Posts tagged: efficiency

Costs – Assessing the Amounts

The Courts have been grappling for some time with only allowing a proportionate and reasonable amount to be recovered by the successful party.  A useful rule of thumb (which could apply equally to arbitration) was expressed by Leggatt J in Kazakhstan Kagazy plc v Zhunus [2015]:

The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.”

This should be readily translatable into an answer expressed in currency.

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 (and other good bookshops!)



Fiona Trust not applicable to Expert Determination

In Barclays Bank v Nylon Capital [2011]. B had invested £250 million in two hedge funds in the Cayman Islands. The funds were managed by N, which was a limited liability partnership. B was a member of the partnership. A partnership agreement set out how the profits were to be allocated. B withdrew its investment, and a dispute arose as to the allocation of profits. However, no formal allocation of profits had been made. B issued a claim for a ceratin declarations. The partnership agreement contained an expert determination clause. It stated that in the event of a dispute regarding profits, an affected party could refer the matter to an accountant for determination, including the determination of any dispute concerning the interpretation of the agreement. The reference could be made 30 days after allocation of profits. N argued that B’s claim should be stayed pending determination of the dispute by an expert under the agreement. B argued that the court should first determine the jurisdiction of the expert, and the expert had no jurisdiction because N had not yet formally allocated the profits.

Against that backgound the court determined the jurisdiction of the expert. The term “jurisdiction of the expert” was a convenient way of encapsulating the issue as to whether under the contract the expert had a mandate to enter into a determination of any part of the dispute between the parties. The extent, and limits, of his mandate was a different question.  Although, generally speaking, parties should adhere to the agreement which they had made, the approach to an expert determination clause should not be the same as the approach to an arbitration clause. Arbitration was usually an alternative to a court for the resolution of all the disputes between the parties. However, in contradistinction, expert determination clauses presupposed that the parties intended certain types of dispute to be resolved by expert determination and other types by the court. The rational of Fiona Trust v Privalov [2007] did not therefore apply.  It was neither just nor convenient to defer a decision until after the expert had determined whether he had jurisdiction,  Under the agreement 30 days had to elapse after allocation of profits before the dispute could be referred to the expert. That made it clear that the making of an allocation was a condition precedent to the appointment of an expert. The expert had no jurisdiction to determine any issues until there had been an allocation.

This seems a sensible approach.  the parties had agreed that the expert was to consider the allocation of profits but only after the profits had been allocated.  Without an allocation the expert had no jurisdiction.

Cross Border Mediation – Changes to Rules and New Legislation

The EU Mediation Directive, which seeks to promote the use of mediation in cross-border disputes, has been partially implemented in England and Wales in advance of the deadline for total implementation by 21 May 2011 and is a welcome development to encourage and bring uniformity to mediation across Europe.    

The Directive covers five areas:

  1. ensuring the quality of mediation, by encouragement of the development of a voluntary code of conduct and training of mediators (Article 4);
  2. recourse to mediation, by the Courts’ invitation (Article 5);
  3. enforceability of agreements resulting from mediation, with the express consent of the parties to the agreement and provided that the agreement is not contrary to the applicable law of the enforcing state (Article 6);
  4. confidentiality, so that neither the mediator nor the parties can be compelled to give evidence regarding information arising out of or in connection with the mediation (Article 7); and
  5. limitation, so that a party pursuing mediation shall not be adversely effected by the passing of any period of limitation during the mediation process.

The Ministry of Justice considered that the arrangements in England and Wales in respect of mediation already satisfied the requirements of Articles 4 and 5, but that Articles 6, 7 and 8 required further implementation.  Accordingly, the Civil Procedure Rules have been amended.  Part 78 has been amedned to allow enforcement of the content of a written mediation agreement whilst maintaining the confidentiality of the agreement. Consequential amendments were also made to Parts 5, 7, 8, 31 and 32 and Practice Direction 5A. These amendments implemented Article 6 but only partially implemented Article 7. A new Statutory Instrument, the Cross-Border Mediation (EU) Directive Regulations 2011, implementing rules as to the confidentiality of mediation and the suspension of limitation during mediation came into force on 20 May 2011.

The Regulations will only apply to cross-border disputes that start on or after 20 May 2011 and should bring a welcome boost to the use of mediation in cross border disputes.

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.

Arbitration “Super Injunctions”

Whilst the English tabloid press works itself into a frenzy over ‘super-injunctions’ to protect the privacy of the rich and famous from exposure and ridicule over their adultery and other indiscretions, the Commercial Court and the Court of Appeal are steadily refining the ‘super-injunction’ of the arbitration field: the anti-suit injunction.  The latest word has come from the Court of Appeal in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC

In dismissing the appeal the Court of Appeal held that where s.44 of the 1996 Act applied, it would be wrong as a matter of principle to utilise s.37 of the 1981 Act to get round the limitations of s.44.  However, where no arbitration had been commenced and none was intended (and hence s.44 was not engaged), and a party asked the court to protect its interest to have its disputes settled in accordance with its arbitration agreement, it was open to the court to consider whether, and how best, if at all, to protect such a right to arbitrate by the use of s.37 of the 1981 Act. Whether the Court would assist a claimant, and if so, how, was a matter for the Court’s discretion.  In exercising that discretion it would take care not to usurp any arbitral process, but it was clear that it had the jurisdiction to intervene in an appropriate case. That was not inconsistent with s.1(c) of the 1996 Act. The words “should not intervene” in section 1(c) were directed towards intervention in the conduct of an arbitration, and not towards intervention in the conduct of litigation which threatened the safety of an arbitration agreement or any possible arbitration pursuant to it. In any event, section 1(c) was only one of three principles stated in section 1: the other section 1 principles (in particular, the need to avoid unnecessary delay and expense) might well point in favour of court intervention.

Hydropower is helpful in clarifying the relationship between section 37 of the 1981 Act and section 44 of the 1996 Act.  Most recent decisions indicate that where an interim injunction is sought, as a matter of discretion, the 1981 Act power should be exercised to grant interim relief only where it would also be appropriate for the court to act under section 44.  However, that restriction does not apply where an application is made for a final injunction (see Welex AG v Roas Maritime [2003] and Steamship Mutual Underwriting v Sulpicio Lines [2008]).

 The approach of the Court of Appeal is founded not only on both the purpose and the policy of the 1996 Act but also in considerations of efficiency and convenience. On the owner’s interpretation of the Act (founded on the Vale do Rio [2000] case), the operator would have been obliged to commence arbitral proceedings for the sole purpose of seeking a ruling on a jurisdictional issue. Since jurisdictional issues will usually reach the court at some stage anyway, to require an arbitration to be commenced in such circumstances would be artificial and inefficient.

Debevoise promote efficiency

Earlier this year Debevoise & Plimpton launced their Protocol to Promote Efficiency in International Arbitration.  It has the laudible aim evident in its title.  The Debevoise commitment is to “…explore with our clients how such procedures may be applied in each case.”  This recognises that it may be in a party’s interests for the reference to be slow and drawn out, even if, in consequence, it is more expensive.

Whilst none of the procedures in the Protocol are, in themselves, especially innovative the collection of a series of good ideas in one document is to be welcomed.

The Protocol is available at the Debevoise website.

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