Using Investment Arbitration to Enforce WTO Commitments

by Roger Alford (Editor)

Notre Dame Law School

plainpackagingI would like to continue the theme of the emerging convergence of investment arbitration and international trade. In my previous posts (see here and here) I discussed the prospect of using trade remedies to enforce investment arbitration awards. Another key example of convergence addresses the emerging trend of relying on investment arbitration to enforce international trade rights. As discussed in my recent article, despite the assumption that international trade disputes must be resolved before the WTO DSB, the existence of broad umbrella clauses in BITs present a promising vehicle for enforcing investment commitments in trade agreements.

Of course, the scope of umbrella clauses is dependent on the language in particular BITs, which varies widely from one treaty to the next. Accordingly, there is no uniform understanding as to the meaning of umbrella clauses. Narrow umbrella clauses are unlikely vehicles for vindicating international trade rights. A treaty commitment such as that addressed in SGS v. Philippines to observe any obligation a Contracting State “has assumed with regard to specific investments” is unlikely to encompass legislative measures or treaty commitments. By contrast, broad umbrella clauses are better candidates for vindicating trade rights, such as the BIT clause at issue in Noble Ventures, Inc. v. Romania, which committed Romania to “observe any obligation it may have entered into with regard to investments.”

ICSID tribunals have interpreted broad umbrella clauses to give investors treaty rights with respect to unilateral undertakings of the State embodied in municipal law. In CMS Gas Transmission Co. v. Argentina, the tribunal concluded that utility tariffs designed to attract foreign investment were “legal … obligations pertinent to the investment.” In LGE v. Argentina, the tribunal concluded that abrogation of guarantees made to investors in a statutory framework gave rise to liability under the umbrella clause. In Enron v. Argentina, another tribunal concluded that the umbrella clause referred to “any obligations regardless of their nature.” This included not only contractual obligations, but also “obligations assumed through law or regulation” that are “with regard to investments.” In Sempra Energy International v. Argentina, a tribunal found that major legal and regulatory changes introduced by the State as part of its public function constituted treaty violations under the umbrella clause. Finally, in SGS v. Paraguay, a tribunal interpreted a broad umbrella clause as creating “an obligation for the State to constantly guarantee observance of its commitments entered into with respect to investments of investors of the other party. The obligation has no limitations on its face—it apparently applies to all such commitments, whether established by contract or by law, unilaterally or bilaterally.”

Note that these sweeping pronouncements do not require that a State’s commitment reference a specific investment or contract. As long as legislative or executive measures relate to the promotion or regulation of investments, they constitute unilateral undertakings covered by a broad umbrella clause. Such ICSID jurisprudence has led María Cristina Gritón Salias to conclude in this book that “tribunals overwhelmingly accept the application of umbrella clauses to obligations assumed unilaterally by host States,” whether those undertakings are “made through legislation or otherwise.” Likewise, Darius Chan has opined here that “the current tide of jurisprudence concerning umbrella clauses is in favor of such clauses encompassing host State commitments of all kinds.”

Assuming such interpretations are correct—which is by no means clear—this has significant implications for the WTO. If trade obligations are subject to investment arbitration, it would authorize private parties to initiate trade cases. Private rights of action through investment arbitration would supplement the diplomatic espousal of claims before the WTO.

This is precisely what one foreign investor has argued with respect to alleged WTO violations as a result of Australia’s plain-packaging laws. On November 21, 2011, Philip Morris Asia Ltd. filed an investment arbitration claim against Australia pursuant to the Hong Kong-Australia Bilateral Investment Treaty. The central contention of Philip Morris is that Australia’s plain packaging legislation violated various international obligations. Among the claims it filed is one under the broad “umbrella clause” in the BIT, which provides that “[e]ach Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party.” According to the Notice of Arbitration:

This [umbrella clause] obligation is broader than specific obligations … made by the host State to investors…. It also encompasses other international obligations binding on the host State that affect the way in which property is treated in Australia…. [T]he relevant obligations are those enshrined in TRIPS, the Paris Convention, and TBT. [Claimant] as an owner of the investments is entitled to expect Australia to comply with its obligations pursuant to those treaties. By adopting and implementing plain packaging legislation, Australia has failed to observe and abide by those obligations.”

In response, Australia argued that:

The meaning and scope of such provisions is a matter of great controversy. However it is clear in the instant case that … the “umbrella clause” in Article 2(2) cannot be understood as encompassing general obligations in multilateral treaties…. Rather … the “umbrella clause” … only covers commitments that a host State has entered into with respect to specific investments…. [T]he obligations under the multilateral treaties … are not “obligations” which have been entered into with regard to investments of investors” of Hong Kong, but are rather obligations that operate on the inter-State level, with their own particular inter-State dispute resolution procedures.

It is too early to assess the likely success of such claims, but if the recent “umbrella clause” jurisprudence is accurate the claims are at least colorable.

This potential convergence of trade and arbitration has profound implications for the resolution of WTO violations. An arbitration panel liberally construing a broad umbrella clause could transform how WTO obligations are adjudicated. Exactly how would the adjudication of WTO obligations through investment arbitration alter the landscape? Here are a few thoughts.

First, umbrella clauses in BITs could create a private right of action for resolving WTO disputes. Investment arbitration circumvents the traditional barriers to initiating a WTO dispute. Diplomatic espousal is no longer a reliable check on the pursuit of unmeritorious claims. Through umbrella clauses foreign investors could seek recourse for violations of investment obligations that form part of WTO disciplines.

Second, with WTO dispute settlement the Member States control all decisions with respect to adjudication and resolution of the dispute. Investors may prefer an alternative dispute settlement process that places such decisions within their control. The incentives to settle an investment dispute depend on satisfying investors concerns rather than satisfying the disputing Member States’ concerns.

Third, with limited exceptions, the WTO prohibits unilateral trade remedies. Article 23 of the DSU provides that Member States “shall not make a determination to the effect that a violation has occurred … except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding.” Investment arbitration is not a unilateral remedy imposed in response to a WTO violation, but neither is it WTO dispute settlement. Investment arbitration may provide a vehicle for compensating or attenuating the harm caused to investors without offending the WTO restrictions on unilateral trade remedies.

Fourth, WTO remedies are prospective, while investment arbitration remedies may be retroactive. The goal of the WTO adjudication is to bring Member States into conformity with their trade obligations. The goal of investment arbitration is, consistent with traditional understandings of state responsibility, to “wipe-out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed.”

Fifth, under the WTO dispute settlement process, any losses an investor suffers as a result of a Member State’s WTO violation are not compensable. WTO remedies contemplate compensation directly to a Member State or, failing that, the suspension of concessions paid directly to the Member State in the form of increased duties. With investment arbitration, international law violations result in monetary compensation due directly to the investor.

Thus, liberal interpretations of broad umbrella clauses that encompass investment commitments in WTO undertakings may prove to be an attractive avenue for future investment arbitration.


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Would Reference to the Decisions of Investment Treaty Tribunals be of Assistance in the Interpretation of Political Risk Insurance Policies?

by Paul Baker

Clyde & Co.,
for Clyde & Co.

Readers of this blog are likely to be familiar with the existence of Bilateral Investment Treaties (“BITs”) and the wealth of arbitral awards made publicly available through the International Centre for the Settlement of Investment Disputes (“ICSID”). Given the publicity afforded to proceedings under BITs, or multilateral investment treaties such as NAFTA, one might be led to believe that recourse to investment treaty arbitration is the sole remedy for a seemingly wronged investor. This is incorrect. While it is true that recompense for a State’s breach of its treaty obligations on account of a failure to provide full protection and security to the investor, or for treatment that was not considered to be fair or equitable, may primarily be found via the investment treaty arbitration route, alternatives are available to compensate an investor’s loss caused by the expropriation by a host State, such as political risk insurance.

Political risk insurance is available from some of the world’s leading insurance companies, and/or insurance syndicates at Lloyd’s of London. An investor with the foresight to identify a risk of expropriation may well take a policy that, while differing in coverage from contract to contract, can provide an indemnity for loss(es) caused by perils such as confiscation, seizure, appropriation, expropriation and/or requisition for title, to name but a few. Such policies are often subject to the law of England and Wales and it is fair to say that English law is somewhat underdeveloped in its consideration of the concept of expropriation, certainly when compared to the body of arbitral awards rendered pursuant to BITs.

This blog addresses the concept of creeping expropriation as determined in various investment treaty arbitral awards, and asks whether deference to the body of such awards could assist insurers and insureds in ascertaining whether a loss is covered.

The difficult concept of creeping expropriation

Political risk insurance wordings rarely go into great detail as to what is to be defined as an “expropriatory event” for the purposes of coverage, often referring only to “loss and/or damage caused by expropriation“. In the “classic” scenario – the blatant seizure of assets by a host State, often accompanied by significant rhetoric and a lack of (adequate) compensation – it can be relatively straightforward for an insured investor to establish that their loss is covered by a political risk insurance policy (subject to potential defences an insurer may have against a claim, that are beyond the scope of this blog). The situation is far more complicated when a claim is made on the basis of an alleged creeping expropriation.

“Creeping” expropriation is defined by the United Nations Conference on Trade and Development as “a slow and incremental encroachment on one or more of the ownership rights of a foreign investor that diminishes the value of its investment”. Reference to English law as to whether a series of incremental steps taken by a State is sufficient to collectively amount to an expropriatory act for the purpose of insurance coverage is likely to be of limited benefit. The lack of clarity surrounding creeping expropriations can often lead to a great deal of time (and money) being spent by all parties in establishing whether an indemnity is due. Would the addition of a clause noting that reference can be made to publicly available investment treaty awards for the sole purpose of determining whether a creeping expropriation has occurred be of use in reducing this burden, or would it make things more difficult?

Requirements for creeping expropriation

It has long been established that investment treaty tribunals are not bound by previously rendered awards. Arbitral tribunals proceed on a case-by-case basis as to whether the actions of a particular State amount to a creeping expropriation. This is not to say, however, that previously rendered decisions do not offer guidance as to the particular components that, if apparent, will lead to a finding that a creeping expropriation has occurred.

I. Substantial interference

The need to establish “substantial interference” is controversial. Although not a traditional “taking” of an investment, if the State in question interferes to such a degree as to deprive the investor of the enjoyment, use or benefit derived of its investment, a creeping expropriation may be deemed to have occurred. Numerous decisions endorse the view that a significant degree of interference is required before a tribunal will establish a creeping expropriation to be apparent. Metaclad Corp v United Mexican States (NAFTA) is particularly pertinent on this:

“…expropriation under NAFTA includes not only open, deliberate and acknowledged takings of property…but also covert or incidental interference with the use of property which has the effect of depriving the owner in whole or in significant part, of the use or reasonably-to-be-expected economic benefit of property even if not to the obvious benefit of the host State.”

So far so good for insurers and insureds. However, the real difficulty comes when determining whether the level of interference is of the requisite degree.

An insignificant restriction or interference with property rights is not generally considered to be sufficient for a finding of creeping expropriation; the decisive element is the “substantial loss of control or economic value of a foreign investment”, as referred to by James Crawford AC SC in “Brownlie’s Principles of Public International Law (8th ed. 2012). For example, the tribunal in Pope & Talbot Inc. v Government of Canada rejected the investor’s claim that Canada’s export control regime constituted an expropriation as it interfered with its exports to the US, holding that “the test [should be] whether that interference is sufficiently restrictive to support the conclusion that the property has been ‘taken’ from the owner.” While the interference may have reduced profits, the investor still exported considerable quantities of its product and earned substantial returns, rendering its argument unsuccessful.

Numerous decisions have held that an investor’s continued control of an enterprise goes against the finding of a creeping expropriation. The requirement of either total or substantial deprivation has led to numerous decisions denying that an expropriation had occurred owing to the investor’s retention of control over the investment.

II. The irreversibility and permanence of the contested measures

The requirement of a certain degree of permanence to the State’s interference is also controversial. While Tecnicas Medioambientales Tecmed SA v United Mexican States referred to a “de facto expropriation [being] irreversible and permanent”, subsequent decisions have taken a more pragmatic approach, preferring to look at the effect of the State action, even if it amounted to a temporary measure. For example, the tribunal in Wena Hotels Ltd v Arab Republic of Egypt held that an Egyptian public sector company’s one-year seizure of two hotels pursuant to a dispute over lease terms was more than an “ephemeral interference” and amounted to an expropriation.

III. Intention versus effect

Often referred to as the “sole effect doctrine”, many tribunals have endorsed the view that it is the effect of the State measure on the economic benefit, value and control over the assets that must be considered and that the state’s intention to expropriate, though of potential assistance, is not decisive.

Given the fact that investment treaty tribunals are not bound by previously rendered awards, it is perhaps unsurprising that the requirements for a creeping expropriation are not particularly clear-cut. For both insurers and insureds, this is problematic and would likely be a significant argument against allowing for reference to such awards for the purposes of coverage determination under a political risk policy. But is there any element of the treatment afforded to the concept of creeping expropriation on the investment treaty level that could be of significant beneficial use?

The date of loss

The date of loss is one of the first issues considered in any coverage analysis under any insurance claim. If the insured’s loss falls outside of the designated policy period, it does not fall within the confines of the contract and no further analysis is required – no indemnity is due. While a date of loss is simple to establish in a number of cases (i.e. in the case of a home-contents insurance policy claim following a break-in), the issue is somewhat more complicated when considering a claim under a political risk policy, especially when considering creeping expropriation. Is the date of loss to be determined from the first of the incremental steps taken by a host State, or the last? What happens when the former falls within a policy period and latter falls outside? Is investment treaty case-law of potential benefit here?

In Siemens A.G. v Argentine Republic, the tribunal found that the State committed both a direct expropriation via issuing a decree unilaterally terminating the investor’s service contract, and a creeping expropriation by measures leading to the decree, including suspending certain services under the contract and attempting to impose a “non-negotiable” renewed agreement. Significantly, for political risk policy claims, the tribunal stated:

“By definition, creeping expropriation refers to…steps that eventually have the effect of an expropriation. If the process stops before it reaches that point, then expropriation would not occur. This does not necessarily mean that no adverse effects would have occurred…the last step in a creeping expropriation that tilts the balance is similar to the straw that breaks the camel’s back.” (emphasis added)

The above appears to provide clarity; it is the final action that one should be concerned with in any coverage analysis under a political risk policy. However, as noted by the tribunal in Azurix Corp v Argentine Republic, “[t]here is no specific time set under international law for measures constituting creeping expropriation to produce the effect…How much time is needed must be judged by the specific circumstances of each case”.

The waters are somewhat muddied once again.

Conclusion

Should political risk policies include a standard clause allowing for the consideration of investment treaty awards for the purposes of coverage analysis? It is difficult to say. In the scenario of an insured’s loss that happens to closely mirror the facts of a case previously considered by an investment treaty tribunal, the answer is likely to be yes. However, as the brief analysis above demonstrates, any deviation from similar facts, and the wealth of consideration given to the concept of creeping expropriation by investment treaty tribunals could well make the sometimes difficult task of coverage analysis under a political risk policy even harder.


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ICCA 2014: Pleading and Proof of Fraud and Comparable Forms of Abuse

by Clovis Trevino

Gomm & Smith

Chair: Klaus Reichert SC (London)
Main Speakers: Dr. Aloysius Llamzon (The Hague), Anthony Sinclair (London)
Commentators: Utku Cosar (Istanbul), Carolyn B. Lamm (Washington, DC)
Rapporteur: Elizabeth Karanja (Nairobi)

No one would seriously challenge the proposition that investor wrongdoing is a systemic threat to international investment arbitration. But what constitutes investor wrongdoing? What are the standards that govern pleading and proving issues of corruption, fraud, misrepresentation and similar serious allegations of misconduct? How are arbitral tribunals addressing these issues? The Precision Stream on ‘Pleading and Proof of Fraud and Comparable Forms of Abuse’ addressed these vexing questions.

Opening the panel, Dr. Aloysius Llamzon identified three operative categories of investor wrongdoing: (i) corruption, (ii) fraud, deceit and misrepresentation, and (iii) other breaches of host state law, which may occur either in the acquisition of the investment or ex post. He stepped away from a line of arbitral cases asserting that an investment must have been made or acquired in good faith. Instead of relying on such abstract concepts, Llamzon suggested that investor misconduct in the vast majority of treaty cases falls under one or more of the identified operative categories.

The second panelist, Anthony Sinclair, laid out three tools to deal with investor wrongdoing: (i) the ‘in accordance with host state law’ or legality clause contained in certain BITs, (ii) the ‘unclean hands’ doctrine, and (iii) international public policy. Addressing the legality clause, Sinclair distinguished between illegality in the ‘making’ of an investment, and subsequent illegality in the carrying out of the investment. Whereas compliance with host state law at the inception of the investment qualifies the offer of treaty protection and goes to the tribunal’s jurisdiction, Sinclair suggested that subsequent illegality goes to admissibility of the claims or the merits of the dispute.

In the absence of an express legality requirement in the BIT, Sinclair proposed that the ‘clean hands’ doctrine may be relied upon to bar an investor’s claim due to its illegal or improper conduct in relation to those claims. The inequitable conduct that would trigger the application of the ‘clean hands’ doctrine must typically be willful, and must have a nexus to the matters in dispute. Sinclair nonetheless acknowledged that the International Court of Justice (ICJ) has yet to accept the ‘clean hands’ doctrine in a majority decision and that its status as a general principle of law is ‘uncertain.’

Sinclair next commented on international public policy, which he defined as principles of mandatory application regardless of applicable law or national rules. Bribery of foreign officials or other forms of corruption or fraud are likely to impinge upon international public policy. Among other decisions, Sinclair referred to Plama v. Bulgaria, where the tribunal found that the enforcement of a contract obtained by fraudulent misrepresentation was ‘contrary to international public policy.’ Concluding, Sinclair questioned whether international public policy amounts to a vehicle for arbitrators to enforce their own ethical or moral standards. ‘Are we stretching the concept too far?’, he posited.

Next, commentator Utku Cosar laid out three key issues in connection with corruption allegations: (i) burden of proof, (ii) consequences of a successful plea of corruption, and (iii) sanctions. With respect to burden of proof, Cosar referred to Metal-Tech v. Uzbekistan, where the tribunal acknowledged that ‘corruption is by essence difficult to establish’ and that it is thus ‘generally admitted that it can be shown through circumstantial evidence.’ She also underscored a tribunal’s powers to investigate and inquire propio motu about issues of corruption, and to draw adverse inferences when appropriate. The question arises: should tribunals take an active stance in investigating allegations of misconduct or remain passive arbiters of the contentions of the parties?

Cosar next discussed the legal consequences of analyzing corruption. She agreed with Dr. Llamzon and Sinclair that if the BIT contains an express legality clause, as was the case in Metal-Tech, the result should be a denial of jurisdiction. In the absence of an express legality clause, Cosar asked whether the misconduct of both parties should be assessed by the tribunal at the merits stage. After all, corruption is a two-way street. Concluding, Cosar addressed possible sanctions for misconduct, suggesting that the tribunal should not only condone illegality in the award but should also take it into account in the allocation of costs.

The last panelist, Carolyn B. Lamm, commented on at least three salient issues: (i) standard of proof, (ii) principles of treaty interpretation, and (iii) timing of the unlawful conduct. As to burden of proof, she argued that there is no strict standard to prove corruption or fraud (unless part of lex specialis), and went on to identify five possibilities: beyond a reasonable doubt, clear and convincing evidence, preponderance of the evidence, balance of probabilities, and prima facie evidence. Lamm rejected the adoption of a high standard of proof (as advocated by Dr. Llamzon and Sinclair), noting that a heightened standard is ‘neither needed nor appropriate’ in a system that lacks the power to compel the production of evidence.

Lamm next commented on the principles of treaty interpretation set out in Article 31 of the Vienna Convention on the Law of Treaties, requiring that treaties be construed in light of their ‘object and purpose’. She noted that, in the absence of an express ‘legality’ clause in a treaty, legality should nonetheless be read as an implicit requirement of an investment treaty, whose ‘object and purpose’ must include the protection and promotion of investments that are made legally. With respect to the timing of wrongdoing, Lamm argued that fraud or corruption, both at the inception of the investment and during its operation, must be condemned. She advocated the rejection of investments born out of, or implemented by, fraudulent or corrupt acts, if not as a jurisdictional issue, as an admissibility matter. Asking a state to ignore illegality, Lamm argued, would amount to an ‘affront to sovereignty.’

Far from giving ‘precise’ answers, the panel discussions revealed not only the inherent difficulties in proving investor misconduct, but also the challenging task faced by tribunals seeking to craft the proper standard of proof to sustain allegations of misconduct or illegality. While no comprehensive framework for addressing pleas of illegality in investment treaty arbitration emerges, the question remains open: should misconduct on the part of the putative investor be addressed as a question of jurisdiction, or is it rather a question of admissibility or one for the merits?


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Arbitral tribunals’ decisions on costs sanctioning the parties for counsel behavior: A phenomenon expected to increase?

by Eliana-Maria Tornese

ICC International Court of Arbitration,
for ArbitralWomen

The views expressed are those of the author alone and should not be regarded as representative of or binding upon the author’s institution or the ArbitralWomen.

Guidelines 26 and 27 of the IBA Guidelines on Party Representation in International Arbitration have again raised the debate on the extent that Arbitral Tribunals are entitled to deal with “guerrilla tactics”. 1 The present contribution will in particular discuss Arbitral Tribunals’ power to sanction parties for the behavior of their counsel in the proceedings by a ruling on costs.

Guideline 26 – on the “remedies for misconduct” – gives Arbitral Tribunals the discretionary power to take into account the Party Representative’s Misconduct 2 when apportioning the costs of the arbitration. This Guideline specifically provides that the Party Representative should be notified and heard before any sanction is determined. Guideline 27 gives a non-exhaustive list of factors that Arbitral Tribunals should take into account when deciding whether or not to apply the remedies set forth under Guideline 26.

A question arises as to how often Arbitral Tribunals sanction parties through cost allocation and whether Guidelines 26 and 27 may increase the use of such a tool in the proceedings.

Preliminarily, it is important to stress that costs regularly represent a considerable portion of the amount in dispute in small or medium sized disputes. Thus, they are a matter of growing concern in the business community. Accordingly, the allocation of costs can be a crucial issue. Despite the importance of the issue, there is conversely a lot of uncertainty regarding the application of existing rules on costs’ allocation. Arbitration agreements very rarely give guidance to the arbitrators as to how costs should be allocated. Even when the arbitration agreements adopt procedural rules on costs’ allocation, those rules will invariably say little or nothing about the arbitrator’s power to sanction parties for their Counsel’s behavior in the proceedings. Such an uncertainty is coupled with the fact that, generally costs are the last claim treated in the briefs. Counsel rarely, if at all, will develop sophisticated arguments on the allocation of the costs. The only well recognized principle in costs allocation is that Arbitral Tribunals have discretion on decisions on costs. As a result, the standards governing costs and the practice adopted by Arbitral Tribunals become of corresponding importance.

Currently, several procedural rules explicitly provide as a general rule that costs ordinarily follow the event. See for example: Rule 28.4 of LCIA which provides that “[u]nless the parties otherwise agree in writing, the Arbitral Tribunal shall make its orders on both arbitration and legal costs on the general principle that costs should reflect the parties’ relative success and failure in the award or arbitration, except where it appears to the Arbitral Tribunal that in the particular circumstances this general approach is inappropriate” (emphasis added); or Rule 44 of SCC which sets forth that “[u]nless otherwise agreed by the parties, the Arbitral Tribunal may in the final award upon the request of a party, order one party to pay any reasonable costs incurred by another party, including costs for legal representation, having regard to the outcome of the case and other relevant circumstances” (emphasis added).

However, the same rules also provide that such principle applies unless “other circumstances” require otherwise. Interestingly enough, some procedural rules expressly link the party’s behaviour to cost allocation. See in this respect Articles 28 and 31 of ICDR’s International Arbitration Rules permit cost/fee shifting for “dilatory or bad faith conduct”; or Article 37(5) of the ICC Rules which provides that “[i]n making decisions as to costs, the Arbitral Tribunal may take into account such circumstances as it considers relevant, including the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner”.

On the other side, arbitration rules increasingly include specific reference to an obligation of “good faith” on the parties’ side in the conduct of the arbitration proceedings. Art. 15(7) Swiss International Arbitration Rules provides that “[a]ll participants in the arbitral proceedings shall act in good faith, and make every effort to contribute to the efficient conduct of the proceedings and to avoid unnecessary costs and delay […]”. Rule 29 of the JAMS sets forth that “[t]he Arbitrator may order appropriate sanctions for failure of a Party to comply with its obligations under any of these Rules. These sanctions may include, but are not limited to, assessment of Arbitration fees and Arbitrator compensation and expenses; assessment of any other costs occasioned by the actionable conduct, including reasonable attorneys’ fees […]”.

Indeed, the ethical misconduct, or rather, the plea for standards of counsel’s conduct is a growing concern. The practice has shown that “guerrilla tactics” are sometimes used as a form of strategy in the management of the proceedings. Most common is misuse of an arbitration tool, (for example voluminous or continuous document requests) or other abuse of proceedings, when requiring unnecessary steps of the proceedings.

Based on the above, is it likely that Guidelines 26 and 27 – by providing in clear words the arbitral tribunals’ possibility to sanction the parties for their procedural behavior – would lead to a misuse of such discretionary power?

The arbitration rules examined above demonstrate that the allocation of costs may largely depend on a number of elements. Most importantly, some rules presently in force endorse the principle that parties’ conduct and the time and effort invested in bringing its claims or defenses will have financial consequences on costs and therefore upon the allocation of costs at the end of the proceedings. Hence, there is already an widespread awareness that the parties’ conduct in the management of the proceedings can have an impact on the costs’ decision. If we are seeing an increase in decisions on costs sanctioning the parties for counsel behavior, it is unlikely that such an increase is to be ascribed to the publication of the Guidelines. Furthermore, it is important to note that Guidelines 26 and 27 are drafted in a very cautious way. Finally, as it has been already pointed out by some authors 3 costs’ allocation will often represent a point of compromise within arbitral tribunals in order to reach a unanimous award and avoid dissenting opinions.


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  1. See Günther J. Horvath, Stephan Wilske (eds), Guerrilla Tactics in International Arbitration (2013).
  2. Both terms are defined in the preamble of the IBA Guidelines.
  3. B. Hanotiau, “The Parties’ Costs in Arbitration”, Dossier of the ICC Institute of World Business Law: Evaluation of Damages in International Arbitration (2006), p. 213.

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A Halftone Application of the New York Convention by the Qatari Supreme Court

by Minas Khatchadourian

Qatar International Center for Conciliation and Arbitration

Few days ago, the Qatari Supreme Court decided to overturn an earlier judgment of the Doha court of appeal which upheld a decision of the court of first instance to set aside an ICC arbitral award as being in violation of the Qatari public policy.

The new ruling comes in rescue of the Qatari courts’ image, reputation and standing which were partly criticized after a series of judgments rendered by different degrees of jurisdiction and which have set aside a large number of awards either domestic or foreign as mentioned in two earlier posts of September 20131 and January 20142.

This kind of flood started in June 2012 when the Qatari Supreme Court decided to invalidate a domestic award rendered in a disagreement which arose between the partners of a Qatari limited liability company, holding that the award violated public policy due to the fact that it was not rendered in the name of H.H. The Emir of Qatar. Since, not only the domestic awards have been invalidated but also foreign awards which were rendered under international arbitral institutions received the same judgment. For example, a ruling of the Court of first instance in Qatar invalidated an ICC award seated in Paris in a case between two Qatari Companies (contractor and sub-contractor) on the same grounds and without any application or reference to the New York Convention.

In all these unfortunate cases, the Court relied on the national provisions (articles 190-210 of the 1990 Qatari Civil Procedural Law (‘The 1990 Law’) and considered that:

the legislator qualified the decision of the arbitrator as a judgment, insisting on its binding effect on the parties and the authority of the Court to issue an execution order to implement and enforce its terms. Therefore, by virtue of Article 204 of the 1990 Law, the arbitrator’s judgment (award) should be issued in the name of H.H. The Emir of Qatar‘.

The Court added:

[r]endering the judgment in the name of H.H. The Emir confirms that it is supported by Public Force and is enforceable as such in accordance with the public order. Any decision or judgment of the arbitral tribunal should be rendered in the name of H.H. the Emir; otherwise, it shall be considered null and void, contrary to public order and the Court may sua sponte declare it as such.

It is obvious that in all these cases, Qatari judges have misconstrued the status of the Arbitrator and confused the ‘permanent mandate’ of the national judge to render justice by ‘judgments’ on one hand, and the ‘temporary mission’ of the arbitrator who is not part of the Judicial Authority and renders ‘awards’ or ‘decisions’ on the other hand. Part of this misperception lays in the Arabic text of the 1990 law as the Arabic language makes no distinction between the words ‘award’ and ‘judgment’.

Background of the new ruling:

In this respect, the concerned ICC award was decided few months ago by a sole arbitrator sitting in Doha, in a dispute between a joint venture contracting company (composed of a Qatari partner and a foreign partner) (‘The contracting company’) on one hand and a Qatari material supplier and sub-contractor (‘The supplier’) on the other hand.

The award came in favor of the supplier and was considered a foreign award for the needs of its execution in Qatar. The supplier was surprised that the joint venture company decided to file an action of nullity against the foreign award relying solely on the 1990 Law provisions, which do not distinguish between a foreign award and a domestic award on the grounds for nullity.

The action for nullity was brought before the court of first instance who decided to invalidate the ICC Paris award. The supplier decided to lodge an appeal against the decision but few weeks later, the invalidation ruling for the ICC award was upheld by the Court of appeal.

Furthermore, the judges decided to refer the ICC award back to the arbitrator to repair any violations contained in it pursuant to article 209 of the 1990 Law which stipulates:

The Court having jurisdiction over the request for setting aside may either confirm the award, or set the award aside totally or partially. If the award is totally or partially set aside, the Court may refer the case back to the arbitrators to repair the violations contained in the award, or the Court may decide on the merits of the case itself if it hold that it has jurisdiction to do so …”.

An underwhelming ruling of the Supreme Qatari Court in respect of the New York Convention:

Brought before the highest jurisdiction of Qatar, the supplier’s legal counsel defended ultimately his client’s interests and requested the application of the New York Convention to which Qatar adhered in 2003. He added that there is not any provision under New York convention which imposes any further condition for the enforcement of an award (such as to be rendered like court judgments in the name of a King, a Sultan, an Emir, or similar authority). Also, he mentioned that the national procedural law may be applicable only at the enforcement phase of the foreign award.

The court, which mentioned solely the arguments of the Claimant, decided to accept them and after a long prelude of the national Qatari provisions in respect of arbitration ordered to quash the judgment of the court of appeal and that the case has to be heard again before another circuit of the court of appeal.

It is important to recall that the purpose of the Court of Cassation or Supreme Court is essentially not to rule on the merits, but to state whether the law has been correctly applied on the basis of the facts already definitively assessed in the decisions referred to it.
In this respect, the Supreme Court stressed on the application of the New York Convention by stating:

that the award was rendered in accordance with the ICC arbitration law (ICC arbitration law was mentioned erroneously instead of ICC arbitration rules), that according to articles I and II (article II was mentioned erroneously instead of article III) of the New York Convention – to which Qatar adhered by virtue of the Emiri Decree 29/2003 and became applicable since 15 March 2003- each signatory state should recognize and enforce the foreign arbitral awards according to its national or internal rules of procedure, that the said Convention did not stipulate any provisions regarding the form of the award or its elements, that any foreign award is subject to the Qatari procedural law at its enforcement phase only“.

Final Comments:

In the light of this first mixed or halftone application of the New York convention by the Qatari judges, it is important to salute this positive step towards a full recognition and enforcement of foreign awards. Although the court of cassation decided – after smashing the invalidation ruling – to send the case to be heard again before the court of appeal, the new judges have received a clear message that the earlier magistrates have misapplied the Qatari law (including the international conventions to which Qatar has adhered and which forms part of the legislation). It is expected within few more weeks to see the first real enforcement of a foreign award in Qatar declared by a Qatari court after a sort of long saga of unfortunate rulings related to arbitration since 2012.

Dr. Minas Khatchadourian is an international arbitrator and the director of the Qatar International Center of Conciliation and Arbitration. He has an extensive experience in the Gulf & MENA Region. He can be reached at drminas@qcci.org.


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  1. http://kluwerarbitrationblog.com/blog/2013/09/23/controversial-ruling-of-the-qatari-court-of-cassation-regarding-arbitral-awards/
  2. http://kluwerarbitrationblog.com/blog/2014/01/28/a-new-bump-on-the-qatar-new-york-road/

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Bilateral Arbitration Treaties: A Few “Bits” More and No “Buts” Within the Portuguese Jurisdiction

by Duarte Gorjão Henriques

BCH Advogados

In his “Kiev Arbitration Days” after-dinner speech in November 2012 (“BITS, BATS and BUTS”), Gary Born presented a suggestion that can leave no one indifferent (speech published as “Essay” by Young Arbitration Review, March 2014 Edition). His idea is to take advantage of the legal framework and experiences gained from the world of investment arbitration and bring that framework and those experiences into international commercial arbitration.

Simply put, investment arbitration stems from Bilateral Investment Treaties, which grant foreign investors the right to arbitrate disputes arising from an investment, carried out in the territory of a contracting state, against that host state.

The proposal that Gary Born has put forward can be simply described as adapting this legal structure to international commercial arbitration in the following terms: two states will enter into a bilateral treaty providing for arbitration as a mechanism to solve disputes between nationals or entities located in the territory of each contracting state arising from any business transaction carried out between those different nationals or entities. The arbitration will be set forth as a default mechanism. In fact, both parties will retain the right to contract out of arbitration and elect recourse to national courts according to general rules applicable to litigation between parties located in different countries.

I believe that this idea is a compelling proposition for the future of international commercial arbitration.
The advantages of the Bilateral Arbitration Treaties (BAT) are obvious with regard to increasing commercial transactions, facilitating commerce between nations and establishing an environment of trust between businesses.

Naturally, this consideration has to be grounded in a bias in favor of arbitration as a means to resolve disputes by contrast to recourse to national courts. Those who have prejudice (or even strong beliefs) against arbitration may never be convinced of the advantages of a BAT. This debate is an old one, and I cannot bring any new or pertinent contribution to it. Therefore, we may dispense with any consideration about the advantages of arbitration by contrast to the judicial court system.

However, regarding the BAT, we cannot fail to answer two fundamental questions.

Firstly, what is the real advantage of a BAT? What are the problems that a BAT addresses and are they in need of a solution?

Secondly, is a BAT feasible in each and every national legal system? What are the national constraints for such a measure within the Portuguese jurisdiction?

With regard to its advantages, the BAT may well provide a straightforward answer to problems related to the arbitrability of disputes, which will inevitably be reduced – if not eliminated – between the two contracting states. A clause open to all commercial contractual relationships with specific exclusions, such as areas of the law where arbitrability is questionable or even prohibited in one or both of the jurisdictions involved, will definitely avoid the risks of a challenge to the arbitral award on those grounds.Therefore, problems of conflicts of positive and negative jurisdiction of the arbitral tribunal will also be reduced, if not eliminated. Where any dispute arising from a contract falls within the scope of the definition clause of the BAT, all doubt concerning the “competence” of the arbitral tribunal to solve that dispute would be removed. Issues with pathological arbitration clauses will virtually disappear. Indeed, the BAT can define what kind of arbitration shall take place: if it will be an institutional arbitration or an “ad hoc” arbitration, and in the case of institutional arbitration, can even provide for a certain institution or a certain type of institution. The BAT can also provide for the place of arbitration, the language, number of arbitrators, and so forth. In other words, the BAT can define typical issues that arise in any international arbitration, but can also prevent any challenge to the validity and enforceability of the arbitration clause.

There is also another important issue that can be addressed by a BAT: the recognition and enforcement of foreign arbitral awards. The New York Convention 1958 has been playing a crucial role in arbitration, and remarkably well. However, it is not enough. A BAT is in a better position to supplant the gaps of the New York Convention 1958 (and also the shortcomings of the Brussels Convention and European regulations on jurisdiction and the enforcement of judgments in civil and commercial matters), freeing all constraints to immediate enforcement of arbitral awards – at least – between a BAT’s contracting states. Moreover, in the case of Portugal, there are strong cultural, historical and also economic relationships with its former colonies (Angola, Mozambique, Cape Verde, Guinea-Bissau, São Tomé, Timor). Presently, only São Tomé and Mozambique are parties to the New York Convention. For those countries, it may be easier to enter into a BAT than to adhere to the New York Convention. The advantages of a BAT are obvious with regard to those countries. On the other hand and more importantly, even between countries that are party to the New York Convention the procedure for the prior recognition of a foreign arbitral award is required for most of the contracting states. Portugal is one of the countries that still require prior recognition of a foreign arbitral award before it may be subject to enforcement. That is the reason why I stated above that the New York Convention is not enough.
A BAT is naturally in a favored position to drive the contracting states to dispense with the procedure of prior recognition. Is there any real advantage to dispensing with the “exequatur” phase? I believe that there are advantages if the “exequatur” is not required between two states that have established between themselves, by way of a BAT, equal legal standards for the arbitration framework. In fact, the prior recognition procedure does not make any sense if two states agree to such a bilateral agreement and should naturally cease with the creation of a default international arbitration instrument such as a BAT. Immediate enforceability must be an integral feature of this bilateral treaty. Finally, there are also doctrinal representations that scholars and commentators have addressed when confronted with the fundamental issue of the “lex arbitri” (the law of the arbitration) or the “lex arbitrii” (the law of the arbitrators). Although it is not advisable for lawmakers to intervene in doctrinal discussions, issues arising therefrom have particular significance when we question the potential applicable law to provide for the assistance of national courts, the appointing authority, provisional measures, etc. A BAT can therefore set forth what the law applicable to the arbitration will be, leaving behind uncertainty.

As far as the second crucial question posed above is concerned – the feasibility of the BAT in the light of the Portuguese jurisdiction – I believe that any constraints can be overcome. There is no constitutional constraint as arbitration is set forth in the Constitution of the Portuguese Republic as a means to serve justice in parallel (somehow) with the judicial system. As far as the level of consent is concerned, I believe that consent will still be a fundamental pillar of arbitration and will be not dispensed with: the parties will still be accorded the right to opt out of arbitration and in an experimental phase of the BAT, any of the parties could be entitled to declare in the underlying agreement that it wants to refer any dispute arising therefrom to the national courts. The arbitration clause of a BAT is no more than a mere “statutory implied term” that can be excluded by way of an express contractual provision. Ontologically speaking, there will still be relevant consent. Thirdly, the Portuguese arbitration legal setting provides for sufficient backup provisions, notably as far as the default appointing authority is concerned (according to the Portuguese Arbitration Act of 2011, the President of the Court of Appeal shall act as default appointing authority). The use of the UNCITRAL rules is perfectly suited to the Portuguese jurisdiction, if not for other reasons because the Portuguese Arbitration Act is based on the UNCITRAL Model Law.

As a final remark, I would say that I do not foresee any obstacles that could prevent the implementation of a BAT between Portugal and other jurisdictions, including those from the European Union. Cultural legal fears and prejudices may well take the stage and play a role which is hard to overcome. Nonetheless, those fears and prejudices are somehow rooted in misconceptions about arbitration itself, but they should not concern a Bilateral Arbitration Treaty. It is now up to the whole legal community to convince the legislators and foreign affairs ministries that such an instrument is in a very favored position to promote and fuel business transactions and commerce between nationals from different countries. Due to historical alliance reasons, I would suggest that the first step might be taken between the United Kingdom and Portugal. For geographical reasons, Spain should follow suit. African Portuguese speaking countries would be the next step. Finally, it goes without saying that a bilateral arbitration treaty should be seen as nothing other than an experiment. As happens in every experimental stage, care should be taken with serious rigor. It is therefore recommended that the BAT should be limited to specific areas of the law where the experience in arbitration is consolidated, such as commercial law and the like. Considering such an experimental phase, I might also suggest a “mitigated” form of referral to arbitration. In that event, the BAT could provide for arbitration as a default means to resolve disputes save in cases where one party (or both parties) unilaterally state(s) in the underlying contract that it (or they) want(s) to resolve its/their disputes in the national courts. This could also be set forth as transitory regime for a limited time frame.

* This post is a summary of the article published by Young Arbitration Review, March 2014 Edition.


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ICCA 2014. Have We Made Progress? What Remains To Be Done?

by Brian Briz

Holland & Knight LLP

And so the twenty-second biennial Congress of the International Council for Commercial Arbitration officially comes to an end. But what progress have we made with respect to the challenges facing international arbitration? And, where do we go from here?

Chief Justice Sundaresh Menon, the Chief Justice of Singapore, delivered his assessment of the progress made on the challenges he identified in his “Golden Age” keynote address delivered at the 2012 ICCA Congress in Singapore. He began his speech by discussing the diversity of viewpoints that exists among international arbitration practitioners who are scattered across the globe. While there is certainly divergence, Chief Justice Menon warned that it would be unrealistic and unwise to seek consensus and regulation. Arbitration, he explained, “is better suited to evolution rather than to revolution.” We must, he said, maintain diversity of ideas.

Chief Justice Menon assured that evolution will occur and that international arbitration will adapt to its challenges and evolve to what is best for its users and practitioners. This, he explained, is already evidenced by the fact that we are moving rapidly from a time where the practitioners knew one another and looked like one another, to a time where the practitioners are increasing both in number and in terms of diversity. The future of arbitration, he stressed, is in the hands of the younger practitioners whose numbers are growing by the day.

While progress have been made, it is yet too soon to declare a victory. And, while Chief Justice Menon is optimistic regarding the future of international arbitration, he identified three issues that must be dealt with that were not addressed directly at the 2014 ICCA Congress.

The first issue, he explained, is the rising cost of international arbitration. Arbitration is not always the cheaper alternative and Chief Justice Menon expressed concern that users are often forced to accept arbitration “despite its cost, and not because of it.” This, he warned, leads to the risk that wealthier parties will be able to buy justice.

The second issue Chief Justice Menon identified is third party funding, a relatively new phenomena that he explained has grown substantially since the turn of the century. The issues created by third party funding—such as conflict issues and disclosure issues—are readily apparent and thus, he warned that we would be wise to study third party funding and address the issues it creates.

And finally, the third and perhaps most difficult issue that Chief Justice Menon identified is ethical standards. We have come such a long way, he explained, that the old rules no longer apply. International arbitration is truly global and has experienced exponential growth. We must have “common” ethical standards so that the users and practitioners can understand the rules of engagement. The challenge, of course, is bridging cultural differences to reach a consensus. Yet, he stressed that it is these very differences that make finding a consensus necessary. Again, Chief Justice Menon is optimistic that this challenge can be overcome as is demonstrated by the IBA guidelines that have already become almost universally accepted.

In conclusion, despite the challenges, Chief Justice Menon, expressed optimism regarding the future of international arbitration. He is encouraged by the subtle shift in the tone of the debate from whether anything needs to be done, to what should be done and why. This shift from ignoring the problems to tackling the problems provides Chief Justice Menon with the hope that international arbitration will overcome its challenges and reach its full potential.

With those words, the 2014 ICCA Miami Congress concluded. Without a doubt, the challenges identified by Chief Justice Menon will be discussed at the twenty-third biennial ICCA Congress to be held in Mauritius in 2016. And without a doubt, the questions will again be asked as to what progress has been made and what is left to be done.


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ICCA 2014. What Do Users Really Think About Document Exchanges And Interim Measures?

by Brian Briz

Holland & Knight LLP

How can arbitrators ensure the fair exchange of documents, and what role should arbitrators play in calling expert witnesses? When and how, if at all, should interim measures be used in international arbitration proceedings? These questions were tackled during a breakout session titled Arbitral Legitimacy: The User’s and Judge’s Perspectives at the ICCA Miami 2014 Congress, on Tuesday, 8 April. The panelists included in-house attorneys, Karl K. Hennessee, Vice-President of Public Law & Technology with Halliburton Energy Services, Clyde W. Lea, Deputy General Counsel of Litigation and Arbitration with ConocoPhillips, and Judge Vance E. Salter of the Third District Court of Appeal of Florida. The chair of the panel was José I. Astigarraga of Astigarraga Davis in Miami, Florida.

Like with most things in life, there were no clear answers to the questions posited during the debate. Mr. Lea opined that document production is a strength of arbitration given the abuse that sometimes occurs in litigation. The challenge he claimed, however, was the ability and willingness of arbitrators to ensure compliance.

This led Mr. Hennessee to discuss the “myth of the courageous arbitrator.” He explained that unlike judges, arbitrators do not have to worry about appellate review of their decisions, yet often times, it seems as if judges are more willing to flex their muscles by, among other ways, sanctioning parties. Mr. Astigarraga inquired as to whether perhaps arbitrators are less bold because they depend on a consuming public and have a market reputation to protect.

This inquiry led the panel to discuss the selection of arbitrators, and specifically, if there is a preference for the selection of civil law arbitrators versus common law arbitrators. Messrs. Lea and Hennessee appeared to agree that each case is different and requires different arbitrator skills, though Mr. Lea did explain that as corporate counsel, he is reluctant to use an American trial lawyer as an arbitrator.

Mr. Hennessee followed up that what users want is “certainty.” Rules need to be set so that the parties can know what to expect. The question that followed is at what stage should an arbitrator decide the scope of document exchange that will be permitted. Judge Salter explained that Florida courts often require document production management discussions at the outset of a case. Mr. Lea also explained that in arbitrations, document production requests are often made at an early stage of the dispute and that arbitrators are therefore forced to resolve a document production dispute before they have full knowledge of what the case is about. He stressed that arbitrators need to be able to adapt to the case because one process does not fit all cases.

The panel then turned to the question of interim measures. The corporate counsel panelists did not appear to be fans of such measures in international arbitration disputes though recognized that they are sometimes necessary. The question was asked about the use of strategic requests for interim measures wherein one party requests such measures for the purpose of planting the seed of an idea to help shape the arbitrator’s thinking for the future. Judge Salter stated that in his opinion, such a tactic —often referred to as a “rolling start”— is not very effective.

Finally, the panel discussed the question as to who decides on witnesses, and specifically, should arbitrators call upon fact witnesses to testify or appoint expert witnesses. Mr. Hennessee acknowledged that there is sometimes a role for tribunal-appointed experts, but that the need is usually obviated if the parties engage experts early enough in the dispute to allow the experts to help guide the proceedings. Moreover, Mr. Hennessee explained that parties should be careful to select arbitrators with sufficient expertise regarding the subject matter of the dispute, which in turn, could also lessen the need for an expert.

With respect to arbitrators calling witnesses, Mr. Hennessee opined that an arbitrator should be strong and engaged, but there is a line that should not be crossed. Where that line lies is not clear. Somewhere between a laissez-faire and activist arbitrator “is just right”, he joked.

So what was the take-away? There is no one-size-fits-all solution for dealing with document production, the calling of witnesses or requests for interim measures. Each dispute is it own story with its own facts and characters. In order to ensure the just and efficient resolution of a dispute, arbitrators should be flexible and should analyze the case at hand to anticipate the particular challenges that may arise in the particular dispute. Taking these steps, arbitrators can help ensure that the process is fair and provide the much needed certainty that users seek when choosing to arbitrate a dispute.


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ICCA 2014. Plenary Session of 8 April: Spotlight on International Arbitration in Miami and the United States

by Frank Cruz-Alvarez

Shook, Hardy & Bacon LLP

The April 8, Plenary Session, chaired by John Barkett (Miami) consisted of several presentations.

1. BG Group v. Argentina Mock Oral Argument

There was a mock argument of the BG Group v. Argentina case, where the participants assumed that they were arguing at the U.S. Supreme Court and assumed that the recently issued opinion from the U.S. Supreme Court was the Circuit Court decision. In the mock argument, Matthew Slater (Washington, D.C.) was counsel for the petitioner Argentina, and Nigel Blackaby (Washington, D.C.) as counsel for the respondent BG Group. The Court consisted of Judge Kathleen M. Williams (Southern District of Florida), Judge Vance E. Salter (Florida Third District Court of Appeal), and Judge Rosemary Barkett (Former 11th Circuit + Hague).

Counsel for Argentina made several arguments in asking the court to overturn the lower court decision in favor of BG Group:

• The lower court mistakenly assumed that the investment treaty at issue contained an agreement to arbitrate. He argued that the proper interpretation of the treaty is that the dispute resolution clause contained an “offer” to arbitrate that an investor could accept “if” the investor first sought relief in the local courts of Argentina. Until that condition as satisfied, Argentina could not be deemed to “consent” to arbitration. In short, his argument was that the issue before the court was whether there was an agreement to arbitrate, and that such a question in typically decided by courts and not arbitrators under U.S. precedent.

Counsel for BG Group asked the court to affirm the lower court’s decision arguing that:

• There was an agreement to arbitrate because the local litigation clause was a “condition precedent” and not a condition of consent. Indeed, counsel argued that a reading of the dispute resolution clause of the treaty supports this interpretation because despite the local litigation requirement either party is always free to institute arbitration if they are unhappy with the result in the local court, or if after 18 months there is no resolution in the local court. As such, all avenues lead to arbitration which supports the idea that there was an agreement to arbitrate. Furthermore, counsel argued that because the issue is one of whether a condition precedent to arbitration was fulfilled and that issue is generally resolved by the arbitrators, the court should affirm the lower court enforcing the award and affirming the arbitrators’ interpretation and application of the local litigation clause.

Following the argument of the lawyers, there was a lively discussion between the advocates and the mock judges, as well as questions from the audience that raised interesting issues regarding the impact of this decision on future investment treaty arbitrations, and whether the decision makes the U.S. an attractive or unattractive forum for enforcement of investment treaty arbitration awards.

2. Miami Spotlight

The second presentation was made by Eduardo Palmer (Miami). The focus of his presentation was to catalogue and discuss the reasons why Miami is a location that should be considered for future arbitrations. He listed a number of advantages that Miami benefits from, including:

• Miami is the gateway to Latin America and everything that goes with it makes this a great location.
• More non-stops to cities in Latin America
• Through waves of immigration over the last 30 to 40 years, Miami has been the center of Latin professional migration.
• Spanish is spoken as part of the business language of Miami
• On a cost basis Miami compares better to other arbitral sites because Miami is substantially cheaper in all categories – it is cheaper to arbitrate here.
• Miami is a beautiful city with a lot to do and great weather.
• Tax considerations – e.g., if you are in NY for a long arbitration tax issues may be implicated.
• Fla. Bar Rules 1-311 – the bar rule that allows foreign lawyers to work in international arbitrations.
• Enactment of UNCITRAL model law in Florida without modification from the original text. Includes arbitrator immunity. Personal jurisdiction
• Hearing centers – ICDR and JAMS (open to all)
• Special court on arbitration in Miami
• University of Miami Law School Institute for International Arbitration

3. Class Actions in Arbitration / New York and Other U.S. Arbitration Venues

The third presentation was given by Rachel Kent (Washington, D.C.), and the focus of the presentation was to highlight other U.S. Arbitration venues and to discuss the current status of class action arbitrations in the U.S.

With respect to other arbitral venues, here are the takeaways from the presentation:

• NY remains the most popular seat for international arbitrations.
• ICC recently opened an office in NY.
• NY courts honor strong pro-arbitration policies
• NY law is widely selected as the governing law in many contracts because it is regarded as well developed.
• NY has a great track record on these types of cases; and a lot of experience applying foreign law.
• Large pool of lawyers
• Significant infrastructure (e.g., NY International Arbitration Center (Midtown in Manhattan)
• Other popular arbitration venues in the U.S. are:
o (1) Houston – in oil and gas disputes;
o (2) Washington, D.C., for investor disputes; and (3) Chicago and Atlanta – particularly in international commercial arbitrations;

With respect to the status of class actions in arbitrations, here are the key takeaways:

• Primarily used in consumer litigation.
• If the agreement expressly permits class arbitration then it is allowed; if it is expressly excluded then class arbitration will not be allowed.
• If the agreement is silent, class arbitration should not be allowed. If the parties do not agree that the agreement is silent, then this requires interpretation – if the parties agree to have the arbitrator decide then the decision will not be reviewed by the court. If the issue is left open, then it is unsettled whether it is a question for arbitrators or the court to decide.
• The future of these types of claims is uncertain until we receive more guidance from the U.S. Supreme Court.

4. Restatement (Third), The U.S. Law of International Commercial Arbitration (Prof. George Bermann / replaced by Jack Coe)

The fourth presentation was given by Professor Jack Coe (Pepperdine University) regarding the status of the American Law Institute’s Restatement (Third), The U.S. Law of International Commercial Arbitration. Professor Coe gave a short presentation where he explained that the complete Restatement will be five chapters, two of which have been completed and in some instances cited by courts. He walked through some of the positions expressed in the Restatement – e.g., under the Restatement forum non conveniens is not a basis to reject enforcement of an arbitral award.

5. Enforcement of International Arbitral Awards In Florida and the United States: Judicial Consistency?

The fifth and final presentation was given by Daniel Gonzalez (Miami). Mr. Gonzalez discussed the need for consistency in Florida and the United States in the realm of international arbitration. He highlighted specific areas where consistency is needed:

• Service of Process – e.g., in the United States and Florida the mechanism for securing proper service are varied;
• There is disagreement among the federal courts as to the availability of defenses to enforcement beyond those articulated in Article V of the New York Convention;
• There is disagreement among the federal courts on the issue of personal jurisdiction – in some circuits the existence of assets within the circuit is enough, in others, the assets within the circuit have to be the assets that were the basis of the arbitration; and
• Finally, he noted the inconsistency in the rulings of certain court when deciding whether to enforce an annulled award.


• Leave a comment on ICCA 2014. Plenary Session of 8 April: Spotlight on International Arbitration in Miami and the United States

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.)
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Piercing the Veil of State Enterprises in International Arbitration Piercing the Veil of State Enterprises in International Arbitration
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International Arbitration and the Permanent Court of Arbitration International Arbitration and the Permanent Court of Arbitration
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ICCA 2014. How to Avoid Cold Sweat and Have Sweet Dreams

by Maria Camila Tobón

Shook Hardy & Bacon LLP

On Monday, April 8, Shook, Hardy and Bacon LLP presented a breakfast program moderated by John Barkett and featuring Frank Cruz-Alvarez, Marike Paulsson, and Sergio Pagliery discussing how to make the New York Convention your best friend. In a nutshell, the panel gave three helpful practice pointers, as discussed below.

First, make sure that when entering into an agreement, you take a close look at the arbitration clause and understand its terms. To enforce an agreement to arbitrate, the New York Convention requires an agreement in writing. Article II(2) provides: “The term ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.” An arbitral clause in a contract is clear. So is an arbitration agreement. But does the phrase “signed by the parties or contained in an exchange of letters or telegrams” apply to both the words “contract” and “arbitration agreement”? The Fifth Circuit Court of Appeals held that it applied only to an “arbitration agreement” (See Sphere Drake Ins. PLC v. Marine Towing, Inc., 16 F.3d 666 (5th Cir. 1993)) while the Second and Third Circuit Courts of Appeal held that it applied to both “contract” and “arbitration agreement” (See Kahn Lucas Lancaster, Inc. v. Lark International Ltd., 186 F.3d 210 (2d Cir. 1999) and Standard Bent Glass Corp. (US) v. Glassrobots Oy (Finland), 333 F.3d 440 (3d Cir. 2003)). No matter the jurisdiction, parties would be well served in understanding what exactly they are obligating themselves to when they enter into an agreement with another party.

Second, do not fear a forum non conveniens challenge to a proceeding seeking enforcement of a foreign arbitral award, notwithstanding the Second Circuit’s decision in Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d Cir. 2011). Article V of the New York Convention lists the grounds on which courts may refuse to recognize or enforce international arbitral awards and forum non conveniens is not one of those grounds. However, having opened the door in Figueiredo to forum non conveniens motions in confirmation and enforcement actions, the Second Circuit has invited every foreign arbitral award loser whose dispute arose, or is centered, abroad to raise that argument to prevent confirmation and enforcement of the award in that circuit. But have no fear. The doctrine is a discretionary doctrine, meaning that the determination is left to the sound discretion of the trial court. There is established precedent in favor of according substantial deference to a party’s choice of forum. And forum selection is a procedural matter to be addressed before reaching the merits of the claim; not after the claim has already been litigated and decided. Therefore, outside of the Second Circuit the holding in Figueiredo is not binding precedent; inside the Second Circuit, there is a lot of room for argument as to why the court’s decision in Figueiredo is distinguishable.

Finally, don’t treat the New York Convention as a static document. Instead, treat it as a living document and understand the applicable jurisprudence of the forum you are working in. In the U.S., as articulated by the district court in Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción, __ F.Supp.2d __, 2013 WL 4517225 (S.D.N.Y. Aug. 27, 2013), U.S. courts presented with a request to enforce a foreign arbitral award that was annulled at the seat of the arbitration are permitted to exercise a narrow discretion and disregard a foreign annulment judgment if the court concludes that the annulment violated fundamental notions of what is fair and just in the United States. When involved in an enforcement proceeding in the U.S., or elsewhere, practitioners should familiarize themselves with the applicable case law on judicial discretion under Article V(1)(E) of the New York Convention.


• Leave a comment on ICCA 2014. How to Avoid Cold Sweat and Have Sweet Dreams

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 ICCA 2014. How to Avoid Cold Sweat and Have Sweet Dreams
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