Posts tagged: LCIA

Whether Request without Fee is Valid

The steps that must be taken to stop time for the purposes of a contractual time bar provision must be determined by construing the contract and, as the contract itself is unlikely to say much beyond incorporating institutional rules, that means construing the rules.  The Court so decided in Libero Commodities SA v Augustin [2015]

Bylaw 302 of the 2011 version of the International Cotton Association (ICA) provides:

“1. Any party wishing to commence arbitration under these Bylaws … shall send us a written request for arbitration …

2. When sending the request, the Claimant shall also send:

… such application fee as may be due …”

Disputes arose in relation to the price under a contract for the sale of cotton. By a further agreement the parties agreed to submit the pricing dispute to ICA arbitration. The latter agreement also provided that if the reference was not commenced by a specified day the price was to be fixed at a spcified price.

On the final date specified, the seller sent a fax to the ICA requesting arbitration, but did not pay the required fee. The arbitration did not proceed further until the fee had been paid.

The first tier tribunal decided that failure to pay the required fee at the time of  the request meant that the seller had not validly commenced arbitration by the required date. The seller appealed to an appeal committee of the ICA, which decided that arbitration had been validly commenced in time, and, further, reached a decision on the substantive pricing issue.

The buyer challenged theappeal committee’s award.

The Court dismissed the appeal against the award on the issue of the commencement of arbitration. However, it allowed the buyer’s appeal against the substantive decision.

In relation to the commencement issue,the Court held that, as a matter of construction, it was not a prerequisite to the effective commencement of arbitration that the request for arbitration should be accompanied by the relevant fee. This conclusion was borne out by four principal factors:

  • Bylaw 302 drew a distinction between the “request for arbitration” and other matters (including the payment of the fee) that should be sent “when sending the request”.
  • The Bylaws did not expressly provide that the matters specified in Bylaw 302(2) were preconditions to the effective commencement of arbitration.
  • A written request for arbitration could be a meaningful and effective document without the matters specified (including the fee).
  • There was no commercial absurdity in this interpretation, and, indeed, it was consistent with the TAC’s own views.

It should not be assumed that the position will be the same under all institutional rules. For example, Article 1.4 of the LCIA  Rules (2014) provides that “The date of receipt by the Registrar of the Request shall be treated as the date upon which the arbitration has commenced for all purposes (the “Commencement Date”), subject to the LCIA’s actual receipt of the registration fee.” Similarly, the issue in this case was decided under the provisions of the 2011 ICA bylaws: those bylaws have since been amended to make clear that an arbitration is not commenced until the requisite fee has been paid.  However, Article 4.4 of the ICC Rules (2012) provides: “Together with the Request, the claimant shall: …b) make payment of the filing fee …
In the event that the claimant fails to comply with … these requirements, the Secretariat may fix a time limit within which the claimant must comply, failing which the file shall be closed without prejudice to the claimant’s right to submit the same claims at a later date in another Request.”

The Court further held, obiter, that some of the matters, such as the other party’s identity, were prerequisites of a valid notice.  Accordingly, it remains the case that it is important to check any applicable rules carefully and ensure that all requirements are addressed when commencing arbitration.

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!)

 

 

Anti-Suit against Non-Party

In Joint Stock Asset Management Company Ingosstrakh Investments v BNP Paribas SA [2012] the Court of Appeal upheld an anti-suit injunction against a non-party to an arbitration clause on the grounds that Russian proceedings being pursued by that non-party were vexatious and oppressive.  The decision shows that there will be circumstances (for example, where there is sufficient evidence of collusion) in which the English courts are willing to grant an anti-suit injunction against a third party. 

In Joint Stock both D1 and D2 were Russian companies ultimately controlled by a Mr Deripaska.  D1 had provided a guarantee to BNP (the Bank) by which it guaranteed certain liabilities of one of its subsidiaries under a loan made by the Bank to that subsidiary.  The guarantee was governed by English law and provided for London seated arbitration under the LCIA Rules (with an option for the Bank to bring proceedings in the English courts).  D2 was the trust manager of a very small shareholding in D1. 

A dispute arose under the loan and the Bank brought arbitration proceedings against D1 seeking payment under the guarantee.  D1 asserted in those proceedings that the guarantee was void as it had not been properly approved under Russian company law.   D2 (and other shareholders of D1) brought proceedings in Russia against the Bank and D1 seeking a declaration that the guarantee was void.   The Bank obtained an interim anti-suit injunction against both D1 (seeking to restrain D1 from assisting in the Russian proceedings) and D2 on the basis that the Russian proceedings were vexatious and oppressive.   D1 and D2 appealed.

The Court of Appeal upheld the injunction on the basis that there was sufficient evidence to show that D2 colluded with D1 in bringing the Russian proceedings in an attempt to defeat or impede the arbitration brought by the Bank.   The factors taken into account by the Court of Appeal were:

  • the common control of D1 and D2;
  • the importance of the transaction (i.e. that Mr Deripaska must have known of the guarantee and both sets of proceedings);
  • the timing of the Russian proceedings (being brought so long after the guarantee was executed in 2008, but shortly after the Bank filed its Statement of Case in the arbitration); and
  • the improbability of D2 acting alone.

It is not unusual for a third party affiliated to a defendant to attempt to undermine proceedings against that defendant by bringing competing proceedings in another jurisdiction.   The problem is that the third party will (invariably) not be party to the arbitration agreement and will, unlike the defendant, not be bound by that agreement. 

The decision of the Court of Appeal in this case demonstrates that the English court are willing, in an appropriate case, to intervene and grant an anti-suit injunction against a third party.   However, as the Court of Appeal was very careful to stress, it will not be enough simply to show that a company involved in foreign proceedings is affiliated to the party bound by the arbitration clause.  More will be required; in this case, sufficient evidence that the court was able to infer that collusion had occurred and that the foreign proceedings were being pursued with the intention of undermining the on-going arbitration.  Where such evidence is present, the English court will act robustly to prevent parties who have agreed to a contractual dispute resolution mechanism from using related parties to subvert that agreement.

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.

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