Source: http://private-dispute-resolution.com/index.php?mid=2&display=updates
Timestamp: 2019-05-21 06:51:33
Document Index: 36310150

Matched Legal Cases: ['EWCA ', 'EWCA ', 'Art. 30', 'Art. 190', 'Art. 5', 'Art. 5', 'art-1', '§ 1035', 'Art. 19', 'UKSC ', 'art 36', 'Art. 18', 'UKSC ', 'Art. 3', '§ 1782', 'Art. 9', 'Art. 16', 'Art. 190', '§ 468', 'Art. 1', 'Art. 23', 'Art. 190', 'EWCA ', 'EWCA ', 'Art. 16']

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The Negotiations in The Hague: Morning Session
The Negotiations in The Hague: Afternoon Session
The Proposal to Mediate ("Getting to the Table")
The Mediation - Phase 1: The Mediator's Opening Statement and Conclusion of Negotiation Agreement
The Mediation - Phase 2: The Parties' Opening Presentations
The Mediation - Phase 2: Identifying Issues and Interests
The Mediation - Phase 3: Fixing the Agenda and Gathering Information
The Mediation - Phase 4: Generating Options for Settlement of the AX-100 Special Dispute ('Group I-Issues') and Bargaining
The Mediation - Phase 4: Restructuring the Future Business Relationship between NedTrans and ALT ("Group II-Issues")
The Mediation - Phase 4: Mr. Jaeggi's Limits of Authority
The Mediation - Phase 5: Settlement Agreement and Termination of the Mediation
Revocation of the Settlement Agreement ("From Interests to Positions")
The Administration of the Statement of Claim by the German Institution of Arbitration (DIS)
The Respondent's Reaction
Challenge of the Tribunal's Jurisdiction
Request for Postponement and Change of Identity
This First Day of the Hearing: The Legal Issue (I)
This First Day of the Hearing: The Legal Issue (II)
The Second Day of the Hearing: Taking of Evidence
Deliberation of the Tribunal and Rendering of the Award
Request for Correction, Additional Award an Setting Aside of the Award
Number of Updates: 27
Scenario: 1 - The Contract
In case you cannot find NedTrans' standard import conditions with the DIS model arbitration clause, which were attached to its March 6 letter, please refer to this pdf.
Scenario: 2 - The Dispute
The Harvard Program on Negotiation provides four helpful rules for handling cultural differences in international negotiations. See here for a summary of these rules and the corresponding report.
The respective cultural backgrounds of businessmen play an important role in international business negotiations. For the specificities of negotiating with a German business partner see Weber, Negotiating with Germans, available here.
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. Concerning the choice of forum to resolve an international business dispute, 90% of respondents indicated that they favor international arbitration as their preferred dispute resolution mechanism, either as a stand-alone method (56%) or together with other forms of ADR (34%).The worldwide enforceability of an arbitral award by means of the New York Convention was seen as the most valuable characteristic of international arbitration.
The detailed results of the survey can be accessed here: <http://www.arbitration.qmul.ac.uk/research/2015/index.html>
The International Institute for Conflict Prevention & Resolution (CPR) has published a guide aiming to assist businesses "in understanding and taking full advantage of the range of [...] ADR processes". The CDR European Mediation and ADR Guide may be accessed here.
At its 47th session UNCITRAL has decided to task Working Group II with considering the issue of enforcement of settlement agreements resulting from international commercial mediation proceedings. The final product could be a proposed international convention on the enforcement of settlement agreements similar to the New York Convention on enforcement of arbitral awards. This is a fundamental departure from the principle that settlement agreements, as a matter of contract law, cannot be directly enforced. The status of the initiative may be accessed here <http://www.uncitral.org/uncitral/en/commission/working_groups/2Arbitration.html>
See also Hacke, „New York Convention II“ to Come?, DisputeResolution 2 (2015), pp. 10-12, available here <http://disputeresolution-magazine.de/wp-content/uploads/2015/06/Seite-10-12_hacke_DisputeResolution_02-2015.pdf>
In July 2018, in its 51st Session, the United Nations Commission on International Trade Law (UNCITRAL) finalized what may be perceived as a milestone in alternative dispute resolution: The United Nations Convention on International Settlement Agreements Resulting from Mediation (also known as Singapore Convention on Mediation) and the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation. By providing a uniform framework to enforce and recognize internationally mediated agreements, the convention and the model law aim to resolve a major shortfall of international commercial mediation: the lack of direct enforceability of settlement agreements. Only time will tell whether these instruments will change the landscape of international commercial mediation to the same extent as the New York Convention of 1958 changed international commercial arbitration.
The text of the model law is available here.
See for a detailed account of the history, purpose and text of the convention Schnabel, "The Singapore Convention on Mediation: A Framework for the Cross-Border Recognition and Enforcement of Mediated Settlements.", available here.
The Swiss Federal Tribunal (SFT) has addressed the consequences of non-compliance with a mandatory pre-tier to arbitration. The dispute resolution clause provided for ad hoc arbitration in Switzerland, preceded by mandatory conciliation under the ICC ADR Rules 2001. Even though this conciliation procedure had not been completed, the arbitral tribunal issued an interim award assuming jurisdiction. Upon request by the respondent, the SFT set aside this award, holding that the failure to comply with the pre-tier leads to a stay of the arbitration proceedings until the pre-arbitral tier has been completed. It considered that it was up to the arbitral tribunal to decide on the modalities of the pre-tier, in particular the time-frame in which to complete it.
SFT, Judgment of 16 March 2016, 4A_628/2015, French original available here.
See for commentary on the decision Boog/Menz, Landmark Swiss Decision on Failure to Comply with a Mandatory Pre-arbitral Tier, available here.
Scenario: 3 - Developing Strategies
See for nine helpful techniques (including 'gun boat diplomacy' and bewaring of the 'scalp hunter mediator') to succeed in a mediation and other negotiation settings, Lovegrove, Nine Tips for Successful Dispute Negotiation, available here.
The Harvard Program on Negotiation provides helpful guidelines on developing ones BATNA in a negotiation. See here for the report.
Scenario: 4 - The Negotiations in The Hague: Morning Session
See for five underused tactics which can be employed to increase bargaining power (Reframing anxiety as excitement, anchoring the discussion with a draft agreement, drawing on the power of silence, asking for advice and putting a fair offer to the test with final-offer arbitration) Shonk, 5 Good Negotiation Techniques, available here.
For advise on how helping a hard negotiator save face by building him a "golden bridge" can help your position see Odeneal, Sunday Minute Tip, The Sunday Minute Newsletter of 25 October 2015, Programme on Negotiation at Harvard Law School
The Harvard Programme on Negotiation has published guidelines for "10 top negotiation skills for success at the bargaining table". These guidelines are tailored particularly to the Harvard style of integrative negotiation and are aimed at both creating and claiming value. They may be accessed here.
In complicated or dead-locked negotiations finding a solution can seem close to impossible. One strategy for tackling such a situation is the "indaba“ method developed by the Zulu and Xhosa people of South Africa. The idea of an "indaba“ is to give all parties concerned an opportunity to speak personally and state their "red lines“, which are thresholds that they are not prepared to cross. At the same time they are encouraged to propose solutions to find a common ground. This method was successfully employed to bring all 195 nations negotiating the Paris Agreement at the UN Climate Conference 2015 in Paris to consensus.
See <http://qz.com/572623/this-simple-negotiation-tactic-brought-195-countries-to-consensus-in-the-paris-climate-talks/>
Scenario: 5 - The Negotiations in The Hague: Afternoon Session
There are no updates for this chapter at the moment.
Scenario: 6 - The Proposal to Mediate ("Getting to the Table")
For an evaluation of the advantages of mediation compared to arbitration see Chitashvili, Advantages of Mediation Compared to Arbitration, in Burduli (ed), Alternative Dispute Resolution Yearbook 2013 (Tbilisi, 2014), 161-183.
Professor Strong has published a comprehensive empirical study on the realities of international business mediation. On the basis of her results she (dis)proves a number of key theories regarding mediation.
S.I. Strong, Realizing Rationality: An Empirical Assessment of International Commercial Mediation, Washington and Lee Law Review 2016 (forthcoming), available here.
English courts have acknowledged that it is appropriate for a court to use its powers to "encourage" parties to settle their dispute by mediation or other ways of alternative dispute resolution (e.g. through cost sanctions in case a party does not agree to mediate). However, they also emphasize that the court should not compel parties to mediate even if it is within its power to do so, in order to do justice to the voluntary nature of mediation.
1. PGF II SA v OMFS Company 1 Ltd, [2013] EWCA (Civ) 1288
2. Halsey v Milton Keynes Gen. NHS Trust, [2004] EWCA (Cic.) 576
The Vienna International Arbitration Center (VIAC) has published rules for institutional mediation. The Vienna Mediation Rules have entered into force on 1 January 2016 and may be accessed here.
Scenario: 7 - The Mediation - Phase 1: The Mediator's Opening Statement and Conclusion of Negotiation Agreement
Regarding the need for confidentiality in mediation see Eloshvili, The Importance of Confidentiality Principle in the Mediation Process, in Burduli (ed), Alternative Dispute Resolution Yearbook 2013 (Tbilisi, 2014), 41-69.
Scenario: 8 - The Mediation - Phase 2: The Parties' Opening Presentations
Scenario: 9 - The Mediation - Phase 2: Identifying Issues and Interests
Scenario: 10 - The Mediation - Phase 3: Fixing the Agenda and Gathering Information
Scenario: 11 - The Mediation - Phase 4: Generating Options for Settlement of the AX-100 Special Dispute ('Group I-Issues') and Bargaining
Scenario: 12 - The Mediation - Phase 4: Restructuring the Future Business Relationship between NedTrans and ALT ("Group II-Issues")
Scenario: 13 - The Mediation - Phase 4: Mr. Jaeggi's Limits of Authority
Scenario: 14 - The Mediation - Phase 5: Settlement Agreement and Termination of the Mediation
Scenario: 15 - Revocation of the Settlement Agreement ("From Interests to Positions")
Scenario: 16 - The Commencement of Arbitration
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. The survey found that the perceived most effective way of controlling time and costs was for tribunals to commit to a schedule for deliberations and delivery of the final award. Almost all respondents considered that another important measure was for arbitral rules to include simplified procedures for claims under a certain value.
See for a collection of essays on the benefits and dangers of the proliferation of best-practice texts in international arbitration Favalli (ed.) The Sense and Non-sense of Guidelines, Rules, and other Para-regulatory Texts in International Arbitration, ASA Special Series No. 37, Huntington, 2015.
The Swiss Federal Tribunal has addressed the relationship between arbitration and expert determination (Schiedsgutachten). Between the parties to a share purchase agreement (SPA) a dispute about the value of the shares had arisen. The SPA provided for expert determination (Schiedsgutachten) in case the purchaser objected to the purchase price suggested by the seller. An expert determination was made and a specific price determined, which the purchaser refused to pay. The arbitral tribunal in the subsequent ICC arbitration decided that the prerequisites for an expert determination (i.e. the purchaser’s objection) were not fulfilled. It therefore held that the expert had not been competent to make his determination and that the arbitral tribunal was thus not bound by it. The Swiss Federal Tribunal agreed and refused to set aside the award.
Swiss Federal Tribunal, Judgment of 1 February 2016, 4A_428/2015, German original available here.
Some international arbitrators are discouraged from employing proactive case management techniques due to what has become known as due process paranoia. This phenomenon describes a situation where the arbitrator grants a number of procedural requests (including extensions of deadlines for submissions, postponements of hearings etc) for the fear that the award might be set aside or denied enforcement if the request is denied. Such procedural conduct makes the arbitration longer and thus more costly - currently two major drawbacks of international arbitration. Such increase of time and costs can easily be avoided as it is unnecessary for international arbitrators to succumb to due process paranoia. They are protected by what may be termed the Procedural Judgment Rule under which state courts do not second-guess their procedural decisions.
See Klaus Peter Berger and J. Ole Jensen, 'Due Process Paranoia and the Procedural Judgment Rule: A Safe Harbour for International Arbitrators' Procedural Management Decisions' (2016) 32(3) Arbitration International, 415-435, available here <http://arbitration.oxfordjournals.org/content/arbint/early/2016/07/19/arbint.aiw020.full.pdf?ijkey=XEIzFreRG3ekAm0&keytype=ref>
The Swiss Federal Tribunal has reaffirmed the high burden of establishing doubts as to an arbitrators impartiality and independence with regard to the arbitrator’s procedural decisions. The Tribunal referred to its established case law, whereby an arbitrator's procedural decisions, whether correct or not, cannot per se serve as grounds for objective suspicion of bias. However, the Federal Tribunal, based on its previous case law, allows for exceptions, that is, where an arbitrator makes blatant mistakes or repeated manifest errors, which qualify as severe breaches of duty, this can result in an appearance of bias.
Swiss Federal Tribunal, Judgment of 24 November 2017, 4A_236/2017, German original available here.
-Voser/Bell, Swiss Supreme Court safeguards arbitrator’s discretion in procedural decisions, available here.
See for a critical analysis as to how tactical conduct by counsel for a party in arbitration proceedings can result in delay and how the management of the procedure by the arbitral tribunal, assisted by opposing counsel, can limit the effects of such delaying tactics, von Schlabrendorff, in: Ehle/Baizeau (eds.) Stories from the Hearing Room: Experience from Arbitral Practice, 2015, 153 et seq.
See for the answer to the question why efficiency in arbitration comprises more than the relationship between time and costs Kirby, 'Efficiency in International Arbitration: Whose Duty Is It?', Journal of International Arbitration, Vol. 32, No. 6, pp. 689-696.
For a critical perspective on the current state of the global market for dispute resolution and how new developments might influence international arbitration in both a negative and positive regard, see Berger/Jensen, It Takes Pressure to Form Diamonds: The Changing Landscape of Dispute Resolution and Its Implications for International Arbitration, Kluwer Arbitration Blog, 23 May 2016
Some practitioners are predicting that the "legitimacy crisis" of investment arbitration (or ISDS) could spill over to commercial arbitration in a significant way. In particular, they expect that there may be an increase in regulation on commercial arbitration. They encourage the arbitration community to "be prepared to defend itself from a metaphorical 'army of undead' who could demand more government control of the arbitration process in the future".
Born, '"Winter is Coming" for Commercial Arbitration', http://www.law360.com/articles/798830/winter-is-coming-for-commercial-arbitration-born-says
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. Regarding best practices and soft law instruments the survey found that respondents generally have a positive attitude towards their use. These instruments are seen to supplement existing rules and provide guidance in (discretionary) decisions were little or none exists.
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. When deciding on an arbitral institution the survey found that the primary factor driving the decision is an assessment of the quality of the institution’s administration of a case and its level of “internationalism“. Institution-specific distinguishing factors were not considered to be decisive. Respondents identified the most preferred institutions to be the ICC, LCIA, HKIAC, SIAC and SCC.
The ICC has revised its arbitration rules to accommodate its users' need for more efficient and less costly proceedings. The new edition of the rules contains a default 'fast-track' or expedited procedure for claims not exceeding US$ 2,000,000 (Art. 30 in connection with Appendix VI). The ICC Arbitration Rules 2017 apply to all disputes commenced on or after 1 March 2017 and are available here.
See for commentary on the revised rules
- Boog/Möckesch, available here
- Finizio/Dai/Sakhno/Lee, available here
On March 1, 2018 the DIS published new Arbitration Rules. At the same time, the DIS was renamed into "German Arbitration Institute". The new 2018 DIS-Rules are characterized by two essential features intended to boost the DIS’s competitiveness in the worldwide market for institutional arbitration services: a) increased efficiency of the proceedings through the use of modern case management techniques by tribunals operating under the new DIS-Rules, and b) quality control and transparency of the increased administrative services to be performed by the DIS under the new Rules.
The Swiss Federal Tribunal has rejected an application to have the award of a sole arbitrator set aside. The appellant challenged the award on the ground that it was not rendered within the time limit stipulated in the rules for expedited procedure under the Swiss Rules. The court dismissed the challenge, holding that the award had in fact been rendered in time as the dates in the procedural timetable contained clerical errors. However, the court indicated that it would be very strict when it comes to time limits for rendering awards. Even if such a time limit were to be missed by only one day, the award could be challenged for lack of jurisdiction pursuant to Art. 190(2)(b) PILS. This decision has important ramifications for both arbitral institutions that provide time limits for expedited procedures and arbitral tribunals under the obligations to comply with time limits when planning the proceedings and drafting the award.
SFT, Judgment of 11 January 2017, 4A_188/2016, French original available here.
See for commentary on the decision, Voser/Gottlieb, available here.
In its decision of 1 October 2014 the Higher Regional Court of Munich (OLG München) has confirmed the validity of an arbitration agreement providing for an appointment procedure which could not be fulfilled when a dispute arose. The arbitration agreement provided for an arbitrator to be jointly appointed by the parties or otherwise by an appointing authority. When the parties could not agree on an arbitrator and the appointing authority refused to appoint an arbitrator the Claimant applied to the Court to have the arbitration clause declared null and void. The Court declined and pointed out that the arbitration agreement was valid and that an ineffective clause is supplemented by statutory German Arbitration Law.
Higher Regional Court of Munich, 1 October 2014, 34 SchH 11/14, WM 2015, 949
The question of how to solve the conflict between the chosen arbitration rules and the parties’ arbitration agreement is fueled once again by the ongoing trend towards the inclusion of expedited procedures into institutional arbitration rules. In two separate but almost identical cases, the Singapore High Court1 and the Shanghai No.1 Intermediate People's Court2 had to address the question whether the SIAC-President has the discretion to appoint a sole arbitrator in expedited procedures even though the arbitration agreement expressly provides for a three-member-tribunal. In the case before the Singapore High Court, the Respondent applied to have the award set aside based on the argument that the appointment of a sole arbitrator was not in accordance with the parties’ express agreement. The Court, however, held that Art. 5 (2) SIAC-Rules provides the SIAC-President with broad discretion to appoint a sole arbitrator even if the arbitration agreement contains a contrary provision. In contrast to this, the Shanghai Court refused to recognize and enforce the award rendered in the underlying arbitration and held that the SIAC-President must give full consideration to the parties’ agreement on a three-member-tribunal.
It has to be noted that these decisions were based on the 2010 and the 2013 version of the SIAC-Rules and that in the meantime the SIAC-Rules were revised to address the question at issue. Art. 5 (3) of the 2016 SIAC-Rules now stipulates: “By agreeing to arbitration under these Rules, the parties agree that […] the rules and procedures set forth in Rule 5.2 shall apply even in cases where the arbitration agreement contains contrary terms.”
1 AQZ v ARA, Singapore High Court, 13 February 2015, [2015] SGHC 49, available here.
2 Noble Resources International Pte. Ltd v. Shanghai Good Credit International Trade Co., Ltd. 11 August 2017, (2016) Hu 01 Xie Wai Ren No. 1
For commentary on the decisions see:
-Born/Lim, AQZ v ARA: Singapore High Court Upholds Award Made under SIAC Expedited Procedure, available here.
-Kwan, PRC Court refuses to enforce SIAC arbitral award made by one arbitrator under expedited arbitration procedures when arbitration agreement provided for three arbitrators, available here.
For different methods of enforcing arbitration agreements see Fellas, 'Enforcing Arbitration Agreements: Two Lessons From Recent Cases', New York Law Journal (2015), Vol. 254, No. 88. Available at <http://www.hugheshubbard.com/repository/enforcing_arbitration%20agreements_dec2015.pdf>
The English High Court handed down a decision in which it found that the arbitration clause did cover tort claims brought by claimant and thus stayed the proceedings pursuant to section 9 of the Arbitration Act 1996. The arbitration clause in question provided that: „Any disputes related to this Agreement or its enforcement shall be resolved and settled by arbitration[…]“. As a matter of construction the court held that it was necessary to consider whether contractual claims arising out of the agreement were sufficiently closely related to the tortious claims so as to render a rational businessmen likely to have intended such a dispute to be decided (like a contractual dispute) by arbitration. The court argued that any other interpretation would allow the circumvention of the arbitration agreement since claimant could simply bring the „same“ claim and disguise it as a tort claim.
Microsoft Mobile Oy (Ltd) v Sony Europe Limited and others [2017] EWHC 374 (Ch)
In its landmark ruling in Case C-352/13, CDC v. Akzo Nobel and Others, the European Court of Justice (ECJ) has dealt with the question of whether a broadly termed choice of court agreement (comprising „all disputes arising from contractual relationships") extends to damages claims arising from competition law infringements (or antitrust follow-on damages claims). Although the decision does not expressly address arbitration it has the implication that antitrust follow-on damages claims are, in principle, arbitrable. However, the underlying arbitration agreement must be specific enough in order for both parties to reasonably foresee a cartel damages action when they agreed to the arbitration clause. This foreseeability criterion will only be met where parties knew or should have known of the cartel when concluding their arbitration agreement.
ECJ, Case C-352/13, CDC v. Akzo Nobel and Others, 21 May 2015, available here
See for commentary on the decision
1. http://kluwerarbitrationblog.com/blog/2015/07/31/the-cjeus-decision-in-cdc-v-akzo-nobel-et-al-a-blessing-or-a-curse-for-arbitrating-cartel-damage-claims
2. http://kluwerarbitrationblog.com/blog/2015/09/22/arbitrating-antitrust-follow-on-damages-claims-a-european-perspective-part-1/
The Swedish Supreme Court has clarified under which circumstances it may set aside awards which violate EU competition law. In a domestic SCC arbitration the tribunal had found that state-owned alcohol monopoly Systembolaget had abused its dominant market position when it terminated an agreement with vodka company Absolut and ordered it to pay damages. Systembolaget had challenged the award referring to the Eco Swiss decision by the ECJ, in which the ECJ had found that national courts may set aside arbitral awards violating EU competition law as a matter of public policy (cf. No. 28-54 fn. 70). It also argued that issues of competition law were not arbitrable in the first place. The Court dismissed both arguments. It held that an award can only be set aside for a violation of public policy under the Eco Swiss doctrine if the award derogates from a competition law issue already clearly settled. Regarding arbitrability the Court held that arbitral tribunals may decide „civil law effects“ of a violation of competition law, i.e. so-called „antitrust follow-on damages claims“.
1. Högsta domstolen, 17 June 2015, T 5767-13, available at <http://www.hogstadomstolen.se/Domstolar/hogstadomstolen/Avgoranden/2015/2015-06-17%20T%205767-13%20Dom.pdf>
2. Unofficial English translation available at <http://www.arbitration.sccinstitute.com/Views/Pages/GetFile.ashx?portalId=89&cat=79572&docId=2476621&propId=1578>
3. See for commentary on the decision Jones, Absolut clarity on set-aside for antitrust breaches from Swedish court, <http://globalarbitrationreview.com/news/article/34227/B-Cremades-Asociados-News-Arbitration-News-Features-Reviews-Global-Arbitration-Review/>
The Singapore Court of Appeal has provided guidance on determining the arbitrability of the subject matter of a claim. The plaintiff had argued that arbitrating a dispute between the majority and minority shareholders of a company in terms of s 216 of the Singapore Companies Act was contrary to public policy. The Court of Appeal rejected this argument and held that such a dispute only concerned the "commercial agreement between the shareholders of a company“ and that there were no public interests involved. The parties were thus free to refer such a dispute to arbitration. It further held that neither the fact that the arbitral tribunal was not equipped to provide the relief sought nor the fact that parties were involved in the dispute that were not party to the arbitration agreement changed their result.
1. Singapore High Court, 26 October 2015, Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals[2015] SGCA 57, available at <http://www.singaporelaw.sg/sglaw/laws-of-singapore/case-law/free-law/court-of-appeal-judgments/18071-tomolugen-holdings-ltd-and-another-v-silica-investors-ltd-and-other-appeals-2015-sgca-57>
2. See for commentary on the decision <http://hsfnotes.com/arbitration/2015/11/03/singapore-court-of-appeal-provides-guidance-on-applications-to-stay-proceedings-in-favour-of-arbitration-and-scope-of-arbitrability/>
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. When deciding on a seat of the arbitration the survey found that the primary factor driving the decision is the seat’s reputation and recognition. These factors are determined by the seat’s formal legal infrastructure, i.e. the neutrality and impartiality of the legal system, the national arbitration law and its case law pertaining to the enforcement of arbitration agreements and arbitral awards. The most preferred and widely used seats were ranked as London, Paris, Hong Kong, Singapore and Geneva.
When parties discuss appropriate candidates for arbitrator appointments they focus on predicting how the candidate will conduct the arbitration and what his or her decision on the merits will be. For a discussion on how arbitrators should deal with these party expectations, see Wilske and Edworthy, ‘The Predictable Arbitrator: A Blessing or a Curse?’ in Christian Klausegger and others (eds), Austrian Yearbook on International Arbitration 2017 (Manz 2017), pp. 77-90.
Scenario: 17 - The Administration of the Statement of Claim by the German Institution of Arbitration (DIS)
In AQZ v ARA the Singapore High Court has dealt with the addition of unexpected procedural innovations to institutional arbitration rules. It has confirmed that the parties are generally bound to the version of the rules which is in force when they commence the proceedings. However, if the addition to the rules is of a substantive nature the version in force at the time of contract conclusion applies. Unfortunately, the court has not offered any guidance regarding the differentiation between substantive and non-substantive changes.
AQZ v ARA, Singapore High Court, 13 February 2015, [2015] SGHC 49
In Trunk Flooring Ltd v HSBC Asset Finance (UK) Ltd and Costa Rica SRL, the High Court of Justice in Northern Ireland has ruled on the effect of the parties’ collective refusal to pay the advance on costs requested by the ICC for administering the arbitral proceedings. The court found that the arbitration agreement had become inoperative through its abandonment by both parties' refusal to pay the administering institution. Hence, the court allowed for the proceedings to advance before the state courts and not an arbitral tribunal.
Trunk Flooring Ltd v HSBC Asset Finance (UK) Ltd and Costa Rica SRL, High Court of Ireland, 8 January 2015, [2015] NIQB 23
Scenario: 18 - The Respondent's Reaction
The Swiss Supreme Court has confirmed that a party loses its right to object to the jurisdiction of the arbitral tribunal if it does not raise that plea prior to any defence on the merits pursuant to Article 186(2) of the Swiss Federal Statute on Private International Law.
Swiss Supreme Court, 28 September 2015, Decision 4A_172/2015, available in German here.
S. 1032 (2) German Arbitration Act - a provision not contained in the UNCITRAL Model Law - allows a party to apply to a German court prior to initiation of arbitral proceedings to have them declared admissible or inadmissible. For an answer to the question of whether this provides obstructive parties (potentially even in arbitrations not seated in Germany) with the opportunity of using a "German Torpedo" see Wittinghofer/Hertel/Kupka, Application to Have Arbitration Declared (In)Admissible – A German Torpedo to Arbitral Proceedings?, Kluwer Arbitration Blog, 5 November 2015, <http://kluwerarbitrationblog.com/2015/11/05/application-to-have-arbitration-declared-inadmissible-a-german-torpedo-to-arbitral-proceedings/>.
Scenario: 19 - Constitution of the Tribunal
In its decision of 1 October 2014 the Higher Regional Court of Munich (OLG München) has confirmed the validity of an arbitration agreement providing for an appointment procedure which could not be fulfilled when a dispute arose. The arbitration agreement provided for an arbitrator to be jointly appointed by the parties or otherwise by an appointing authority. When the parties could not agree on an arbitrator and the appointing authority refused to appoint an arbitrator the Claimant applied to the Court to have the arbitration clause declared null and void. The Court declined and pointed out that the arbitration agreement was valid and that an ineffective clause is supplemented by statutory German Arbitration Law. In this case § 1035 (4) ZPO would apply, providing that if the agreed appointment procedure cannot be fulfilled the competent court will appoint the sole arbitrator.
In a rare decision, the Spanish Supreme Court has held two arbitrators liable for damages because they had deliberately excluded the third arbitrator from deliberations. The two arbitrators were condemned to repay the fees they had received to one of the parties to the arbitration. The Supreme Court held that the collegiality principle had been violated as only two arbitrators participated in the final deliberation in which the majority award was finalized, and that the two arbitrators thus incurred liability for having acted with recklessness by excluding the third arbitrator from their deliberations.
Puma AG Rudolf Dassler Sport v Estudio 2000 SA, Spanish Supreme Court, 15 February 2017, Docket No 102/2017
See for commentary on the decision, Victor Bonin Reynes, 'The Spanish Supreme Court confirms declaring the liability of two arbitrators for excluding their colleague‘, available here.
Scenario: 20 - Challenge of the Tribunal's Jurisdiction
See on the importance of language in international business transactions as well as international arbitration (in particular concerning the parties’ due process rights), Sherlin Tung, The Importance of Languages in International Arbitration and How They Impact Parties’ Due Process Rights (2017) 10(1) Contemporary Asia Arbitration Journal, pp. 113-131.
See for exceptional cases in which an arbitration without a hearing ("documents-only") might be appropriate under Art. 19.1 LCIA Arbitration Rules Scherer/Richman/Gerbay (eds.) Arbitrating under the 2014 LCIA Rules, 2015, p. 222 et seq.
One potential issue for a case manangement conference is third-party funding. Third-party funding in international arbitration can create imbalances between the parties. For an article which sheds light on how specifically third-party funding has impacted the arbitral process and which proposes remedies to redress such imbalances in order to safeguard the integrity and efficiency of the arbitral process, see
Nadia Darwazeh & Adrien Leleu, ’Disclosure and Security for Costs or How to Address Imbalances Created by Third-Party Funding’ (2016) 33 J Int’l Arb 125.
UNCITRAL has completed the revision process of its Notes on Organizing Arbitral Proceedings. The revised UNCITRAL Notes on Organizing Arbitral Proceedings 2016 reflect the current best practices in regard to case management and the administration of cases. They may be accessed here.
See for commentary on the Flex-N-Gate decision by the Frankfurt Court of Appeal of 17 February 2011:
1. https://www.heuking.de/uploads/tx_nplawyer/050_YIAG_Newsletter_August_2013.pdf
2. http://www.hlarbitrationlaw.com/2013/04/german-courts-emphasize-supremacy-of-parties-agreements-on-arbitration-procedure/
3. Wagner/Bülau, Procedural Orders by Arbitral Tribunals: In the Stays of Party Agreements?, SchiedsVZ (German Arbitration Journal) 2013, 6
The Swiss Federal Tribunal (SFT) has ruled on an application to set aside an award due to an alleged violation of the applicant’s right to be heard. In the underlying arbitration, the parties had agreed on a specific procedural timetable which envisaged only one round of briefs. When the claimant in the arbitration intended to open a second round, the arbitral tribunal denied admitting the brief, pointing to the parties’ procedural agreement. Before the SFT, the issue was whether the parties’ agreement could really be construed as to prohibit the exchange of a second round of briefs. Taking into account the European Convention on Human Rights, the SFT ruled that in an international arbitration it was possible for parties to restrict exchanges to one round of briefs and that the parties in the present case had agreed to do so. The SFT thus denied the applicant's request to set aside the award.
Swiss Federal Tribunal, Decision of 26 April 2016, 4A_342/2015, French original available at <http://entscheide.weblaw.ch/cache/f.php?url=links.weblaw.ch/26.04.2016_4A_342-2015>
See for German language commentary on the decision, Gabriel, 'Minimalgarantie versus Verfahrensvereinbarung‘, dRSK, 21 July 2016.
The Singapore High Court has answered what itself has dubbed „the chicken and the egg question“. In Malini Ventura v Knight Capital Pte Ltd & others the Court was faced with an application to stay arbitration proceedings because allegedly there was no arbitration agreement in existence. The Court considered whether the question of the very existence of an arbitration agreement should be determined by the arbitral tribunal or by the courts. While it acknowledged that there is "some degree of logical discomfort in the notion that an arbitral tribunal can be given authority to decide on its jurisdiction when it may end up deciding that [...] no arbitration agreement ever existed and therefore in fact the tribunal had no authority to decide the question“, the Court found that the established principle of Kompetenz-Kompetenz required to disregard such discomforts. Hence, the Court denied the application and tasked the arbitral tribunal to decide on its own jurisdiction.
1. Malini Ventura v Knight Capital Pte Ltd & others, Singapore High Court, 11 August 2015, [2015] SGHC 225
2. Boltenko/Lua, Prakash J of the Singapore High Court decides the arbitration „chicken and egg“ dilemma, Kluwer Arbitration Blog, 21 September 2015, available at <http://kluwerarbitrationblog.com/blog/2015/09/21/prakash-j-of-the-singapore-high-court-decides-the-arbitration-chicken-and-egg-dilemma/>
In Ciano Trading and Services CT v Skylink Aviation Inc. the Court of Appeal of Ontario confirmed the principle of Kompetenz-Kompetenz, i.e. that an arbitral tribunal can rule on its own jurisdiction. Italian food manufacturer Ciano had sued Skylink, a Canadian supplier of meal services for the Canadian armed forces, for Skylink's termination of their contract. The contract contained an arbitration agreement in favor of the AAA as well as a „survival clause“, stipulating that certain provisions would „survive“ the termination of contract. Ciano argued that since the arbitration clause was not included in the list of provisions to survive termination the arbitration agreement had become inoperative and that therefore the Canadian state courts were competent. The Court of Appeal of Ontario disagreed, citing the established principle in international arbitration that „where it is unclear if the arbitrator has jurisdiction, it is preferable to leave the issue to the arbitrator pursuant to the competence-competence principle". It therefore deferred the issue to a sole arbitrator as envisaged under the arbitration agreement.
Ciano Trading and Services CT v Skylink Aviation Inc., Court of Appeal of Ontario, 9 February 2015, [2015] ONCA 89 (CanLII), available at <http://www.canlii.org/en/on/onca/doc/2015/2015onca89/2015onca89.html>.
See for commentary on the decision: Armstrong/Crane/Holmberg, Canadian court endorses power of arbtrator to determine competence-competence, 20 IBA Arbitration News 2 (2015), pp. 86-88.
In Henry Schein, Inc. v. Archer & White Sales, Inc., the US Supreme Court held that the so-called “wholly groundless”-exception is incompatible with the Federal Arbitration Act. Under this exception, some federal courts had assumed jurisdiction to rule on the jurisdiction of an arbitral tribunal even where the parties had clearly designated those questions to the tribunal if the court considered the argument that the arbitration agreement does extend to the present dispute to be “wholly groundless”. In reaching the conclusion that this exception is incompatible with the Federal Arbitration Act, the Supreme Court emphasized the contractual nature of arbitration and the need to enforce arbitration agreements according to their terms.
It must be borne in mind that in the US the term ‘arbitrability’ is used in a much broader sense than in most other jurisdictions. In the US, the term also encompasses the question of scope and validity of the arbitration agreement at stake and not just the public policy question of whether a certain subject matter is capable of being settled by arbitration.
Henry Schein, Inc. v. Archer & White Sales, Inc., Docket No. 17-1272, Judgment of January 8 2019, available here.
The Indian Supreme Court has confirmed that an arbitration agreement remains valid even if the underlying contract should be void. This is because "the arbitration clause (agreement) is independent of the underlying contract“. The Indian Supreme Court has thus confirmed the principle of separability for all arbitrations seated in India.
Ashapura Mine-Chem Ltd vs Gujarat Mineral Devlopment, Indian Supreme Court, 16 April, 2015, AIR 2015 SC(SUPP)1153
Several domestic courts have had reason to address the proper relationship between arbitral tribunals and state courts. They all have confirmed that, in dealing with setting aside or enforcement actions, the courts do not conduct a review on the merits, i.e. that there is no révision au fond. This principle can be difficult to adhere to when parties disguise questions of merit as jurisdictional issues. However, in setting aside or enforcement actions, the only time courts should examine de novo the jurisdictional issues dealt with by the arbitral tribunal is when determining the formation and scope of the arbitration agreement.
1. AKN and another v ALC and others and other appeals, Singapore Court of Appeal, 31 March 2015, [2015] SGCA 18; see for commentary on this decision Jensen, 4 European International Arbitration Review 1 (2015), pp. 55-80, available here.
2. Government of the Lao People's Democratic Republic v Sanum Investments Ltd, Singapore High Court, 20 January 2015, [2015] SGHC 15.
3. PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal, Singapore Court of Appeal, 31 October 2013, [2014] 1 SLR 372.
4. Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Gov't of Pakistan, UK Supreme Court, 3 November 2010, [2010] UKSC 4.
5. Svea Court of Appeal, Case No. T 10470-10, 26 March 2015, avaiable here.
6. Swiss Supreme Court, Case No. 4A_69/2015, 26 October 2015, available here.
See for possible solutions of the "battle of forms" problem in international sales contracts governed by the CISG Steensgaard, Internationales Handelsrecht (IHR) 2015, 89 et seq.
In a recent case concerning the challenge to an LCIA tribunal's assumption of jurisdiction, the English High Court has applied the pro-arbitration approach to the construction of arbitration agreements developed by the House of Lords in the Fiona Trust case (cf. 20-77, fn. 119). The parties had concluded a contract for the operation of two offshore oil blocks and six years later concluded another agreement providing for the termination of that contract. While the original contract provided for ad hoc arbitration the termination agreement included a standard LCIA arbitration clause. Claimant initiated LCIA arbitration with a claim arising under the termination agreement. Respondent tried to set-off the claim by bringing a counterclaim arising under the original contract. Claimant disputed that the LCIA tribunal had jurisdiction to hear the counterclaims arising under the original contract and pointed to the corresponding arbitration clause providing for ad hoc arbitration. Citing Fiona Trust the Court held that commercially minded parties can be presumed not to enter into a situation where different tribunals hear different aspect of the same case. Insofar, the new, "notably broader" arbitration clause could be understood as "migrating" claims under the old arbitration agreement to the new one. It therefore confirmed the LCIA tribunal’s jurisdiction to hear both, the original and the counterclaim.
C v D1, D2 and D3, English High Court, 22 July 2015, [2015] EWHC 2126 (Comm)
With yet another English court applying the 'Fiona Trust' principle, the principle can now be regarded well-established in English arbitration law.
1. Egiazaryan & Anor v. OJSC OEK Finance & Anor, English High Court of Justice, 20 November 2015, [2015] EWHC 3532 (Comm), <http://www.bailii.org/ew/cases/EWHC/Comm/2015/3532.html>
2. For commentary on the decision see <http://www.out-law.com/en/articles/2015/december/english-courts-will-extend-arbitration-clauses-to-widest-possible-range-of-disputes-expert-says/
In Pricol Ltd. v. Johnson Controls Enterprise Ltd. & Ors. the Supreme Court of India addressed a pathological arbitration clause. The parties had agreed to arbitration under the arbitration rules of the „Singapore Chamber of Commerce“. Since an arbitral institution by that name does not exist the Indian Supreme Court held that the only reasonable interpretation of the clause was a reference to the Singapore International Arbitration Centre. Accordingly, it referred the parties to SIAC arbitration.
Pricol Ltd. v. Johnson Controls Enterprise Ltd. & Ors., Supreme Court of India, 16 December 2014, Arbitration Case (Civil) No. 30 of 2014, available at <http://indiankanoon.org/doc/168474344/>
The Swiss Federal Tribunal was concerned with a pathological arbitration clause. The parties’ agreement merely referred to „the International Chamber of Commerce, Zürich“, without mentioning arbitration or dispute settlement. The arbitral tribunal had found that this was not enough to establish the parties’ consent to refer their dispute to arbitration. The Swiss Federal Tribunal agreed and refused to set aside the award declining jurisdiction for lack of an arbitration agreement.
Swiss Federal Tribunal, 3 June 2015, Decision 4A_676/2014, available in French at
Scenario: 21 - Interim Measures of Protection
See for a discussion on the factors to be dealt with and to be balanced by the arbitral tribunal in deciding on a request for interim relief Heilbron, in: van den Berg (ed.) Legitimacy: Myths, Realities, Challenges, ICCA Congress Series No. 18, 2015, p. 241, 253 et seq.
The English High Court has elaborated on the relationship between arbitral interim relief and that of the courts. In Gerald Metals S.A v Timis & Ors the Court considered its power to grant interim relief under s 44 English Arbitration Act 1996. It held that it lacked such power where there is sufficient time to obtain interim relief from an expedited tribunal or emergency arbitrator. As the LCIA Rules (which applied in the arbitration) provided for such timely and efficient relief, the Court held that it did not have the power to grant the requested freezing order.
Gerald Metals S.A v Timis & Ors [2016] EWHC 2327 (Comm)
For commentary on the decision see Knowles/Land, Kluwer Arbitration Blog, 22 October 2016, available here
Scenario: 22 - Request for Postponement and Change of Identity
When negotiating a settlement outside the hearing room, parties sometimes make use of an instrument referred to as sealed or 'Calderbank' offer (cf Part 36 English Civil Procedure Rules). The term sealed offer is somewhat misleading. The offer is not sealed between the parties, but vis-à-vis the arbitral tribunal. While the tribunal will learn about the existence of the offer, it will not know its contents. Only when the tribunal has finally determined all issues at dispute except for the decision as to costs will it unseal the offer. When making its decision as to costs it will then take the offer into account. If it becomes obvious that the party rejecting the offer has gained nothing from that rejection, but has contributed to increasing costs by dragging the arbitration along, the arbitral tribunal may take this into account when allocating costs. The ICC has introduced a new mechanism for handling sealed offers in its ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration of 1 March 2017. Essentially, the ICC Secretariat will serve as custodian of the sealed offer while the arbitration is ongoing and finally transmit the offer to the arbitral tribunal.
For commentary on that new ICC Procedure, see Seppälä/Brumpton/Coulet-Diaz, „The New Assistance ICC Provides to Protect the Confidentiality of a ‘Sealed Offer’“ (2017) ICC Disp Res Bull, Issue 1, 84-92.
For the origin of the 'Calderbank' offer (usually referred to as an 'offer without prejudice, save as to costs') see https://en.wikipedia.org/wiki/Calderbank_v_Calderbank.
The Higher Regional Court of Munich has ruled on a challenge to an arbitral tribunal consisting of two arbitrators under s 1037 of the German Arbitration Act. Before the oral hearing, the arbitral tribunal had issued an order indicating that it considered the claim brought by Claimant to be without merit and proposed a settlement. In Claimant’s opinion, this meant that the arbitrators had already made up their minds as to the outcome of the arbitration and thus lacked impartiality. The arbitral tribunal had rejected Claimant’s challenge arguing that the indicative order was only meant to prepare the oral hearing, giving the parties an idea about which arguments to address. Although the order did not explicitly state its preliminary nature (e.g. by using words like „probably“, „likely“ etc.), the Court concurred with the arbitral tribunal. It held that the order did not mean that the arbitrators had already made up their minds. It held that by the very nature of an indicative order, its contents are not final but just serve preparatory purposes. It also stated that the settlement proposal was in line with the arbitral tribunal’s powers under s 278 of the German Code of Civil Procedure, which applied under the parties’ agreement by analogy. It therefore dismissed the challenge to the two arbitrators.
OLG München, Decision of 24 November 2015, 34 SchH 5/15, SchiedsVZ (German Arbitration Journal) 2015, 309
See for commentary on the decision Niehoff, Germany: Would, Could, Should – Arbitrator’s Duty of Impartiality Does Not Require Use of Language Emphasizing the Preliminary Nature of a Pre-Hearing Indicative Order, available here.
Whether it is compatible with the mandate of an international arbitrator to facilitate settlement between the parties or whether that mandate is strictly limited to deciding the dispute in a final award has long been a subject of debate. Berger and Jensen argue that it is past time to dispense with such conceptual discussions and focus on the joint will of the parties. In many cases, parties are interested in an arbitral tribunal that is willing and able to help them negotiate a settlement.
See Klaus Peter Berger and J. Ole Jensen, The Arbitrator's Mandate to Facilitate Settlement (2017) 40(3) Fordham International Law Journal 887-917, available here.
Scenario: 23 - Challenge of Arbitrator
See for an extreme case in which a domestic court set aside awards because one of the party-appointed arbitrators exercised a determinative influence on the proceedings and the decision-making of the tribunal by taking total control of the proceedings, presenting the dispute in a unilateral fashion when drafting the award, by orienting deliberately and systematically the deliberations of the tribunal members in the interest of the party that had appointed him and by concealing previous close business ties between him and that party:
CDR Créances SAS et al v Mr Bernard Tapie et al, Paris Court of Appeal No. 13/13278, 17 February 2015, French version available here
For a comprehensive study on the challenge of biased arbitrators, featuring detailed commentary on specific situations giving rise to challenges, see Froitzheim, Die Ablehnung von Schiedsrichtern wegen Befangenheit in der internationalen Schiedsgerichtsbarkeit, Carl Heymanns Verlag 2016.
The author regularly publishes updates on current developments in regard to arbitrator challenges.
In the case Cofely Ltd v Bingham & Anor, the English High Court found that a number of grounds for justifiable doubts as to his impartiality in terms of section 24(1)(a) of the Arbitration Act 1996 had been met. The arbitrator in that case had such strong relations to one of the parties that the test whether 'the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased‘ had been met. It therefore held that an order for removal would be made if the arbitrator did not resign.
Cofely Ltd v Bingham & Anor [2016] EWHC 240 (Comm), English High Court of 8 February 2016, available here.
The Austrian Supreme Court was tasked with deciding the challenge of an arbitrator who had not disclosed facts which could attribute him to one of the parties. While the facts themselves did not constitute grounds for challenge, the Court had to decide whether the failure disclose relevant facts might itself constitute a ground for challenge. It held that this question could only be answered on a case-by-case basis, taking into account the weight of the failure to disclose in relation to the likelihood that the relevant facts actually constitute grounds for challenge. In this evaluation it also considered it relevant whether the arbitrator deliberately concealed the information to avoid a challenge or whether he simply did not realize the materiality of it. Notably, in its judgment the Court made reference to the IBA Guidelines on Conflicts of Interest in International Arbitration.
1. OGH, Decisions of 5 August 2014, 18 ONc 1/14p & 18 ONc 2/14k, German version available here
2. Zollner/Riedl, Austrian Supreme Court: Failure to disclose = ground for challenging an arbitrator?, <http://globalarbitrationnews.com/austrian-supreme-court-failure-to-disclose-ground-for-challenging-an-arbitrator-20150819/>
The Higher Regional Court of Munich has ruled on a challenge to an arbitral tribunalconsisting of two arbitrators under s 1037 of the German Arbitration Act. Before the oral hearing, the arbitral tribunal had issued an order indicating that it considered the claim brought by Claimant to be without merit and proposed a settlement. In Claimant’s opinion, this meant that the arbitrators had already made up their minds as to the outcome of the arbitration and thus lacked impartiality. The arbitral tribunal had rejected Claimant’s challenge arguing that the indicative order was only meant to prepare the oral hearing, giving the parties an idea about which arguments to address. Although the order did not explicitly state its preliminary nature (e.g. by using words like „probably“, „likely“ etc.), the Court concurred with the arbitral tribunal. It held that the order did not mean that the arbitrators had already made up their minds. It held that by the very nature of an indicative order, its contents are not final but just serve preparatory purposes. It also stated that the settlement proposal was in line with the arbitral tribunal’s powers under s 278 of the German Code of Civil Procedure, which applied under the parties’ agreement by analogy. It therefore dismissed the challenge to the two arbitrators.
See for an overview of the 2014 Revisions to the IBA Guidelines on Conflicts of Interest in International Arbitration by the Co-Chairs of the IBA Arbitration Committee in 2014 Zuleta/Friedland, Dispute Resolution International (The Journal of the Dispute Resolution Section of the IBA) May 2015, 55 et seq.
In W Ltd v M SDN BHD, the applicant challenged two awards made by a sole arbitrator due to ’serious irregularities’ in terms of s 68 English Arbitration Act 1996. Both parties accepted that the arbitrator’s relationship with one of the parties fell within para 1.4 of the non-waivable red list of the 2014 IBA Guidelines on Conflict of Interest. Nevertheless, the court did not consider that under the circumstances of the case the arbitrator appeared biased. Although formally he was a partner of a law firm which advises a company in the same group of companies as one of the parties, the arbitrator mainly worked as a sole practitioner, only using the firm for administrative and structural support. Insofar the court did not consider that a „fair minded and informed observer“ would conclude that there was apparent bias. While the court saw the IBA Guidelines as a „distinguished contribution in the field of international arbitration“, it also pointed out that there were 'weaknesses' in them. In the court’s opinion, the situation in the present case (which is described in para. 1.4) does not necessarily lead to apparent bias. It therefore criticized that it was included in the non-waivable part of the IBA Guidelines’ red-list. Upon full disclosure by the arbitrator, the parties should be able to jointly waive the potential conflict. These 'weaknesses' led the court not to follow the IBA Guidelines in its decision. It thus did not set aside the awards.
W Ltd v M SDN BHD [2016] EWHC 422 (Comm), English High Court of 16 December 2015, available here.
The four-tier test which the arbitral tribunal in Aguas de Barcelona has developed has been confirmed by the ICSID Annulment Committee tasked with reviewing the tribunal's awards. Argentina had attempted to overturn the awards in ICSID annulment proceedings arguing that due to Gabrielle Kaufmann-Kohler’s former role as non-executive director of Swiss bank UBS (which had held a 2% stake in two of the investors), the tribunal had been improperly constituted. In Argentina’s opinion, that role and the fact that Kaufmann-Kohler had failed to disclose it constituted justifiable doubts as to her impartiality and independence. The Annulment Committee rejected the investor’s application. With a reference to the IBA Guidelines on Conflict of Interest, it held that the tribunal’s decision to dismiss the investor’s challenge to Kaufmann-Kohler had not been „plainly unreasonable“. Rather, it considered the qualitative assessment enshrined in the four-tier test developed in that decision „within the Tribunal’s reasonable discretion“ (para 200).
Suez, Sociedad General de Aguas de Barceolna S.A. and Vivendi v Argentine Republic, ICSID ARB/03/19, Decision of the Annulment Committee of 5 May 2017, available here.
The Paris Court of Appeal has added a new chapter to what may be referred to as the Jarvin Saga (cf para 23-21, fn 39). The Court has confirmed an arbitral award rendered by Sigvard Jarvin who had allegedly not fully disclosed his law firm’s ties to one of the parties. The ICC arbitration between Greek construction company J&P Avax and Italian construction company Tecnimont had resulted in a partial award providing for Avax’s liability. Avax has already twice attempted and failed to set aside the award due to Jarvin’s former law firm’s ties to Tecnimont. Avax now challenged the award arguing that there were new serious doubts regarding the arbitrator’s independence and impartiality. While the arbitrator had disclosed that its law firm had advised Tecnimont’s parent company, he had neglected to disclose that a different office of the same law firm had advised Tecnimont in a Chinese construction project. The Court rejected the challenge, holding that it was belated as Avax had failed to comply with the ICC Rules’ requirement to challenge the arbitrator within 30 days after learning of the relevant facts. It added that, in any case, this additional information did not add more grounds for justifiable doubts as the information disclosed by the arbitrator and also decided upon in the prior set aside proceedings did.
Cour d’appel de Paris, Judgment of 12 April 2016, available here.
The Bar Council of England and Wales has published guidelines on how to proceed when a barrister appears before a barrister from the same chambers sitting as an arbitrator (cf. 23-23, fn. 41). The aim of these guidelines is to assist in handling situations of potential conflict in a transparent manner. They may be accessed here.
See for considerations as to when a tribunal may withhold its approval of an intended change or addition to a party’s legal representativesunder Art. 18.4 LCIA Rules Scherer/Richman/Gerbay (eds.) Arbitrating under the 2014 LCIA Rules, 2015, p. 291 et seq.
The French Cour de Cassation has denied enforcement of a partial award which was rendered by an arbitrator who had failed to disclose relevant information. The arbitrator had not disclosed that a different office of his law firm was advising the parent company of one of the parties in other matters. The court held that this failure to disclose cast reasonable doubt on the arbitrator’s impartiality and independence. It therefore denied enforcement of the award due to an improper constitution of the tribunal. The original French version of the judgment is available here. An English translation is available here.
"The US District Court for the District of Minnesota has rejected an application for vacatur of a FINRA award. It has held that nondisclosure of past services as arbitrator or mediator for one of the parties alone does not mandate vacatur, neither under a “reasonable impression of bias” nor under an “appearance of bias” standard. In the case at hand, the losing party in a FINRA arbitration sought vacatur of the adverse arbitration award on the ground that one of the arbitrators had failed to disclose his role as mediator in an unrelated matter which involved the respondent (MSSB). The court, however, found it sufficient that the arbitrator had disclosed his service as arbitrator in six arbitrations involving MSSB. The court rejected the petitioner’s interpretation of Commonwealth Coatings that that mere fact of non-disclosure mandates vacatur. It held that there is no case law that follows the petitioner’s interpretation. The court further held that the petitioner had not met the heavy burden of proving evident partiality, as he did not specifically show that particular contacts with the respondent influenced the arbitrator's resolution of this dispute. In rejecting the application for vacatur the court followed the case law that places a heavy burden on the petitioner to prove bias and underscored that the mere appearance of bias does not suffice.”
Ann Eleanor Ploetz, as Trustee For the Laudine L. Ploetz, 1985 Trust v. Morgan Stanley Smith Barney, LLC, Dist. Court, Minnesota May 25 2017, availabe here.
The ICC has issued a Guidance Note regarding the disclosure of conflicts of interest by arbitrators. The Note clarifies that disclosure does not necessarily imply the existence of a conflict and that in the event of a challenge it will be for the ICC Court to decide this challenge. The Note further enumerates some situations which may call into question arbitrators' impartiality and independence in the eyes of the parties. The Guidance Note is included in paras 15-26 of the ICC's Note to Arbitrators and Parties, which may be accessed here.
The German Supreme Court (BGH) has addressed a situation where one arbitrator was challenged but the tribunal dismissed the challenge. The challenging party had then brought its challenge before the German courts. In the meantime the tribunal, including the challenged arbitrator, had rendered its award. Shortly after, the court tasked with the challenge proceedings found the challenge to be justified. The challenging party then argued that the arbitral tribunal was constituted contrary to the relevant provisions of the German Code of Civil Procedure (ZPO). The BGH agreed and set the award aside due to wrongful composition of the arbitral tribunal.
BGH, 11 December 2014, I ZB 23/14, ZIP 2015, 1363
<http://hsfnotes.com/arbitration/2015/07/14/arbitrations-seated-in-germany-due-to-the-dynamics-within-arbitral-tribunals-an-award-can-be-set-aside-even-if-only-one-of-the-arbitrators-was-successfully-challenged-in-the-german-courts-and-the-de-2/>
<http://globalarbitrationnews.com/bgh-low-threshold-for-setting-aside-of-an-award-rendered-by-a-tribunal-including-an-arbitrator-who-was-successfully-challenged-20150714/>
Scenario: 24 - This First Day of the Hearing: The Legal Issue (I)
In a recent article published in Arbitration International the authors analyze current trends regarding the principle of force majeure in international arbitration practice. An excerpt of this article can be found on our TransLex-website (link).
Regarding the concept of economic hardship, the authors conclude that:
“As a matter of principle, in the event of […] economic hardship, the parties [to international business contracts] must adhere to the terms of their agreement and the affected party, therefore, cannot claim the right to refuse performance, merely since contract becomes unprofitable."
Firoozmand, Mahmoud Reza/ Zamani, Javad, Force majeure in international contracts: current trends and how international arbitration practice is responding, Arb. Int'l 2017, 395 et seq.
Scenario: 25 - This First Day of the Hearing: The Legal Issue (II)
The English High Court had to decide whether an award which is based on a penalty clause should be denied enforcement due to a public policy violation. The judge set out by noting that there is generally a strong presumption under the New York Convention that an award is enforceable and that the grounds on which enforcement may be denied are narrow. He then considered that although in England there is an important public policy against the enforcement of penalty clauses, the rule does not protect a „universal principle of morality“. The enforcement of an award which is in part based on a penalty clause is not automatically „injurious to the public good“. Rather, according to the judge, it depends on how the applicable law deals with penalty clauses. As the applicable law in the underlying award allowed the arbitral tribunal to reduce the penalty clause so it was no longer „excessive“, the judge considered that the public interest in enforcing foreign arbitral awards outweighed the interest in not enforcing penalty clauses. He therefore refused to deny enforcement of the award.
Pencil Hill Limited v US Citta di Palermo S.p.A., English High Court, 19 January 2016, unreported, abstract available here.
The UK Supreme Court has clarified its stance on the enforcement of penalty clauses in the combined cases of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis. Before this decision the leading precedent in the UK was Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] A.C. 79. According to Dunlop, a contractual clause was unenforceable if it provided for a specified payment or transfer to be made by a party in case it breached the contract. Only if the clause could be considered a "genuine pre-estimate of damage" likely to be suffered by the party entitled to payment as a result of the breach, was the clause enforced. However, this principle turned out to be hard to apply to complex commercial contracts. The judgment in Cavendish and ParkingEye now clarifies that enforcement will only be denied if "the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation". This clarification is considered to make the enforcement of penalty clauses easier.
Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis, UK Supreme Court, 4 November 2015, [2015] UKSC 67,
1. Dymond/Chesney/Pape, 'UK Supreme Court Provides Welcome Clarification to Rules on Penalty Clauses for First Time in a Century‘, 10 November 2015, <http://www.debevoise.com/~/media/files/insights/publications/2015/11/20151110_uk_supreme_court.pdf>
2. <http://mcnairchambers.cmail20.com/t/ViewEmail/t/C673E77CDB2B0C60/87532293BC1268D5D9767B6002735221>
English High Court, 22 July 2015, decision not yet publicly available. Cf. <http://globalarbitrationreview.com/news/article/34043/a-tale-two-clauses-english-court-applies-fiona-trust-nigerian-oil-case/>
Scenario: 26 - The Second Day of the Hearing: Taking of Evidence
See for an analysis of the dangers of transaction counsel appearing as witness (and/or arbitration counsel) in international arbitrations Wegen, in: Ehle/Baizeau (eds.) Stories from the Hearing Room: Experience from Arbitral Practice, 2015, 205, 213 et seq.
See for a helpful and practical guide making use of original hearing transcripts to teach the art of witness examination Ragnar Harbst, 'A Counsel’s Guide to Examining and Preparing Witnesses in International Arbitration', Kluwer Law International 2015.
See for suggestions to improve Witness Statements in international arbitration Shore, in: van den Berg (ed.) Legitimacy: Myths, Realities, Challenges, ICCA Congress Series No. 18, 2015, p. 302, 311 et seq.
See for a detailed analysis of the requirements for a document production request under Art. 3 (3) IBA Rules (especially specificity of documents and their prima facie relevance and materiality) with examples from arbitral practice, Marghitola, Document Production in International Arbitration, 2015, pages 35 et seq.
See for the use of the Redfern Schedule in international arbitration by its inventor Redfern, Documentary Disclosure in International Arbitration: The IBA Rules and the Redfern Schedule, in: Carlevaris/Levy/Mourre/Schwartz (eds.) International Arbitration under Review: Essays in Honour of John Beechey, 2015, 343, 350 et seq.
See for details on a legal representative's duty not to knowingly conceal or assist in the concealment of any document (or any part thereof) which is ordered to be produced by the Arbitral Tribunal pursuant to para. 5 of the LCIA’s General Guidelines for the Parties’ Legal Representatives, Scherer/Richman/Gerbay (eds.) Arbitrating under the 2014 LCIA Rules, 2015, p. 303 et seq.
The US Federal District Court for the Southern District of New York has allowed a party to an international arbitration seated in London to obtain US-style discovery under 28 U.S.C. s. 1782. The court held, in very general terms, that an international commercial arbitral tribunal constituted an „international tribunal“ in the sense of 28 U.S.C. s. 1782 (a).
In re ex parte application Kleimar N.V., Case #: 1:16-cv-07701, US Federal District Court for the Southern District of New York of 16 November 2016, available here.
The question of whether private international arbitral tribunals qualify as a ‚foreign or international tribunal‘ in terms of 28 U.S.C. s. 1782 (a) remains controversial among different Circuits of US Courts of Appeals. For an in-depth review of recent appellate decisions, suggesting a growing circuit split on the issue, see here.
For a comprehensive German language analysis regarding this question also see Oehm, Das Rechtshilfeverfahren in Beweissachen nach 28 U.S.C. § 1782 in der internationalen Handels- und Investitionsschutzschiedsgerichtsbarkeit (Peter Lang 2016).
See for a detailed analysis of theoretical and practical aspects priviliges as defences to document production requests under Art. 9 (2) IBA Rules, including a comparative analysis of the most important privilege defences (legal professional privilege, settlement privilege) as well as the waiver of privilege protection and the question as to whether the same or different standards of privilege protection should be applied to the parties in a particular arbitration, Marghitola, Document Production in International Arbitration, 2015, pages 70 et seq.
The High Court of Singapore confirmed the broad discretion of arbitral tribunals regarding the assessment of evidence. In the case, the High Court dismissed a challenge against an arbitral award arguing that the tribunal was entitled to disregard the parol evidence rule on contract interpretation. In reaching this conclusion, the High Court examined the lex arbitri and the SIAC-Rules as the applicable arbitration rules and found that they afford arbitral tribunals with broad discretion regarding the assessment of evidence: First, Sec. 2 I Singapore Evidence Act expressly stipulates that the Act does not apply to arbitral proceedings. Second, Art. 16 II SIAC-Rules, like many other institutional arbitration rules, provides that: “The Tribunal shall determine the relevance, materiality, and admissibility of all evidence.” It has to be noted, however, that it is established case law in Singapore that the interpretation of contracts is a matter of procedural law and therefore falls squarely within the procedural discretion of the arbitral tribunal. Hence, the decision may have been different in jurisdictions where the interpretation of contracts is regarded as a matter of substance. Nonetheless, the High Court’s decision serves as yet another example of the ongoing trend towards the application of autonomous evidentiary principles rather than strict adherence to domestic laws on evidence in international arbitration.
BQP v BQQ, Singapore High Court, 14 March 2018, [2018] SGHC 55, available here.
- Tan/Ng, Singapore High Court Finds that an Arbitral Tribunal is Empowered to Disregard the Parol Evidence Rule, available here.
- Chan, Interpreting Contracts Under Singapore Law in International Arbitration — The Sequel, available here.
Scenario: 27 - Deliberation of the Tribunal and Rendering of the Award
For an insight into dynamics of tribunal deliberations and what might go on "behind the scenes" see Draetta, Behind the Scenes in International Arbitration, Juris 2011, pp. 83 et seqq.
Professor Stavros Brekoulakis has critically assessed existing empirical studies on arbitral decision-making and offers an alternative model for the analysis of arbitral decision-making. The prize-winning article may be accessed here.
In the case B.V. Scheepswerf Damen Gorinchem v The Marine Institute the English High Court was faced with a challenge of an award purportedly issued too late (more than one year after the conclusion of the oral hearings). The Claimants had applied to set aside the award under Sec. 68 of the English Arbitration Act 1996 („serious irregularities“) on the basis that the delay in issuing the award amounted to a breach of the arbitrator’s general duties and the procedure agreed between the parties. The Court held that a delay could in itself not constitute a ground for set aside. If anything, it only warrants a closer scrutiny by the Court in set aside proceedings. It therefore rejected the challenge.
English High Court, B.V. Scheepswerf Damen Gorinchem v The Marine Institute, 4 June 2015, [2015] EWHC 1810 (Comm), available at <http://www.bailii.org/ew/cases/EWHC/Comm/2015/1810.html>
The IBA Arb40 Subcommittee has published a helpful instrument containing guidelines and best practices for drafting arbitral awards. The IBA Abr40’s Toolkit for Arbitral Award Writing may be accessed here.
The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration surveyed a total of almost 900 respondents including a range of different stakeholders. A clear majority of the respondents found that the use of tribunal secretaries requires further regulation. Regarding their frequency of appointment, 82% of respondents had either seen them used or used their services themselves. Most respondents thought that it was up to the arbitral institutions to provide the services of tribunal secretaries. A vast majority of respondents does not consider it appropriate that the secretary conduct substantive or merits-related tasks.
In a recent decision, the Swiss Federal Tribunal has for the first time addressed the role of tribunal secretaries and so-called "legal consultants". The losing party in an arbitration concerning the renovation of a building in Switzerland had applied to vacate the award due to an "improper constitution of the tribunal" in terms of Art. 190 (2) (a) of the Swiss Private International Law Act. According to the challenging party, the sole-arbitrator (who was an architect) had improperly delegated his decision-making powers to the legal constultant and secretary he had appointed. The Court held that arbitrators were entitled to delegate certain of their responsibilities so long as they did not pertain to "core decision making functions" and the arbitrators were transparent about their use of external help. As both prerequisites were fulfilled in the instant case, the Court dismissed the challenge to the award.
Swiss Federal Tribunal, 21 May 2015, Decision 4A_709/2014, available in French at <http://res.cloudinary.com/lbresearch/image/upload/v1438706137/21_mai_2015_4a_709_2014_french_47115_1735.pdf>
For commentary on the decision see
- Bärtsch/George, Swiss Supreme Court outlines permissible use of administrative secretaries and "consultants" to arbitral tribunals, available here.
- Jensen, The Swiss Federal Tribunal addresses the role of secretaries and ‘legal consultants’ to arbitral tribunals, 21 IBA Arbitration News 1 (2016), pp. 66-69, available here.
The role of the tribunal secretary has recently received significant attention in connection with the famous Yukos awards, which make up the largest award that was ever rendered. The Russian Federation, who lost in the arbitration, seeks to set aside the awards before Dutch courts at the seat of the arbitration arguing, among other things, that one of the tribunal’s secretaries has participated in the arbitral tribunal’s decision-making, thereby becoming a "fourth arbitrator". To support their contention, Russia has provided an expert opinion by a forensic linguist. According to the expert report the tribunal assistant Martin Valasek has written substantial parts of the award. Russia argues that the drafting of the award pertains to the core of arbitral decision-making and may therefore not be delegated.
See for the Russian Federation’s arguments for set aside of the award their application to the District Court of the Hague at §§ 468 et seqq.
See for commentary on this application:
1. Newman/Zaslowsky, The Yukos Case: More on the Fourth Arbitrator, New York Law Journal, 28 May 2015, available here
2. Galagan/Å½ivkoviÄ‡, The Challenge of the Yukos Award: an Award Written by Someone Else – a Violation of the Tribunal’s Mandate?, Kluwer Arbitration Blog, 27 February 2015, <http://kluwerarbitrationblog.com/blog/2015/02/27/the-challenge-of-the-yukos-award-an-award-written-by-someone-else-a-violation-of-the-tribunals-mandate/>
3. Ross, Valasek wrote Yukos awards, says linguistics expert, Global Arbitration Review, 20 October 2015, <http://globalarbitrationreview.com/news/article/34234/valasek-wrote-yukos-awards-says-linguistics-expert/
The Australian Centre for International Commercial Arbitration (ACICA) has published guidelines on the appointment and use of tribunal secretaries. The ACICA Guideline on the Use of Tribunal Secretaries is available here. In addition, the ACICA has launched the ACICA Tribunal Secretary Panel, i.e. a list of individuals available to act as tribunal secretaries who can be appointed to assist in individual cases. More information is available here.
See for a critical view of dissenting opinions as an expression of an arbitrator's "intellectual need to express a different opinion" Dimolitsa, Are Genuine Dissenting Opinions of Any Real Use?, in: Carlevaris/Levy/Mourre/Schwartz (eds.) International Arbitration under Review: Essays in Honour of John Beechey, 2015, 137 et seq
The Austrian Supreme Court has set aside an award due to a violation of the procedural ordre public as the award was not properly reasoned. The parties to the arbitration had concluded a consultancy agreement. Pursuant to this agreement respondent was obliged to produce documentation of contracts it had concluded with its customers. In the arbitral proceedings, claimant requested the tribunal to order respondent to provide said documentation. The tribunal noted that this request was phrased too broadly and had to be dismissed due to a lack of specificity, but it did not explain why it considered the request too broad. Therefore, Claimant applied to have the award set aside. The OGH held that the award is in violation of public policy as it contained a mere pseudo-reasoning (Scheinbegründung), which rendered the tribunal's decision incomprehensible.
This decision confirms that the standard for the reasoning of an arbitral award is not as high as the standard for the decision of national courts. Nonetheless, the award has to be comprehensible.
OGH , Judgment of 28 September 2016, 18 OCg 3/16i, German original available here.
For commentary on the decision see <https://www.globalarbitrationnews.com/austrian-supreme-court-set-aside-arbitral-award-for-violation-of-public-policy/>
The New Zealand Court of Appeal has set aside an award for a lack of proper reasoning. The case revolved around a territorial dispute between two Maori groups. In its award the tribunal split the land equally between the two. One of the groups challenged the award for insufficient reasoning. While the High Court denied the challenge, the Court of Appeal granted the application and set the award aside.
According to the Court of Appeal the rationale behind the duty to give reasons is “that the parties, especially the disappointed party, should be left in no doubt why they have won or lost or their expectations have otherwise been frustrated.” The Court held that the requirements for the reasoning of an award are not as strict as those for judicial decisions. However, they have “to be sufficiently full for the parties to understand the pathway taken by the panel to explain the result” and “dispell[…] any suggestion of arbitrariness”. According to the Court the importance of the dispute to the parties and the complexity of the legal and factual issues has to be taken into account in order to determine the adequate level of reasoning on a case-by-case basis. In the case at hand, the Court held that a mere restatement of the arguments by the respective parties and a brief conclusion did not meet the required standard of reasoning.
Ng?ti Hurungaterangi v Ng?ti Wahiao [2017] NZCA 429, available here.
In Smarter Tools, Inc. v. Chongqing SENCI Import & Export Trade Co., the District Court for the Southern District of New York remanded an arbitral award for insufficient reasoning. At the outset of its analysis, the court restated the basic principle that under the FAA an award must only contain a reasoning if – as was the case in the underlying arbitration agreement – the parties provide for such a requirement in their agreement. In determining whether the award in question was sufficiently reasoned, the District Court followed the standard that was established by the Second Circuit in Leeward Const. Co., Ltd. v. Am. Univ. of Antigua-College of Medicine. According to this standard, “a reasoned award is something more than a line or two of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue raised before the panel. A reasoned award sets forth the basic reasoning of the arbitral panel on the central issue or issues raised before it. It need not delve into every argument made by the parties.” As the award in the question did not contain any rationale for rejecting the respondent’s counterclaim in the arbitration, the District Court held that the award was not properly reasoned. However, rather than vacate the award, the court remanded the award to the arbitrator for supplementation “in order to facilitate the purpose underlying arbitration: to provide parties with efficient dispute resolution”.
Smarter Tools, Inc. v. Chongqing SENCI Import & Export Trade Co., 18-CV-2714 (S.D.N.Y. Mar. 26, 2019) (slip op.), available here.
For further commentary see: Behrman/Roessler, District Court for the SDNY Remands Insufficiently Reasoned Award Back to Arbitrator, available here.
Leeward Constr. Co. v. Am. Univ. of Antigua-College of Med., 826 F.3d 634 (2d Cir. 2016), available here.
The Swiss Federal Tribunal has confirmed that an award violates Swiss procedural public policy if it ignores the res iudicata effect of an earlier arbitral award or court judgment regarding the same subject matter between the same parties.
Swiss Federal Tribunal, 29 May 2015, Decision 4A_633/2014, available in German at <http://relevancy.bger.ch/php/aza/http/index.php?lang=de&type=show_document&highlight_docid=aza://29-05-2015-4A_633-2014>
In Ecopetrol S.A. and Korea National Oil Corporation v. Offshore Exploration and Production LLC the U.S. District Court for the Southern District of New York has confirmed two "interim awards“ under the New York Convention. It held that, generally, it lacks authority to enforce awards that are not final. However, what determines the finality of an award is not the label the arbitrators put on it but "if it resolves the rights and obligations of the parties definitively enough to preclude the need for further adjudication with respect to the issue submitted to arbitration“. It does not have to dispose of all claims pending with the arbitral tribunal. Under this definition, the court found the awards to be final although the arbitrators had considered them only partial. Accordingly, the awards were enforced by the court.
S.A. and Korea National Oil Corporation v. Offshore Exploration and Production LLC, U.S. District Court for the Southern District of New York, 10 September 2014, 14 Civ. 529 (JGK) (S.D.N.Y. Sep 10, 2014)
In Enterprise Insurance Company PLC v U-Drive Solutions (Gibraltar) Limited the English High Court had to determine whether an arbitrator's decisions rendered in the form of 'procedural orders' actually constituted awards and could therefore be challenged under s 68 and 69 of the English Arbitration Act 1996. The Court held that this was not the case. It stated that a procedural decision reached during the case was not the same as a determination of the substantive issues submitted to the tribunal. In the case at hand the arbitrator had merely decided on such procedural matters, including a refusal of an application to dismiss the case. The court therefore rejected the challenge.
Enterprise Insurance Company PLC v U-Drive Solutions (Gibraltar) Limited and another [2016] EWHC 1301 (QB), Judgment of 15 June 2016, available here.
In two subsequent decisions, the Swiss Federal Tribunal has confirmed that an ordinary procedural order can in general not be challenged in set aside proceedings, as it does not constitute an arbitral award. The only exception is where a procedural order contains an implicit decision regarding the arbitral tribunal’s jurisdiction. In making that determination, the content and not the procedural order’s designation as an order or an (interim) award is decisive. As a general rule, procedural orders do not contain an implicit decision on the tribunal’s competence.
SFT, Judgment of 10 October 2016, 4A_555/2016, French original available here.
SFT, Judgment of 20 September 2016, 4A_524/2016, French original available here.
See for commentary on
- the first decision: Voser/Estermann, Arbitrator's Procedural Order is Generally Not Subject to Setting Aside Proceedings, available here.
- the second decision: Boog, Swiss Supreme Court refuses to review the merits of a manifestly inadmissible petition to set aside two procedural orders, available here.
Scenario: 28 - Request for Correction, Additional Award an Setting Aside of the Award
Until now, Spanish courts have complied with the principle that there is no révision au fond of the arbitral tribunal's decision on the merits and have not reviewed the merits of an award in set aside proceedings. However, three recent decisions by the Tribunal Superior de la Justicia, Madrid use the public policy ground for setting aside in the Spanish arbitration law to revisit the meritsof the award. The Court has held that the concept of public policy comprises all mandatory rules and principles of Spanish and EU legislation and that the Court may therefore scrutinize the award regarding a correct application of these rules.
Judgments of the Superior Court of Justice of Madrid, 28 January 2015, Nº 13/2015; 6 April 2015, Nº 7/2015; 14 April 2015 Nº 31/2015
The Swiss Federal Tribunal has declared an annulment application inadmissible based on a breach of good faith. The parties to an arbitration had waived their right to judicial review in their share purchase agreement. The appellant argued that this waiver was invalid and that the jurisdiction of the sole arbitrator was based on the unconditional appearance of the defendant and not on the arbitration agreement itself. The Swiss Federal Tribunal did not discuss the effect of the unconditional appearance. Rather, it held that the appellant’s behavior was in contradiction to its previous behavior (venire contra factum proprium) because in the arbitral proceedings, it had relied on the validity of the share purchase agreement to obtain payment under said agreement. In the annulment proceeding, however, the claimant/appellant argued that the agreement was invalid in order to escape the waiver of judicial review. Therefore, the court declared the challenge inadmissible.
SFT, Judgment of 18 January 2017, 4A_500/2015, French original available here.
- Feit, available here
- Voser/Gottlieb, available here
See for venire contra factum proprium as a general principle of law, www.trans-lex.org/907000.
BGH, Judgment of 11 December 2014, I ZB 23/14, ZIP 2015, 1363
The New Zealand Supreme Court in Carr v. Gallaway has invalidated an arbitration clause in which the parties had agreed to apply to the courts at the seat of the arbitration for a review of the ultimate award as to "questions of law and fact", emphasising that it is not possible to confer upon courts in Model Law jurisdictions the power to review arbitral awards on the grounds of error of fact. The Court argued that the parties' invalid agreement on an appeal on questions of fact was an essential element of their agreement to arbitrate, which could not be separated from their agreement to arbitrate without altering the central purpose and nature of that agreement, thereby invalidating the arbitration clause as a whole.
Carr v. Gallaway, [2014] NZSC 75; see also Monichino, Asian Dispute Review 2015, 97
In In re: Wal-Mart Wage and Hour Employment Practices Litigation, the U.S. Ninth Circuit Court of Appeal has ruled that parties cannot waive their right to a judicial review of the award in their arbitration agreement. The parties had agreed that the award should be "non-appealable". However, the court held that this clause could not be construed to exclude a parties’ right to challenge the award in set aside proceedings. The relevant provisions of the Federal Arbitration Act are mandatory and therefore cannot be derogated by the parties.
In re: Wal-Mart Wage and Hour Employment Practices Litigation, U.S. Ninth Circuit Court of Appeal, 17 December 2013, 737 F.3d 1261 (9th Cir. 2013)
1. AKN and another v ALC and others and other appeals, Singapore Court of Appeal, 31 March 2015, [2015] SGCA 18; see for commentary on this decision Jensen, 4 European International Arbitration Review 1 (2015), pp. 55-80.
In the case of A v B, the English High Court set aside an award because it was based on one request for arbitration that raised two disputes from two separate contracts containing two identical LCIA arbitration clauses. In reaching its decision the Court held that under Art. 1.1 of the LCIA Rules it is necessary to file a separate request for arbitration for each and every dispute. The court further analyzed whether the Respondent had raised its objection to the Tribunal’s Jurisdiction in time pursuant to Sec. 31 (1) English Arbitration Act. In this regard, the Court held that a challenge is raised in time, if it is raised before the submission of a statement of defence and that this mandatory provision supersedes Art. 23 (3) LCIA Rules.
It remains to be seen whether this rather formalistic application of the LCIA will stand on appeal. Until then parties wishing to raise disputes from separate contracts and based on separate arbitration agreements will have to file two requests for arbitration under the LCIA rules and then request joinder of those proceedings.
A v B [2017] EWHC 3417 (Comm), available here.
The Swiss Federal Tribunal has confirmed that the principle of iura novit curia also applies to arbitral tribunals seated in Switzerland. The underlying arbitration concerned the payment of an earn-out from a share purchase agreement concluded between the parties. During the arbitration, Claimant and Respondent both exclusively pleaded extreme positions as to the calculation of this earn-out. While Claimant argued that no deductions were justified when calculating the earn-out quantum, R alleged that no earn-out was due at all, because all the deductions were justified. In its award, the Arbitral Tribunal found that only some of the deductions were justified and partially granted Claimant’s claim. The Respondent went on to challenge the award and asserted, inter alia, that the Arbitral Tribunal had violated its right to be heard by using a calculation method that no party had pleaded. The Federal Tribunal rejected this challenge and held that arbitrators have the right – most likely also the duty – to apply the applicable substantive law to the factual scenario of the case. This is the case even if the parties failed to plead the correct application of the law, as long as the decision is not surprising for the parties. However, the Federal Tribunal held that this “surprise-exemption” has to be interpreted narrowly. The mere fact that the application of the law which the arbitral tribunal ultimately adopts in its award has not been pleaded by either party is, therefore, insufficient.
This decision underlines the broad interpretation of the principle of iura novit arbiter in Switzerland. Against this backdrop, parties in arbitral proceedings seated in Switzerland may consider whether they want to anticipate and address as subsidiary positions further potential applications of the law by the arbitral tribunal.
SFT, Judgment of 11 January 2018, 4A_56/2017, French original available here.
See for commentary on the decision: Gabriel/Buhr, Iura Novit Arbiter: Application of the Law on the Tribunal’s Own Motion, in: dRSK, published on 14 Februrary 2018, available here.
In a recent decision, the Swiss Federal Tribunal (SFT) confirmed that the principle of equal treatment only applies to the evidentiary phase of the proceedings and not to the deliberations of the arbitral tribunal and its decision on costs. In the underlying case, the respondent to the arbitration had challenged the award arguing that the arbitral tribunal had violated the principle of equal treatment by awarding the costs entirely to the Respondent even though neither party had succeeded entirely with its claims. The SFT rejected this challenge. It reasoned that it would circumvent the Swiss legislator’s decision not to allow a challenge of the award on the basis of arbitrariness or factual and legal errors by the tribunal for international arbitrations if such a challenge could simply be disguised as a challenge based on the violation of equal treatment.
SFT, Judgment of 12 March 2018, 4A_450/2017, French original available here.
See for commentary on the decision Voser/Wimalasena, Arbitral cost decisions cannot violate the principle of equal treatment of parties, available here.
The odds of successfully challenging an award for serious irregularity pursuant to Sec. 68 (2) English Arbitration Act 1996 remain low as about 95% of these applications are unsuccessful. However, the case of RJ and another v HB provides a rare example of such a successful application.
In the underlying contracts, HB agreed to transfer shares to RJ or an affiliate nominated by him (L Ltd.) in exchange for US$ 75 million. When the transfer could not be effected, HB initiated arbitration proceedings against RJ and L Ltd. alleging that they had failed to obtain regulatory approval to effect the transfer. In his award, the sole arbitrator held that RJ and L Ltd. had indeed failed to obtain the approval and that RJ was the beneficial owner of the shares. RJ and L Ltd. applied to have the award set aside for serious irregularity arguing that the Arbitrator had granted relief that was never sought and that is significantly different to anything that was contended without giving proper notice to the parties. The court held “that it is a serious irregularity within s.68(2) of the 1996 Act for an arbitrator to decide a dispute on a basis significantly different to anything raised by or with the parties, if that causes or will cause substantial injustice. I say 'by or with' the parties because of course arbitrators are not restricted to choosing between whatever rival contentions are developed by the parties; but if they are to contemplate determining a dispute on some different basis, fairness dictates, and so the arbitrators' general duty of fairness under s.33 of the Act requires, that the parties be given notice and a proper opportunity to consider and respond to the new point.“ Since the question of beneficial ownership had not been addressed by either party, the court held that the award was tainted by serious irregularity. The court further decided to set aside rather than remit the award because the irregularity affected the granted relief to such an extent that it was necessary to have the question of proper relief decided afresh.
RJ and another v HB [2018] EWHC 2833 (Comm), available here.
For commentary see Peacock/Warder, English court sets aside arbitration award for serious irregularity due to tribunal’s non-disclosure of novel point central to award, available here.
See for a similar case decided by the Hong Kong Court of First Instance, P v M, Hong Kong Court of First Instance, Judgment of 9 Oct. 2018, [2018] HKCFI 2280.
In P v M, the Hong Kong Court of First Instance remitted an arbitral award for serious irregularity pursuant to Sec. 4 of Schedule 2 of the Hong Kong Arbitration Ordinance. In the arbitration, Claimant claimed additional payment for losses and expenses incurred during the execution of the construction contract concluded between the parties. In its submissions, Claimant argued that there either was no contractual notice requirement for those claims or, if such a requirement did exist, that Respondent had waived it. The arbitrator ultimately awarded the Claimant the requested additional payment and reasoned that Claimant had satisfied the notice requirement. Respondent applied to have this award set aside arguing that it did not have a reasonable opportunity to present its case because Claimant had never submitted that it actually met the notice requirements and the arbitrator had not indicated that he or she was considering rendering a decision on that basis. After reiterating the high threshold for serious irregularity, the Court sided with the Respondent and ruled that the award was indeed affected by serious irregularity. The court, however, did not set aside the award. Rather, it held that it would suffice to remit the award to allow Respondent to make further submissions as to the notice requirements because there was no indication that the arbitrator was biased or otherwise unfit to determine the issues.
This decision demonstrates that even in the rare instances of successful challenges for serious irregularity Hong Kong courts are reluctant to set aside an arbitral award and prefer to remit the award to the Tribunal.
P v M, Hong Kong Court of First Instance, Judgment of 9 Oct. 2018, [2018] HKCFI 2280
See for further commentary on this decision, Sanger/Chapman/Furlong/Young, “Back whence it came: Hong Kong Court remits award for serious irregularity”, available here.
See for a similar case decided by the English High Court, RJ and another v HB [2018] EWHC 2833 (Comm), available here.
In a recent decision, the Swiss Federal Tribunal revised its jurisprudence on the requirements for setting aside an arbitral award due to a violation of the right to be heard. It is no longer sufficient for the applicant to show that his right to be heard was violated. Rather, the applicant must additionally “demonstrate, on the basis of the grounds set out in the challenged award, that the facts, evidence or law which it had duly presented, but which the arbitral tribunal failed to take into consideration, were such as to influence the outcome of the dispute”
This decision marks a much welcomed departure from the court’s previous formalistic jurisprudence regarding violations of the right to be heard.
SFT, Judgment of 29 January 2019 , 4A_424/2018, French original available here.
In two set-aside applications of 27 March 2014 the Swiss Federal Tribunal decided that an arbitral award based on illegally obtained evidence does not necessarily violate procedural public policy. The underlying dispute concerned a match-fixing scandal in Ukraine which had led to sanctions by the Football Federation of Ukraine. The Court of Arbitration for Sport (CAS) in Lausanne had confirmed these sanctions, partly basing its decision on a secretly recorded video tape. The Swiss Federal Tribunal held that in assessing a violation of procedural public policy a balancing of the interests at stake must be made. In particular, the importance of the public interest involved must be taken into account. The court held that the public’s interest in a scandal-free football league trumped the procedural rights of the losing party. Hence, in this case, an illegally obtained piece of evidence did not violate procedural public policy.
Swiss Federal Tribunal, Decisions 4A_362/2013 and 4A_448/2013, 27 March 2014
The IBA Subcommittee on Recognition and Enforcement of Arbitral Awards has published a comparative study on "public policy“ as a defense to the recognition and enforcement of arbitral awards under the New York Convention. Their results, comprising analysis of more than 40 jurisdictions, may be accessed here.
The English High Court has dismissed a challenge to an arbitral award which allegedly violated public policy. The challenging party had argued that the contract at the heart of the dispute had been procured by bribery and was therefore illegal. As the tribunal had nevertheless enforced the award, the award allegedly violated English public policy. The arbitral tribunal had decided that the contract was in fact neither an illegal contract nor procured by means of corruption. The Court held that, in general, "English public policy applies so as to lead a court to refuse to enforce an illegal contract". However, "there is no English public policy requiring a court to refuse to enforce a contract procured by bribery". In any case, the Court held that "it should not interfere with the Arbitrators’ decision", who had thoroughly considered the evidence and come to the conclusion that no bribery was involved.
1. National Iranian Oil Company v Crescent Petroleum Company International Ltd & Anor [2016] EWHC 510 (Comm), available here.
2. See for commentary on the decision Ross, Court declines to interfere with tribunal's finding on corruption allegation, Global Arbitration Review, available here.
The Swiss Federal Tribunal has rejected an application to set aside an arbitral award rendered under the auspices of the CAS due to an alleged violation of Swiss substantive public policy. The applicant had argued that the award disregarded mandatory provisions of Swiss and French substantive law. The Court clarified that only because a provision is mandatory it does not automatically form part of public policy in terms of Art. 190 (2) (e) PILS. Rather, only those provisions that reflect fundamental legal principles which constitute the basis of any legal systems are considered part of substantive public policy. This was not the case for the provisions the applicant had relied on. The Court therefore rejected the challenge to the award.
SFT, Judgment of 30 June 2016, 4A_132/2016, German original available here
The Swiss Federal Tribunal has held that there is no such thing as a particular public policy for specific business branches. In 2012, a football club (A) entered into several agreements regarding the acquisition of a player (B) with B's former club and an investment firm (C). Under this agreement, A effectively transferred 95% of the economic rights in B, to C and B's former club (third party participation scheme). In 2014, B was transferred to another club and C requested its share of the transfer proceeds from A. A denied payment and initiated proceedings before the Court of Arbitration for Sport (CAS). The Tribunal dismissed A’s assertion that the third-party participation scheme violated Swiss public policy. A then went on to challenge the award before the Swiss Federal Tribunal. The Swiss Federal Tribunal rejected the challenge as well. It held that there is no branch specific notion of public policy as such an application would dilute the notion of public policy and it would interfere with the right of the relevant associations to conduct their internal affairs.
SFT, Judgment of 13 December 2016, 4A_116/2016, French original available here.
- Bärtsch/Wimalasena, available here
In Stati & Ors v The Republic of Kazakhstan, the English Commercial Court has addressed the conditions to permit a party to pursue to trial an allegation that a New York Convention award was obtained by fraud: To be able to rely on this asserted violation of public policy, the party must prove (1) that the evidence of the fraud was not available to the party at the time of the hearing; and (2) that there is a prima facie case which is sufficient to overcome the extreme caution of the court when invited to set aside an award on the grounds of public policy.
Stati & Ors v The Republic of Kazakhstan [2017] EWHC 1348 (Comm)
In RBRG Trading (UK) Ltd v Sinocore International Co Ltd, the English Court of Appeal held that the enforcement of an award is not contrary to public policy if, albeit there is fraudulent conduct or an attempt thereof in the performance of the contract, there is no connection between that fraudulent conduct and the enforcement itself. In the case, the underlying contract concerned the delivery of steel from China to Mexico. After the parties had agreed to an amendment of the original sales contract, the buyer unilaterally amended the conditions for the letter of credit. In order to meet these conditions, the seller presented forged bills of lading to the issuing bank. The buyer then obtained an injunction from a Dutch court, which prevented the bank from making payment under the letter of credit against the false bills. Following these events, the seller terminated the contract. In its award, the Tribunal held that the buyer had breached the sales contract by unilaterally amending the letter of credit and awarded damages to the seller. The seller then applied to have the award enforced in England. The High Court granted this application and dismissed the buyers argument that the enforcement would be contrary to public policy. This decision was affirmed by the Court of Appeal. The Court held that the enforcement was not contrary to public policy because there was no sufficient causal connection between the sellers conduct in presenting fraudulent documents and its enforcement application. The court concluded that: “There is no public policy to refuse to enforce an award based on a contract during the course of the performance of which there has been a failed attempt at fraud.”
The Court thereby reaffirmed that, due to the interest in the finality of arbitral awards, the maxim fraud unravels all has to be restricted when it comes to the enforcement of a foreign arbitral award.
RBRG Trading (UK) Ltd v Sinocore International Co Ltd [2018] EWCA Civ 838, available here.
RBRG Trading (UK) Ltd v Sinocore International Co Ltd [2017] EWHC 251 (Comm), available here.
The German Federal Supreme Court (BGH) held that it amounts to a violation of procedural public policy if an arbitral tribunal erroneously assumes that a claim is precluded by the res judicata-effect of a previous award and therefore rejects the claim. Sec. 1055 of the German Code of Civil Procedure stipulates that an “award has the same effects between the parties as a final and binding court judgment”. Therefore, the scope of the res judicata-effect of an arbitral award also equals that of a court judgment. In this context, the court reaffirmed that the scope of res judicata-effect depends on the matter in dispute, which is determined by the claimant's request for relief and the underlying facts and not by the reasoning of the arbitral award.
Although this case concerned a domestic dispute, it is highly likely that the court would adopt the same standard when determining whether an international arbitral award violates German public policy.
-BGH, Order of 11 October 2018, I ZB 9/18, available here.
-See for further commentary: Wilske/Krapfl, What is the scope of the res judicata-effect of an arbitral award in Germany?, available here.
The English High Court had to decide whether an award which is in part based on a penalty clause should be denied enforcement due to a public policy violation. The judge set out by noting that there is generally a strong presumption under the New York Convention that an award is enforceable and that the grounds on which enforcement may be denied are narrow. He then considered that although in England there is an important public policy against the enforcement of penalty clauses, the rule does not protect a „universal principle of morality“. The enforcement of an award which is in part based on a penalty clause is not automatically „injurious to the public good“. Rather, according to the judge, it depends on how the applicable law deals with penalty clauses. As the applicable law in the underlying award allowed the arbitral tribunal to reduce the penalty clause so it was no longer „excessive“, the judge considered that the public interest in enforcing foreign arbitral awards outweighed the interest in not enforcing penalty clauses. He therefore refused to deny enforcement of the award.
As a very narrow exception to the prohibition of a révision au fond, some jurisdictions allow their courts to set aside awards if there has been a 'manifest disregard of the law' by the arbitral tribunal. Due to the extraordinary nature of this ground, only very few courts have acted under it. One of these courts is the New York Supreme Court in its decision Daesang Corp. v NutraSweet Co. In the underlying arbitration, NutraSweet had brought a counterclaim for reimbursement. In its award, the arbitral tribunal considered that NutraSweet had waived this counterclaim in the oral hearing, citing a portion of the hearing’s transcript. The court considered that "a careful reading of the transcript utterly fails to demonstrate that there was a waiver by Nutrasweet [at the] hearing“. Accordingly, it set aside the relevant portions of the award.
On appeal, the NY Appellate Court reversed the decision and granted the petition to confirm the award. In its reasoning, the Appellate Court emphasized "the ‘emphatic federal policy in favor of arbitral dispute resolution’ embodied in the FAA" and argued that due to this policy the doctrine of manifest disregard must be construed narrowly. The court held that the doctrine requires "that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." The court decided that the errors in the underlying arbitral award did not meet this threshold and therefore reversed the decision of the first instance.
Daesang Corp. v NutraSweet Co, New York Supreme Court of 15 May 2017, available here.
See for commentary on the decision Yong, Sweetener dispute ends on sour note with "manifest disregard“ ruling, available here.
Matter of Daesang Corp. v NutraSweet Co, NY Supreme Court Appellate Division of 27 Sept. 2018, available here.
In a rare decision the Swiss Federal Tribunal (SFT) set aside an award for a violation of the right to be heard.In the case at hand the arbitral tribunal denied the petitioners request for two seperate licenses. In its award the arbitral tribunal applied the same reasoning to both licenses, but failed to adress the petitioners specific arguments relating to the second license. The court held that the right to be heard is violated if the arbitral tribunal fails to adress relevant aspects of the case in its award altogether. The court further noted that, because of the formal nature of the right to be heard, it is not relevant whether the decision would have been different if these aspects had been considered.
Swiss Federal Tribunal, Judgment of 30 May 2017, 4A_532/2016, German original available here.
In Grindrod Shipping Pte Ltd (t/a Island View Shipping) v. Hyundai Merchant Marine, the English High Court dismissed an application to have the award set aside pursuant to s. 68 of the English Arbitration Act of 1996. In its award, the tribunal had dismissed the claim pursuant to s. 41 (3) of the English Arbitration Act of 1996. However, in reaching this decision, the tribunal rejected the respondent’s contention that it suffered serious prejudice due to the deterioration of evidence since the proceedings had been dragged on for more than five years. Rather, the tribunal based its conclusion on an argument which was raised in a different context: the costs incurred from upholding the security for costs which the respondent had to put in place in 2016. The claimant applied to have the award set aside pursuant to s. 68 of the English Arbitration Act of 1996. It argued that it did not have a reasonable opportunity to present its case since the issue of costs as a ground for prejudice had not been specifically argued before the tribunal. The High Court held „that a party will usually have had a sufficient opportunity to meet the case if the ‘essential building blocks’ of the tribunal's analysis and reasoning were ‘in play’ or ‘in the arena’ in relation to an issue, even where the argument was not articulated in the way adopted by the tribunal.” As the issue of costs had been addressed – albeit under a different heading –, the High Court dismissed the claimant’s application.
Grindrod Shipping Pte Ltd (t/a Island View Shipping) v. Hyundai Merchant Marine Co Ltd [2018] EWHC 1284 (Comm), available here.
Scenario: 29 - Enforcement of the Award
With the assistance of two experts, Professor Emmanuel Gaillard and Professor George Bermann, UNCITRAL has prepared a Guide on the New York Convention. The Guide aims to promote the uniform and effective interpretation and application of the New York Convention with a view to limit the risk that State practice might diverge from its spirit. The Guide is supplemented by an online platform which makes available case law implementing the New York Convention from multiple common law and civil law jurisdictions, and much more.
The UNCITRAL Secretariat Guide on the New York Convention may be accessed here.
The online platform is available at <http://newyorkconvention1958.org>.
The English Court of Appeal has decided to enforce an award despite pending set-aside proceedings in Nigeria. The court held that the objective of the New York Convention to guarantee the smooth and efficient circulation of foreign arbitral awards demanded that an award be enforced even though there might still be set aside proceedings pending in its country of origin. In arriving at this decision the court weighed several factors relating to the foreign proceedings like their expected length and the degree of scrutiny employed. Due to the delay expected in the set-aside proceedings the court found that the efficiency aspect underlying the New York Convention prevented it from adjourning and demanded the enforcement of the award instead.
1. English Court of Appeal, IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation, 10 November 2015, [2015] EWCA Civ 1144.
2. See for commentary on the decision here.
In Astro v. Lippo, the Singapore Court of Appeal had to assess whether a party is estopped from relying on the New York Convention’s grounds for non-enforcement if it has not previously challenged the arbitral tribunal’s jurisdiction before the courts under Art. 16 (3) of the UNCITRAL Model Law. The Court denied this. It held that nothing in the drafting history of the UNCITRAL Model Law indicated that the provision was intended to prevent a party from relying on the „passive remedies“ of the New York Convention.
PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v. Astro Nusantara International BV and others and another appeal (2013) SGCA 57
The global debate whether arbitral awards that have been set aside at the seat of the arbitration should be enforced under Art. V (1) (e) of the New York Convention also takes place in Brazil. The Brazilian Superior Tribunal de Justiça has held that under the New York and Panama Conventions as well as the Brazilian Arbitration Law, awards set aside at the seat will not be recognized or enforced.
1. EDF International S/A v. Endesa LatinoAmérica S/A & YPF S/A (SEC nº 5.782/AR), Portuguese original available here.
2. See for commentary on the decision, Tomasi and de Campos Ludwig, No Recognition of Foreign Arbitral Award Set Aside in the Country where the Award was Issued (2017) 1 ICC Dispute Resolution Bulletin pp. 19-20.
In Commisa v. Pemex, the United States Court of Appeals for the Second Circuit has confirmed an earlier decision by the US District Court for the Southern District of New York. In that case, an award had been confirmed in enforcement proceedings although the award had been set aside at the seat of the arbitration (Mexico). The Court has based its decision on a reading of the Panama Convention, which is similar to Art. V (1) (e) of the New York Convention. While the Court held that the provision grants the enforcing court discretion whether to enforce an award that has been set aside, it also strictliy limited the application of this discretion by holding that the "application of this discretion [is] appropriate only to 'vindicate fundamental notions of what is decent and just' in the United States". In the case at hand the court saw such a need inter alia because the Mexican court had applied reatroactive legislation and thereby fundamentally disrupted contractual expectations.
Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex Exploración Y Producción, Docket No. 13-4022, (2nd Cir, 2 August 2016), available here.
The US Court of Appeals for the second Circuit has confirmed a decision by the US District Court for the Southern District of New York which denied the enforcement of an award that had been set aside at the seat of arbitration. The court confirmed the high standard it had set in Commisa v. Pemex. In the case a hand the court saw no volation of public policy and therefore found that it had no discretion to enforce the award even though it had been set aside.
1. Thai-Lao Lignite (Thailand) Co., Ltd. v. Government of the Lao People’s Democratic Republic, Docket No. 14-597 (2nd Cir, 20 July 2017), available here.
2. Further commentary available here.
The English High Court confirmed its high standard regarding the enforcement of an arbitral award which has been set aside at the seat of arbitration. The High Court held that: „The Claimant bears a heavy burden to establish not only that a foreign court's decisions were wrong or manifestly wrong but that they are so perverse as for it to be concluded that they could not have been arrived at in good faith or otherwise than by bias.“ In the case at hand the court declined the enforcement as the claimant was unable to discharge this heavy burden.
The decision falls in line with the 2012 decision of the Amsterdam Court of Appeal which also denied the enforcement of the same award.
1. Maximov v. OJSC [2017] EWHC 1911 (Comm), available here.
2. Decison of the Amsterdam Court of Appeal available here.
The United Arab Emirates (UAE) have ratified the New York Convention in 2006. Still, when dealing with the enforcement of foreign arbitral awards, the local courts have applied the provisions of the UAE Civil Procedure Law instead of the NYC. This practice has now likely come to an end with the Dubai Court of Cassation explaining that the NYC applies as the "applicable domestic law" in the UAE.
Dubai Court of Cassation, 23 November 2014, case reported at: <http://kluwerarbitrationblog.com/blog/2015/04/13/dubai-issues-judgment-in-support-of-international-arbitration/>