‘Arbitrator Intelligence’ Is Here!

by Catherine A. Rogers

Penn State Law

On Monday, September 22, Arbitrator Intelligence officially launches! This blog post gives some basic background about the project, explains how to use the site, and asks for your help in fulfilling our “Wish List.” When you are done reading, visit the site here!

The goal of Arbitrator Intelligence is to promote transparency, fairness, and accountability in the selection of international arbitrators by increasing and equalizing access to critical information about arbitrators and their decision making. Arbitrator Intelligence is currently in a preliminary start-up phase, organized around a Pilot Project.

The Pilot Project

While later phases of Arbitrator Intelligence will develop a number of different sources of information about arbitrators, the Pilot Project focuses on international arbitral awards. The specific objective of the Pilot Project is to collect as many awards as possible from its launch through January 14, 2014.

To measure our success, we have broken this goal into two parts. First, we aim to collect 100 previously unpublished awards, meaning awards that have not been widely disseminated or are not otherwise generally available to the international arbitration community. Second, we are seeking to amass as many awards as possible so that we can develop research tools for later phases of Arbitrator Intelligence.

Contributing Awards

The Arbitrator Intelligence site has been designed to make finding and submitting Awards easy and, yes, fun! There are two ways to contribute awards.

The first way is simply to upload any award you may have collecting dust on your office shelves, cluttering your office drawers, or taking up space on your computer.

The second way more closely resembles a global treasure hunt. The site includes an interactive, color-coded Map. For each jurisdiction that is shaded, we have information about court cases in which a party has sought annulment, recognition and enforcement of an award, and the like. The court records for these cases are likely to contain awards. Members can use the map to identify court cases to “mine” their files and records for arbitral awards.

When awards are contributed for each jurisdiction on the Map, that jurisdiction will “light up.” Altogether, we have indicated over 1200 court cases throughout the world that might contain an award—we need your help to track down these awards!

Building this Map also remains a work in progress. So, in addition to contributing awards, Members can also use a button on the site to provide additional information about court cases that they know about, but are not yet on the Map.

Membership & Prizes

Only registered Members can contribute awards. Becoming a Member is free and straightforward. To make being a Member and contributing an award even more rewarding, we have a number of wonderful prizes generously donated from our many supporters.

Every two weeks, we will draw two names from the pool of people who became Members during that period (just by becoming a Member, you get entered to win!) and who contributed awards during that period. At the end of the Pilot Project on January 14, 2015, all of the entries throughout the Pilot will go back into the jar for a final random drawing for the Sweepstakes Super Prize—a 6-month subscription to LexisNexis’ online research service. This means that the more awards you contribute during the duration of the Pilot Project, the greater your chances of winning the Super Prize.

We are also giving away a Grand Prize for the “Best Tale About an Award”—for those Members with especially creative, informative, or expository inclinations. Members are invited to share useful tips, colorful anecdotes, or just plain interesting stories about your experiences finding an Award, or other aspects about a contributed award. We hope that these stories will not only entertain, but also aid and inspire others to contribute awards. Members will be able to vote for the winning Best Tale (rules are on the site) and the Grand Prize for the winner couldn’t be better: a full three-volume set of the second edition of Gary Born’s International Commercial Arbitration treatise, signed and personally addressed to the winner!

Final Points

Before closing this overview of how the site works, it is important to note a few features of Arbitrator Intelligence and the Pilot Project. First, Arbitrator Intelligence is a not-for-profit initiative. Second, Awards contributed during the Pilot Project will not be published at this time. Before any awards are made publicly available in later phases of Arbitrator Intelligence, we will work with parties to the awards to allow them an opportunity to indicate sensitive information that may need to be redacted prior to publication. Third, Awards collected in the Pilot Project will be integrated into development of the larger framework of Arbitrator Intelligence. Details about future phases of Arbitrator Intelligence will be announced here and on the site, and we will solicit your input and ideas. So stay tuned!

* * *

In launching Arbitrator Intelligence, we are filled with optimism about its potential success, but recognize that it will only be a success with your support. For these reasons, we have developed a “Wish List” for the project.

THE OFFICIAL ARBITRATOR INTELLIGENCE “WISH LIST”

• First and foremost, for the Pilot Project, we hope that thousands of arbitration specialists from around the world become Members and contribute awards to help us meet our goals and demonstrate the power of collective cooperation.

• To that end, we hope people will help spread the word about Arbitrator Intelligence by
- Tweeting about it,
– “Liking” it on Facebook,
- Giving it a shout-out at arbitration conferences and in arbitration online discussions,
- Casually working it into cocktail party and coffee break conversations wherever arbitration specialists are gathered.

• We especially hope that members of the arbitration community from newer, but increasingly-important jurisdictions (outside the traditional North American and European hubs) will contribute to increase the availability of information about what is happening in these jurisdictions.

• We hope many Members will share interesting and entertaining stories about Awards, making for intense competition for the Grand Prize of Gary Born’s signed treatise.

• In future phases of Arbitrator Intelligence, we hope that increased information about their skills and performance will help younger, newer, and more diverse arbitrators establish their reputations.

• We hope in-house counsel and Parties who use international arbitration will see Arbitrator Intelligence as a great resource that they themselves can build.

• We hope arbitral institutions will see Arbitrator Intelligence as an opportunity for inter-institutional cooperation to build a resource that no single institution could build on its own.

• We hope established international arbitrators will participate in Arbitrator Intelligence as an opportunity to reaffirm their contributions to, and re-enforce the legitimacy of, international arbitration.

• We hope all who visit Arbitrator Intelligence appreciate the generous contributions of our wonderful supporters and Special Advisors, without whose help, this project would not be possible!

• We hope Members will share with us ideas and advice about how to make the site better for the Pilot Project and, going forward, for the more ambitious aspirations of Arbitrator Intelligence.

• Catherine not-so-secretly hopes that people interested in Arbitrator Intelligence will read her soon-to-be-in-print book, Ethics in International Arbitration, to learn more in Chapter 8 about the conceptual and theoretical underpinnings for Arbitrator Intelligence.

• Most importantly, we hope that Members of the international arbitration community will regard contributing to Arbitrator Intelligence as a means of building a brighter, fairer and more user-friendly future for international arbitration.

Now, come visit arbitratorintelligence.org!


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Summary Judgment in International Arbitration – No Longer Dismissed?

by Claire Morel de Westgaver

Bryan Cave

and Irina Tymczyszyn, Bryan Cave LLP

An M&A dispute between Travis Coal Restructured Holdings LLC (“Travis”) and Essar Global Fund Limited (“EGFL”) and related parallel proceedings in England and New York have shone the spotlight back on the issue of summary judgment in international arbitration. The United States District Court for the Southern District of New York (“New York Court”) was due to decide whether it should confirm or vacate an award including a summary finding. In the meantime, the English Court adjourned enforcement proceedings of the same award in England pending the New York court’s decision (Travis Coal Restructured Holdings LLC v Essar Global Fund Limited, [2014] EWHC 2510).

On 29 March 2010, Essar Minerals Inc (“EMI”) (a wholly owned subsidiary of EGFL) purchased shares in Trinity Parent Corporation (“Trinity”) from Travis. As part of the consideration, EMI issued promissory notes in favour of Travis to the sum of $203 million. On the same date, EGFL guaranteed EMI’s obligation to make payment to Travis in accordance with the promissory notes (the “Guarantee”).

Following the acquisition, EMI claimed that Trinity’s financial position had been misrepresented by Travis. Following non-payment by EMI, Travis claimed payment from EGFL under the Guarantee. EGFL refused to pay, relying on the alleged misrepresentations by Travis for non-payment (the “Fraud Defences”).

The Guarantee included an arbitration clause providing for arbitration under the ICC Rules in New York. Travis commenced arbitral proceedings on 25 May 2012 and the Tribunal comprising Professor William W. Park, Mr Mark Kantor and Mr Philip Lacovara was appointed on 26 October 2012. On 7 December 2012, Travis submitted a motion for summary judgment. EGFL opposed the motion on the basis that the Tribunal did not have the power to determine the claim on a summary basis; and that doing so would contravene EGFL’s right to a fair opportunity to be heard on its Fraud Defences. On 25 November 2013, the Tribunal ruled that, in light of the waivers and disclaimers contained in the Guarantee, there were no reasons why the Fraud Defences could deny its effect. Subsequently, on 7 March 2013 the Tribunal granted a final award ordering EGFL to pay Travis $210,889,788.20 under the Guarantee (“Award”).

Travis applied to the New York Court to have the Award confirmed and EGFL filed a cross-petition to have the award vacated. Following EGFL’s cross-petition, Travis applied to the English Court and successfully obtained judgment to enforce the Tribunal’s award. EGFL then applied for an order setting aside the judgment or, in the alternative, an adjournment of the decision on recognition and enforcement of the award pending the determination of EGFL’s motion to vacate the award in the New York Court. When faced with an application to adjourn enforcement of an arbitral award under s.103(5) of the Act, one of the factors that the English courts will consider is whether the challenge before the court of the seat has a realistic prospect of success.

It is in this context that the English court looked into the validity of an award made on the basis of a summary judgement procedure. In particular, the court considered the two grounds relied upon by EGFL for the purpose of its motion to vacate: (1) that the Tribunal had acted ultra vires by adopting a summary judgment procedure and (2) that it had manifestly disregarded the summary judgment standard under New York law by dismissing the claim when substantial disputes of fact existed.

In support of its assertion that the Tribunal has exceeded its power by dismissing its defences on a summary basis, EGFL argued that summary judgment is strongly disfavoured in international arbitration and that a distinction needs to be drawn between empowering a tribunal to conduct proceedings efficiently and exercising a summary judgment power. Further, it submitted that (at least in the absence of express power) the exercise of summary judgment by arbitrators constitutes a denial of due process. The English Court rejected these submissions, holding that the question of whether or not a tribunal in international arbitration has the power to make summary judgment will depend on the terms of the arbitration agreement and the procedure adopted by the tribunal.

In this case, the arbitration agreement provided that the “arbitrators shall have the discretion to hear and determine at any stage of the arbitration any issue asserted by any party to be dispositive of any claim or counterclaim, in whole or part, in accordance with such procedure as the arbitrators may deem appropriate, and the arbitrators may render an award on such issue”. Such wording gave the Tribunal wide powers in respect of any procedure adopted to determine dispositive issues, the Court said. Furthermore, the Court noted the steps the Tribunal took to ensure proper consideration of EGFL’s Fraud Defences, including the fact that the Tribunal had heard oral testimony in respect of these defences. The Court indicated that the Tribunal had made every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the nature of the dispute it had to decide. In doing so, the Court found that the Tribunal gave each party a fair opportunity to present its case and, insofar as the Tribunal’s decision was summary, the procedure it adopted fell within the ambit of its powers set out in the arbitration agreement.

EGFL’s second contention was that the Tribunal misapplied the summary judgment standard under New York law, and determined disputed issues of fact on the basis of the limited evidence that had been submitted and without a full evidentiary hearing. Whilst the English Court observed that this issue is primarily a matter for the New York Court, it indicated that it did not consider that there was any realistic prospect of EGFL demonstrating that the arbitrators “intentionally flouted” the New York summary judgment test, which EGFL accepted it had to follow to be successful.

Ultimately, despite the fact that it did not believe that EGFL’s challenge had a realistic prospect of success on either of the grounds discussed above, the English Court adjourned the enforcement proceedings of the award pending final determination of the New York proceedings, in order to avoid the risk of conflicting judgments. This would occur if the award was enforced in England and successfully challenged at the seat.

Whilst the English Court did not rule on the availability of summary judgment in international arbitration (it expressly refused to enter into the wider debate concerning the desirability of such procedure in arbitration generally), its findings relating to the prospect of success of the ongoing challenge in New York offer useful insight into what appear to be the prerequisites for summary judgment to be accepted in an international arbitration context. The tribunal must be technically empowered by the parties to decide a claim on a summary basis and the procedure it adopts must comply with due process requirements. The first condition relates to the mandate of the tribunal to which the terms of the arbitration agreement and the applicable procedural rules are relevant, whereas the second condition concerns the more factual issue of what happened during the proceedings.

Starting with the latter, of particular importance is the fact that a hearing was held in this case – a step which even EGFL recognised went beyond the summary judgment procedure adopted in either New York or London. Giving the opportunity to the parties to be heard in relation to the claim or defence to be dismissed appears to designate the limit beyond which a summary procedure may be deemed unfair at least under certain rules and arbitration laws.

In respect of the Tribunal’s mandate, in this case, the wording relating to awards on dispositive issues contained in the arbitration agreement did not expressly refer to the disposal of a claim or defence on a summary basis. Further, arbitration laws and procedural rules, including the ICC Rules, generally provide that tribunals may render awards on separate issues. One may therefore question whether that wording resulted in the scope of the tribunal’s prerogatives being increased under the ICC Rules.

In this case, EGFL who had advocated the position that summary judgment was not appropriate in international arbitration, made the point that when the ICC Rules were revisited in 2012, the absence of a summary procedure was deliberate. In the same vein, most major arbitration rules have been revised in the last few years, and yet none of the leading rules have provided for a procedure under which a meritless claim or defence could be disposed of on a summary basis (except for Article 41(5) of the ICSID Arbitration Rules which was introduced in 2006). This suggests that the arbitration community feels that there is no need for such a provision in procedural rules. What remains unclear is the rationale behind this consensus amongst the institutions and the committees who were in charge of the redraft of these arbitration rules. Do these stakeholders agree that there is no need for a summary procedure provision to be included in arbitration rules because they consider that summary judgment is not appropriate in international arbitration? Or do they consider that such a provision is not necessary because summary judgment is de facto already available and (impliedly) allowed under the leading commercial arbitration rules and arbitration regimes?

The authors have now learned that the ongoing proceedings in New York have been discontinued following settlement, under which EGFL agreed to withdraw its motion to vacate. This will enable Travis to proceed with the enforcement of the award in England or any other jurisdictions in which assets are available. Ultimately, despite considerable delay, the use of summary procedure in an arbitration context did not jeopardise the validity of the award that embodied the Tribunal’s summary judgment.


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Harvesting Data to Shape the Future of International Dispute Resolution

by Deborah Masucci

and Michael Leathes

Among the early words of wisdom expressed by Sherlock Holmes in the first of Sir Arthur Conan Doyle’s 56 novels, A Scandal in Bohemia in 1891, was this classic line:

I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.

And so it is with dispute resolution. There is a paucity of reliable statistics out there to enable users of dispute resolution services, as well as advisers, providers, educators, adjudicators and policymakers, to understand how best to prepare and steer ourselves for the future. And even if we take the few nuggets of mediation data that have been generated in recent years1, the field is not proficient at inter-communication: arbitrators don’t liaise enough with mediators (and vice-versa), users are rarely heard, providers compete for space and legislators get confusing signals. It’s incoherent and ineffective.

A Convention is being held next month at the London Guildhall on Shaping the Future of International Dispute Resolution which is expected to attract over 150 leaders in this area from all stakeholder groups, especially corporate and other users. Sponsored by Herbert Smith Freehills LLP, the International Mediation Institute, the IDR Group and CEDR, generously supported by the Corporation of the City of London and backed by many other bodies, all delegates will be provided with voting handsets to express their views on a series of key issues, with the results instantly projected on the big screen. There will also be tablets on each table to enable delegates to contribute comments, ideas and proposals throughout the day – all of them shared with those present.

Session 1 will give corporate users the chance to surface their needs; Session 2 will address what service providers are offering; Session 3 will cover issues that will help the field to expand (such as opt-outs rather than opt-ins, enforcement of mediated settlements and hybrids); and Session 4 will direct the spotlight on mediation in several different fields, and highlight blockages as well as successes. Finally, Session 5 will enable another group of users to draw conclusions about how best to shape the future. In every session, delegates will be able to interact with panellists and to use their handsets to express what they think about the issues raised. Those collective views will have a direct and significant influence on how international dispute resolution develops in the future.

The dispute resolution field must address hitherto unexpressed needs of the demand side on a global scale. The seminal event that spawned the growth of mediation was the Pound Conference in St Paul, Minnesota in 1976. Perhaps, the London Convention will be the first of a series of “Pound Conferences” around the world, as we have proposed previously, and generate the data to help configure the future in order to fit the facts.


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  1. For example: IMI International Corporate Users ADR Survey and Fortune 1,000 Survey on Mediation, Arbitration and Conflict Management

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International Arbitration in a Time of Global Upheaval

by Catherine A. Rogers

Penn State Law

A few weeks ago, the day before the Obama Administration and the EU announced dramatic new sanctions against Russia, an international tribunal announced a $50 billion award against Russia in favor of a group of oil investors. The current violence engulfing Iraq has multiple satellite arbitration disputes over oil sales to Turkey. Recent violence on the Crimean Peninsula implicates massive oil fields off the coast of Crimea that will soon spawn international arbitration claims against the Ukraine, Russia or both. Last Spring, China positioned an oil rig near islands whose control is disputed with the Philippines. The move triggered not only a Philippines-China diplomatic row, but also an UNCLOS arbitration over the disputed islands.

Looking even further back to earlier, a less-well-known consequence of the Arab Spring is that it triggered a multi-billion dollar international arbitration about a gas pipeline between Egypt and Israel. The list could go on.

In almost uncanny tandem, the most important front-page geopolitical events seem to have a corollary large-scale international arbitral energy dispute attached. In these contexts, international arbitration is not only cleaning up the aftermath of international events. It is affecting how those events play out. While this state of affairs seems normal to international arbitration practitioners, the rest of the world is wondering: Is this a good thing?

In an increasingly globalized world, it is almost inevitable that significant geopolitical developments implicate competing claims to energy resources. For centuries, international arbitration has been the primary means for resolving international economic disputes. In more modern times, it is the forum for virtually all large-scale energy disputes. For many outside international arbitration practice, a largely private system seems like a counter-intuitive venue for such high-stakes controversies with such epic political implications. International arbitration defies conventional wisdom about how international adjudication and international institutions should work.

Most international institutions are top-down, centralized regimes. They are created and empowered through sovereigns working collectively through traditional international organizations and frameworks. Much progress has been demonstrated by some public international tribunals that have been organized under this traditional model. The largest volume of cases and arguably the most enforceable outcomes, however, are being generated by international arbitration tribunals.

As international arbitration practitioners are learning, this effectiveness is not universally understood or regarded as a positive development. Debates are bubbling over about the impact of arbitration on legitimate national policies. These debates, in turn, raise questions about its inclusion in new and ever-more expansive trade agreements, such as the Trans-Pacific Partnership (TTP) and the Canada-EU free trade pact. Such criticisms must be taken seriously. They must also, however, be evaluated in light of international arbitration’s unique effectiveness and the need for effective international dispute resolution.

Adjudication aims to bring independent, neutral fact-finding and legal assessment to resolve competing claims. Legitimate questions exist about whether international arbitration always fulfills these goals. But all adjudicators sometimes reach wrong answers. And even right answers leave some parties and constituencies unhappy. In this respect, at least some of the flaws attributed to international arbitration are problems that are universal to any system of adjudication.

Other critiques of international arbitration may be too quick to throw out the source of its greatest strengths. International arbitration is often criticized for being ad hoc. Arbitrators are criticized as unaccountable to any formal institution. The entire system is criticized for being organized around private interests, lacking transparency, and generally failing to account for political and policy issues that are implicated when States are parties.

There is undoubtedly room to improve on some of these issues. Most specifically, the high stakes increasingly require that, in addition to being capable case managers and legal decisionmakers, international arbitrators must exercise their power with integrity and sensitivity regarding the potentially momentous implications of their decisions. But international arbitration’s history suggests that it is capable of evolving to meet even these great challenges.

Arbitration’s ad hoc nature and separateness from State apparatus are some of its greatest sources of strength. Individual cases have been an essential incubator. Incrementally over time, international arbitration has bridged conflicting legal cultures and procedural traditions. It has developed its own highly effective international procedures and a robust legal framework that has garnered enough confidence for States to entrust it with their most sensitive regulatory matters.

Today, States are increasingly turning to or permitting international arbitration to enforce their own legal obligations and or vindicate their legal rights. In a world where diplomatic solutions are often limited and economic sanctions take years to take effect, law-bound solutions to large-scale energy disputes are urgently needed. International arbitration is providing such solutions, but not only post hoc. Now, when States take actions, they must consider not only the diplomatic fallout, but also whether such actions will trigger an international arbitration against them. And both States and investors that might be victimized by such actions have a new tool through which to pursue meaningful remedies.


Catherine Rogers is a Professor of Law at Penn State Law, and Queen Mary, University of London.


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Enforcement of Arbitration Awards in Ukraine: Chances are Measured

by Konstantin Pilkov

CAI & Lenard

Ukraine has a reputation of a country with an imperfect justice system. No wonder that the country is also pictured by many arbitration practitioners as one unfriendly to arbitration, though refusals to grant the leave for enforcement of arbitral awards in Ukraine are relatively rare – 10% and 18% of all requests considered in 2013 and 2014 respectively, according to the Statistical Report “Ukraine. Arbitration-friendly jurisdiction: 2013-2014” prepared by Cai & Lenard.

Ukrainian courts sometimes refuse to leave to enforce arbitral awards, and sometimes the reasoning of the refusal is very much controversial. For example, in 2014, a court refused to grant the leave to enforce an LCIA award, issued by a sole arbitrator on the ground that an arbitration agreement contained a reference to an «arbitration panel», and, according to the court, “the word “panel” always refers to the collegial body. There is no linguistic reason to believe that the terms “arbitration panel” and “arbitration tribunal” have similar meaning”. The court did not even check whether the respondent had made any objections with respect to the composition of the tribunal during the arbitral proceeding. In general, as shown by the practice analyzed in the study, Ukrainian courts have developed a friendly attitude to arbitration and do not create significant barriers for arbitration agreements to be recognized and arbitral awards to be recognized and enforced.

Statistics of granting leave for enforcement of arbitral awards issued by the International Commercial Arbitration Court (ICAC) at the Ukrainian Chamber of Commerce and Industry (UCCI) in 2013-2014 was even more impressive: when requests are considered by the courts of first instance (i.e., not left without consideration, and the proceedings upon the request is not closed), in 2013 the claimant was granted with the leave to enforce in 93% of all cases; in 2014 the leave was granted in almost 77% of all cases. It should be noted that in 2014 in those cases when the leave for enforcement was not granted, this was largely due to the fact that the award was executed voluntarily (in 2013 the courts usually closed the proceedings in such a situation). It means that almost 91% of requests were satisfied in 2014. It is a good reason for foreign partners to think twice before insisting on “classical” arbitration when dealing with Ukrainian companies. In matters of setting aside arbitral awards Ukraine only seeks to enter the league of countries with arbitration-friendly court practice (20-30% of arbitral awards are successfully challenged).

Thus, common courts rarely refuse to enforce arbitral awards and in exceptional cases set aside arbitral awards. At the same time, further stages of the enforcement usually become time consuming and sometimes even ineffective process, which does not show any specific negative attitude towards arbitral awards because problems of enforcement are peculiar to all court decisions. It is true that Ukrainian courts grant interim measures in support of enforcement of arbitral awards in rare cases which certainly does not help the enforcement. At the same time, if compared with 2011-2012, in recent years there has been some progress in this matter –courts have begun to impose seizure on the debtor’s property in support of the enforcement of arbitral awards (app. 5 % of the left for enforcement arbitral awards were secured with the arrest of debtors’ assets in 2013-2014).

The report also made it possible to name the arbitration institutes and rules most frequently referred among Ukrainian parties. These are: ICAC at the UCCI, ICAC at the Russian Chamber of Commerce and Industry, SCC and LCIA. ICC and VIAC arbitral awards are also among the arbitration institutions well known in Ukraine.

The Report is available in English, Russian and Ukrainian.


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Transparency as a Global Norm in International Investment Law

by Stephan Schill

Max Planck Institute for Comparative Public Law and International Law,
for ITA

Transparency is one of the hot topics in international law. With governance functions increasingly shifting from the domestic to the international level, transparency is demanded, as Andrea Bianchi and Anne Peters show in their new seminal study, in order to compensate for the lack of a full-fledged international system of checks and balances. Transparency promises a more accountable, more democratic and hence more legitimate system of global governance. International investment law cannot escape from this general drift. As I noted in my Editorial for the latest issue of the Journal or World Investment and Trade (JWIT), secrecy in treaty negotiations and confidentiality in dispute settlement, two hallmarks of investment law so far, are eroding. Four developments are noteworthy: 1) new approaches to treaty negotiation by the EU Commission in the Transatlantic Trade and Investment Partnership (TTIP); 2) the UNCITRAL Rules on Transparency; 3) the use of freedom of information acts; and 4) the contribution of scholarship. Building on earlier approaches to increase transparency, namely the 2001 Note of Interpretation of the NAFTA Free Trade Commission, the 2006 amendments to the ICSID Rules and Regulations, and the transparency rules under CAFTA, among others, these elements contribute to transparency becoming a global norm in international investment law.

Transparency and the EU Commission’s Public Consultation on the TTIP

As a reaction to the persistent criticism of investment treaty negotiations as backroom politics, transparency has forcefully entered the negotiations on TTIP. In fact, the European Commission has just closed a “Public consultation on modalities for investment protection and ISDS in TTIP” that returned almost 150.000 responses. It consisted of a questionnaire on key issues, ranging from the scope of application of investment treaties, via substantive standards, to various issues concerning investor-State dispute settlement, and had the purpose of collecting the public’s views on the biggest bilateral trade and investment deal ever. While such consultations are not entirely new, the Public Consultation on TTIP has tapped a wider public and concerns an international treaty that would have deeper impact than any earlier external EU agreement. It is therefore hardly an exaggeration to state that this consultation process constitutes a paradigm shift in how international investment law is made.

The Public Consultation changes the way the public and EU government communicate with each other and opens up new paths for democratic input. By allowing direct input into the EU negotiation process, the Public Consultation circumvents traditional channels of policy-making within the EU. Above all, the consultation parts with the usual assumption that the interests of the public are represented and mediated through the Member States. The direct corridor of communication through the Public Consultation can give a voice to interests not well-represented through Member States governments and allows for new transborder interest coalitions.

Furthermore, the Public Consultation can also impact the legal discourse within the EU by bridging the divide between the international and domestic legal communities. The Public Consultation brings the debate about international investment law to professional communities at the domestic level that have so far been at the periphery, at least from the international perspective. For example, the “verfassungsblog”, the internet platform of German Staatsrechtslehre, has launched a debating series on TTIP, which will certainly help increase investment law’s importance in domestic constitutional debates, while also furthering the reverse process of bringing more domestic constitutional law thinking into investment treaty-making. This is likely going to replicate a process within the EU that has taken place more than a decade ago in the United States, where the recalibrated provisions on expropriation in the 2004 US Model BIT were inspired by US takings law. The EU Commission’s initiative, and transparency more generally, will therefore not only tap existing publics, but likely create new ones and affect the relations between center and periphery.

UNCITRAL Rules on Transparency

Another major development on the transparency front is the coming into effect of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration on 1 April 2014. While allowing parties to opt out of the new framework, the Rules reverse the presumptions of confidentiality and privacy in investment treaty arbitration in favor of a presumption of openness. While containing exceptions to protect confidential business information and national interests, the Rules provide for transparency concerning all phases of investment treaty-based arbitral proceedings, including submissions to arbitral tribunals and arbitral awards. The Rules also address participation of non-parties, including amici curiae, and deal with the extent to which hearings should be public. The Rules complement, but also go beyond, the transparency rules already in existence in some regional regimes, such as NAFTA or CAFTA, and, albeit to a more limited extent, in the context of ICSID proceedings, as mentioned before.

In my view, the openness of hearings will positively affect the public’s assessment of investor-State arbitration. It will show that investor-State arbitration constitutes an adjudicatory process which is, despite its idiosyncrasies, similar to that of any other domestic or international court. Moreover, transparency is likely to increase the quality of reasoning, as arbitrators will know that the world will read and critically assess their words. However, there are also critical aspects, such as the limited scope of application of the Rules. They only apply to arbitrations under the UNCITRAL Arbitration Rules that are based on an investment treaty concluded on or after 1 April 2014, unless the parties have opted out of the Rules. Application to treaties concluded prior to that date is only possible if the disputing parties or the contracting States so agree. This significantly limits the otherwise far-reaching transparency obligations under the Rules.

To remedy this shortcoming, UNCITRAL has prepared a transparency convention, which was approved at the beginning of July for submission to the UN General Assembly. In parallel, it may also be worth exploring whether the Rules on Transparency could influence investor-State arbitrations beyond their proper scope of application as soft law. One could, for example, consider whether the principles enshrined in the Rules can be viewed as expressions of general principles of law, in light of the fact that transparency is widely recognized in governing public-private dispute settlement in domestic adjudicatory systems and also increasingly at the international level.

Domestic Freedom of Information Acts

In addition, there are important statutory instruments that can make international investment law more transparent but are little discussed. I am referring here to freedom of information acts that exist in many countries and at the EU level. These can be used – and successfully have been used as early as 2000 in the context of NAFTA arbitrations – to obtain decisions and awards by investment tribunals. Yet, there are also signs that they could enable access to documents relating to (ongoing) investment treaty negotiations. A ruling by the Court of Justice in C-350/12 P, handed down on 3 July 2014, has been interpreted in this way.

Still, freedom of information acts contain various exceptions that can frustrate information requests. They often exclude requests relating to ongoing proceedings and may contain exceptions for information protected under specific confidentiality agreements. If push comes to shove, it will be important to analyze whether such confidentiality agreements can block the statutory right to information, and if it does, whether such agreements are valid under the applicable constitutional law. The path towards transparency via domestic laws may be long and winding. This notwithstanding, the gateway is open; it is just waiting to be used…

Transparency through Scholarship

Finally, scholarship –and by prolongation academic journals and blogs, such as the present one– can play an important role in increasing transparency. They can uncover unknown data and interpret existing data in ways that help our understanding of the world we live in. Scholarship can thereby help to make the invisible visible and also increase the transparency of what is going on in global governance, including in international investment law. A fitting example are the contributions in JWIT’s latest Special Issue with the allusive title “The Anatomy of the (Invisible) Model EU BIT”. They are aiming at distilling the EU’s approach to international investment policy from the ongoing negotiations on the EU-Canada Comprehensive Trade and Economic Partnership. Given that the EU, unlike many other countries, has not formally adopted a model BIT, this scholarly approach can help make the substance of the EU’s negotiations and its assessment by the European public more transparent.

Overall, increasing transparency is certainly not the solution to all problems of international investment law, but it is perhaps the single most important avenue for bringing the system in line with principles of democratic governance and the rule of law. The multiple avenues towards transparency can help in this process.

Stephan Schill, LL.M. (Augsburg) 2002; LL.M. (NYU) 2006; Dr. iur. (Frankfurt) 2008, is a Senior Research Fellow at the Max Planck Institute for Comparative Public Law and International Law and Principal Investigator in the ERC project on “Transnational Private-Public Arbitration as Global Regulatory Governance: Charting and Codifying the Lex Mercatoria Publica”. He is a Member of the ICSID List of Conciliators and the Editor-in-Chief of the Journal of World Investment and Trade.


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Transparency as a Global Norm in International Investment Law

by Stephan Schill

Max Planck Institute for Comparative Public Law and International Law,
for ITA

Transparency is one of the hot topics in international law. With governance functions increasingly shifting from the domestic to the international level, transparency is demanded, as Andrea Bianchi and Anne Peters show in their new seminal study, in order to compensate for the lack of a full-fledged international system of checks and balances. Transparency promises a more accountable, more democratic and hence more legitimate system of global governance. International investment law cannot escape from this general drift. As I noted in my Editorial for the latest issue of the Journal or World Investment and Trade (JWIT), secrecy in treaty negotiations and confidentiality in dispute settlement, two hallmarks of investment law so far, are eroding. Four developments are noteworthy: 1) new approaches to treaty negotiation by the EU Commission in the Transatlantic Trade and Investment Partnership (TTIP); 2) the UNCITRAL Rules on Transparency; 3) the use of freedom of information acts; and 4) the contribution of scholarship. Building on earlier approaches to increase transparency, namely the 2001 Note of Interpretation of the NAFTA Free Trade Commission, the 2006 amendments to the ICSID Rules and Regulations, and the transparency rules under CAFTA, among others, these elements contribute to transparency becoming a global norm in international investment law.

Transparency and the EU Commission’s Public Consultation on the TTIP

As a reaction to the persistent criticism of investment treaty negotiations as backroom politics, transparency has forcefully entered the negotiations on TTIP. In fact, the European Commission has just closed a “Public consultation on modalities for investment protection and ISDS in TTIP” that returned almost 150.000 responses. It consisted of a questionnaire on key issues, ranging from the scope of application of investment treaties, via substantive standards, to various issues concerning investor-State dispute settlement, and had the purpose of collecting the public’s views on the biggest bilateral trade and investment deal ever. While such consultations are not entirely new, the Public Consultation on TTIP has tapped a wider public and concerns an international treaty that would have deeper impact than any earlier external EU agreement. It is therefore hardly an exaggeration to state that this consultation process constitutes a paradigm shift in how international investment law is made.

The Public Consultation changes the way the public and EU government communicate with each other and opens up new paths for democratic input. By allowing direct input into the EU negotiation process, the Public Consultation circumvents traditional channels of policy-making within the EU. Above all, the consultation parts with the usual assumption that the interests of the public are represented and mediated through the Member States. The direct corridor of communication through the Public Consultation can give a voice to interests not well-represented through Member States governments and allows for new transborder interest coalitions.

Furthermore, the Public Consultation can also impact the legal discourse within the EU by bridging the divide between the international and domestic legal communities. The Public Consultation brings the debate about international investment law to professional communities at the domestic level that have so far been at the periphery, at least from the international perspective. For example, the “verfassungsblog”, the internet platform of German Staatsrechtslehre, has launched a debating series on TTIP, which will certainly help increase investment law’s importance in domestic constitutional debates, while also furthering the reverse process of bringing more domestic constitutional law thinking into investment treaty-making. This is likely going to replicate a process within the EU that has taken place more than a decade ago in the United States, where the recalibrated provisions on expropriation in the 2004 US Model BIT were inspired by US takings law. The EU Commission’s initiative, and transparency more generally, will therefore not only tap existing publics, but likely create new ones and affect the relations between center and periphery.

UNCITRAL Rules on Transparency

Another major development on the transparency front is the coming into effect of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration on 1 April 2014. While allowing parties to opt out of the new framework, the Rules reverse the presumptions of confidentiality and privacy in investment treaty arbitration in favor of a presumption of openness. While containing exceptions to protect confidential business information and national interests, the Rules provide for transparency concerning all phases of investment treaty-based arbitral proceedings, including submissions to arbitral tribunals and arbitral awards. The Rules also address participation of non-parties, including amici curiae, and deal with the extent to which hearings should be public. The Rules complement, but also go beyond, the transparency rules already in existence in some regional regimes, such as NAFTA or CAFTA, and, albeit to a more limited extent, in the context of ICSID proceedings, as mentioned before.

In my view, the openness of hearings will positively affect the public’s assessment of investor-State arbitration. It will show that investor-State arbitration constitutes an adjudicatory process which is, despite its idiosyncrasies, similar to that of any other domestic or international court. Moreover, transparency is likely to increase the quality of reasoning, as arbitrators will know that the world will read and critically assess their words. However, there are also critical aspects, such as the limited scope of application of the Rules. They only apply to arbitrations under the UNCITRAL Arbitration Rules that are based on an investment treaty concluded on or after 1 April 2014, unless the parties have opted out of the Rules. Application to treaties concluded prior to that date is only possible if the disputing parties or the contracting States so agree. This significantly limits the otherwise far-reaching transparency obligations under the Rules.

To remedy this shortcoming, UNCITRAL has prepared a transparency convention, which was approved at the beginning of July for submission to the UN General Assembly. In parallel, it may also be worth exploring whether the Rules on Transparency could influence investor-State arbitrations beyond their proper scope of application as soft law. One could, for example, consider whether the principles enshrined in the Rules can be viewed as expressions of general principles of law, in light of the fact that transparency is widely recognized in governing public-private dispute settlement in domestic adjudicatory systems and also increasingly at the international level.

Domestic Freedom of Information Acts

In addition, there are important statutory instruments that can make international investment law more transparent but are little discussed. I am referring here to freedom of information acts that exist in many countries and at the EU level. These can be used – and successfully have been used as early as 2000 in the context of NAFTA arbitrations – to obtain decisions and awards by investment tribunals. Yet, there are also signs that they could enable access to documents relating to (ongoing) investment treaty negotiations. A ruling by the Court of Justice in C-350/12 P, handed down on 3 July 2014, has been interpreted in this way.

Still, freedom of information acts contain various exceptions that can frustrate information requests. They often exclude requests relating to ongoing proceedings and may contain exceptions for information protected under specific confidentiality agreements. If push comes to shove, it will be important to analyze whether such confidentiality agreements can block the statutory right to information, and if it does, whether such agreements are valid under the applicable constitutional law. The path towards transparency via domestic laws may be long and winding. This notwithstanding, the gateway is open; it is just waiting to be used…

Transparency through Scholarship

Finally, scholarship –and by prolongation academic journals and blogs, such as the present one– can play an important role in increasing transparency. They can uncover unknown data and interpret existing data in ways that help our understanding of the world we live in. Scholarship can thereby help to make the invisible visible and also increase the transparency of what is going on in global governance, including in international investment law. A fitting example are the contributions in JWIT’s latest Special Issue with the allusive title “The Anatomy of the (Invisible) Model EU BIT”. They are aiming at distilling the EU’s approach to international investment policy from the ongoing negotiations on the EU-Canada Comprehensive Trade and Economic Partnership. Given that the EU, unlike many other countries, has not formally adopted a model BIT, this scholarly approach can help make the substance of the EU’s negotiations and its assessment by the European public more transparent.

Overall, increasing transparency is certainly not the solution to all problems of international investment law, but it is perhaps the single most important avenue for bringing the system in line with principles of democratic governance and the rule of law. The multiple avenues towards transparency can help in this process.

Stephan Schill, LL.M. (Augsburg) 2002; LL.M. (NYU) 2006; Dr. iur. (Frankfurt) 2008, is a Senior Research Fellow at the Max Planck Institute for Comparative Public Law and International Law and Principal Investigator in the ERC project on “Transnational Private-Public Arbitration as Global Regulatory Governance: Charting and Codifying the Lex Mercatoria Publica”. He is a Member of the ICSID List of Conciliators and the Editor-in-Chief of the Journal of World Investment and Trade.


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Precision and Legitimacy in International Arbitration: Empirical Insights from ICCA

by Susan D. Franck

Washington and Lee University School of Law,
for ITA

This past April, the International Council for Commercial Arbitration (ICCA) held its prestigious biennial conference in Miami, with more than 1,000 people in attendance. Our research team received unprecedented access to collect demographic information and administer a survey. The results offer an unprecedented window into the “invisible college” of the international commercial and investment arbitration community. As data about the world of international commercial arbitration is notoriously difficult to obtain given doctrinal obligations of confidentiality, the data offers a particularly critical baseline for assessment and comparison.

Our research sought to use empirical methods to explore the international arbitration community. At ICCA, we were able to collect detailed information about the counsel, experts, judges and arbitrators. We obtained responses from more than 500 attendees, 413 of whom had served as counsel in at least one international arbitration and 262 of whom had served as an arbitrator in at least one case. We also note than 67 respondents had served as an arbitrator in at least one investment treaty arbitration.

Aspects of the research, including aspects related both to conference themes of precision and justice, will be published as a chapter in the next ICCA Congress Proceedings. One of the core insights from the research relates to burden of proof. The data revealed that individuals who had served as arbitration counsel and/or arbitrator considered issues burden of proof to frequently be outcome determinative in arbitration cases. Nevertheless, those same respondents indicated that international arbitral tribunals only occasionally articulated those standards in advance. This poses a quandary for the international arbitration community. On the one hand, both counsel and arbitrators acknowledged the importance of the burden of proof in a proceeding, yet on the other hand, tribunals did not appear to be doing a thorough job of informing counsel about the particular standards for each case in a timely manner. The gap between the responses raises an issue as to whether there are opportunities to create targeted improvements in international arbitral procedure to generate enhanced precision.

Yet, issues of procedure are nuanced and may require tailored solutions. For both questions involving burden of proof—namely whether proof issues were outcome determinative and articulated in advance—we identified a statistically meaningful divide among lawyers with common and civil law training. Specifically, common law lawyers were less likely to identify that arbitrators provided the burden of proof in advance, whereas civil law lawyers were more likely to conclude arbitrators frequently articulated the burden of proof in advance. Likewise, common law trained lawyers were less like to identify that burden of proof was outcome determinative, whereas civil law lawyers believed proof was more likely to be outcome determinative in international arbitration.

We also surveyed respondents about their views on important topics in international arbitration related to fraud, document withholding, costs, arbitral reappointments, and diversity. This first of its kind survey research sheds light on the “invisible college” of international arbitration; and we hope that the results provide a historical moment for the arbitration community that serves as a constructive launching point for an informed discussion about how the larger international law community should evolve.

In addition to myself, the research team also comprised Dr. Anne van Aaken, Professor of Law and Economics, Legal Theory, Public International Law and European Law, University of St Gallen; Chris Guthrie, Dean and John Wade-Kent Syverud Professor of Law, Vanderbilt University School of Law; Jeff Rachlinski, Professor of Law, Cornell University School of Law; James Freda of Freshfields Bruckhaus Deringer US LLP’s international arbitration group; Tobias Lehmann, a Ph.D. candidate at the University of St. Gallen; Kellen Lavin, a recent graduate of Washington & Lee University School of Law; and a talented team of current Washington & Lee students.


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Answers to the Summer Quiz 2014

by Michael McIlwrath

General Electric Company

Packing the summer stadiums

Packing the summer stadiums

With hopes that those in the northern hemisphere had a fun summer packed with arbitration-related events for themselves and their families, below are the answers to this year’s summer quiz. The answer keys to the crossword and the word hunt were published in August.

While a Ph.d is not required to read the Kluwer arbitration blog, the winner of the dinner in Florence (for speed and accuracy of answers) went to Barbara Warwas, who is based in the UK and recently obtained her doctorate in international arbitration. Coming in at a close second was Phil Ray, a dispute resolution specialist (and retired Siemens in-house counsel) in Germany.

Congratulations to both Barbara and Phil!

Summer 2014 Quiz Answers

1. Which one of the following institutions did NOT introduce revised arbitration rules in 2014?
A. LCIA
B. ICC
C. ICDR
D. WIPO

Answer: B, the ICC, which last updated its rules in 2012.

2. Which of the following arbitration institutions introduced revised mediation rules in 2014?
A. LCIA
B. ICC
C. ICDR
D. SIAC

Answer: B and C, the ICC and ICDR. (SIAC does not provide a mediation service, and instead relies on mediation by the Singapore Mediation Centre.)

3. The International Bar Association (IBA) has published rules or guidelines for all but which of the following areas of international arbitration practice?
A. Costs
B. The conduct of party representatives
C. Evidence
D. Conflicts of interest
E. How to draft an arbitration clause

Answer: A, Costs, an area where there remains wide variability in international arbitration practice.

4. Which of these institutions was sued in a national court for allegedly promoting the unlawful practice of law by foreign lawyers, and by whom?
A. The American Arbitration Association (AAA), by the National Trial Lawyers Association
B. The Court of Arbitration of the Milan Chamber of Commerce, by the Italian National Bar Association
C. The Russian Association of Arbitration (RAA), by the Federal DUMA (parliament)
D. The LCIA India, by the Association of Indian Lawyers

Answer: D, the LCIA India. Helping to further discourage foreign parties from considering India as a place of dispute resolution, the Association of Indian Lawyers filed suit against the LCIA India in India for promoting the practice of international arbitration. Since it can be conducted by foreign counsel, allegedly this would violate India’s restriction against the practice of foreign lawyers.

5. True or False: the English Arbitration Act of 1996 has been interpreted by the English courts to require any arbitrator appointed in an arbitration seated in London to be from the caste of Queens Counsel or higher.
A. True
B. False
C. They wish
D. “Higher”?

Answer: B, False. But you got full credit if you answered C or D. For parties from countries that do not have a tiered bar (eg, most of the world), the domestic practice of appointing barristers (often QC’s) to conduct arbitration advocacy can be confusing.

New Horizons

6. In 2014, UNCITRAL Working Group II decided to explore the possibility of a new multi-lateral convention on which of the following topics?
A. Recognition and enforcement of foreign court judgments
B. Recognition and enforcement of foreign arbitral awards
C. Recognition of famous arbitrators
D. International standards of conduct for arbitrators
E. Enforcement of foreign settlement agreements reached in mediation

Answer: E, recognition of settlement agreements reached in mediation. (A, of course, is a frequent topic of discussion but the lack of such a convention is one reason that arbitration is often more attractive for cross-border contracts than court litigation. B, of course, already exists. C happens naturally. D would be good to have, although the IBA has partially occupied this space well with different guidelines.)

7. Which of the following locations announced plans in 2014 to introduce new mediation procedures, quality control, and certification requirements to become a more attractive international forum for business disputes?
- Singapore
- London
- New York
- Switzerland
- Berlin

Answer: Singapore, which is taking the lead to develop international mediation just as it previously did with international arbitration.

8. The procedural device known in the USA as “depositions”, oral testimony taken in advance of a hearing, is routinely used in the domestic arbitration of which other countries?
A. England and Wales
B. Germany
C. Australia
D. Singapore
E. Brazil
F. None of the above

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

9. For the purpose of calculating arbitrator fees, in which country are hearings broken into “sittings” typically of 2 to 4 hour duration, with anything over considered a second sitting entitling the tribunal to additional fees?
A. India
B. Hong Kong
C. Finland
D. Russia
E. England

Answer: A, India

10. In July 2014, the largest arbitration award in history, USD 51 billion, was rendered in the Yukos cases against Russia. With respect to the possibility of collecting such an award, comparisons might be made with Franz Sedelmayer, who once successfully collected a different arbitration award for expropriation against Russia. Sedelmayer says this took over 10 years and required some 60 enforcement cases and litigation in 80 countries.
How large was Sedelmayer’s award compared with Yukos?
A. 16%
B. 6%
C. 0.6%
D. 0.06%
D. 0.00006%

Answer: D. Sedelmayer’s award was for less than $3 million.

11. For the price of $30, you can still buy which of the following in support of an international arbitration?
- an hour of document review by a qualified lawyer at a legal process outsourcing company in India
- coffee for an arbitration hearing held at the Intercontinental Hotel in Geneva (three arbitrators, tribunal secretary, and a counsel and party for each side)
- a new copy of the Kluwer book, International Arbitration and Mediation: A Practical Guide, by Messrs. Mcilwrath and Savage
- Discounted tickets to a new Broadway musical for an arbitral tribunal holding evidentiary hearings in New York

Answer: A, an hour of document review by a qualified LPO lawyer. Costs may vary, and some sources on the internet claim hourly rates ranging from $20 to $60 per hour (presumably all negotiable depending on the case). As for the coffee service for a hearing, we found various options at well-regarded hotels in Geneva and none would have been for less than $100 (and most considerably more). As for the list price of the Kluwer book that John and I co-authored, it lists for Euro 150, which is actually on the low end for international arbitration texts. A good argument could be made that arbitration would be more accessible if the prices of specialized texts were lower. Discounted tickets to a new Broadway musical? Good luck finding them at any price.

Efficient and Effective Methods

12. Which one of the following is advice contained in the ICC Guide for Inhouse Counsel and other Party Representatives:
A. Because ICC Rule 30 requires an arbitral tribunal to render its award within six months, parties should refuse to pay the advance on fees unless the tribunal commits to comply with this requirement
B. Parties should ask themselves whether it would be better not to hear any witnesses in the arbitration
C. In order to encourage efficient handling of the case, parties should inform the tribunal at the case management conference that they intend to publish the arbitration award and all information about how the case was conducted
D. Parties should always appear at the case management conference in person rather than remote participation via video or teleconferencing

Answer: B. The Guide advises parties against just assuming that an expensive hearing must be scheduled at some point in the future to hear witnesses, and asks them to reflect on whether the dispute is one that really requires witness testimony to be decided. It is sensible advice that may be counter-intuitive to some lawyers.

13. Which of the following is NOT a recommendation of the IBA Guidelines on Party Conduct in International Arbitration?
A. Parties may communicate with an appointed arbitrator they nominated in order to discuss potential candidates for presiding arbitrator
B. Parties may compensate witnesses for the loss of their time in preparing to testify (and for testifying)
C. Where there is a finding of severe misconduct by a Party Representative, arbitral tribunals may take the remedial step of an order prohibiting their further participation in the proceedings
D. If a Party Representative believes false evidence may be presented, she or he should promptly take steps to prevent this, including by resigning from the case

Answer: C. The Guidelines do not take the step of advising the tribunal to remove counsel from the case, and it is doubtful that a tribunal would have such a power even if it were inclined to do so.

14. Which of the following arbitration institutions once had the practice of publishing on the stock exchange the name of any party that failed to comply with an arbitral award?
A. The American Arbitration Association in New York (AAA)
B. The Hong Kong International Arbitration Centre (HKIAC)
C. The Court of Arbitration of the Finnish Chamber of Commerce in Helsinki (FCC)
D. Arbitration Centre of Lisbon (ACL) of the Portuguese Chamber of Commerce and Industry

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


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Untying the Knot: Estoppel and Implicit Designation of a Constituent Subdivision or Agency under the ICSID Convention

by Inna Uchkunova

International Moot Court Competition Association (IMCCA)

and Oleg Temnikov

Foreword

Designation by a State of a constituent subdivision or agency provided for in Article 25, paragraphs 1 and 3, of the ICSID Convention has recently sparked a debate particularly in terms of the manner in which the designation is made and communicated to the Center.

This is the subject of the present post.

I. Meaning of “constituent subdivision or agency of a Contracting State”

Past tribunals have noted that “the term ‘constituent subdivisions’ covers a fair range of subdivisions including municipalities, local government bodies in unitary states, semi-autonomous dependencies, provinces or federated States in non-unitary States and the local government bodies in such subdivisions.” (Government of the Province of East Kalimantan v. PT Kaltim Prima Coal, Rio Tinto PLC, BP P.L.C., Pacific Resources Investments Ltd., BP International Ltd., Sangatta Holdings Ltd.& Kalimantan Coal Ltd., ARB/07/3, Award, 28 December 2009, para. 191)

The term “agency” refers to “State corporations such as national petroleum corporations, utilities, mining corporations, etc.” (NIKO Resources (Bangladesh) Ltd. v. People’s Republic of Bangladesh, BAPEX and PETROBANGLA, ARB/10/11 & ARB/10/18, Decision on jurisdiction 19 August 2013, para. 286)

In either case, emphasis is put on the functions fulfilled by the given entity, i.e. they must be vested in the Government but delegated to the entity and the latter must be controlled in some measure by the Government. (NIKO Resources, paras. 228, 261)

II. What is a designation?

Designation is “an act by a Contracting State by which the State confers upon the agency the capacity to conclude a valid ICSID arbitration agreement and become a party to an ICSID arbitration.” (NIKO Resources, para. 325) The consent to ICSID arbitration expressed by such an entity needs to be approved by the State. This may be viewed as the so-called gate-keeping role of designation which allows the State to control an entity’s dealings with foreign investors. Seemingly, approval needs to be made in written form. (NIKO Resources, paras. 301)

III. Purpose of the designation

The fairly neglected issue of designation assumes particular importance in terms of jurisdiction. Since the ICSID Convention gives jurisdiction with respect to disputes between an investor and a State, a State subdivision or agency may participate in proceedings only if designated.

The main function of designation is therefore to confer on the entity a “limited international capacity” and thus to enable it to become a party in the proceedings. (NIKO Resources, paras. 281, 329) In contract-based arbitration, if designation is made, this would even permit the entity to appear as a claimant in the case.

One shall distinguish between designation and attribution. Thus, in contract-based cases, if the State is not a party to the contract, the acts of the entity may or may not be attributable to the State, but this does not change the jurisdiction of the tribunal. In such cases, since arbitration is based on consent as expressed in the arbitration clause, the State will not be a proper respondent and the tribunal’s jurisdiction will at all times depend on the existence of a valid designation. (See NIKO Resources, para. 248) The case of a treaty-based arbitration is not so problematic in the sense that the respondent State may not hide itself behind the separate personality of a subdivision and would not be able to escape jurisdiction in this way as far as treaty breaches are concerned. (See C. Schreuer et al., The ICSID Convention: A Commentary (CUP 2009) at 151)

IV. Who is competent to make the designation?

As the text of Article 25(1) shows, designation is made by the State, but this does not indicate which the competent State authority is. This will depend on the national law of the host State and may refer to the Government, the Ministry of Foreign Affairs, etc. For example, in the case of NIKO Resources, the tribunal had to deal with a dispute relating to the exploration of marginal gas fields – an issue falling within the competence of the Ministry of Energy and Mineral Resources. In view of this, the tribunal decided that this Ministry is the competent designating authority.

V. Means of effecting a designation

The jurisprudence of ICSID tribunals shows that there are three types of designation:
general designations which are typically entered in the list of “Designations by Contracting States Regarding Constituent Subdivisions and Agencies” published by ICSID. An entry on the list of is not a requirement under Article 25(1);
ad hoc designations which are limited to a specific investment and the corresponding arbitration agreement and
implicit designations.

The latter type of designation has split past tribunals. In Cambodia Power case, the tribunal held that a written communication is inherent in the notion of designation, otherwise the words “to the Centre” would be otiose. Nevertheless, the tribunal endorsed the view that a valid designation may also be made in a national legislation or a bilateral investment treaty insofar as it achieves public notoriety. (Cambodia Power Company v. Kingdom of Cambodia and Electricité du Cambodge, ICSID Case No. ARB/09/18, Decision on jurisdiction 22 March 2011, paras. 225, 245) Based on this view, the tribunal concluded that the designation made in casu in a private contract lacks the necessary notoriety. The tribunal also held that since no step had been taken on the part of the State to bring the private contract to the attention of the Centre, a designation cannot be validly communicated by the claimant with its request for arbitration. (Cambodia Power, paras. 246, 254) In this case, the tribunal was concerned with achieving stability and security, however its conclusion does not answer the question what would happen if the State has led the investor to believe that it would make the designation but eventually does not take the necessary measures in order to escape jurisdiction.

By contrast, in the East Kalimantan case the tribunal accepted that designations may be made ad hoc and that Article 25(1) does not set out any formal requirements. Consequently “the designation requirement may in particular be deemed fulfilled when a document that emanates from the State is filed with the request for arbitration and shows the State’s intent to name a specific entity as a constituent subdivision or agency…” (East Kalimantan, paras. 192-193) The tribunal therefore put the emphasis on the clear intention to designate and eventually held that the minutes on which the claimant relied in this case did not meet this threshold since they only related to the allocation of certain shares and did not concern designation at all.

Recently, the tribunal in the NIKO Resources case turned the tide. Taking the word “designation” into context and comparing it with the word “notification” which appears in different texts in the ICSID Convention, the tribunal held that designation is not the same as formal notification. The tribunal thus held that designation may even be made implicitly. (NIKO Resources, para. 299) The tribunal was seised with a case in which the State had approved the arbitration clause contained in the contract whose breaches gave rise to the dispute. The tribunal decided that this amounts to a valid implicit designation. The tribunal highlighted that ad hoc and implicit designations are by their very nature not given general publicity. (NIKO Resources, paras. 291, 301)

VI. Made to the Center

It has been generally accepted in the jurisprudence of ICSID tribunals that a designation must be made known to the Centre. Consequently, under Article 25(1) of the ICSID Convention the designation must reach the Center.

VII. Who is competent to communicate the designation to the Center?

This question has split tribunals. As noted in the previous section, the tribunal in Cambodia Power case decided that only the State may communicate the designation to the Center. On the other hand, and this seems to be the preferred view, the tribunal in NIKO Resources accepted that “an arbitral tribunal may give effect to an existing ad hoc designation which may be made known to ICSID by an investor when filing a Request for Arbitration by a statement pertaining to a specific dispute, particular facts, and in accordance with Institution Rule 2.” (NIKO Resources, para. 327) The tribunal underlined that the objective of protecting the State against poorly considered commitments by agencies is achieved by the requirement of approval under Article 25(3).

VIII. Timing of the communication

As the preceding section shows, in principle, a designation is made and communicated to the Center before the proceedings are instituted. However, in the case of ad hoc and implicit designations, they may be communicated by the investor when filing the request for arbitration.

IX. Obligations of good faith and estoppel

In NIKO Resources, Bangladesh had approved the consent to arbitration by Petrobangla and BAPEX but did not communicate the designation to the Center. Without the recognition of the implicit designation, the completion of the procedure would depend on the State and the investor would be left with no remedy. In this regard, it must be noted that in East Kalimantan, the tribunal accepted the applicability of the doctrine of estoppel as to designation. It held that the following test reflects customary international law: (i) a clear and unambiguous statement; (ii) made voluntarily and unconditionally; (iii) on which the other party has relied either to its detriment or to the advantage of the party making the statement. (East Kalimantan, para. 211) However, the first element was not satisfied, and, therefore, no situation of estoppel had occurred. Nevertheless, the case shows that considerations of good faith require that the State be held to its side of the bargain.

Conclusion

The above discussion shows that an implicit designation by way of approval on the part of the State of an arbitration clause is a valid means of designating a State entity for the purpose of Article 25 of the ICSID Convention. The communication of the designation may be made by the investor along with its request for arbitration. Additionally, future tribunals should pay specific regard to considerations of estoppel. As a consequence, in some cases even a promise to designate given by the host State may reach the threshold of implicit designation.


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