Posts tagged: arbitration appointment

Vis Pre-Moot in London

Pre-Moot in London:

On the weekend 27-28 February 2016 Fox Williams’ International Arbitration Group will be hosting a Willem Vis Pre-Moot in their new offices in the City of London.

The Pre-Moot will be on the official problem of the 23rd Vis Moot.

Teams and arbitration practitioners, lawyers and academics with interest in participating or judging are encouraged to register their interest in attending the Pre-Moot as early as possible.

Precise timings will be circulated nearer the time depending on the number of participants.

Location:

The Pre-Moot will be held at Fox Williams’ new offices at 10 Finsbury Square, London EC2A 1AF.

Registration:

For further information and registration please contact Ms Sabrina Janzik at sjanzik@foxwilliams.com   (http://www.foxwilliams.com/profiles/132/)

 

We look forward to welcoming you to the 23rd Willem Vis London Pre-Moot !

State Appointee and Independence

Venezuela is again pushing the boundaries of arbitral independence (see Repeat Appointments and Conflicts of Interest below).

In Saint Gobain v Bolivarian Repulic of Venezuela (2013) an ICSID party-nominated arbitrator has survived an attempt to disqualify him on the ground that he manifestly lacked independence and impartiality, qualities required by Article 14(1) of the ICSID Convention.  At the time of appointment, the arbitrator was a lawyer in the Argentinian Attorney General’s Office, a position he subsequently left.  The claimant proposed his disqualification, arguing that he would have been disqualified from sitting as a judge under the International Court of Justice (ICJ) Statute, because his position was political.  Even it were not political, there was an issue conflict, in he had previously argued from Argentina’s perspective issues that may arise in this case.

Rejecting the challenge, the remaining members of the tribunal noted that the ICJ Statute was of no direct application.

The arbitrator’s position was not, of itself, incompatible with his role as an arbitrator.  The tribunal noted the arbitrator was not subject to any current control by Argentina or Venezuela and it rejected the claimant’s concern that there was an issue conflict.  There was no evidence that cast reasonable doubt on his impartiality and independence, let alone that made it highly probable that he lacked these qualities.  The fact that a lawyer has argued a particular position in the past does not necessarily mean that he will take the same position in the future.  The tribunal accepted that the situation could be different if an arbitrator is simultaneously acting as counsel for a party in another arbitration, but there was no indication here that that was the case.

 

I am pleased to announce the ‘birth’ of the Guide to the IBA Rules

I am pleased to announce the ‘birth’ of  “The IBA Rules on Taking Evidence in International Arbitration – A Guide”.  The Guide reproduces the Rules and the Commentary by the IBA Committee and I have added my own thoughts on how practitioners and arbitral tribunals might approach issues that arise from the Rules.

The IBA Rules are commonly used in international commercial arbitration (and investor – state arbitrations) and yet there are few guides to their use and interpretation.  I trust my thoughts benefit the discussion of their application.

The book is available from the publishers, Cambridge University Press, at http://www.cambridge.org/gb/knowledge/isbn/item6969277/?site_locale=en_GB (and other good bookshops!)

 

 

LCIA fees increase

 

The LCIA fees increased with effect from 1 July 2012. The LCIA administration fee  increased from £1,500 to £1,750 and the maximum hourly rate that arbitrators appointed by the LCIA may charge (other than in exceptional cases) increased from £400 to £450. The registration fee for the LCIA to act as appointing authority is £1,250.

The LCIA fees continue to give greater transparency than, say, the ICC.  The latter continue to have a value based remuneration paid in stages which can result in a generous fee for the tribunal if matters settle before substantial work is undertaken.

Law of the Arbitration Agreement

In Sulamerica v Enesa Engenharia [2012] , the Court of Appeal was asked to determine the law applicable to an arbitration agreement contained in two insurance policies. Whilst the law of the insurance policies was Brazilian, the Court confirmed that the law of the arbitration clause is legally distinct from the contract of which it forms a part. On the facts, the Court upheld the High Court’s decision that the law of the seat of the arbitration (which was English law) should apply in this case and set out a test by which to ascertain the relevant law.

Background

The case involved two policies relating to the construction of a hydroelectric generating plant in Brazil. The insured, Enesa, submitted a claim under the policies for physical damage and consequential losses. The insurer, Sulamerica, denied liability under the policies and commenced arbitration proceedings seeking declarations of non-liability and that a material alteration had occurred. The policies provided for arbitration in London.

In response, Enesa commenced proceedings in the Brazilian courts pursuant to the exclusive jurisdiction clause  contained in the policies. Sulamerica sought an interim anti-suit injunction in the English Commercial Court to restrain Enesa from pursuing the Brazilian proceedings in view of the arbitration afoot.

In the anti-suit proceedings, Enesa submitted that the parties had impliedly chosen the law of Brazil as the law governing the arbitration agreement. They relied, in particular, on the facts that the Policy was expressly subject to Brazilian law and the exclusive jurisdiction of Brazilian courts; and that the parties, location of risk and events in question were all Brazilian. In response, Sulamerica argued that the law with which the arbitration agreement has its closest and most real connection was that of England, because the arbitration clause provides that the seat of the arbitration is to be London, England.

First Instance Decision

At first instance, Mr Justice Cooke agreed with Sulamerica that the law of the seat (the law of England) should apply to the arbitration agreement. In so doing, he adopted a ‘closest connection’ test, namely “if there is no express or implied choice of law, the arbitration agreement will be governed by the law with which the agreement has its closest and most real connection“. He determined that the choice of supervisory jurisdiction as England was the deciding factor in this case.

Court of Appeal Decision

The Court of Appeal upheld the Judge. However, the Court provided a more sophisticated analysis and recognised that the closest connection will not always be to the law of the seat. The Court’s two pronged approach was that (1) one cannot assume that the proper law of the arbitration agreement will follow the law of the contract; and (2) that there should be a “three-stage enquiry” into (i) express choice; (ii) implied choice and (iii) closest and most real connection, in that order (albeit (ii) and (iii) would often be hard to separate). Contrary to the decision of the Judge, the Court accepted that, in the absence of other factors, the implied law of the arbitration agreement will often be the same as the law of the substantive contract.

Here, the Court first determined that there was no implied choice of Brazilian law. The two key factors were the choice of another country as the seat of the arbitration (which imported an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to proceedings); but also the fact that, under Brazilian law, the agreement to arbitrate would be enforceable only with Enesa’s consent, which tended to undermine the arbitration agreement. The Court then turned to limb (iii) of its test and determined that the law of England had the closest and most real connection with the arbitration agreement in light of the fact that the arbitration was to be held in England and that the English Courts would exercise supporting and supervisory jurisdiction.

As regards the mediation provisions within the policies, the Court of Appeal concurred with the Judge that these did not give rise to a binding obligation to mediate (and so there was no requirement to comply with the mediation clause in order to be permitted to commence arbitration). It was noted that the relevant condition did not set out any defined mediation process, nor did it refer to the procedure of a specific mediation provider.

Finally, the Court of Appeal agreed with the Judge that the scope of the arbitration clause included determinations as to liability. The insured had argued that the words “shall fail to agree as to the amount to be paid” in the arbitration clause meant that the clause applied only to quantum disputes. The Court of Appeal disagreed and noted that it would be unusual for parties to establish separate procedures for determining what in many cases would be different aspects of the same dispute. He had no difficulty in holding that a dispute as to whether there was any liability to pay anything at all fell within the above wording.

Comment

Although the Court of Appeal has provided clearer guidance as to the law which will apply to the arbitration agreement in the absence of express agreement, the case underlines the importance of making an express determination. In particular, it is important to note that an arbitration agreement is a separate agreement to the underlying insurance policy. A policy that provides that a particular law will apply to the policy does not, without more, make the arbitration agreement within the policy subject to that same law.  

Whilst the result is welcome the refusal of the Court of Appeal to give definitive guidance as to how to resolve the “rather unsatisfactory tension” between the approach in cases such as Sumitomo Heavy Industries v Oil and Natural Gas Commission [1994] where it was held that the choice of law to govern the substantive contract will usually be decisive in determining the proper law of the arbitration agreement and CvD  [2007] where it was held that the the choice to arbitrate in London carried with it a choice of English law.  The Court of Appeal said that whichever was the correct approach they led to the same conclusion on the facts ands hence it was unnecessary to decide between them.  Given the desirability of certainty (which the Court recognised) the failure to give definitive guidance is disappointing and either a venture to the Supreme Court or another trip in a different case to the Court of Appeal will be required to bring the required certainty.

Non-sensical dispute resolution clause?

It happens all too often.  In Sulamerica CIA Nacional De Seguros SA v Enesa Engenharia SA [2012]  the contract provided, by clause 7, that the contract was “governed exclusively by the laws of Brazil” and that any disputes were “subject to the exclusive jurisdiction of the courts of Brazil”.   Clause 11 provided for mediation and that if mediation was not successful or either party refused to participate then the dispute was to be referred to arbitration.

Clause 12 dealt with the arbitration and provided  that in the event that the parties failed to agree through mediation the dispute be referred to arbitration with a London seat.  The issue arose, unsurprisingly, whether a substantive dispute was to be litigated in the Courts of Brazil or arbitrated in London.   The Court held that the arbitration clause was governed by English law on the basis on a London seat – an unsurprising result in light of CvD.  Furthermore, insofar as the mediation provision was an integral part of the agreement to arbitrate it was governed by the same law.  The arbitration clause was an agreement to arbitrate whenever there was a failure to settle by mediation. Entering into mediation proceedings was not a condition precedent to the existence of a binding arbitration agreement.

Clause 12 obliged all disputes to be referred to arbitration notwithstanding that this deprived clause 7 of much of its utility. Clause 7 remained of some use as it enabled the courts of Brazil to declare the arbitrable nature of a dispute, to compel arbitration, to declare the validity of the award, to enforce the award or to adjudicate on the merits if the parties agreed not to arbitrate.  No other court could adjudicate on the merits.  Viewed in this way, apparently, clause 7 and clause 12 could live alongside each other (whether they did so happily is another matter!).

Recourse to National Courts – problems with service

Issues arise either before or during (or indeed after) an arbitral reference that require the intervention of the Courts of the seat exercising their supervisory jurisdiction.  The Courts of most countries and certainly the UK are swift and supportive in their role: the Courts are willing to grant injunctions in appropriate cases and generally assist the reference.

Things can however stall when it comes to serving the Court documents.  Unlike a Request for Arbitration sent by courier from the institution administering the reference, Court documents require formal service as it is an interference with sovereignty.  Ordinarily, service is a exercise of the power of the Court.  In a case involving service out of the jurisdiction (which will often arise in international arbitration), it is an exercise of sovereignty within a foreign state by requiring the defendant to the Court proceedings to contest matters in what is to him, a foreign state.

In recent months the English Courts have addressed this issue with surprising frequency.  The issue the Courts have grappled with arises from the very considerable delays that arise with service in countries such as Russia (which can be a year or so).   Firstly, in February 2011, the Court of Appeal alerted the profession and the  judiciary to a potential weapon of deeming service to have occurred or providing alternative means of service (Cecil v Bayat).  This was followed swiftly by a series of judgments using this new toy in the toolbox: (Bacon v Automattic – May 2011; JSC BTA Bank v Ablyazov and BNP Parisbas v Open Joint Stock – both November 2011).  All of those judgments permitted alternative service.  Following immediately on the Court of Appeal in Abela v Baadarani (December 2011) refused alternative service on the facts emphasising the exceptional nature of the remedy.  In that case the claimant had to win on alternative service otherwise the claim was struck out – and it failed to persuade the Court.

This perhaps shows the Courts trying to craft a remedy to do justice in support of arbitration.  We are sure not to have heard the last of this!

ICC Arbitration Debate on Arbitrator and Counsel from same Chambers

At an interesting debate on Tuesday (14 June 2011) hosted by Linklaters there was a clear feeling that whilst UK practitioners would be confident that there was no perception difficulty with counsel and arbitrator from the same chambers, the same could not be said from an international perspective.  The topic is very topical especially in light of the ICSID Solvenia decision where a party was prevented from using counsel of its choice.  That decision has been widely criticised and, essentially, not followed in a later ICSID decision, Romania where the tribunal regarded the Slovenia decision as a sanction for the failure to make proper disclosure (of the identity of counsel) in a timely fashion. 

There was consensus at the debate that early disclosure was desirable, indeed essential, in order that any issue could be dealt with at an early stage and before time and cost were wasted.  The tip that appeared to have near universal endorsement was that there should be a running (i.e. regularly updated) “cast-list” identifying counsel engaged by any party.   John Beechey of the ICC Court said that the ICC was encouraging tribunals to adopt this practice.  Equally, John made it clear that:

(a) the ICC Court would back tribunals robustly if there was any attempt to derail an arbitration by a late and tactical engagement of counsel from the same chambers as a member of the tribunal;

(b) that it was the UK that needed to get its house in order rather than the rest of the world being made to understand a peculiarly UK phenomenon ; and

(c) that the ICC, at least, had no appetite to make all appointments to a tribunal as a route to avoid any potential conflict.

Repeat Appointments and Conflicts of Interest

In Tidewater Inc and others v Venezuela (ICSID Case No ARB/10/5) (23 December 2011) the claimants filed a proposal to disqualify Professor Stern, contending that multiple appointments by the same party (Venezuela) and by the same counsel (as had occurred) gave rise to objective and justifiable doubts regarding her independence and impartiality.

In accordance with ICSID rules the challenge was adjudicated upon by the other 2 arbitrators.

The decision of the arbitrators confirms that, in case of multiple appointments by the same party, the three-year period prescribed in the IBA Guidelines on Conflicts should be interpreted flexibly.  That must surely be correct – conflicts cannot be judged on whether the appointment was on a Tuesday or a Wednesday.

They applied the  ‘obvious and highly probable’ test of not being capable of being relied upon to exercise independent and impartial judgement and found it not met.  Such a test is, I suggest, too high.  It sets the bar much closer to the U.S. test of ‘would have to conclude’ than the English test of ‘real possibility’ and the ‘reasonable suspicion’ or ‘reasonable apprehension’ tests that prevail in European Court of Justice, Australia and South Africa and .  The evidential burden seems near impossible to surmount: for an applicant to show that the that appointments might have created a relationship of influence on an arbitrator’s judgment or that the arbitrator would have been influenced by factors outside the case record by virtue of knowledge derived from other cases, seems near impossible.  It appears to create the burden of showing subjectively the arbitrator’s state of mind rather than a legitimate objective doubt.

Equally the fairly relaxed attitude of the arbitrators to the disclosure, both forgiving an initial non-disclosure and relying on the publicly available information for ICSID matters is, I suggest, inadequate.  The IBA Guidelines and the cases make it clear that the duty is on the arbitrator to disclose and any attempt to throw the burden back on the parties to undertake due diligence on the arbitrators is to be resisted.

 

Jivraj in the Supreme Court

I understand that the hearing of the appeal in Jivraj v Hashwani (see posts of 20 July and 8 December 2010 below) will take place in the Supreme Court in early April with both the LCIA and ICC intervening.

Watch this space!

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