offers both mediation and arbitration services, the absence of “by arbitration” before “under the auspices” coupled with the reference to a “mediator” hardly makes this a mandatory and unambiguous arbitration clause. In the face of two rather poorly drafted dispute resolution clauses, the SC’s decision is, perhaps, a tad less surprising.

 

Conclusion

Certain Canadian judgments may have recently raised doubts about the judiciary’s support for arbitration (see, e.g., discussions about the Supreme Court of Canada’s judgments here and here, as well as those of British Columbia and Ontario courts). Meanwhile, the CA’s judgment in Specter Aviation v. Laprade unambiguously demonstrates respect for some of the most fundamental principles of arbitration: party autonomy, competence-competence and separability.

 

*  The views expressed herein are those of the author and do not necessarily reflect the views of Woods LLP or its partners.

References[+]

References ↑1 See para. 12: “Toute litige sera réglé à l’amiable. À défaut de règlement à l’amiable, le cabinet d’audit PWC sera désigné comme arbitre. À défaut de résolution du litige par l’arbitre, le litige sera porté devant le tribunal arbitral de Paris.↑2 Gary B. Born, International Commercial Arbitration (2021), pp. 1875-1876. ↑3 See, e.g. Art. 1450 of the French Code of Civil Procedure which applies to domestic matters, or Art. 19 of the Serbian Arbitration Act. ↑4 See para. 17 : “Toute contestation survenant à l’occasion du présent avenant et de ses suites fera l’objet d’une procédure de médiation préalable conduite sous l’égide de Price WaterhouseCoopers. En cas d’échec de la médiation, le différend sera résolu par arbitrage sous l’égide de la CHAMBRE ARBITRALE INTERNATIONALE DE PARIS, conformément à son Règlement que les parties déclarent connaître et accepter.” ↑5 See para. 13 :  “[…] En cas d’échec de la médiation, le différend sera résolu sous l’égide de la Chambre Arbitrale Internationale de Paris, conformément à son règlement que les parties déclarent connaître et accepter, sans toutefois identifier le médiateur.” function footnote_expand_reference_container_41481_27() { jQuery('#footnote_references_container_41481_27').show(); jQuery('#footnote_reference_container_collapse_button_41481_27').text('−'); } function footnote_collapse_reference_container_41481_27() { jQuery('#footnote_references_container_41481_27').hide(); jQuery('#footnote_reference_container_collapse_button_41481_27').text('+'); } function footnote_expand_collapse_reference_container_41481_27() { if (jQuery('#footnote_references_container_41481_27').is(':hidden')) { footnote_expand_reference_container_41481_27(); } else { footnote_collapse_reference_container_41481_27(); } } function footnote_moveToReference_41481_27(p_str_TargetID) { footnote_expand_reference_container_41481_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } } function footnote_moveToAnchor_41481_27(p_str_TargetID) { footnote_expand_reference_container_41481_27(); var l_obj_Target = jQuery('#' + p_str_TargetID); if (l_obj_Target.length) { jQuery( 'html, body' ).delay( 0 ); jQuery('html, body').animate({ scrollTop: l_obj_Target.offset().top - window.innerHeight * 0.2 }, 380); } }More from our authors: International Investment Protection of Global Banking and Finance: Legal Principles and Arbitral Practice
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Paris Arbitration Week Recap: Affaires d’Etats: Practical Considerations When Defending States In International Arbitration

Kluwer Arbitration Blog - Tue, 2022-05-03 01:00

In the last three decades, the advent of investment treaty arbitration and more recently third-party funding have led to an exponential rise in the number of international arbitrations pursued by private parties against sovereign States. Against this background, on March 28, 2022, as part of Paris Arbitration Week, Curtis, Mallet-Prevost, Colt & Mosle hosted the webinar “Affaires d’Etats: Practical Considerations When Defending States in International Arbitration.”  This session examined the practical challenges faced by States when defending themselves against these claims.  The event featured Marie-Claire Argac, Jaroslav Kudrna, Claudia Salgado Levy and Jeremy Sharpe, and was moderated by Simon Batifort.  This post encapsulates key takeaways from the webinar.

 

The Lack of Institutionalization of Investor-State Dispute Settlement (ISDS)

The speakers noted the differences between ISDS and other forms of dispute settlement involving States. Mr. Sharpe pointed out, for instance, that a first structural difference between ISDS and other forms of international dispute settlement lies in the absence of institutionalization. ISDS differs in this respect from the international trade regime institutionalized around the WTO. The WTO regime is comprised of treaties setting out obligations common to all member States, which facilitates the system’s accessibility. At the domestic level, a bureaucratization is implemented through the establishment of offices and ambassadors. ISDS is different in that there is generally no single body of laws that apply to all States, and BITs may differ greatly from one another. There is also no overarching supervisory international institution managing disputes or delimiting State obligations. As a result, it falls upon each State to organize itself.  However, in practice many States have focused on ISDS episodically, when faced with a claim, rather than through a systemized approach towards arbitration claims.

Dr. Salgado illustrated the impact of these features of ISDS by reference to the evolution since the early 2000s of Ecuador’s legal mechanisms for responding to ISDS claims. Initially, although the Attorney General Office (“AGO”) already existed, there was no specialized team in charge of handling international investment disputes. Ecuador’s first arbitration cases illustrated the need for specialized counsel and experienced arbitrators. The AGO is now a 12-member division dedicated to international affairs, which includes international commercial and investment arbitration. Ecuador combines retaining outside firms to handle arbitral proceedings, while ensuring that they collaborate with the local team for research on domestic law and liaison with public entities. Depending on the workload (currently 15 international commercial arbitrations and 7 investment arbitrations) the local team can play a more active role within the arbitrations.

Dr. Kudrna explained that the Czech Republic has adopted a hybrid model for its defense.  A 10-member internal team is heavily involved in the cases and to the extent necessary is supplemented by outside firms that are chosen after taking into account the initial analysis of the case, the amounts claimed, the expected complexity and risks, and the quality of the opposing counsel.  Boutique law firms tend to be favored for smaller cases.  He went on to list some of the attributes that States value most in outside counsel, including: the experience of the lead counsel and excellent pleadings skills; organizational skills to avoid unnecessary hastiness or delays; an understanding of the State’s needs, interests and inner workings; attention to the client-relationship, including having the lead counsel devote the necessary amount of time to the case; and effective cost management, for example to ensure that not too many resources are spent on secondary issues.

Mr. Sharpe spoke about the importance of formally designating a State agent, i.e., someone within the State bureaucracy who will take the lead on the State’s defense and oversee inter-agency coordination, drawing lessons from the way agents operate in international litigation. Such agents would officially represent States before tribunals, thereby enhancing the reliability of the State by reflecting its consistent position on a given issue. They may also help to coordinate and manage litigations and liaise with outside counsel. Finally, agents can help States articulate their views, as Mr. Sharpe detailed in an article.

 

Access to Documents and Witnesses

Panelists also engaged with certain practical difficulties that may be faced by States defending ISDS claims. Dr. Kudrna mentioned some of the specific challenges that may be encountered during the document production phase such as the fact that many document requests are drafted in an overly broad manner.  Furthermore, he noted that, given the lack of any statute of limitations in old BITs, some investment claims related to facts that occurred decades ago, when documents were not digitalized and have since been destroyed. Dr. Kudrna also referred to the misconception that the State entity in charge of the State’s defense can access any documents produced by other state organs, such as those relating to criminal investigations. Ms. Argac also stressed how difficult it can be to gain access to all of the relevant information and individuals in some cases due to the fact that claims are often brought years after the fact, when the relevant individuals have left and documents may have been lost or destroyed.

Dr. Salgado underscored difficulties arising from the lack of inter-institutional coordination between public entities. In the case of Ecuador, she explained that the law now requires public entities to provide the AGO with relevant documents within a few days. Dr. Kudrna added that it can be more challenging to find witnesses who will testify on behalf of a State, as opposed to employees of the claimant, a difficulty that may be compounded if hearings become open to the public.

 

Procedural Challenges

The session also addressed several difficulties that might arise procedurally for States in ISDS, including challenges associated with frivolous claims and with information asymmetry and limited preparation time.

The proliferation of third-party funding has led to an increase in the number of frivolous claims, said Dr. Salgado. Some investors resort to arbitration as a means of pressure against States.  Even if States ultimately prevail in such scenarios, it may represent a waste of costs and human resources.

Another significant challenge in the defense of States relates to the fact that claimants have months to prepare their case with outside counsel and come up with their optimal case strategy, while States rarely have this luxury.  Ms. Argac noted that in investment arbitration in particular, States receive a request for arbitration with a basic description of the claims and little more to work off of and that they have to wait until the memorial on the merits to get a proper view of the claims.  The limited information available to the States at such early stages may affect their ability to effectively present their case.  In addition, many arbitration rules require that certain rights be exercised early on, such as the right to raise counterclaims for instance.

Ms. Argac emphasized the importance of retaining outside counsel sufficiently early in the case to advise on the composition of the tribunal, noting that arbitration rules generally provide for tight deadlines within which to constitute the tribunal and that there is a limited pool of arbitrators who are sufficiently sensitive to the interests of States.  Another important aspect resides in the arbitrator’s approach towards quantum and DCF, as this can have a devastating effect on potential damages.  Dr. Salgado also referred to the fact that the significant amount of cases faced by Ecuador and the limited pool of arbitrators have led to situations where the same arbitrators who had already decided cases involving Ecuador were reappointed in other cases against the State, which could lead to them being influenced by their previous decisions.  One solution proposed by Mr. Sharpe was to increase the pool of arbitrators sensitive to the interests of States by encouraging former State agents who were directly involved in the defense of States in international arbitration to act as arbitrator.

 

Recommendations for States

In closing, Ms. Argac offered recommendations to States seeking to improve their defense practice:

  1. select outside counsel as soon as possible to be advised early on, especially regarding the constitution of the arbitral tribunal.
  2. think carefully about the selection of outside counsel: prior experience in international arbitration, particularly representing States, is fundamental; parallel representation of investors with diametrically opposed positions on key recurring issues may raise difficulties.
  3. pay attention to the early stages of a case: while it may be tempting to respond to all the accusations raised in a notice of dispute or a request for arbitration, it is often prudent for the respondent to limit itself to what is required by the applicable rules and stay concise.
  4. facilitate counsel’s access to relevant documents and individuals, for example through the designation of an agent to liaise with external counsel or assist with the search for potential witnesses and document gathering.

A final recommendation was directed towards tribunals and arbitral institutions: the legitimate push towards expediency should not come to the detriment of States’ rights to plead their case, locate and gather evidence or witnesses in these often complex, high-stakes disputes, and have sufficient time to liaise among the relevant agencies and obtain necessary approvals.  Having a more realistic schedule from the start will ultimately ensure a smoother arbitration.

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Unearthing FET: What Did States Intend, and Does It Matter?

Kluwer Arbitration Blog - Mon, 2022-05-02 01:00

FET is often described as the core standard of international investment law.  Recently, there has been renewed discussion on its intended meaning, by reference to a range of source materials that arguably reflect States’ intentions at the time of concluding investment treaties.  On December 10, 2021, the Dispute Resolution Interest Group of the American Society of International Law hosted the webinar “Unearthing FET:  What Did States Intend, and Does It Matter?”.  The event featured Jaroslav Kudrna, Ana María Ordóñez Puentes, Martins Paparinskis and Jennifer Thornton, all speaking in their individual capacities, and was moderated by DRIG co-chairs Simon Batifort and Rémy Gerbay. This post summarizes the key takeaways.

 

States’ Different Negotiating Approaches on the Scope of FET

Quoting the tribunal in Pawlowski v. Czech Republic, which described FET as “a rule of laconic brevity and delphic obscurity”, Jaroslav Kudrna noted that tribunals’ interpretations of FET are sometimes unanticipated due to a lack of universal agreement on the standard’s scope.  Thus, one of the cross-cutting themes of the event was the different negotiating approaches by different States towards FET provisions.

Martins Paparinskis explained how British and German treaty drafters approached FET, drawing on research contained in an article “Investment Law Before Arbitration” he co-authored with Hepburn, Poulsen, and Waibel.  Recalling the provisions of Articles 31(1) and 31(4) of the VCLT, he suggested that FET can have two special meanings and one ordinary meaning.  One special meaning is found in pleadings before the ICJ and PCIJ, according to which FET is thought of as a technically equivalent reference to customary international law, analogous to denial of justice.  The second special meaning comes from the League of Nations’ treaty practice on international trade, given that Article 23(e) of the Treaty of Versailles referred to “equitable treatment.”  Later on, States concluded bilateral treaties in which FET was applied in the context of non-discriminatory competition.  The third – the ordinary meaning – is that FET is a vague term, similar to other vague terms used in fields such as the law of the sea, State succession, human rights, and environmental law.  Paparinskis explained that in applying these alternatives, it is difficult to maintain that British and German treaty negotiators considered that FET had a certain special meaning in the sense of VCLT Article 31(4).  FET was not treated with a great deal of interest, not due to treaty negotiators’ lack of knowledge – they were leading international lawyers – but because it was not something treaty negotiators focused on, unlike the national treatment and expropriation standards.

In turn, Kudrna explained that the negotiating history of investment treaties concluded by the Czech Republic provides scarce evidence of FET’s intended role.  Negotiations focused mostly on provisions regarding national treatment, free transfers of profits, and dispute settlement.  The only treaty negotiations in which the FET standard was touched upon were those conducted with France, as the travaux préparatoires indicate that France suggested a clause in which FET would be afforded in accordance with international law.  Czech representatives conveyed to their French counterparts that this provision should be concretized, but no specification was made in the final text of the treaty, in which the FET standard is linked to principles of international law.

Jennifer Thornton explained that the United States’ consistent position is that FET refers to a developed body of customary international law that evolved in the era of diplomatic protection and requires that States provide certain minimum standards of protection to the property interests of foreign nationals.  The U.S. has always maintained that no single standard applies to all FET claims or to all MST claims.  Rather, the U.S. maintains that it is an umbrella concept, and a floor beneath which no State can fall, but that ultimately it is akin to a set of common law tort claims with unique elements that claimants must prove.  The U.S. has acknowledged that the obligation prohibits States from denying justice to foreign nationals in their courts, as well as unlawfully expropriating foreign property interests and repudiating their contractual commitments to foreign nationals in certain circumstances, in addition to requiring States to offer full protection and security to foreign property interests. Notwithstanding its best efforts to use conventional mechanisms to clarify the obligation’s scope, such as NAFTA’s Free Trade Commission’s Note of Interpretation and non-disputing party (“NDP”) submissions, the U.S. has never been able to persuade tribunals to completely embrace its approach on FET.  The consequence of this lingering ambiguity is that U.S. treaty negotiators have been unable to persuade Congress that the obligation is sufficiently well-defined so it can be fully embraced in future agreements.

 

Joint Interpretations, NDP Submissions, Amendments

The event also addressed the role of joint interpretations, NDP submissions and amendments calibrating the scope of FET.  Ana María Ordóñez explained that joint interpretations and NDP submissions are valid international law instruments that States rely on to define the scope of concepts such as FET.  These do not constitute a supplementary source of interpretation but a keystone of treaty interpretation, which in the context of ISDS exist precisely because States are aware of current arbitral practice that sees standards such as FET as empty clauses needing interpretation.  As to whether these instruments are taken into consideration in practice, Ordóñez opined that arbitral practice was inconsistent.  She held that whenever NDP submissions were taken into account, tribunals’ level of engagement with them seemed more concerned with the need to avoid allegations of failure to state reasons than with engaging with the arguments raised.  Ordóñez also noted that in 2020, UNCITRAL Working Group III (“WGIII”) issued a note in which it made specific reference to NDP submissions as authoritative interpretation mechanisms under VCLT Article 31(3)(b).  She pointed out that WGIII meetings show that States share a concern about tribunals adopting questionable interpretative approaches, and that WGIII’s work could indicate a general understanding between States that tools such as joint interpretations or NDP submissions can ensure that vague treaty provisions are not interpreted in a manner inconsistent with States’ intentions.

As to the proposition that States should amend their treaties if they are unsatisfied with tribunals’ interpretations of FET, Thornton opined that amending treaties is easier said than done, as the process can be complicated.  She concluded that States need to be more precise in their treaties when identifying FET’s scope, while recognizing that even their best efforts to clarify the obligation may not be fully embraced by a tribunal interpreting the treaty.  She stressed that this is the sort of bargain that States make when entering into these agreements to protect the offensive interests of their investors.

 

New-generation FET Clauses and the Uncertain Impact of Current Reform Efforts

Speakers also considered the possibility for new-generation FET clauses to clarify the meaning of FET provisions into the future.  In recent treaties, some States have opted for a more elaborate concept of FET, in order to set a higher threshold for the application of this standard for tribunals, which in turn results in more predictability.

Kudrna referred to the European Union’s practice and explained that the scope of FET was an issue in the negotiations of CETA, in which Canada wanted to link the FET standard to the MST under customary international law, a proposal which was strongly opposed by the EU.  The EU instead proposed to set out elements of the FET standard, codifying existing elements appearing in case law.  New agreements concluded by the EU containing its revised FET standard provide for an exhaustive list of conduct that can result in an FET standard violation.  This new approach is also being used by EU Member States individually when negotiating new investment treaties with third States or renegotiating existing treaties.  Regarding future treaty negotiations, Thornton opined that States should be clear about FET’s scope because conventional control mechanisms can be ignored.  She considered that the U.S. needs to move towards the CETA approach if the FET obligation is to remain in U.S. agreements.  Still, the devil is in the details: every time an attempt was made to enumerate the norms that had sufficient State practice and opinio juris to have crystallized into custom, there was fierce debate within the U.S. government about what those norms actually were.

Paparinskis contended that European and American approaches to FET are not similar but rather address very different points.  He explained that in examining FET, one intellectual exercise goes to the determination of the content of the rule, i.e. interpretation, and another goes to the application of that rule.  We have sophisticated machinery for determining whether interpretation of a treaty provision or the determination of the content of custom is correct or persuasive:  the VCLT for one, and rules of determination of customary law for the other.  Application of FET on the other hand is something about which international law says little.  We must be clear about these different exercises.  He referred to the above-mentioned quote by the Pawlowski v. Czech Republic tribunal, and explained that the tribunal conflated two meanings of vagueness.  One is vagueness as opposed to concreteness.  The other is vagueness as something similar to what VCLT Article 32 refers to, namely a meaning that is obscure.  He explained that there was nothing wrong with a rule being vague in the sense of not being concrete.  That is a plausible conclusion – after all, international law is full of vague but applicable and routinely applied rules.  The problem appears at the application level, where we can identify good and bad examples of the rule’s application.  Thus, U.S.is addressing the first point, namely clarifying and concretizing the content of the rule.  Europe is addressing the second point, namely identifying examples of application that fit within the rule.

However, these new approaches to FET do not come without difficulties. Kudrna noted that it is not always easy in practice when States attempt to negotiate reforms to unqualified FET clauses with third States, as some prefer to link the FET standard to the MST under customary international law.  As he concluded, we still remain far from a uniform understanding of the scope of the FET standard.

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International Arbitration as an Instrument of Economic Development: The Indo-Pacific Case Study

Kluwer Arbitration Blog - Fri, 2022-04-29 01:00

Historical records indicate that Tuesday, 10 June 1958 must have been a busy day in the corridors of the United Nations.1)Gary Born and the author are Expert International Commercial Arbitration Consultants retained by the Asian Development Bank to advise states on accession to the Convention, legislative reform and capacity building. jQuery('#footnote_plugin_tooltip_41369_24_1').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_1', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); On that day, following the diplomatic conference which had taken place in May and June 1958 as a precursor to the adoption of the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “Convention”), 10 states formally signalled their intent to become the first contracting parties to the Convention by becoming the Convention’s first signatories. A further 14 states followed later that year. In subsequent years, all of those original signatories eventually ratified the Convention, but not necessarily with immediate effect.2)Pakistan did not ratify the Convention until 2005. jQuery('#footnote_plugin_tooltip_41369_24_2').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_2', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

It is noteworthy that the initial signatory states represented a diverse cross-section of developing and developed economies. Amongst them, India, Pakistan, the Philippines, Sri Lanka and Egypt joined France and The Netherlands as first adopters on 10 June 1958. Almost 65 years later the current count of states which are parties to the Convention is 166 out of the 193 states presently represented at the United Nations.3)In the South Pacific the Cook Islands is a party to the Convention but is not a Member State of the United Nations. jQuery('#footnote_plugin_tooltip_41369_24_3').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_3', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); Whilst that number represents an array of states on all inhabited continents and across the five oceans, it is instructive to consider which states remain to accede to the Convention and why that might be the case.

One area where, en bloc, the Convention had gained limited traction was the Indo-Pacific, and in particular the South Pacific. Of the 14 states comprising the South Pacific very few had acceded to the Convention prior to 2018.4)The South Pacific states which had acceded included the Cook Islands and the Marshall Islands. Fiji had acceded to the Convention in 2010 but did not enact legislation ratifying until the International Arbitration Act 2017. jQuery('#footnote_plugin_tooltip_41369_24_4').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_4', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); That statistic is curious in circumstances where many of those same states which had not acceded to the Convention had in fact acceded to the ICSID Convention, some as far back as the 1970s.5)Fiji, Samoa and Papua New Guinea acceded to the ICSID Convention in 1978. jQuery('#footnote_plugin_tooltip_41369_24_5').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_5', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

There has been a concerted push in recent years to bring the South Pacific under the umbrella of the Convention. This initiative, led by the Asian Development Bank in cooperation with UNCITRAL has been supported across the academic, institutional and professional arbitration community.6)Asian Development Bank technical assistance program entitled “Promotion of International Arbitration Reform for Better Investment Climate in the South Pacific”. jQuery('#footnote_plugin_tooltip_41369_24_6').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_6', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); What are the reasons for this reform and why now?

The answer is multidimensional. When a state considers whether to adopt such a reform the underlying policy case for the reform must run deeper than the argument that most states have acceded to the Convention and therefore Pacific states should follow suit. The real case for the reform is founded in the theory of economic development and the role international arbitration can play in facilitating foreign direct investment. In their Journal of Law and Economics article entitled “Does International Commercial Arbitration Promote Foreign Direct Investment?” the authors conducted empirical research on bilateral investment flows and concluded that foreign direct investment followed arbitration reform.7)Andrew Myburgh & Jordi Paniagua, 2016. “Does International Commercial Arbitration Promote Foreign Direct Investment?,” The Journal of Law and Economics, University of Chicago Press, vol. 59(3), pages 597-627. jQuery('#footnote_plugin_tooltip_41369_24_7').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_7', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); The reasons for this are multi-faceted but prominent amongst them are that investors and the recipients of the investment have a neutral and level playing field, avoid one another’s home jurisdictions and have an enforceable award as a result. This increased foreign direct investment flow appears particularly pronounced in countries with weaker institutions and in relation to larger projects.8)Ibid. jQuery('#footnote_plugin_tooltip_41369_24_8').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_8', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

The effects of accession to the Convention and arbitration reform across the South Pacific resonate in two principal ways: first, the combination of accession and reform signals to the world that the country is open to business. Second, the effects of increased flows from foreign direct investment have been measured at as high as an 11% increase in gross domestic product for the South Pacific.9)Jordi Paniagua, “The Economic Impact of International Commercial Arbitration” Third South Pacific International Arbitration Conference, Sydney, 17 March 2021. jQuery('#footnote_plugin_tooltip_41369_24_9').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_9', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

In developing economies, where foreign investment inflows are crucial to employment, education, training and infrastructure, and also to current and future climate adaptation and mitigation efforts, arbitration reform alone will not be a magic bullet but rather an important condition precedent to attracting such investment. That investment is needed even more urgently given the impact of COVID-19 which has devasted all South Pacific economies and particularly the many Pacific economies which rely heavily on tourism. For example, the economies of Fiji and Palau have depended on tourism for between approximately 40-55% of their GDP.10)Fiji Market Insights 2021, Department of Foreign Affairs and Trade (Australia) https://www.dfat.gov.au/sites/default/files/fiji-market-insights-2021.pdf and World Tourism Organisation for Palau in 2015 https://www.theglobaleconomy.com/Palau/international_tourism_revenue_to_GDP/. jQuery('#footnote_plugin_tooltip_41369_24_10').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_10', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], });

As to the impetus of the timing of the reform, the Asian Development Bank helped drive the reform by investing ongoing in-country time and resources over a considerable period by assisting governments in developing policy papers, and by briefing all relevant government departments, businesses and the legal community on the potential benefits of the reform. This was in response to the growth of arbitration as the primary means of dispute resolution and the recognition of the potential benefits of foreign direct investment as a development tool which may have been underappreciated in the South Pacific prior to the Asian Development Bank’s involvement.

Following the Asian Development Bank’s technical advisory program, states which have acceded to the Convention and/or enacted arbitration legislation include Fiji, Palau, Tonga, Papua New Guinea and Timor-Leste. The Asian Development Bank has invested significant resources into not only assisting these states with reform but also in capacity building of judiciary, government and the private sector so that there is a sufficient knowledge base to implement the reform and to use arbitration with confidence. As a result, arbitration continues to grow in those states in a concrete sense and there is no reason to believe there is resistance in other states in the South Pacific to adopting similar measures.

The Asian Development Bank’s reform program is ongoing but the single most important factor in whether other states in the South Pacific will elect to undertake arbitration reform is likely to be the ongoing capacity and commitment to on-the-ground engagement which necessarily was curtailed during COVID-19. Personal relationships are highly valued in the South Pacific and ministers and ministerial departments need specialised advice and consultation. Such legislative reform requires considerable bandwidth from politicians and public servants in developing states who have other pressing commitments, takes time to percolate amongst stakeholders through public consultations and is subject to parliamentary sitting calendars and election cycles.

It is positive to note that institutional arbitrations have been filed before such institutions as SIAC and ACICA and arbitration-related proceedings have occurred before various courts in the region under new best practice legislation.11)See for example South Pacific Fertilizer Ltd v Allied Harvest International Pte Ltd [2019] FJHC 400; HBC142.2017 (8 May 2019); Stantec New Zealand Ltd v Fiji Roads Authority [2018] FJHC 867; HBC324.2016, HBC227.2017 (14 September 2018). jQuery('#footnote_plugin_tooltip_41369_24_11').tooltip({ tip: '#footnote_plugin_tooltip_text_41369_24_11', tipClass: 'footnote_tooltip', effect: 'fade', predelay: 0, fadeInSpeed: 200, delay: 400, fadeOutSpeed: 200, position: 'top right', relative: true, offset: [10, 10], }); It is hoped that foreign direct investment will grow concurrently for those states which have engaged in the reform and signalled to the world they are open for business with reliable, predictable and dependable dispute resolution scaffolding in place.

References[+]

References ↑1 Gary Born and the author are Expert International Commercial Arbitration Consultants retained by the Asian Development Bank to advise states on accession to the Convention, legislative reform and capacity building. ↑2 Pakistan did not ratify the Convention until 2005. ↑3 In the South Pacific the Cook Islands is a party to the Convention but is not a Member State of the United Nations. ↑4 The South Pacific states which had acceded included the Cook Islands and the Marshall Islands. Fiji had acceded to the Convention in 2010 but did not enact legislation ratifying until the International Arbitration Act 2017. ↑5 Fiji, Samoa and Papua New Guinea acceded to the ICSID Convention in 1978. ↑6 Asian Development Bank technical assistance program entitled “Promotion of International Arbitration Reform for Better Investment Climate in the South Pacific”. ↑7 Andrew Myburgh & Jordi Paniagua, 2016. “Does International Commercial Arbitration Promote Foreign Direct Investment?,” The Journal of Law and Economics, University of Chicago Press, vol. 59(3), pages 597-627. ↑8 Ibid. ↑9 Jordi Paniagua, “The Economic Impact of International Commercial Arbitration” Third South Pacific International Arbitration Conference, Sydney, 17 March 2021. ↑10 Fiji Market Insights 2021, Department of Foreign Affairs and Trade (Australia) https://www.dfat.gov.au/sites/default/files/fiji-market-insights-2021.pdf and World Tourism Organisation for Palau in 2015 https://www.theglobaleconomy.com/Palau/international_tourism_revenue_to_GDP/. ↑11 See for example South Pacific Fertilizer Ltd v Allied Harvest International Pte Ltd [2019] FJHC 400; HBC142.2017 (8 May 2019); Stantec New Zealand Ltd v Fiji Roads Authority [2018] FJHC 867; HBC324.2016, HBC227.2017 (14 September 2018). function footnote_expand_reference_container_41369_24() { jQuery('#footnote_references_container_41369_24').show(); jQuery('#footnote_reference_container_collapse_button_41369_24').text('−'); } function footnote_collapse_reference_container_41369_24() { jQuery('#footnote_references_container_41369_24').hide(); jQuery('#footnote_reference_container_collapse_button_41369_24').text('+'); } function footnote_expand_collapse_reference_container_41369_24() { if (jQuery('#footnote_references_container_41369_24').is(':hidden')) { footnote_expand_reference_container_41369_24(); } else { footnote_collapse_reference_container_41369_24(); } } function footnote_moveToReference_41369_24(p_str_TargetID) { footnote_expand_reference_container_41369_24(); 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_41369_24(p_str_TargetID) { footnote_expand_reference_container_41369_24(); 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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Pappas named Dean at North Dakota

ADR Prof Blog - Thu, 2022-04-28 15:11
News broke earlier this week that another ADR law school dean has been appointed.  Brian Pappas – Fulbright Scholar, Assistant Vice President of Academic Affairs at Eastern Michigan, incoming ABA Section of Dispute Resolution Chair, and former law faculty at Michigan State – is coming back to legal academia to be Dean at the University … Continue reading Pappas named Dean at North Dakota →
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