Notes on the Persistent Latin American Countries’ Attitude Towards Investment Arbitration and ICSID

by Ricardo Dalmaso Marques

Pinheiro Neto Advogados

Investment arbitration is a crucial and sensitive dispute-resolution method, notably because the treatment given to foreign investment matters may materially affect the economic and social realities of a country or region, particularly those in development. In the last decade, however, as already reported and addressed in this blog by, among many others, Vanessa Giraud and Carlos González-Bueno, countries in Latin America — a true hot-spot for foreign investment1 — have been either ignoring, denouncing or resisting the International Centre for Settlement of Investment Disputes (“ICSID”), the dispute-resolution framework for investment protection enacted under the Washington Convention of 1965.2

The most notable examples of this Latin American trend include: (i) Brazil’s refusal to ratify the ICSID Convention, purportedly for both political and economic reasons;3 (ii) Bolivia’s, Ecuador’s and Venezuela’s withdrawal from the ICSID Convention, due to alleged structural and legal problems with it;4 and (iii) Argentina’s threat to withdraw, according to a bill pending before its Congress.5 The legal problem to be addressed, therefore, is the apparent reluctance of Latin American countries to subject themselves to ICSID as an effective international investment protection forum. Accordingly, Latin American countries must determine whether avoiding ICSID is the appropriate solution, given the need for foreign investment in the region.

Although not expressly acknowledged, this dissatisfaction of certain Latin American countries clearly results from the exponential increase of ICSID arbitrations brought against these countries. These cases have arisen mostly from financial crises, as well as nationalization and expropriation initiatives.6 Brazil, however, is a different story; its decision not to adhere to ICSID seems to be more closely related to its actual advantages, considering that the country is already a major recipient of investment in Latin America and one of its largest economies.7

The facts that only Latin American countries have withdrawn from the ICSID Convention and that Brazil is one of the only world economic forces not to adhere to it are not per se indications of a bad policy. Indeed, ICSID is not the only investment protection system available, and should not be treated as such. On the other hand, as previously addressed in this blog by Mariano Tobías de Alba Uribe, UNASUR’s8 announced desire to create its own (regional) investment arbitration center to replace ICSID, in fact, seems to deserve some criticism.

An investment dispute-resolution forum that favors sovereign power and regionalism over international standards will inevitably raise questions as to its neutrality and, as a result, fall into disuse. Hence, the instability and lack of clarity concerning investment protection caused by this “regionalization” of justice is expected to decrease the amount of foreign investment in the region, with a severe impact on its social reality — which is marked by alarming rates of poverty, unemployment and illiteracy.9 This is an unfortunate truth even in Brazil, which, though not currently in a position where it needs to encourage foreign investment, perhaps won’t be able to sustain the current level of investment in the long-term.10 Latin America has, in fact, demonstrated a growing acceptance of international commercial arbitration (as reported, for instance, by Manuel A. Gómez), but that alone may not be enough.

Moreover, by isolating Latin America from the international investment standard, Latin American policymakers may undermine the enforcement of rule of law in the region, which would negatively impact the region’s economic and social development.11 Without a doubt, a rebirth of the so-called Calvo Doctrine — which, for some, has never vanished completely within the region — is not an adequate solution, given especially the existing competition over FDI with African and Asian countries (a number of them parties to ICSID and to BITs).

In brief words, such an extreme position would likely have serious repercussions on the welfare of the region by impacting (i) the countries’ receipt of foreign investment, and (ii) the development of international and domestic law. It is manifest that Latin American countries cannot afford such an important loss right now. The proper answer, instead, seems to be related to the ability of Latin America to establish a legal framework that enables it to refuse unwanted investments, and that gives preference to the needs of the host states. Latin American countries could repeal ICSID, as long as they take other relevant measures to ensure investments’ growth and stability — which unfortunately has not yet been the case.12

Besides, if thoroughly analyzed, the Latin American countries’ complaints about ICSID — or at least the ones based on scientific and logical grounds, and not on ideological components — seem not to be sustainable if an investment protection framework beneficial to both investor and State is enacted. And even if the “structural” dissatisfaction with ICSID could be considered justifiable, BIT’s options for ad hoc arbitration proceedings under the auspices of UNCITRAL or ICC Rules, for instance, are still a valuable option, along with investor-state mediation, which has demonstrated a high percentage of effective results (as reported by Muniz Maniruzzaman).

As a preferable solution, therefore, Latin American should focus on the fact that, to ensure economic and social development, these countries must enact substantive laws to protect investments, rather than “concentrating” investment justice in the region’s own hands.13s that [ICSID) system confronts certain stresses, it is important to recall the complexities of the era that lacked such a system and the fact that the legal framework for investment disputes put into place over many years is not likely to be quickly deconstructed”).] While some may view ICSID as expendable in the region, one thing is for certain: the enforcement of rule of law is not.

The author deeply thanks Fernanda Marques Dal Mas, associate at Pinheiro Neto Advogados (São Paulo, Brazil), for her kind and crucial assistance in the revision of this post.


• Leave a comment on Notes on the Persistent Latin American Countries’ Attitude Towards Investment Arbitration and ICSID

  1. Unit on Investment and Corporate Strategies of the Division of Production, Productivity and Management of the Economic Commission for Latin America and the Caribbean (ECLAC), Foreign Direct Investment in Latin America and the Caribbean 2012 (2013), (reporting that, in 2012, Latin America received US$ 173.361 billion in investments, an increase of 5.7% from the previous year, as opposed to a worldwide foreign direct investment decrease of 14%).
  2. While ICSID is not the only international arbitral forum available, it is certainly the most prominent option. See ICSID, ICSID Caseload – Statistics, Issue 2013-2, 7 (2013), (reporting that, as of June 30, 2013, ICSID had registered 433 cases under the ICSID Convention and Additional Facility Rules). See also Sergio Puig, Emergence and Dynamism in International Organizations: ICSID, Investor-State Arbitration, and International Investment Law. Geo. J. Int’l L. 44, 531, 597 (2013), (affirming that “time has proven the deep reach of the Convention, as well as ICSID’s status as not simply another arbitration facility”).
  3. Gilberto Giusti & Ricardo Dalmaso Marques. Dispute Resolution, in BRAZILIAN COMMERCIAL LAW – A PRACTICAL GUIDE, 271, 331 (Silvia Fazio ed., Kluwer Law International 2013) (describing that, despite the fact of having its economic growth based on a market economy supported by incoming capital flow, Brazil has not ratified the ICSID Convention, and signed fourteen (14) Bilateral Investment Treaties – BITs, but never ratified them).
  4. Ignacio Vincentelli, The Uncertain Future of ICSID in Latin America, Social Science Research Network (SSRN), 13 (February 20, 2009), (detailing this movement and reporting that some of these countries even initiated a widespread termination of BIT’s that provided for the ICSID dispute-resolution method).
  5. Argentinean Congress (March 21, 2011). See also Argentina acuerda pagar 500 mln dlr por demandas ante paneles Banco Mundial, ONU, Reuters (October 19, 2013), (outlining that, albeit Argentina has recently accepted to fulfill the payment of agreements arising from ICSID arbitrations in the amount of US$ 500 million, the Argentinean Finance Minister affirmed that the settlement was reached “under local legislation” and that such attitude illustrates a “ratification of Argentina’s position towards ICSID.”).
  6. Katia Fach Gómez, Latin America and ICSID: David versus Goliath? (November 12, 2010), Social Science Research Network (SSRN), 3, (emphasizing that, among the main criticisms made by these countries against ICSID are the alleged: (i) concerns that hostility toward ICSID might impede access to World Bank credit; (ii) pressure to hire expensive foreign law firms; (iii) lack of attention to non-commercial interests, such as health or environmental protection; (iv) arbitrator bias in favor of the investor; and, maybe more decisively, (v) lack of sensibility by the tribunals on issues relating to collective interests, such as human rights and indigenous peoples).
  7. Gilberto Giusti & Adriano Drummond C. Trindade, As arbitragens internacionais relacionadas a investimentos: a Convenção de Washington, o ICSID e a posição do Brasil, Revista de Arbitragem e Mediação 7, 45, 48 (2005) (detailing the legal, economic and political reasons for Brazil’s decision not to ratify the ICSID Convention nor the fourteen BITs previously signed).
  8. The Union of South American Nations, an intergovernmental union integrating Mercosur and the Andean Community of Nations (CAN) as part of a continuing process of South American integration, and inspired and modeled after the European Union. UNASUR’s members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela. Panama and Mexico hold an observer status.
  9. Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America 2012 (2013) (reporting that 167 million Latin Americans (28.8% of the region’s population) were living under the poverty line in 2012, including 66 million (11.4% of the region’s population) living in indigence).
  10. More than that, Brazil also has been playing an important role as an “exporter” of investment, and these investments will also require protection beyond “shell and holding companies”, as asserted by Jean Kalicki in discussions held at the IBA Annual Conference, 2013, in Boston. IBA panel shares arbitration tips for energy lawyers, Global Energy Review (October 14, 2013).
  11. David W. Rivkin, The Impact of International Arbitration on the Rule of Law: The 2012 Clayton Utz/University of Sydney International Arbitration Lecture, Arbitration International 29, 327, 340, (LCIA 2013) (stressing that investor-state arbitration is a “different animal” than international commercial arbitration, not only because it involves sovereign states and “public goods and money”, but also due to the fact that it has a profound impact on the development of public international and national laws; a true impact on the enforcement of rule of law).
  12. One cannot disregard that the Latin American countries could benefit from establishing a new and more balanced system of international investment, mainly in virtue of the many unfavorable BIT’s to the region signed in the past — for some, practically allowing the abuse of the first world in Latin America through the exploitation of resources by foreign companies. See Katia Fach Gómez, Latin America and ICSID: David versus Goliath? (November 12, 2010), Social Science Research Network (SSRN), 26.
  13. Jonathan C. Hamilton. A Decade of Latin American Investment Arbitration, in LATIN AMERICAN INVESTMENT TREATY ARBITRATION: THE CONTROVERSIES AND CONFLICTS, 69, 78 (Mary H. Mourra, ed., Wolters Kluwer 2008) (expressing his similar view in the sense that “[a

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on Notes on the Persistent Latin American Countries’ Attitude Towards Investment Arbitration and ICSID

British Columbia Signals To The International Community That It Is An Enforcement-Friendly Jurisdiction

by Henri C. Alvarez

Fasken Martineau DuMoulin LLP,
for ITA

By Henri Alvarez and Alexandra Mitretodis, Fasken Martineau DuMoulin LLP

In Sociedade-de-fomento Industrial Private Limited v. Pakistan Steel Mills Corporation, decided on June 2, 2014, the Court of Appeal of British Columbia set the test in international arbitration for enforcing foreign arbitral awards by freezing assets. The decision confirms that a party with limited association to British Columbia may enforce an arbitral award by Mareva injunction without an onus to first establish that enforcement elsewhere was not possible. In considering when to grant an injunction, the court may consider the relative ease or difficulty of enforcement abroad, among other factors. Delay, inconvenience and financial loss are some of the factors that indicate difficulty in enforcement.

The Court of Appeal held that the New York Convention provides a presumption of a ‘real and substantial connection’ and explicitly permits parties to an international arbitration to enforce an award in any contracting state.

In June 2010, Sociedade-de-Fomento Industrial Private Limited (“SFI”), a company incorporated in India, obtained an arbitral award of $8, 673, 492.55 (“the Final Award”) against Pakistan Steel Mills Corporation (Private) Limited (“PSM”), a Pakistani state owned steel manufacturer, in an arbitration conducted under the arbitration rules of the ICC. Following the award, PSM did not pay SFI. SFI was unable to identify any overseas assets of PSM against which it could seek to enforce its award. SFI eventually became aware of the fact that PSM had purchased and would be importing coal of a value of $16.5 million from British Columbia.

SFI filed a petition in the BC Supreme Court for payment of the Final Award on April 21, 2011. It also applied for and obtained an ex parte Mareva injunction, preventing the use of PSM’s assets (including the coal delivered F.O.B.) or removal from British Columbia until $9,000,000 was paid into court. The Mareva Order required SFI to provide an undertaking as to any damages that PSM or a third party might suffer by reason of the Order.

On December 1, 2011, the Court recognized and enforced the Final Award. SFI sought to recover all of its costs in enforcing the Final Award. PSM argued that the Mareva injunction was wrongly obtained and SFI should bear the costs.

The BC Supreme Court considered the core principles for granting a Mareva injunction: the applicant must show a good arguable case for the underlying claim, and the granting of the injunction must on balance be just and convenient. The Court found that the limited association of either party with British Columbia and the ability of SFI to enforce its award elsewhere, in particular in Pakistan, was a material fact that should have been disclosed to obtain the Mareva injunction. The Court held that the lack of evidence that SFI had made an inquiry regarding the possibility of enforcement of the award in Pakistan and the fact that SFI did not disclose that Pakistan is a signatory to the New York Convention constituted material non-disclosure.

Accordingly, the injunction was set aside and SFI was held liable to PSM for the damages caused by the Mareva injunction. SFI appealed the ruling.

The Court of Appeal considered whether the court of first instance erred in deciding that an injunction to secure an international arbitration award ought not to have been issued where the parties had little connection to British Columbia and where the arbitration award could have been enforced in Pakistan.

The Court of Appeal confirmed that the test for the granting of a Mareva injunction is the balance of justice and convenience between the parties. Depending on the facts of the case, important factors may include the merits of the underlying claim, the risk of dissipation of the asset, the balance of convenience and the interests of third parties.

The Court of Appeal addressed the effect of the New York Convention and the enabling legislation in British Columbia and found that for jurisdictional purposes, an international arbitral award is recognised on the same basis as if it were a domestic award originating in the province. The recognition and enforcement of international arbitral awards is governed by the international commercial arbitration acts of each province, which incorporate the UNCITRAL Model Law. The enforcement of foreign awards is governed by the New York Convention. The relevant legislation in British Columbia is the Foreign Arbitral Awards Act, RSBC 1996 c 154 and the International Commercial Arbitration Act, RSBC 1996, c 233 (“ICCA”). Section 4 of the Foreign Arbitral Awards Act provides that foreign arbitral awards may be enforced in British Columbia by application to the Supreme Court of British Columbia. Section 35(1) of the ICAA, which also provides for enforcement of awards, is expressly not limited to arbitration conducted within British Columbia. Section 10 of the Court Jurisdiction and Proceedings Transfer Act, SBC 2003, c 28 (“CJPTA”) provides that a real and substantial connection is presumed to exist in a proceeding to enforce an arbitral award made outside of British Columbia.

The Court of Appeal found that the New York Convention, as implemented in British Columbia, removes jurisdictional boundaries and the “need for expansive inquiries into whether a proceeding has a real and substantial connection to British Columbia as an enforcing jurisdiction”. The statutory scheme is unambiguous in its presumption of a real and substantial connection which is not limited to final judgments and applies equally to interlocutory remedies. The Court noted that the statutory scheme implementing the New York Convention anticipated an action to enforce the award and that there were only limited grounds on which a defendant could resist recognition and enforcement under Article V of the New York Convention and Section 36 of the ICAA. Accordingly, there was no basis for finding that a real and substantial connection existed for some, but not all, purposes in pursuing a claim for enforcement.

The Court found that while the availability of enforcement proceedings in Pakistan was not an entirely irrelevant factor to the balance of convenience analysis, the court of first instance ought to have taken into account the delay that would accompany enforcement proceedings in Pakistan, as well as the considerable challenges to the enforcement of the Final Award under Pakistani law. The expert evidence presented by the parties conflicted on how long the enforcement process would take in Pakistan. One expert maintained that the estimated enforcement process would take between 12 and 18 months, while the other expressed the view that inordinate delay occurs in all Pakistani judicial proceedings. Both experts agreed that one of the defences available to PSM in Pakistan would have been a public policy defence, which has been interpreted as incorporating Islamic Law with respect to the payment of interest. The issue remains unsettled under the law of Pakistan.

The Court of Appeal concluded that in considering whether it was just and convenient to grant the injunction, the analysis ought to have taken into account the delay that would accompany enforcement proceedings in Pakistan, as well as the considerable doubt about the enforcement of that part of the award representing interest under Pakistani law. The Court of Appeal held that the injunction was properly ordered, set aside the order that SFI was liable to PSM for the damages suffered by it as a result of the injunction. The Court also awarded SFI its costs of enforcing the award as damages, which were remitted to court of first instance for assessment.

This appears to be the first case of its kind in Canada in which a court has granted a Mareva injunction in support of the enforcement of an arbitral award. This case reaffirms British Columbia’s flexible approach to the granting and upholding of Mareva injunctions, particularly in support of international arbitration.

This case clarifies the situation in British Columbia on enforcement. This is a significant decision for the international community as foreign litigants may increasingly be looking to Canadian courts to recognize and enforce foreign arbitral awards, even when the parties to the underlying arbitration may have little or no connection to Canada. Of particular note is the Court’s finding that under the British Columbia legislative scheme implementing the Convention and the British Columbia CJPTA, a real and substantial connection is presumed to exist within British Columbia in a proceeding to enforce an arbitral award made outside of British Columbia. This decision contrasts with the uncertain and difficult situation in respect of jurisdiction taken by certain US courts upon application to enforce foreign and international awards. In view of its interpretation that the Convention explicitly permits parties to an international arbitration to enforce an award in any contracting state, the Court could have reached the same decision without the support of the legislative scheme of the CJPTA.
With this decision, British Columbia has positioned itself as an enforcement-friendly jurisdiction in which the courts are prepared to uphold the spirit and purpose of the Convention.


• Leave a comment on British Columbia Signals To The International Community That It Is An Enforcement-Friendly Jurisdiction

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on British Columbia Signals To The International Community That It Is An Enforcement-Friendly Jurisdiction

Effective Management of Arbitration; A Guide for In-House Counsel and Other Party Representatives

by Mirèze Philippe

Special Counsel, Secretariat of the ICC International Court of Arbitration,
for ArbitralWomen

The worldwide launch of the Guide for In-House Counsel and Other Party Representatives on Effective Management of Arbitration Guide took place on 6 June 2014 in Paris. The Guide provides a checklist for the procedural decisions that need to be made at each principal phase of an arbitration. Useful in both large and small cases, it enables in-house counsel worldwide to participate effectively in the tailor making process throughout the arbitration proceedings. The Guide was drafted by a Task Force of the ICC Commission on Arbitration & ADR (“Commission”).

John Beechey (President of the ICC International Court of Arbitration) launched the conference, noting that the ICC Rules of Arbitration (“ICC Rules”) require parties and arbitrators to conduct cases in a time and cost efficient manner. “I sometimes see letters from in-house or outside counsel, complaining of delay in the arbitral process. If we establish that our systems or procedures are at fault, we take the criticism on board and improve things. However, when users say that they own the case, we tell them: “OK, we will help you, but if it is your case, own it and make sure you take an active part.” The Guide is intended to encourage a more pro-active role on the part of users of arbitration services” said Beechey.

“In order to assist arbitration users, this Guide is specifically designed to provide them with tools for making decisions to ensure the cost effectiveness of each arbitration”, added Peter Wolrich, Former Chairman to the ICC Commission of Arbitration & ADR. He explained that the ICC Rules were drafted to enable the parties and the arbitrators to create a tailor-made procedure that is adapted to the particular needs of each case. However, too often, the parties and arbitrators do not tailor-make the procedure but either apply standardized procedures or decide procedural matters piecemeal as the case moves along. This tends to increase time and cost. This is why it is necessary to determine which procedures are cost effective, i.e. whether their benefit in terms of improving chances of success is worth the cost. For example, it is faster and cheaper to have one round of briefs rather than three. In each case it is necessary to determine whether the benefit of additional rounds is worth the cost. This is ultimately a business decision. Parties must have a good understanding of the procedural options and the pros and cons of the various options so that they can make an effective cost/benefit analysis and choose the optimum procedure for their case. The new guide provides party representatives with tools to assist them in accomplishing this important task. Wolrich walked through the guide by explaining the sections on ‘settlement considerations’ and ‘case management conference’ and the various Topic Sheets: 1. Request for Arbitration; 2. Answer and Counterclaims; 3. Multiparty Arbitration; 4. Early Determination of Issues; 5. Rounds of Written Submissions; 6. Document Production; 7. Need for Fact Witnesses; 8. Fact Witness Statements; 9. Expert Witnesses; 10. Hearing on the Merits; 11.Post-Hearing Briefs.

A panel of in-house counsel, moderated by Vera van Houtte (Vice President, ICC International Court of Arbitration) shared their experience about each of the stages defined in the Topic Sheets.

Maria Vicien-Milburn (General Counsel, UNESCO) provided an insight of how party representatives from international organisations deal with decisions related to arbitral procedural issues. International organisations are usually in the position of respondent and rarely institute arbitration, although they have the legal capacity to do so. Vicien-Milburn covered the topic sheets “answer and counterclaim” which she considered in many aspects similar to preparing a request for arbitration.

Jeffrey Robert Holt (Head of Legal Affairs, Saipem Offshore Norway) dealt with the Topic Sheet “multi-party arbitration”. Holt was of the opinion that having multi arbitrations joined together is possible, but it is something parties may wish to avoid. CEOs may be of the view that it is possible to get all involved in the various arbitrations around one table and solve the problem, but that is where the in-house counsel has a role to play; the pros and cons in the Topic Sheet are helpful.

Pierre-Jérôme Abric (Vice President, General Counsel Litigation, AREVA) added that the tailor making approach is achieved with the case management conference where parties and arbitrators must be able to determine the best timetable for the case. The process is a partnership matter between in-house and outside counsel, and parties should not let outside counsel take any direction without the input of the client.

Holt and Abric addressed the issue of experts and whether there should be any. One of the difficulties of this issue is the difference of cultures of the parties.

The early determination of issues that can dispose of all or a meaningful part of a case has been a controversial topic and the failure to consider this possibility can lead to the highest level of frustration among in-house counsel, said Michael McIlwrath (Global Chief Litigation Counsel, GE Oil & Gas). Because early disposition is one of the procedural tools that is most effective and the least used, the Guide rightly encourages parties to contemplate at the outset what issues can have a critical impact on the life of the case; for example, it often makes sense to split quantum and damages, or determine the application of key contractual provisions. With respect to the number of rounds of written submissions, McIIwrath noted that the Guide encourages parties to consider what is really necessary for their case rather than just following the usual script, which he said is a trap, even for experienced professionals. “This Guide is extremely useful not just for in-house counsel but for everyone, parties, counsel and arbitrators. There is nothing new under the sun here, as the Guide refers to concepts which have been around for a while, but it is helpful to remind all of the stakeholders about how to adapt arbitration to the needs of each case.”

Isabelle Hautot (General Counsel, Orange) described “this Guide as an important turning point in the life of arbitration”. In-house counsel feel shy and do not have the courage or knowledge to interfere. Parties should not embark in proceedings as something inevitable. The arbitration is not the final word even if the award is successfully enforced; settlement remains always possible. Parties may also decide to keep one or two fundamental issues for the arbitration and discuss other matters which may be settled or left out of the arbitration.

Van Houtte referred to the obligation under the ICC Arbitration Rules to list the issues in the terms of reference which forces the parties and the arbitrators to focus on what is really at stake. Nonetheless terms of reference often do not list the issues and arbitrators and parties miss the opportunity to verify, whether there are among the issues any which may be the subject of early determination. Van Houtte, tongue in cheek, finally asked whether it may become a professional duty or at least best practice for counsel in arbitration to refer their clients to this Guide and to suggest that they read it thoroughly before starting the arbitration?

In his closing remarks, Jean-Claude Najar (Founder & Member, Steering Committee, Corporate Counsel International Arbitration Group, CCIAG,) said that “The users’ voice is heard”. The Guide is a do-it-yourself toolkit allowing the parties to take business decisions and to participate in the shaping of the arbitration. “My plea to in-house counsel is ‘please participate’”.

The conclusions were made by Andrea Carlevaris (Secretary General, ICC International Court of Arbitration). In-house counsel were absent from the arbitration scene for a long time and nothing was done to take them into consideration for many reasons. This has changed and in-house counsel now regularly participate in conferences on arbitration, including as speakers, and have a prominent role even in the bodies of some institutions including the ICC International Court of Arbitration and the ICC Commission on Arbitration and ADR. We all welcome these developments. However, these developments are not sufficient. In order for in-house counsel to re-appropriate a system that belongs to them, appropriate tools were put in place to allow them to be involved in the relevant procedural decisions. The Guide contributes to filling this gap. “The Guide puts in-house and outside counsel on the same footing” he added. Strategy is part of the process but it is not part of this Guide. “The Guide was drafted with the ICC Rules and ICC arbitration in mind but can be used in any kind of arbitration and by all participants. It is the kind of contribution an institution like the ICC is expected to make in the interest of users” Carlevaris concluded.

Mirèze Philippe, Special Counsel, Secretariat of the ICC International Court of Arbitration, with special thanks to Dr. Helene van Lith, Secretary to the ICC Commission on Arbitration and ADR and member of the Drafting Group.


• Leave a comment on Effective Management of Arbitration; A Guide for In-House Counsel and Other Party Representatives

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on Effective Management of Arbitration; A Guide for In-House Counsel and Other Party Representatives

The Jurisdiction of Indian Courts over Arbitrations Seated Outside India. An Outsider’s Perspective.

by Felipe Sperandio

Clyde & Co LLP,
for Clyde & Co.

The potential intervention of Indian courts over foreign seated arbitrations is a hot topic in international arbitration. On 28 May 2014, the Supreme Court of India (“SCI”) heated up the debate by handing down a judgment in Reliance Industries Limited & Anr v Union of India. The SCI found that Indian courts had no jurisdiction to set aside an award made in London – which is undoubtedly correct. But can this recent SCI decision be considered a development in Indian arbitration-related case law?

Facts

The disputes between Union of India and Reliance arose from two oil and gas production-sharing contracts. These contracts were governed by Indian substantive law, and provided for UNCITRAL arbitration, with the seat in London, and the arbitration agreement governed by the laws of England. Reliance commenced arbitration, and Union of India challenged the arbitrability of certain claims. On 12 September 2012, the tribunal issued a final partial award concluding that the claims put forward by Reliance were arbitrable.

Union of India started proceedings to set aside that award in the Delhi High Court, India. These proceedings were filed according to Section 34, Part I, of the Indian Arbitration and Conciliation Act 1996 (“ACA”). Section 34, in essence, provides for the application for setting aside an arbitral award.

Although the seat of the arbitration was London, the Delhi High Court accepted jurisdiction to hear the set aside proceedings. It reasoned this decision on three points: (i) the applicability of Part I of the ACA had not been excluded; (ii) English procedural law did not extend to issues of arbitrability or challenges to an award; and, (iii) since the dispute raised by Union of India carried considerations of the public policy of India, the jurisdiction of the Indian courts could not be excluded.

Reliance, in turn, lodged a special appeal in the SCI. It argued that the parties had excluded the application of Part I of the ACA and, therefore, the set aside proceedings should have been filed in the seat of the arbitration, i.e., English courts.

The SCI overturned the Delhi High Court’s decision on jurisdiction. It found that the Indian courts had no jurisdiction to hear the set aside proceedings because the arbitration agreement provided for: (i) London-seated arbitration; and (ii) English law as the law governing the arbitration agreement. According to the SCI, this “would clearly show that the parties have by express agreement excluded the applicability of Part I of the [Indian Arbitration Act] to the arbitration proceedings”.

Analysis

The question that arises in Reliance v Union of India is: do the national courts of the seat have exclusive jurisdiction to hear set aside proceedings? Although the answer seems clear, and the issue has been settled in many jurisdictions,1 it is not the case in India.

In 2002, the SCI concluded in Bhatia 2 that: “[i]n cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions”. Bhatia meant that Indian courts assumed jurisdiction to set aside awards rendered in arbitrations with a foreign seat.

On 6 September 2012, the SCI amended its position in Balco,3 and decided that Part I of the ACA does not apply to foreign seated arbitrations. Indian courts, therefore, have no jurisdiction to hear set aside proceedings if the seat is outside India. However, the SCI only partially solved the issue as it determined that Balco has prospective application.

As such, both Bhatia and Balco are good law. And the jurisdiction of Indian courts over arbitral proceedings with a nexus to India is dependent upon the date on which the parties entered into the arbitration agreement:
- Arbitration agreements entered into before 6 September 2012, foreign seat: Indian courts have jurisdiction to hear proceedings to set aside an award, unless the application of Part I of the ACA had been excluded by agreement of the parties.
- Arbitration agreements entered into after 6 September 2012, foreign seat: Indian courts have no jurisdiction to entertain set aside proceedings.

In Reliance v Union of India, the parties entered into the arbitration agreement in 1994. The SCI therefore focused on the intention of the parties, and concluded that a seat in London, coupled with reference to English law as the law applicable to the arbitration agreement, evinced the parties’ intention to exclude the application of Part I of the ACA. The fact that the arbitration agreement was governed by English law was a key factor considered by the SCI to reach its conclusion.

Therefore, Reliance v Union of India set out a two-fold test in order to circumvent the Indian courts’ jurisdiction for arbitration agreements entered into prior to 6 September 2012: (i) foreign seat; and (ii) arbitration agreement governed by foreign law.

Commentary

Reliance v Union of India correctly curbed the jurisdiction of the Indian courts. However, somewhat problematically, the SCI did not clarify what would happen in the following scenarios:
- Seat in London, Indian substantive law, and no agreement with respect to the law applicable to the arbitration agreement; or
- Seat in London, Indian substantive law, and arbitration agreement governed by Indian law.

The courts of the seat of the arbitration have “supervisory” jurisdiction over an award. In other words, the courts of the seat ought to have exclusive jurisdiction to hear set aside proceedings. Moreover, the selection of London as the seat means that the arbitral proceedings will be mandatorily conducted in accordance with the English Arbitration Act (“EAA”).4 Thus an application to set aside the award must be filed before the English courts, in accordance with the grounds specified in sections 67, 68 or 69 of the EAA.5 This automatically renders Section 34 of the ACA incompatible with any arbitral proceedings seated in London.

Hence the law applicable to the arbitration agreement should be entirely irrelevant. Equally, it should not matter whether parties intend to exclude the application of the Part I of the ACA. Selection of the seat ipso facto grants exclusive jurisdiction to the courts of the seat to set aside awards.

From the perspective of a non-Indian lawyer, it is difficult to understand why the ACA, which is a national law, should cross India’s borders and govern arbitral proceedings with a foreign seat.

In Reliance v Union of India, even if the parties had agreed to (i) Indian substantive law, plus (ii) Indian law as the law of the arbitration agreement – the English courts should have retained exclusive jurisdiction to set aside the award.

This was the case in Union of India v McDonnell.6 2 Lloyd’s Rep 48. Although this decision is prior to the English Arbitration Act 1996, and the Indian Arbitration and Conciliation Act 1996, the position remains. ] The parties agreed on Indian substantive law and Indian law to govern the arbitration agreement, with a London seat. Moreover, the parties expressly agreed to arbitral proceedings conducted in accordance with the Indian Arbitration Act 1940. The English Commercial Court reasoned that, by choosing the seat of the arbitration, the parties incorporate the laws of that country to govern their arbitral proceedings. Thus the parties had chosen English law as the law to govern their arbitral proceedings, while importing from the Indian Arbitration Act 1940 only those provisions which were not inconsistent with the choice of English arbitral procedural law. For these reasons, the court concluded that any award made by the tribunal was subject to the supervisory jurisdiction of the English courts.

In addition, it should be immaterial whether the set aside proceedings are based on grounds of non-arbitrability or public policy. The nature of the challenge does not interfere with the jurisdiction of the courts of the seat to set aside an award. In Reliance v Union of India, the English courts, while deciding set aside proceedings, would have to ascertain which law governs the arbitrability of the claims. But the English courts’ jurisdiction is neither dependent on the law applicable to issues of non-arbitrability, nor to the law applicable to the arbitration agreement (if different).

In order to understand the issue fully, the SCI should not have asked:
- Did the parties agree to exclude Part I of the ACA?”

Instead, the SCI should have asked:
- Does the selection of the seat grant exclusive jurisdiction to the courts of seat to set aside an award?

In Reliance v Union of India, the SCI implied that it could have reached a different conclusion if Indian law applied to the arbitration agreement. Worryingly, this approach raises more questions than it answers.

Conclusion

In Reliance v Union of India, the position should have been that the Indian courts had no jurisdiction because London was the seat of the arbitration – and not because the parties excluded Part I of the ACA, or because the applicable law to the arbitration agreement was English.

The law applicable to the arbitration agreement governs, amongst other things, the substantive validity of the arbitration agreement itself. But this law has no influence in respect to the jurisdiction to set aside an award.

This post submits that the SCI’s test “did parties agree to exclude the application of Part I of the ACA” is improper. This means that Indian courts, as well as the courts of the seat of the arbitration, could have concurrent jurisdiction to set aside an award. This is a recipe for uncertainty and conflicting decisions. In addition, neutral decision-makers are highly desirable in international arbitration. And neutrality is seriously undermined if one party is allowed to bring the dispute back to the courts of its home jurisdiction.

Moreover, Union of India may still deploy the arbitrability and public policy defences to resist enforcement of an award in India (art. V(2)(a)(b) New York Convention).

According to this outsider’s perspective, it seems that the SCI cured the patients’ disease, but did so while prescribing the incorrect medication. Meanwhile, the ghost of the Bhatia decision – which clashes with international case law – may still haunt parties that entered into arbitration agreements executed prior to 6 September 2012, and did not expressly exclude Part I of the ACA.

All views expressed in this post are that of the author alone and do not necessarily represent the views of his institution.


• Leave a comment on The Jurisdiction of Indian Courts over Arbitrations Seated Outside India. An Outsider’s Perspective.

  1. See for recent examples: Brazil, 3 April 2014: First Brand do Brasil v Petroplus Sul, Apelação no. 0014578-23.2004.8.26.0100, Tribunal de Justiça de São Paulo. Mauritius, 28 March 2014: Cruz City 1 Mauritius Holdings v Arsanovia Limited, record no. 107967, Supreme Court of Mauritius.
  2. Bhatia International v Bulk Trading SA and Anr. (2002) 4 SCC 105 (“Bhatia”), the Supreme Court of India.
  3. Bharat Aluminium v Kaiser Aluminium (2012) 9 SCC 552 (“Balco”), the Supreme Court of India.
  4. Section 2(1) of the English Arbitration Act provides that the provisions of Part 1 of the Act are to apply where the seat of the arbitration is England or Wales.
  5. Schedule I of the English Arbitration Act provides for its mandatory provisions. Sections 67 and 68 apply to any arbitration with seat in England or Wales. But parties may opt out section 69.
  6. Union of India v McDonnell Douglas Corporation [1993

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on The Jurisdiction of Indian Courts over Arbitrations Seated Outside India. An Outsider’s Perspective.

The DIFC and arbitration: Raising the stakes?

by Gordon Blanke

Baker & McKenzie Habib Al Mulla

In a recent, worldwide yet unprecedented move, the DIFC Courts have circulated for public consultation a draft Practice Direction (see Practice Direction No. X of 2014 amending Practice Direction No. 2 of 2012 DIFC Courts’ Jurisdiction, electronically accessible on the official website of the DIFC Courts at www.difccourts.ae), which essentially aims to provide for the conversion of a DIFC Court judgment into a DIFC-LCIA arbitration award in order to avoid potential difficulties of enforcement of a DIFC judgment in jurisdictions outside the UAE. This is achieved by creating a system of optional referral to DIFC-LCIA arbitration of “any dispute arising out of or in connection with the enforcement of any judgment given by the DIFC Courts, including any dispute as to the validity or enforcement of the said judgment” (ibid.)

By way of background for the uninitiated, the DIFC – shorthand for Dubai International Financial Centre – is a six-acre common law jurisdiction carved out of the heart of the Emirate of Dubai. It is equipped with its own courts and laws, both modeled on the English legal system. The DIFC also maintains an arbitration centre, the DIFC-LCIA, a sister organization of the London Court of International Arbitration, which administers arbitration proceedings under the DIFC-LCIA Rules of Arbitration.

The draft Practice Direction follows other, equally bold initiatives by the DIFC to promote its arbitration capabilities, most recently the introduction of an Arbitration Institute (see Dubai Law No. (7) of 2014 Amending Law No. (9) of 2004 Concerning the Dubai International Financial Centre and issued by the Ruler of Dubai on 21st May 2014; for further reporting, see my previous blog of 4 June 2014). Furthermore, the DIFC Court of First Instance recently confirmed its status as “host jurisdiction” for the enforcement of both domestic and foreign arbitral awards (see Case No. ARB 002/2013 – (1) X1, (2) X2 v. (1) Y1, (2) Y2, ruling of the DIFC Court of First Instance, undated, 2014; and Case No. ARB 003/2013 – Banyan Tree Corporate PTE LTD v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 27 May 2014; for further reporting, see my previous blog of 7 June 2014.
The present initiative continues the maverick approach of the DIFC as an offshore common law jurisdiction embedded within the onshore civil law system of the UAE: Who – one may ask – has heard of procedural directions of courts anywhere in the world that facilitate the conversion of a court judgment into an arbitration award? Where the converse, i.e. the conversion of an arbitral award into a court judgment is widely practiced in all leading arbitration jurisdictions and essentially forms the basis of exequatur of an arbitration award (as it is commonly known), the proposal of the draft Practice Direction provokes a radical rethinking of the natural boundaries between the powers of courts and arbitration tribunals: one cannot help feeling that the draft Practice Direction is an practical instance of the French proverbial monde à l’envers, yet not entirely of the nonsensical type. It would essentially allow DIFC Court users to benefit from the scope and ease of enforcement of arbitral awards under international enforcement instruments and most importantly the New York Convention (on the recognition and enforcement of foreign arbitral awards, done in New York, 10 June 1958). This being said, however, this latter assumption – no matter how tantalizing to the international arbitration practitioner – may ultimately reveal itself as premature and as an unfortunate fallacy given that it remains to be tested to what extent an award rendered within the meaning of the draft Practice Direction would qualify as an award in the proper terms of the individual enforcement instrument: To say the least, to ensure its enforceability, an arbitral award is usually required to conclude a genuine dispute subject of the arbitration – it may be questionable in this context whether a foreign court’s potential reluctance to enforce a DIFC Court judgment can qualify as a genuine dispute between the judgment creditor and the judgment debtor. There is a strong argument for saying that the enforcement of judgments – being a prerogative of the courts – should not be circumvented by recourse to arbitration. For sure and in any event, a foreign supervisory court will be tempted to look behind an arbitration award that embodies a DIFC Court judgment it may not have recognized and enforced in a direct enforcement action of the DIFC judgment itself and may be likely to refuse to enforce.

In the present instance, the proof of the pudding will, no doubt, be in the eating. To say the least, the wording of the draft Practice Direction is in the language of genuine disputes and provides a sensible opt-in for contracting parties. These may decide in favour of a referral of any enforcement disputes to DIFC-LCIA arbitration either as part of the exclusive or non-exclusive jurisdiction of the DIFC Courts ex ante or ex post. Importantly, referrals are generally confined by reference to the following referral criteria:

(1) The [DIFC Court] judgment has taken effect […];

(2) The [DIFC Court] judgment is a judgment for the payment of money (whether or not the judgment also provides for remedies other than the payment of money);

(3) There is an enforcement dispute in relation to the [DIFC Court] judgment;

(4) The [DIFC Court] judgment is not subject to any appeal and the time permitted for a party to the judgment to apply for permission to appeal has expired; and

(5) The judgment creditor and judgment debtor have agreed in writing that any enforcement dispute between them shall be referred to arbitration pursuant to this Practice Direction.

It will be interesting to see the outcome of the consultation process, which is open until 6 August 2014. It is anticipated that this most recent initiative of the DIFC Courts will be warmly received by the international arbitral community and hence supported without reservation. Whatever the outcome, no doubt, the DIFC is continuing to raise ever higher the stakes for arbitration in the UAE and the Middle East more generally. Watch this space for further reporting: Exciting times ahead!


• Leave a comment on The DIFC and arbitration: Raising the stakes?

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on The DIFC and arbitration: Raising the stakes?

The DIFC and arbitration: Raising the stakes?

by Gordon Blanke

Baker & McKenzie Habib Al Mulla

In a recent, worldwide yet unprecedented move, the DIFC Courts have circulated for public consultation a draft Practice Direction (see Practice Direction No. X of 2014 amending Practice Direction No. 2 of 2012 DIFC Courts’ Jurisdiction, electronically accessible on the official website of the DIFC Courts at www.difccourts.ae), which essentially aims to provide for the conversion of a DIFC Court judgment into a DIFC-LCIA arbitration award in order to avoid potential difficulties of enforcement of a DIFC judgment in jurisdictions outside the UAE. This is achieved by creating a system of optional referral to DIFC-LCIA arbitration of “any dispute arising out of or in connection with the enforcement of any judgment given by the DIFC Courts, including any dispute as to the validity or enforcement of the said judgment&lt” (ibid.)
By way of background for the uninitiated, the DIFC – shorthand for Dubai International Financial Centre – is a six-acre common law jurisdiction carved out of the heart of the Emirate of Dubai. It is equipped with its own courts and laws, both modeled on the English legal system. The DIFC also maintains an arbitration centre, the DIFC-LCIA, a sister organization of the London Court of International Arbitration, which administers arbitration proceedings under the DIFC-LCIA Rules of Arbitration.

The draft Practice Direction follows other, equally bold initiatives by the DIFC to promote its arbitration capabilities, most recently the introduction of an Arbitration Institute (see Dubai Law No. (7) of 2014 Amending Law No. (9) of 2004 Concerning the Dubai International Financial Centre and issued by the Ruler of Dubai on 21st May 2014; for further reporting, see my previous blog of 4 June 2014). Furthermore, the DIFC Court of First Instance recently confirmed its status as “host jurisdiction” for the enforcement of both domestic and foreign arbitral awards (see Case No. ARB 002/2013 – (1) X1, (2) X2 v. (1) Y1, (2) Y2, ruling of the DIFC Court of First Instance, undated, 2014; and Case No. ARB 003/2013 – Banyan Tree Corporate PTE LTD v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 27 May 2014; for further reporting, see my previous blog of 7 June 2014).

The present initiative continues the maverick approach of the DIFC as an offshore common law jurisdiction embedded within the onshore civil law system of the UAE: Who – one may ask – has heard of procedural directions of courts anywhere in the world that facilitate the conversion of a court judgment into an arbitration award? Where the converse, i.e. the conversion of an arbitral award into a court judgment is widely practiced in all leading arbitration jurisdictions and essentially forms the basis of exequatur of an arbitration award (as it is commonly known), the proposal of the draft Practice Direction provokes a radical rethinking of the natural boundaries between the powers of courts and arbitration tribunals: one cannot help feeling that the draft Practice Direction is an practical instance of the French proverbial monde à l’envers, yet not entirely of the nonsensical type. It would essentially allow DIFC Court users to benefit from the scope and ease of enforcement of arbitral awards under international enforcement instruments and most importantly the New York Convention (on the recognition and enforcement of foreign arbitral awards, done in New York, 10 June 1958). This being said, however, this latter assumption – no matter how tantalizing to the international arbitration practitioner – may ultimately reveal itself as premature and as an unfortunate fallacy given that it remains to be tested to what extent an award rendered within the meaning of the draft Practice Direction would qualify as an award in the proper terms of the individual enforcement instrument: To say the least, to ensure its enforceability, an arbitral award is usually required to conclude a genuine dispute subject of the arbitration – it may be questionable in this context whether a foreign court’s potential reluctance to enforce a DIFC Court judgment can qualify as a genuine dispute between the judgment creditor and the judgment debtor. There is a strong argument for saying that the enforcement of judgments – being a prerogative of the courts – should not be circumvented by recourse to arbitration. For sure and in any event, a foreign supervisory court will be tempted to look behind an arbitration award that embodies a DIFC Court judgment it may not have recognized and enforced in a direct enforcement action of the DIFC judgment itself and may be likely to refuse to enforce.

In the present instance, the proof of the pudding will, no doubt, be in the eating. To say the least, the wording of the draft Practice Direction is in the language of genuine disputes and provides a sensible opt-in for contracting parties. These may decide in favour of a referral of any enforcement disputes to DIFC-LCIA arbitration either as part of the exclusive or non-exclusive jurisdiction of the DIFC Courts ex ante or ex post. Importantly, referrals are generally confined by reference to the following referral criteria:

(1) The [DIFC Court] judgment has taken effect […];

(2) The [DIFC Court] judgment is a judgment for the payment of money (whether or not the judgment also provides for remedies other than the payment of money);

(3) There is an enforcement dispute in relation to the [DIFC Court] judgment;

(4) The [DIFC Court] judgment is not subject to any appeal and the time permitted for a party to the judgment to apply for permission to appeal has expired; and

(5) The judgment creditor and judgment debtor have agreed in writing that any enforcement dispute between them shall be referred to arbitration pursuant to this Practice Direction.

It will be interesting to see the outcome of the consultation process, which is open until 6 August 2014. It is anticipated that this most recent initiative of the DIFC Courts will be warmly received by the international arbitral community and hence supported without reservation. Whatever the outcome, no doubt, the DIFC is continuing to raise ever higher the stakes for arbitration in the UAE and the Middle East more generally. Watch this space for further reporting: Exciting times ahead!


• Leave a comment on The DIFC and arbitration: Raising the stakes?

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on The DIFC and arbitration: Raising the stakes?

Why Can’t Arbitration Go Faster? The ICDR Brings Expedited to International

by Michael McIlwrath

General Electric Company

Slow Lane
The request for arbitration had just been filed a few years ago, and the ICDR case manager immediately sent the parties a letter to warn us about the contract’s dispute clause. The clause in question specified expedited procedures under the AAA’s Commercial Arbitration Rules. (The ICDR, the international branch of the AAA, has traditionally provided case management support where the parties are from different countries and have agreed on the application of AAA arbitration rules.)

She pointed out that the expedited procedures were designed for domestic cases of less than USD 75,000, and required the entire proceeding to be concluded within 60 days of the appointment of a sole arbitrator.

Plainly, there was a mismatch with the dispute that had arisen. Our case was international and involved significant issues of fact and law, was for several million dollars, and our contract called for three arbitrators.

She politely suggested we agree to waive the expedited procedure.

No, both sides responded, we would not. But we did insist on the appointment of highly experienced arbitrators who would agree to the time limitation. The ICDR obliged our request.

It did not surprise us, therefore, that we were able to conclude our arbitration within the specified time (albeit briefly extended to accommodate a change in the hearing date following the sudden illness of one counsel). What did come as a surprise, however, was that we never felt rushed, or that we had to accept shortcuts on procedure.

This was not an “arbitration lite”. We engaged in full document disclosure (with the tribunal issuing sanctions against one party for a lapse), had exchanges of robust submissions and replies, provided witness statements and expert reports, and briefed the tribunal on what the applicable law should be. There was also a two-day evidentiary hearing. In compliance with the expedited rules, the arbitrators issued their award 14 days later.

And now the ICDR is itself taking a step in this direction by including an expedited procedure within its new International Arbitration Rules, which debuted this summer. The jurisdictional limit is USD 250,000, ie, much higher than the AAA’s Commercial Rules, but still low for international arbitration.

Of course, the parties do not have to limit themselves to the ICDR’s jurisdictional value. As had happened in our case, parties can agree to have the procedures apply to disputes of any size.

The rules do contain some prescriptions to enable speed, and which renders them similar to those in the AAA’s Commercial Arbitration Rules.

A single arbitrator appointed using ICDR’s list selection process;

Robust initial submissions. Both the Notice and Answer-Counterclaim shall include “all of the evidence then available on which such party intends to rely”;

Evidentiary hearing within 60 days of the procedural order or, for disputes of less than USD 100,000, an award on documents only, without an evidentiary hearing; and

Award due within 30 days after the close of hearing.

Speaking from our one experience discussed above, the time frame provided in the ICDR’s expedited rules seems feasible for disputes involving a relatively limited number of issues to be decided, regardless of their monetary value. If parties believe they will need to move quickly, they may want to assess including the ICDR’s or a similar expedited procedure as the default arbitration in their contract’s dispute resolution clause.

new expedited rules from the ICDR, for those who need to get to a result sooner

New expedited rules from the ICDR, for those who need to get to a result sooner


• Leave a comment on Why Can’t Arbitration Go Faster? The ICDR Brings Expedited to International

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on Why Can’t Arbitration Go Faster? The ICDR Brings Expedited to International

Does Supreme People’s Court’s Decision Open the Door for Foreign Arbitration Institutions to Explore the Chinese Market?

by Arthur Dong

AnJie Law Firm

and Li Meng, AnJie Law Firm

Whether foreign arbitration institutions could conduct arbitration in the People’s Republic of China (“PRC”) is a question that many industry insiders are curious about. Back in 2006, when the Wuxi Intermediate People’s Court (“Wuxi Court”) refused to recognize and enforce an arbitral award issued by the ICC Court of Arbitration in Shanghai in the Züblin case,1 many practitioners deemed that Chinese courts would decline opportunities for foreign arbitration bodies to carry out arbitration in China. However, the recently published PRC Supreme People’s Court (“SPC”) instruction in Longlide Packaging Co. Ltd. v. BP Agnati S.R.L. may suggest otherwise.

Looking at PRC Court previous cases, in Züblin, the court denied enforcement of the award based on the invalidity of the arbitration agreement; it did not comment on the legality of arbitration activities conducted by the ICC Court of Arbitration in Shanghai. The ruling categorized the arbitral award issued by the ICC Court of Arbitration seated in PRC as a “non-domestic award” and was therefore to be reviewed under the New York Convention. This view once caused heated debate among arbitration scholars, many of whom considered it a mistake to categorize such an award as “non-domestic.”

In another controversial case, Duferco S.A. v. Ningbo Art & Craft Import & Export Corp., Ningbo Intermediate People’s Court enforced an arbitration award given by ICC with the arbitration seated in Beijing. Duferco was widely criticized by arbitration scholars and the media as a dangerous precedent because it classified the award as a “non-domestic award” and failed to take into account that Chinese law may not allow a foreign arbitration institution to arbitrate a case in China.

In Longlide Packaging Co. Ltd. v. BP Agnati S.R.L., the SPC clarified the tests to be used in determining the validity of the arbitration agreement if the parties choose a foreign arbitration institution to arbitrate their dispute in China. Although such an arbitration agreement is supported by the SPC, the enforceability of the awards issued under such arbitration agreements remains uncertain. The authors believe that this instruction may trigger another round of heated discussions on the possibility of international arbitration organizations entering the Chinese market.

Facts of the Case:

In Longlide (SPC Docket Number: 2013-MinTa Zi No.13),2 the SPC upheld the validity of an arbitration clause involving an ICC arbitration with the seat of arbitration in Shanghai.

Applicant Longlide Packaging is a Chinese company located in Anhui Province. On October 28, 2010, Longlide Packaging entered into a Sales Contract with respondent BP Agnati S.R.L, a company domiciled in Italy. The arbitration clause states that “any dispute arising from or in connection with this contract shall be submitted to arbitration by the International Chamber of Commerce (‘ICC’) Court of Arbitration according to its arbitration rules, by one or more arbitrators. The place of jurisdiction shall be Shanghai, China. The arbitration shall be conducted in English.”

The applicant argued that under PRC law, the arbitration agreement should be invalid based on three reasons. First, the ICC Court of Arbitration is not an arbitration institution recognized by the China Arbitration Act. Second, the seat of ICC arbitration in Shanghai would violate China’s public policy because it could infringe China’s judicial sovereignty. Third, even if the ICC Court of Arbitration in Shanghai issued an award, such award should be considered a domestic award, and thus the New York Convention is not applicable for its recognition and enforcement in China.

Review by the Intermediate Court of Hefei City (“Hefei Court”)

First, the Hefei Court decided that Chinese law shall be the governing law in determining the validity of the arbitration agreement. According to the Hefei Court, the China Arbitration Act does not explicitly address the issue of whether a foreign arbitration institution is allowed to conduct arbitration in China. Since both parties selected Shanghai as the seat of arbitration, the arbitration shall be classified as a domestic arbitration, which is different from the “non-domestic” classification described in Article 1 of the New York Convention. Additionally, under Article 10 of the China Arbitration Act, “the establishment of an arbitration commission shall be registered with the administrative authority of justice of the relevant province, autonomous region or municipality directly under the central government.” This regulation means that a foreign arbitration institution, acting as a service provider, can only conduct arbitration after obtaining the permission of and filing for registration in the appropriate administrative agency of justice. In fact, because the PRC has not opened its arbitration market to foreign arbitration institutions, a foreign arbitration institution cannot conduct arbitration proceedings in China. As a result, the court held that the arbitration agreement between the Chinese and the Italian company is invalid.

Review by the Higher People’s Court of Anhui Province (“Anhui Court”)

The Anhui Court agreed with the lower court’s view that Chinese law should be the governing law for this issue. However, it disagrees with the substantive issues of the lower court’s ruling. The Anhui Court explains that under Article 16 of the China Arbitration Act, “an arbitration agreement shall contain three elements: 1) an expression of intention to apply for arbitration; 2) subject matters for arbitration; 3) a designated arbitration commission.” Here, the Sales Contract showcases the true intent of the parties, i.e. parties’ intent to apply for arbitration and the subject matter of the arbitration. Additionally, the parties have designated an arbitration institution, namely, the ICC Court of Arbitration. Therefore, the ruling of the lower court that the arbitration agreement is invalid because foreign arbitration institutions cannot conduct arbitration in China lacks merit.

However, the Anhui Court also included a minority view in their report to the SPC. Their view is that since the Chinese government has not opened up the market of arbitration service to foreign entities, foreign arbitration institutions cannot conduct arbitration in China. Here, since the parties agreed to arbitrate at the ICC Court of Arbitration, the arbitration agreement shall be invalid due to violation of the PRC’s arbitration law.

Final Review by the Supreme People’s Court of China

The SPC upheld the majority view of the Anhui Court. Since the three elements of a valid arbitration agreement had been satisfied, under Article 16 of the China Arbitration Act, the SPC determined that the arbitration clause is valid.

However, under its instruction, the SPC did not address the question of whether the law allows foreign arbitration institutions to hold arbitrations in China.

The Uncertainty of Enforcing an Award Issued by a Foreign Arbitration Institution with a Seat of Arbitration in PRC

China acceded to the New York Convention in 1987. Under Article 1, there are two kinds of arbitral awards for which recognition and enforcement shall be given based on the Convention:

“This convention shall apply to the recognition and enforcement of arbitral awards made in territory of a State other than the State where the recognition and enforcement of such award are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.”

Since the first criterion only applies to scenarios in which the seat of arbitration is outside China, an arbitration award issued by a foreign arbitration institution in China can either be enforced under the second criterion, i.e. a non-domestic award, or as a domestic Chinese arbitration award. Based on the intent of the New York Convention, an award could be accepted as a ‘non-domestic award’ only if the governing law of arbitration for the award is different from the law of the country in which the award is to be made.3 In reality, such scenario is rare in international arbitration practice.

In the Züblin and Duferco cases, whereas the court defined the ICC awards seated in China as “non-domestic” awards, the recognition and enforcement of the awards were subject to the New York Convention. Many scholars once criticized those decisions. Yet it is uncertain whether the courts had ever consulted with SPC before making such decisions.

In the Longlide case, the SPC declared the validity of the arbitration agreement, but failed to address how to classify such an award for enforcement purposes if the parties continue the arbitration proceedings under the said arbitration agreement. Nevertheless, if the winning party in Longlide seeks enforcement after issuance of the award, the Chinese court has to determine whether to treat the arbitration award as a domestic award or a “non-domestic” award under the New York Convention. If the award issued in Longlide is enforced by a Chinese court, it would be a big boost for foreign arbitration institutions to expand their presence in China because it would appear to give a green light for them to provide their services in the PRC.


• Leave a comment on Does Supreme People’s Court’s Decision Open the Door for Foreign Arbitration Institutions to Explore the Chinese Market?

  1. The ruling was given by Wuxi Intermediate People’s Court on July 19, 2006. The Applicant: Züblin International GmbH,a German company; the Respondent: Wuxi Woke General Engineering Rubber Co. Ltd., a Chinese company. Wuxi is a city located in Jiangsu Province not far from Shanghai.
  2. This instruction was actually made by SPC on March 25, 2013, which was not published until April 2014. Please note that such instruction, acting as a guide for the lower court for individual cases, is handed out by the SPC to the lower court through an internal court system. Upon SPC publication, they become accessible to the public.
  3. Albert Jan van den Berg, The New York Convention of 1958, P23, Kluwer Law and Taxation Publishers (1981)

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on Does Supreme People’s Court’s Decision Open the Door for Foreign Arbitration Institutions to Explore the Chinese Market?

A certifiable point? Enforcement of arbitral awards under Article IV of the New York Convention and section 102 of the Arbitration Act 1996

by Nicholas Querée

Peters & Peters Solicitors LLP,
for YIAG

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) is given effect in England and Wales through sections 100 to 103 of the Arbitration Act 1996 (the “1996 Act”). As is well known, the beneficiary of an award promulgated by an arbitral tribunal in a state-party to the New York Convention is broadly entitled to enforce the award in any other state-party, in the same manner as a judgment or order.

To enforce a New York Convention award in England and Wales, the party relying on it must satisfy certain basic procedural norms, which are themselves prescribed by Article IV of the Convention. Section 102 of the 1996 Act gives effect to, and replicates the language of, Article IV. It requires that the party relying on the New York Convention award must produce “the duly authenticated original award or a duly certified copy of it” and “the original arbitration agreement or a duly certified copy of it”. What constitutes “certification” for these purposes both in the context of the 1996 Act and the New York Convention is therefore of practical significance. The question has recently received useful attention from the Court of Appeal of England and Wales in Lombard-Knight (and another) v Rainstorm Pictures Inc [2014] EWCA Civ 356.

Background

Pursuant to arbitration clauses in agreements dated 3 and 23 December 2010 (the “Agreements”), Rainstorm Pictures Inc (“Rainstorm”) had brought arbitral proceedings against Anthony Lombard-Knight and Jakob Kinde (the “Defendants”) before the Judicial Arbitration and Mediation Service of Los Angeles, California (the “JAMS”). Rainstorm was successful in those proceeding. On 26 March 2012, the arbitral tribunal promulgated its award, the terms of which required the Defendants to pay Rainstorm in excess of $28 million (the “Award”).

By a Claim Form dated 29 August 2012, Rainstorm applied to the Commercial Court in London for permission to enforce the Award in the same manner as a judgment or order. Photocopies of the Agreements were attached to the Claim Form, which contained brief particulars describing the Agreements and was accompanied by a Statement of Truth in the conventional form. Also attached was a copy of the Award, and a separate document, entitled “Certification of Award”, in which an officer of the JAMS certified that the copy was a true and correct one.

On 4 September 2012, Eder J made an order granting Rainstorm permission to enforce the Award (the “Eder J Order”).

The Defendants applied to the court to have the Eder J Order set aside. The Defendants’ grounds at the oral hearing included, inter alia, that the Eder J Order was defective. The Defendants submitted that Rainstorm had failed to produce either the original agreements or a certified copy of the same, and so had not complied with section 102(1) of the 1996 Act. The Judge hearing the Defendants’ application, Cooke J, agreed. He held as follows:

[I]t is not sufficient merely to produce a copy of the award with an accompanying Statement of Truth in a Claim Form. Certification means what it says. The importance of that provision appears from the reference to the need for production either of an original Arbitration Agreement or a duly certified copy of it. This, of course, is important in the context of the New York Convention and the international dimension which is involved in enforcement of it. A court must be astute to ensure that the appropriate formalities are complied with so that there can be no doubt whatsoever about the validity of an award or the validity of the Arbitration Agreements which underlie it. Along with the Arbitration Agreement there must be independent certification of the authenticity of the copy produced as compared with an original”.

That notwithstanding, Cooke J continued to consider the Defendants’ substantive grounds of challenge to the enforcement of the Award, which he rejected. Both Rainstorm and the Defendants cross-appealed (Rainstorm against Cooke J’s finding that it had failed to comply with section 102, and the Defendants against the Judge’s rejection of their substantive challenge).

The Judgment of the Court of Appeal

The Court of Appeal disagreed with Cooke J (albeit noting that the Judge had not had the benefit of full argument and had been referred to no authorities on the point). In the Court of Appeal’s judgment, the Agreements had been properly certified in compliance with section 102 of the 1996 Act. In particular:

• In the Court’s judgment, Cooke J had elided issues of certification of the Agreements with their validity. In the Court of Appeal’s view, where applicable, issues as to validity were properly dealt with by reference to the exhaustive list of grounds under which a New York Convention award could be challenged listed in section 103 of the 1996 Act (specifically sub-sections 103(2)(a) and (b)).

• The Judge had allowed an additional requirement of “authenticity” to creep in, which was not contemplated in section 102.

• In addition, Cooke J had, wrongly, looked for “independent certification” of the Agreements. It was, in the Court of Appeal’s view, not necessary for the deponent giving certification either to be an independent person or, as the Defendants had alluded, to give certification by some express reference to a comparison undertaken by the deponent between the original document and the certified copy. That would introduce “an unnecessary element of formalism to require the deponent to be able to say he has compared the copy with the original”.

The Court of Appeal held that for the purpose of certification under section 102 it was sufficient to say that to the maker of the statement’s knowledge and belief it was a true copy. This was particularly so given that in modern business conditions, an agreement to arbitrate would often be in email form or equivalent and “it would be absurd to suggest that the certifier must have actually seen the written record of an electronic transmission as it was first perceived by either the sender or the receiver”.

The Defendants’ further grounds of appeal in relation to their substantive challenge to the grant of permission to enforce the Award either fell away as a consequence, or were otherwise rejected by the Court of Appeal.

Comment

It is unsurprising to see the Court of Appeal, in its interpretation of that section (and, by extension, Article IV of the New York Convention, which it replicates almost exactly) take an expansive and purposive approach. Courts in the UK have long adopted a decidedly pro-arbitration stance. As the Court of Appeal noted “[t]he process is intended to promote enforcement, not to put meaningless and purposeless hurdles in the way”.

This approach accords with the prevailing view amongst the courts of states-parties to the New York Convention. Although, as the Court of Appeal accepted, the interpretation of Article IV in other states-parties to the New York Convention has not been uniform, it has been recognised that courts in states-parties “appear to be quite liberal in accepting that an original award is authenticated or a copy of an award or agreement is certified” (Albert Jan Van den Berg, The New York Arbitration Convention of 1958 (1981), page 255).

The Court of Appeal’s judgment gives further succour to a purposive interpretation of the New York Convention generally, and Article IV specifically. In this jurisdiction, the judgment’s practical effect means business as usual for English and Welsh practitioners applying for permission to enforce New York Convention awards.


• Leave a comment on A certifiable point? Enforcement of arbitral awards under Article IV of the New York Convention and section 102 of the Arbitration Act 1996

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on A certifiable point? Enforcement of arbitral awards under Article IV of the New York Convention and section 102 of the Arbitration Act 1996

Last Chance to Complete China Arbitration Survey

by Roger Alford (Editor)

Notre Dame Law School

Thank you to everyone who has participated in our Survey on the Enforcement of International Arbitration Awards in China. We have been gratified at the strong number of responses. We wanted to remind anyone who has not yet had a chance to fill out the survey that we will be closing the survey to new responses on July 13, 2014. The survey is available immediately to the right on your screen.

Thanks again for your participation.


• Leave a comment on Last Chance to Complete China Arbitration Survey

More from our authors:

International Commercial Arbitration - Second Edition. Three-Volume Set International Commercial Arbitration - Second Edition. Three-Volume Set
by Gary Born
€ 500
Guerrilla Tactics in International Arbitration Guerrilla Tactics in International Arbitration
by Günther J. Horvath, Stephan Wilske (eds.)
€ 160
Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
by Albert Badia
€ 160
International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
by Manuel Indlekofer
€ 160
Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI) Collection of ICC Arbitral Awards 2008-2011/ Recueil des Sentences Arbitrales de la CCI 2008-2011 (Volume VI)
by Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher
€ 265



• Leave a comment on Last Chance to Complete China Arbitration Survey
Follow seachangenoosa on Twitter
Subscribe to our Newsletter
Sign up here for our Monthly Newsletter.