Professional Documents
Culture Documents
Quarterly
www.floridabar.org www.internationallawsection.org
In ThIs Issue:
The 2012 ICC Rules of Arbitration ....1 Negotiating and Drafting an International Arbitration Clause with a Focus on Latin America: A Primer .........................................1 Message from the Chair ...................3 From the Editor ................................4 World Roundup.................................5 The Role of the International Arbitrator from a Civil Law Perspective ..................................15 International Frauds and Ponzi Schemes............................23 Counterclaims by Respondent States in Investment Arbitration: Two Recent Cases Leave Counterclaiming States Frustrated Again ..........................27 Litigation Note.................................32 Ill-Defined Boundaries? The Scope of Arbitral Authority in the United States ..........................................33 Section Scene ................................36 Damages Claims Following Antitrust Violations in European Markets ...38 Sovereign Bonds and the Struggle to Limit Article 25 of ICSID...............41 Arbitration in Poland A Modern Approach and Vivid Development ...............................45 Avoiding Litigation in France by Properly Terminating Contractual Relationships ...............................51 Whats Driving the Global Growth of Mediation in Business and Commerce? .................................55
negotiating and Drafting an International Arbitration Clause with a Focus on Latin America: A Primer
By Richard C. Lorenzo and Mara Eugenia Ramrez, Miami, Florida
Over recent years, international commercial arbitration has gained worldwide acceptance as one of the preferred means of international dispute resolution. Recent advancement in Latin Americas receptivity towards international arbitration, however, requires a new focus on the way businesses and counsel negotiate and draft the arbitration sections of their agreements. These developments warrant a fresh look into the main issues that parties should address when negotiating and drafting an arbitration clause in a transaction connected to Latin America. This article will examine the various aspects of an arbitration clause that should be understood, analyzed, and considered when negotiating and drafting an international arbitration clause in a Latin American-related transaction involving one or more U.S. parties.
Spring 2012
The International Law Quarterly is prepared and published by the International Law Section of The Florida Bar. Nicolas Swerdloff, Miami Chair Richard C. Lorenzo, Miami Chair-elect C. Ryan Reetz, Miami Secretary Peter A. Quinter, Miami Treasurer Edward M. Mullins, Miami Immediate Past Chair Mark R. Weiner, Tampa CLE Chair Alvin F. Lindsay, Miami Editor-in-Chief Angela Froelich, Tallahassee Program Administrator Lynn M. Brady, Tallahassee Layout Elizabeth Ortega Media Contact, ECO Strategic Communications eco@ecostrats.com Articles between 7 and 20 pages, doublespaced, involving the various disciplines affecting international law may be submitted via email in MS Word format (with the use of endnotes, rather than footnotes). Please contact Alvin.Lindsay@hoganlovells.com for submissions and for any questions you may have concerning the Quarterly.
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the first annual winners from all the issues during my time as editor-in-chief. With that said, it is with great appreciation that we now announce the winners of the first annual International Law Quarterly Editors Choice Awards:
Best Articles:
nicholas Ware: China Factory Investigation Ride Along, Fall 2010 Special China Issue omar K. ibrahem: Unchartered Waters: The Kishenganga River Project Dispute and Arbitration under the Indus Water Treaty, Winter 2011 Special International Litigation and Arbitration Issue Rafaela Vianna: Ethanol: Sweetening the Deal Between the U.S. and Brazil, Fall 2011 Special Brazil Issue Kimra Major-Morris: The Quest for Intellectual Property Protections in the Digital Age, Winter 2012 International Intellectual Property Focus-On Issue nadia B. ahmad: High-Speed Public Policy for Algae-Based Biofuel as a Viable Energy AlternativeImproving FloridaChina Relations Through Sustainable Collaboration, Winter 2012 International Intellectual Property Focus-On Issue
Africa
By Pierre M. Gaunaurd pierre.gaunaurd@gmail.com south Africa proposes change in labeling rules for Israeli imports. South African Trade and Industry Minister Rob Davies recently published a notice for comment adjusting the rules for the labeling of products coming from Israel. As reported by Hareetz and The Telgraph, the proposed changes prohibit any product originating in occupied areas such as the West Bank from being labeled as made in Israel. Dr. Davies, defended the rule change, stating that the move was meant to help consumers and that the South African government recognizes Israel only along its original 1948 borders. Israels South African Ambassador, Dov Segev-Steinberg, described the act as discriminatory. The public has sixty days from the 10 May notice to comment. Malawi devalues its currency, un-pegs it from the dollar. The Malawi central bank, under the direction of new president Joyce Banda, devalued the nations currency in April in an attempt to satisfy international donors and make its markets more competitive. Un-pegging Malawis currency, the kwacha, from its previous exchange rate of 165 kwacha to one U.S. dollar, is expected to attract positive attention from organizations like the IMF, which had a strained relationship with the East-African countrys previous leadership. After the 50% devaluation, the currencys rate stands at approximately 253 kwacha to one dollar. International court sentences former Liberian President. This May, over six years after his arrest, former Liberian president Charles Taylor, 64, was convicted and sentenced for war crimes by the Special Court for Sierra Leone. As reported by NPR, the crimes included aiding and abetting rebel soldiers in Sierra Leone that were terrorizing local populations with murder, rape, mutilations,
and enslavement. Mr. Taylor was sentenced to fifty years in prison. This is the first successful prosecution of a former head of state since the end of World War II. Africa sees 27% surge in FDI. According to the 2012 Africa Attractiveness Survey, published by Ernst & Young, Africa as a whole experienced a 27% increase in foreign direct investment (FDI) between 2010 and 2011. In a further sign that African economies are demanding the attention of global investors, the report finds that seven African countries will be among the worlds ten fastest growing economies between 2010 and 2015. This increasing clout in the marketplace is already being felt within the continent where intra-African FDI, as reported by the survey, rose 42% since 2007.
Asia China
By Mikki Canton mcanton@usa.net Loans from China come with strings attached. To Europesand perhaps the worldsdismay, China has avoided buying European debt and prefers to invest its money where the return is more immediate. Indeed, Chinas interest in investing in major projects in North and South America gives no sign of waning. Just last week, top leaders from China and Chile engaged in successful goodwill diplomatic talks to fortify trade and focus on greater economic cooperation. Chiles rich copper resources are the object of Chinas interest. Chinas investment strategy, however, is not limited to in emerging global economies that possess the natural resources and commodities that China lacks. While it is true that the Chinese government, through its government-owned banks, continues to lend to and invest in countries all over the world, the modus operandi emerging should raise flags and give some cause for concern. No longer are Chinese banks going the traditional route of lending to foreign countries to
finance infrastructure projects that these countries otherwise would not be able to afford. Examples of past Chinese lending for railroads, bridges, and processing plants aboundmany in Brazil. The scary twist is that Chinese banks are more and more tying mega-loan contracts to mandates that overseas projects being built with Chinese money employ Chinese companies and workers. That Chinese companies and workers will displace a significant portion of the locals naturally follows. This has been a political and diplomatic sore point between China and Brazil and is becoming a real possibility in the United States. China Development Bank, a state-owned policy bank and a major lender to local governments in China for commercially viable internal projects, most likely will lend U.S. corporation Lennar $1.76 billion to turn former San Francisco military sites and nearby areas into a mega residential and commercial mixed-use project. The catch is that China Development Bank wants its very own China Railway Construction Corporation to do the projects majorand lucrativeinfrastructure work. No longer is China simply lending and investing money. Given the dire conditions of the global economy, China is truly in a win-win position. At the end of the day, China is all about China and has but one goal: to put back into China what comes out of China. And then some.
Australia
By Peter anagnostou peter.anagnostou83@gmail.com Australia marine parks exclude industry. Australia will create the worlds largest network of marine parks, making approximately one-third of Australian waters off-limits to fishing, oil and gas exploration. The forty-four new marine parks, which include the Coral Sea and the southwest coast of Western Australia, are part of the new marine reserves announced by the Australian Government on 14 June 2012. Commercial fishing businesses are set
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to receive up to $100 million dollars in compensation, but Sunfish Queensland chief executive Judy Lynne believes the ban on commercial use will result in more foreigners fishing illegally. Australian Conservation Foundation and Environment group Pew described the marine reserve plan as a turning point in marine protection but warned that certain areas outside the marine parks are still at risk to threats of oil spills. Australian trade deal could weaken tobacco fight. Concerns have emerged that a new trade agreement among the U.S., Australia and several other Pacific nations could weaken Australias defences against challenges to its planned tobacco packaging laws. Negotiations over the Trans-Pacific Partnership have been taking place behind closed doors for more than two years. On 14 June 2012, however, a key chapter was leaked, revealing that Australia has refused to agree to a system of tribunals whereby foreign companies could arbitrate in third countries. Australias objection to investor-state dispute settlement provisions is already on the public record, but Australias determination not to concede to foreignsettlements procedures is understood to be also partly due to tobacco giant Philip Morriss initiation of a claim for arbitration against the Australian Governments new tobacco labelling laws, to be introduced later this year. The Trans-Pacific draft agreement contains an ISD clause that is strongly supported by the U.S., provoking intense discussion at the most recent major negotiating session in Texas last month. During the negotiations, 100 retired judges, academics, lawyers and MPs from the U.S., New Zealand, Canada, Singapore and Australia wrote an open letter to the negotiators urging all governments to follow Australias example by rejecting the ISD clause. While holding diverse views about the treaty, they claimed to be united in not wanting replicated in the TPP the foreign-investor protections included in many recent FTAs and BITs. They based their opposition on concerns about how the expansion of this regime threatens to undermine the justice systems in our various countries, and fundamentally shift the balance of power between investors, states and other affected parties. In contrast however, Sergey Ripinsky, a legal affairs officer at UNCTAD, noted that unless the countries all agree to translate the TPP into domestic law . . . companies wouldnt be able to enforce TPP investor protections, except through state-state dispute resolution, which could lead back to politicisation of disputes.
Caribbean
By sandy Jones sjones14@gmail.com Private property changes underway in Cuba. Cubans gained the right to buy and sell private property last November in an attempt by Raul Castro to jumpstart the communist countrys faltering economy. This first move toward privatization since the 1959 revolution began with the legalization of car sales and has expanded to the housing sector. While only Cuban citizens and permanent residents may own land in the country, many Americans are entering the housing market through contacts in Cuba. Until now Cubans were forced to remain in the family home and able to relocate only through housing swaps and marriage. Though Castro admits the current economic system is not working, the Cuban President says he intends to keep Cuba a socialist state and will use regulation and taxation to prevent citizens from amassing wealth. Cayman Islands plans a cluster of technology parks. The Cayman Enterprise City (CEC), a grouping of separate technology parks planned by the Cayman Islands, is being billed as a Strategic Gateway to the Americas for knowledge-based industry. The country hopes that the first-of-its-kind Special Economic Zone will lure Fortune 500 companies through: a favorable tax system; work permit exemptions; currency pegged to the U.S. dollar; a ten-day streamlined setup; import duty exemptions; and intellectual property protection. The CEC development, to be located in Grand Cayman, will feature innovative and sustainable architecture and will focus on biotech, global commodities and derivatives, internet and technology, media, outsourcing, and international academics. Manufacturing activities, industrial activities, and trade within the Cayman Islands are prohibited in
Canada
By Lucius smejda lex1usa@aol.com new thin capitalization rules proposed. In its 2012 budget, the Canadian government proposed modifications to thin capitalization rules that should prompt Canadian-resident corporations owing debt to certain foreign entities to review their capital structure carefully. Canadian thin-capitalization rules were designed to discourage the disproportionate capitalization of domestic entities through debt funding by foreign persons owning shares representing 25% or more of the voting rights or the total value of the Canadian entity. Prior to the 2012 budget, Canadian-resident corporations were allowed to deduct interest payments to such foreign shareholders on any debt not exceeding a 2:1 ratio over equity. Canadas new thin-capitalization regime provides that for fiscal years ending after 28 March 2012, interest accrued on any debt in excess of the 2:1 debt-equity ratio shall be re-characterized as a dividend paid to the foreign shareholder, thus triggering non-resident withholding tax obligations. For tax years starting after 28 March 2012, the allowed maximum debt-equity ratio will be lowered to 1.5:1, and the new regime will be extended to include debts owed by partnerships having a domestic corporation as a member.
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order to insulate local businesses. A VAT tax for st. Lucia. St. Lucia is believed to be the last Eastern Caribbean nation to introduce a valueadded tax (VAT). St. Lucias Governor General believes a new system of taxation will reduce inequity found in the existing tax structure. The tax will apply evenly throughout the supply chain based on the percentage of value added at each stage. When a good or service is imported into the nation, the importer will be responsible for VAT. The expected implementation date is 1 September 2012. Jamaica considers revamping insolvency law. For the first time since 2004, Jamaica is pondering a change to the bankruptcy code to improve direct foreign investment in the country as well as investor confidence. According to the Doing Business Project, Jamaicas 2012 ranking for resolving its insolvency dropped from 26 to 28 among 138 economies. The average time it takes to shut down a business is only 1.1 years, as opposed to the average of 3.3 years for Latin America and the Caribbean. The recovery rate is 34.6 cents on the dollar higher than the average in Latin America and the Caribbean. Though these numbers do not seem to invite a redraft of the bankruptcy law, the existing law has had a stigmatizing effect. Critics say the law needs to be updated with rehabilitation in mind. Dr. Christopher Tufton, the newly appointed head of the Caribbean Policy Research Institute (CaPRI), plans to prioritize an in-depth examination of insolvency laws in the Caribbean.
port, Practice of Commercial Arbitration in Nicaragua, prepared by consultant Elsy Marenco. The report analyzes the state of commercial arbitration in Nicaragua and finds that the use of arbitration under national rules is on the rise. The report discusses a generally favorable legal framework for arbitration in Nicaragua and identifies challenges such as perceptions of arbitration being costly and time consuming. The report also analyzes the approval of arbitral awards and provisional remedies pursuant to the Nicaraguan Code of Civil Procedure. Finally, ways to increase the use and benefits of arbitration in Nicaragua are also proposed. Costa Rican March of the Invisibles seeks civil rights. In a movement called Marcha de los Invisibles (March of the Invisibles), several thousand people in San Jos, Costa Rica, marched the streets in June demanding rights for homosexuals, the establishment of a secular state, the approval of in vitro fertilization, and immigration rights. Regarding in vitro fertilization, reports indicate that Costa Rica is the only western hemisphere country that prohibits the practice. In September, the Inter-American Court of Human Rights, headquartered in San Jos, will analyze a complaint alleging human rights violations for the prohibition of in vitro fertilization. ICsID arbitration panel rules that Canadian miners may proceed with arbitration against el salvador. Canadian company Pacific Rim and the government of El Salvador have been in a long-fought arbitration battle in which Pacific Rim seeks millions of dollars in damages for violations of the countrys foreign investment laws as a result of the governments refusal to issue permits that Pacific Rim needed to operate the El Dorado gold-mining project. In June 2012, a panel of arbitrators under the World Banks International Centre for Settlement of Investment Disputes (ICSID) denied El Salvadors jurisdictional objections and held that the arbitration would proceed under El Salvadorian Investment Law, not the
Central America Free Trade Agreement (CAFTA). Panama experiences economic growth in the first quarter. Panamas Comptroller General reported a 10.6% economic growth in the first quarter from a year earlier, which was reportedly fueled by government spending on infrastructure, such as a $1.5 billion subway line for the capital and the $5.25 billion Panama Canal expansion project. Moodys drops Belizes credit rating, again. For the second time this year, Moodys Investors Service has downgraded Belizes credit rating. Moodys cited the governments deteriorating capacity and willingness to service its external debt as well as Moodys assessment of investor losses in the event of a debt restructuring. Moodys also stated that Belize faces weak short-to-medium-term growth prospects, accumulating contingent fiscal liabilities and a questionable outlook for debt sustainability.
european union
By santiago Cueto sc@cuetolawgroup.com Corporate downsizing in France comes under increased legal scrutiny. Companies looking to reduce the ranks of their employees in France are facing increased exposure to litigation in labor courts. While downsizing in France has always been a complex processrequiring compliance with mandatory rules set out in the French Labor Codethe new regulatory regime is making it much more difficult for companies in France to restructure their operations. In several recent decisions, courts have held that dismissed employees can challenge the economic rationale behind any downsizing initiative. If a company fails to present a valid economic motive (based either on financial losses or on an absolute
Central America
By Daniel Cervantes daniel.cervantes@hoganlovells.com Commercial arbitration in nicaragua on the rise. In April of this year, the Nicaraguan Foundation for Economic and Social Development (FUNIDES) presented its re-
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need to remain competitive) for downsizing, dismissals will be reversed. In such a case, employees will be entitled to reinstatement and/or damages, as well as payment of back wages and social security contributions. Profitable multinational companies will come under the most scrutiny. Amendment to Commercial Code clarifies limitation of liability for damages in Czech Republic. The Czech Commercial Code was recently amended to clarify the law on contractual limitation of damages. Article 386(1), which regulates limitation of liability for damages, was modified to clarify and liberalize the scope of its effect. The amended provision enables parties to modify liability in several different ways for damage caused by a breach of contractual obligations. The only express restriction in this provision is that parties cannot limit or exclude liability for damage caused intentionally. Widely viewed as a positive change in Czech commercial law, the amendment brings an end to the provisions ambiguity and provides more flexibility to contractual relationships. Mandatory mediation in Italy successfully implemented. The introduction of mandatory mediation in Italy has significantly reduced the number of cases ultimately tried in Italian courts. Italy was one of the first EU member states to implement the EU Mediation Directive (2008/52/EC). The Mediation Law (Legislative Decree 28/2010) requires the mediation of most disputes before a case can be brought in civil court (or as a condition of continuing legal proceedings, if they have already been started). The mandatory provisions caused an upsurge in requests for mediation, totaling more than 90,000 between March 2011 and March 2012. The response in business circles and from institutions has been very favorable, reflecting the view that mediation is a vital means of minimizing the case load of the Italian court system. new spanish law permits sale of real estate in bankruptcy before liquidation. Spains Parliament recently enacted a key provision (Act 38/2011) of the Insolvency Act to simplify and speed up bankruptcy proceedings in connection with the disposition of real estate. In the wake of the global financial crisis, many creditors were left without recourse due to the rapid decline in real-estate values during the pendency of a bankruptcy proceeding. The amendment to the Insolvency Act lifts certain barriers to the sale of real estate in two ways. First, the new provision relaxes the requirements that prevented receivers from selling real estate without court approval. Second, the amendment permits the sale of property subject to special privileges at a price lower than that agreed when the relevant security was created, provided that it matches the market value. These more relaxed requirements of the new law are counterbalanced by a waiting period for the submission of competing offers. German appeal court limits importers product-liability exposure. A recent decision in the Hamm Court of Appeal limits the product-liability exposure of importers or quasi-manufacturers. The case involved a German motorcycle dealership that purchased motor scooters from a German wholesale dealer that had imported the scooters from China. The dealership was subsequently held liable for damages sustained by a purchaser. The dealership filed an indemnification action against the importer. The court held that the importer had not violated its duty of care under the German Civil Code. In holding that importers could not be held responsible for hidden defects, the court stated that, while an importer has a general duty to detect product hazards, such duty will (in the absence of any obvious indications of potential hazards) usually be limited to an external visual inspection of the product.
India
By sumeet H. Chugani schugani@diazreus.com India adds Mainland China, hong Kong, and Macao to its official list of new York Convention Countries. On 19 March 2012, Indias Department of Legal Affairs of the Ministry of Law and Justice declared China, along with its Special Administrative Regions (SARs) of Hong Kong and Macao as territories to which the New York Convention applies for purposes of the Arbitration and Conciliation Act of India of 1996. This declaration is vital to China and its SARs, since India only enforces awards made in territories identified in Indias Official Gazette. This addition makes China, and especially Hong Kong, a formidable new situs for international arbitration. Vodafone takes legal action over tax proposal in India. Vodafone, one of the largest international investors in India, has initiated legal proceedings against the Indian government over Indias new retroactive tax that could cost the company more than $2 billion. Vodafones move comes after implementation of Indias new legislation that retroactively taxes overseas transactions involving local assets. Vodafones actions are the first step towards international arbitration, which will necessarily involve extensive negotiations between India and the Netherlands. The proceedings are projected to take upwards of two years. supreme Court upholds constitutionality of Right to education Act. The Indian Supreme Court has struck down a challenge made by private schools to the Right to Education Act of 2010. Currently operational in nineteen states around India, the Act envisages free and compulsory education for all underprivileged children between the ages of six and fourteen. The decision further requires that
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one-fourth of admissions in all schools, including private institutions, be reserved solely for economically disadvantaged students. Indias Insurance Regulatory and Development Authority (IRDA) releases new draft guidelines. In an effort to strengthen Indias health insurance industry, the IRDA has promulgated new terms and conditions for health insurance, including outlining age of entry, claim settlement periods and specific reasons for claim denial. Pursuant to the new guidelines, companies must provide health insurance for all employees up to sixty-five years old. In an effort to reduce instances of claim repudiation on flimsy grounds, the new guidelines also require written reasons for claim denial by insurance companies. President approves Finance Bill 2012. On 28 May 2012, the Finance Bill of 2012 received Presidential assent. With this move, the Finance Bill has been enacted into law, giving the Indian government the go-ahead to garner tax revenues from all indirect transfers of sharesincluding a large sum from the controversial Vodafone tax matter. The Finance Bill includes retrospective changes to the income tax law, which bring into Indias tax net all indirect share transfers. The tax-revenue implication of the Financial Bill is estimated at RS 40,000 crore. India, Bahrain sign new tax information exchange agreement. India and Bahrain have signed a tax information exchange agreement (TIEA) to bolster economic cooperation between the two nations. Signed during Prince Salman Bin Hamad Al-Khalifas most recent visit to India, the agreement seeks to further increase tradecurrently valued at more than $1.7 billion a yearbetween the two nations. In addition to the TIEA, delegations from India and Bahrain have entered into numerous memoranda of understanding aimed at promoting the nations mutual commercial and industrial interests.
India increases iron ore export duties. A formal order issued by the Indian government will increase export duties of iron ore from 20% to 30%, in an effort to conserve domestic supplies for its own steel industry. The increased tariff level will impact Indias mass exportation of iron ore to China, the commoditys main purchaser.
Korean Peninsula
By Patrick M. talbot talbot@handong.edu south Korea: Korea-u.s. FTA comes into play. The Korea-U.S. Free Trade Agreement (KORUS FTA), still somewhat controversial in some sectors of Korean society, was implemented on 15 March 2012. About 80% of U.S. industrial goods, including agricultural equipment, auto parts, construction equipment, and consumer goods, can now be imported into Korea duty-free from the U.S. In contrast to Koreas longstanding access to U.S. consumer marketsthrough such well-known manufacturers as Samsung, LG and Hyundaiexposure of Korean markets to U.S. consumer goods is new and a bit controversial. So far, U.S. auto imports into Korea have been sluggish possibly due to various consumer perceptions. European auto sales, especially from German suppliers, remain strong (Korea entered into an earlier European FTA). Some sectors of Korean society are still politically opposed to the FTA, raising new concerns about Mad Cow Disease from imports of American beef. Others are concerned about the novelty of investor-state dispute (ISD) resolution clauses. On the other hand, several scholars and Korean suppliers are generally optimistic of the benefits of free trade for Koreas growth, and Korean controversies with the FTA seem less frequent. The U.S. also remains generally optimistic about the expected benefits of the KORUS FTA for U.S. exporters over the
long term. Such benefits include stronger protection of intellectual property rights and access to Koreas legal services market. As of April 2012, at least seven U.S. law firms had applied for licenses to open offices and begin providing foreign legal consultation services. Significant numbers of smaller Korean companies are evidently not taking advantage of the FTA as much as initially expected, according to surveys. This may be due to difficulties experienced in trying to comply with the Rules of Origin and Certificate of Origin (COO) procedures, which are apparently more cumbersome than counterpart rules under the European FTA. Rules of Origin may be particularly problematic for Korean textile exporters, many of whom use raw materials or components from third countries, such as China. COO issues continue to be an area of concern impacting the success of this FTA. north Korea: Regime change breeds speculation. After dictator Kim Jung-il died of an apparent heart attack in December 2011, his youngest son, Kim Jong-un, took over as leader of the communist country. Speculation abounds as to what this means for politics, stability, and commercial enterprise in the region. Kim Jong-un is young (late 20s) and was partly educated in Switzerland. These and other factors led some, at least initially, to embrace a more optimistic view of North Koreas future, anticipating gradual economic liberalization, improved human rights, increased trade, and even steps toward eventual reunification. Political and military events of the past five months do not seem to lend much support to this initial optimism. For example, North Korea continues to make occasional military threats against South Korea. An April 2012 missile launch, however, failed dramatically. In response to the launch, the U.S. withheld significant amounts of food aid. On 4 June 2012, the North, apparently offended by the Souths hard line on politics and smearing of some of its civic events, retaliated by pointing missiles at several South Korean news agencies and threatening to use
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them at any time. In addition, North Korea was recently cautioned by the International Telecommunication Union (ITU) a U.N. organization, for jamming GPS signals in South Korea in April and May, an act that caused hundreds of ships and commercial airplanes to divert courses or rely on back-up navigational equipment. In the meantime, some Chinese companies are reportedly violating UN Resolution 1874 (2009) in support of an arms embargo, by selling banned materials to North Korea for the building of intercontinental ballistic missiles. Change does not seem imminent. Some analysts believe this military flexing may amount to no more than a show of strength to the external world and to Kim Jong-uns internal military leadership to secure his control. Some also say that Kim Jong-un is smart enough to realize he needs to pursue economic reforms gradually, as most of his country is struggling simply to survive. They suggest he still may seek a course similar to Chinas economic liberalization but would have to do so very carefully. countries for the automotive sector under the same agreement, which regulates tarifffree trade between Mexico and southern cone South American countries. To date, Mexico has openly rejected any talks of renegotiating with Argentina. Mexico attracts foreign investment away from China. A recent JP Morgan report reveals that even though Chinas manual-labor market is consistently cheaper, there has been a considerable reduction in the salary difference between Mexico and China. As a result, Mexico is attracting greater direct foreign investment in such areas as aerospace, medical supplies, medical services and software. Several Asian auto manufacturers have announced the creation of assembly plants in Mexico. Other factors that help Mexicos competitive position include the depreciation of the Mexican peso, the low cost of a qualified labor force, a strategic location and the existence of free-trade agreements. new trade and tax agreements approved by Mexico. On 19 January 2012, three decrees were announced by the Mexican Department of Foreign Relations. The first decree, which has been approved by the Mexican Senate, allows for free trade between the United Mexican States and the Republics of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The second decree, also endorsed by the Mexican Senate, approves the Commercial Integration Agreement between the United Mexican States and Peru. The final decree was entered into with the Republic of Singapore and will prevent double taxation and income tax evasion. The WTO sides with Mexico in dispute over u.s. dolphin-safe tuna labeling. The United States will appeal a World Trade Organization decision that ruled U.S. dolphin-safe tuna policies are overly restrictive. The ruling favors Mexico, which for two decades has argued that its northern neighbors policies on importing tuna have shut them out of the U.S. canned tuna market. Sales of Mexican tuna in the U.S. have been barred since the policy requiring a dolphin safe label was implemented in 1991.
Middle east
By omar K. ibrahem omar@okilaw.com Dow chemical wins $2.16 billion arbitration award against Kuwaiti stateowned company. The International Chamber of Commerce (ICC) awarded Dow over $2 billion in damages against Petrochemical Industries Co. (PIC), a Kuwaiti state-owned entity. The dispute arose in 2008 when PIC canceled a planned plastics joint venture with Dow after pressure from Kuwaiti parliament members due to the global recession. According to Dows attorneys, the arbitration award is one of the largest ever. Terms of Iraqs latest energy licensing auction forbid deals with Kurdistan. The terms of Iraqs latest energy licensing auction includes a clause in the final model contract that permits the Iraqi Oil Ministry to cancel contracts if a successful signatory signs an oil deal with the Kurdistan Regional Government without obtaining prior approval from the Oil Ministry. The move comes after Iraq barred Exxon Mobil from taking part in the upcoming licensing round after Exxon signed a deal with the Kurdistan Regional Government without approval from the Oil Ministry. Iraq and Kuwait discussing arbitration to resolve disputes over Port Mubarak construction. Iraq and Kuwait are deadlocked over the location of Kuwaits construction of Port Mubarak. Iraq believes the proposed port would block its waterway or strangle shipping lanes from Iraqs southern ports in Basra, as well as compete with Iraqs own proposed mega-port of Fao. Iraqi officials recently indicated they were open to Kuwaits suggestion of arbitration by neutral
Mexico
By a. Renee Pobjecky Renee@pobjeckylaw.net Mexico and Brazil renegotiate MeRCOsuR economic Complementation Agreement no. 55 (ACe 55). On 19 March 2012, Brazil and Mexico signed the Fourth Additional Protocol to Appendix II of Economic Complementation Agreement No. 55 (ACE 55), establishing quotas on Mexicos exports of automotive vehicles to Brazil, beginning on that date and extending through 18 March 2015. Mexico agreed to the temporary limits on vehicle exports in order to assuage Brazils concern over their recent trade imbalance. In a related move, Nissan has already announced plans to accelerate investment in a new plant in Rio de Janeiro. Argentina is also putting pressure on Mexico to renegotiate the conditions agreed to by both
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parties if the two countries are unable to resolve the dispute. Gulf Cooperation Council (GCC) okays draft rules on IPOs and securities listings. The Gulf Cooperation Council (GCC) ministerial committee has approved draft rules on initial public offerings (IPOs) and unified rules for listing of securities (stocks, bonds, sukuk and mutual fund units) on the GCC markets and has referred them to the Supreme Council for endorsement and implementation. GCC officials believe the unified rules are an important step forward in unifying the market policies and regulations in GCC states to achieve integration of GCC financial markets.
pears such a clause could be interpreted as providing for an ad hoc arbitration under the ICC Rules. Optional arbitration clauses, such as those used in financing and real estate transactions to assure that a lender secures the best recourse available, are scrutinized in Russia, especially when only one of the parties has a right to opt out of arbitration. According to a recent ruling by the Supreme Arbitrazh Court (Supreme Commercial Court in Case No. -1831/12 of 28 March 2012), however, a clause giving only one of the parties the right to choose a forum is contrary to the fundamental principles of equal access to justice. The case will now be heard by the full Presidium of the Supreme Arbitrazh Court. Reciprocity may require the enforcement of foreign court judgments in Russia in the absence of generally applicable law providing for such enforcement. Pursuant to the Arbitrazh Procedure Code (Commercial Procedure Code), foreign judgments may be enforced on the basis of a federal law or an international treaty. There is, however, no generally applicable law providing for enforcement of foreign judgments, and there are few international treaties (particularly with Western European and North American states) providing for recognition and enforcement of judgments. Recently, the Moscow Circuit Court confirmed a lower courts decision to enforce several orders of the English High Court and recognize (without enforcement) the judgment of the High Court in the same case (Case No. 40-119397/11-63-950). The court held that several multilateral agreements between EU states and the Russian Federation, as well as the general international law principle of reciprocity, implicitly required enforcement of judgments of EU courts, Government procurement disputes are arbitrable in Russia. A German contractor terminated a procurement contract that contained a dispute resolution procedure. Claimants, consisting of several state agencies, argued in
both the Moscow Arbitrazh Court and the Ninth Appellate Arbitrazh Court that the arbitration clause in the contract was not enforceable and that any disputes arising out of such contracts should have been resolved by state commercial courts under the applicable Russian law on government procurement. In rejecting that argument, the courts found that the purpose of the provision referring government procurement disputes to state commercial courts was to allocate jurisdiction between the Russian state courts (that is, between commercial courts and courts of general jurisdiction). The courts further explained that commercial disputes are generally arbitrable, and a specific and clear exclusion is necessary to render a commercial dispute non-arbitrable. ICsID rules that the TurkeyTurkmenistan BIT required submission of investors claims against Turkmenistan to the national courts before the initiation of international arbitration proceedings. On 25 May 2012, ICSID released a decision in Kilic Insaat Ithalat Ihracat Sanayi ve Ticaret Anonim Sirketi v. Turkmenistan (ICSID Case No. ARB/10/1) finding that the Turkey-Turkmenistan BIT required submission of the dispute in question to the national courts before the initiation of international arbitration proceedings. The tribunal specifically noted, however, that it has yet to decide on the effect of noncompliance with this condition.
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consensus is the new CPC will pass and go to the President for signature. The new CPC will likely maintain the status quo regarding the enforcement of arbitration awards, but there are some potentially big changes regarding appeals. Currently, there is a strong push to restrict the stay of proceedings that normally comes after an appeal from the first instance court. Such a change could significantly alter parties strategies and shorten the litigation process. Brazilian Government continues to increase reporting requirements on offshore assets. The National Monetary Council recently announced new reporting requirements for Brazilian individuals and companies with offshore assets. When applicable, Brazilians must annually report assets in excess of $100,000 and quarterly report assets over $100,000,000. The term assets is interpreted broadly. The Councils move continues a recent trend of exercising greater control over offshore assets. In the past, many Brazilians sent assets overseas without any declaration and while these assets have increased, payment of taxes on these assets has not. (3) the requirement that special considerations extended by law to armed forces and governmental agents be adopted within the framework of a peace agreement and subject to the armed groups demobilization; (4) the establishment by law of a Truth Commission; (5) the adoption of guidelines for the investigation and prosecution of human rights violations, genocide and war crimes, including the possibility of waiving criminal prosecution or adopting alternative sanctions subject to fulfillment of certain conditions; (6) the exclusion of groupsoutside Colombias internal conflicts or members of these conflicts who continue to commit crimesfrom receiving the benefits of the transitory justice regime; and (7) the exclusion from future political activities those participating in gross human-rights violations or genocide. The proposed reform must still go through further review by Colombias Constitutional Court to become official. Collective actions and injunctions in Venezuela. On 7 June 2012, the Constitutional Chamber of the Supreme Tribunal of Venezuela (TSJ) declared itself competent to entertain a lawsuit filed by Venezuelas Public Defender on behalf of all victims who received breast implants manufactured by the French company Poly Implant Prothse (PIP). In 2010, this manufacturer was ordered by the French health authorities to withdraw its implants as consequence of numerous complaints by customers regarding ruptures or breaks. Under its own statute, the TSJ has jurisdiction over actions seeking remedies in connection with collective rights when the alleged facts concern a matter of national importance. The Public Defender has exclusive standing to prosecute these collective actions, as occurred here. More importantly, the Public Defender sought an injunction against the distributors, health centers and physician involved in the surgeries using the PIP implants. The TSJ considered reports issued by French and Spanish health authorities concerning the risks associated with not removing already-fractured implants from patients and, in light of the imminent risk to the patients, it ordered the distributors, health centers and physician who participated in the mammoplasties to replace the implants as soon as possible and at their own cost, pending the final outcome of the case. Venezuelas controversial new labor statute. Last April, President Hugo Chavez decreed a new Labor Law. The new regime contains several controversial reforms among its many changes, including its application to workers hired in Venezuela to provide services abroad. Further, the regime applicable to contractors is modified so that these persons are given the benefits applicable to regular employees if more favorable. The new law also prohibits the use of third parties or contractual arrangements to avoid complying with the labor regime, including the use of subcontractors, intermediaries or work entities. Additionally, the new legislation increases the compensation payable for termination of employment for causes not attributable to the employee and provides for substantial and enhanced benefits to employees in special situations like pregnancy, adoption, sick leave, etc. Finally, the new law opens the possibility of piercing the corporate veil to protect employees.
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some Latin American leaders. Despite the Spanish governments threats of retaliation, the Argentine Congress swiftly approved the government bill to nationalize YPF, and on 4 May 2012, President Kirchner enacted the so-called YPF Nationalization and Oil and Gas Self-sufficiency Law, formally expropriating Repsols YPFs stock. The expropriation reduced Repsols stake from 57.43% to 6.43%, and the Argentine government divided the expropriated 51% between the national government and the countrys provincial governments. On 15 May 2012, The Washington Post reported that Repsol sent a letter to Argentine President Cristina Kirchner notifying her that the controversy should be resolved by the World Banks International Center for Settlement of Investment Disputes (ICSID). Repsol said the notification represented the formal start of legal action to have the nationalization declared illegal and Argentina obliged to reverse the decision and, or, compensate for it. Repsol has said its 57% stake is worth $10.5 billion, according to the valuation criteria in Argentine takeover law. On the other hand, Argentines Deputy Economy Minister Axel Kicillof said that the country will make its own assessment of the value of YPF after analyzing the companys secret information. According to the ICSID rules, the sides have six months to negotiate a solution before petitioning for arbitration. As a result of the nationalization, Spain has decreased its multimillion-dollar imports of Argentine bio-diesel, and Standard and Poors has downgraded Repsols credit rating to BBB-. Chile: record foreign investments in 2011. According to data published by The Economist, foreign direct investment projects authorized by the Chilean government hit a new record of $13.8 billion in 2012 (around 6% of estimated GDP4% above the 2010 figure). Most of the investments are in min-
ing ventures, which reached $9.7 billion or 70.1% of the total. The largest investor is Barrick, a Canadian company that received approval for a $4 billion participation in the Cerro Casale gold and copper mining project and $800 million to develop the Zaldvar copper mine. Other Canadian and Japanese companies also obtained approval for their investments in mining ventures. The Chilean services sector accounted for 16.7% of the authorized foreign investments in 2011, and companies from Spain and Switzerland have projects to invest in banking and insurance services. Utilities (electricity, gas and water) accounted for 5.9% of authorized investments, transport and communications 3.3%, industry 2.8% and other sectors 1.2%. According to the newspaper, the Chilean government is now focusing on attracting foreign investment from Asiaparticularly from China which, along with Hong Kong, accounted for less than 1% ($1.2 billion) of the total stock of foreign direct investment in 2011.
imported merchandise must originate in one country to be imported duty free into the other country. The origination rules must be followed carefully, and the U.S. or Colombian importer must obtain a Certificate of Origin from the foreign manufacturer or exporter and then declare the merchandise subject to the CTPA to obtain the duty free benefits. Florida is one of the top trading destinations for Colombia with multiple daily flights by Avianca, American Airlines, Jetblue, and Spirit Airlines. Ocean cargo is much more significant, with numerous carriers calling at PortMiami, JAXPORT, Port Everglades, and Port of Tampa. u.s. Government seizing bank accounts of u.s. exporters in Florida. WARNING! Dozens of bank accounts in Florida, mostly in Miami, have been seized in 2012 by the Drug Enforcement Administration (DEA) or the Department of Homeland Security Investigation (HSI) from exporters of merchandise to Latin America. The problem is not with the U.S. seller or even the foreign buyer, but with the method of payment for the merchandise. DEA and HSI monitor what they describe as the black-market peso exchange. Payments from these casas de cambios for exported merchandise to Latin America make the payment suspicious because the DEA and HSI believe these money exchange houses, where there is a better-than-the-official monetary exchange rate for U.S. dollars, also are used by the drug traffickers. Hence, any money from these casas de cambios is mixed with drug money, and any payments to U.S. exporters would be considered laundered money subject to seizure for violation of 21 USC 981 and 18 USC 1956. Fortunately, there is an administrative process for return of the money and an asset-forfeiture judicial process in the courts, as well.
united states
By Peter a. Quinter peter.quinter@gray-robinson.com u.s.-Colombia Trade Promotion Agreement takes effect. The U.S.-Colombia Trade Promotion Agreement (CTPA) went into effect on 15 May 2012. Similar to the North American Free Trade Agreement (NAFTA) and the U.S.-Dominican Republic and Central American Free Trade Agreement (DRCAFTA), this agreement provides for immediate free trade benefits by eliminating customs tariffs for most merchandise trading between the United States and Colombia. Major product categories exported from Colombia to the United States, especially Florida, include coffee, cut flowers, bananas, and crude oil. Of course, the
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PeTeR QuInTeR Florida Bar Board Certified in International Law E-MAIL: peter.quinter@gray-robinson.com DIRECT: 305-416-6960 CELL: 954-270-1864 SKYPE: Peter.Quinter1 vCard Miami Office 1221 Brickell Avenue, Suite 1600 Miami, FL 33131
E-MAIL: melissa.groisman@gray-robinson.com DIRECT: 305-913-6772 CELL: 305-527-3971 SKYPE: Melgrois vCard Fort Lauderdale Office 401 East Las Olas Boulevard, Suite 1850 Fort Lauderdale, FL 33301 BLOG: GRCUSTOMSLAW.COM
The Customs and International Trade Law Group assists individuals and companies located in the United States and around the world with understanding and complying with the complex Federal regulations affecting international trade. Our practice focuses on U.S. Customs law, FDA law, Homeland Security, import regulations and export compliance. We are aggressive advocates, strategists, and partners with our clients, which include domestic and foreign manufacturers, importers, exporters, trading companies, customs brokers, and freight forwarders. We work all over the country, assisting our clients with investigations, audits, detentions, seizures, and penalties by U.S. Government agencies, especially by: U.S. Customs & Border Protection (CBP) Alcohol and Tobacco Tax and Trade Bureau (TTB) U.S. Food & Drug Administration (FDA) U.S. Department of Homeland Security (DHS) U.S. Immigration and Customs Enforcement (ICE) Bureau of Industry and Security (BIS) Office of Foreign Assets Control (OFAC) Directorate of Defense Trade Controls (DDTC) Transportation Security Administration (TSA) Because this area of the law is unique and heavily regulated, we use a broad range of lawyers and other professionals to represent you. Our commitment to this area of law is demonstrated by the fact that Peter Quinter, the head of our Customs and International Trade Law Group, currently serves as the Chair of the Florida Bar Customs Committee, the Vice-Chair of the American Bar Associations Customs Law Committee, and the Chair of the American Bar Associations International Transportation Committee. About GrayRobinson, P.A
Founded in 1970, GrayRobinson is a full-service law firm providing legal assistance across the state of Florida. With more than 260 attorneys and 10 offices from Tallahassee to Key West, GrayRobinson proudly provides legal assistance for Fortune 500 companies, emerging businesses, lending institutions, local and state governments, developers, entrepreneurs and individuals. Throughout the years, GrayRobinson has continued to stay ahead of the curve with a firm commitment to creativity and innovation.
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Introduction
A substantial amount of legal writing exists on the disparities between the civil law system and the common law system in the conduct and management of international arbitration proceedings. This article does not seek to evaluate which constitutes the better approach to dispute resolution. Both the common law and the civil law systems have their strengths and weaknesses. The reality is that both systems are, in principle, equipped to produce a fair and efficient resolution of a dispute, fully complying with dictates of due process. This article outlines the role of the international arbitrator from a civil law perspective, particularly a continental Europeannotably German, Swiss or Austrianperspective. For potential participants in an international arbitration, it is important to be aware of this perspective, as it may serve as a point of consideration in the constituting of the arbitral tribunal, the choice of the seat of arbitration and the formulation of the parties expectations regarding the conduct and management of the proceedings. As we will set out below, civil law systems contain a number of useful procedural tools that have proven to improve the time and cost efficiency of judicial proceedings significantly and are thus apt to counter the widely criticized development of international arbitration into some kind of costly and time consuming offshore litigation.1 Parties to an international arbitration have the opportunity to profit from those techniques, thereby combining the best of both worlds. In the following pages, we will first examine what is called the common law civil law divide2 and give a brief overview of the underlying civil law and common law concepts. In a second step, we will analyze the basis and extent of the international arbitrators broad procedural discretion with regard to the conduct and management of arbitral proceedings. We will then, third, address the arbitrators exercise of his or
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her procedural discretion and outline some of the most important civil law procedural tools serving considerations of time and cost efficiency.
in name, common law systems of different countries are all but uniform.8 Further, the terms civil law system inquisitorial system and common law system adversarial system do not do justice to the individual legal system. For example, the German legal system, considered as representative of civil law systems, cannot, upon closer look, be qualified as an inquisitorial system. German civil procedure is fundamentally based on the so-called Beibringungsgrundsatz, leaving it solely to the parties to present the facts supporting their claims.9 In civil proceedings, the judges power to investigate the facts ex officio is very limitedessentially reduced to the right to ask clarifying questions and to indicate if the court finds that certain issues have not been sufficiently substantiated. Those principles come close to the those of an adversarial system.10 Notwithstanding the difficulties in distinguishing one common law and one civil law system, there are important conceptual differences between the systems, specifically with regard to the role and function of the judge. As these differences reflect also on the role of the arbitrator, parties should be aware of those differences as they might have important consequences for the whole of the arbitral processfrom the composition of the arbitral tribunal to the further conduct of the proceedings, notably the taking of evidence. The judges role in civil law systems Broadly speaking, in the civil law world, specifically from the perspective of German, Austrian or Swiss law, judges take a more proactive role than in common law systems. The judge generally plays the central role in the management and the conduct of the proceedings. While in a civil law process, it is upon the parties to substantiate their case and proffer evidence for the facts they deem relevant, it is the judge who steers the taking of evidence. He or she will carefully review the case prior to the
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witnesses, prescribe the order of witnesses, or give directions regarding which pieces of evidence should be submitted, is very limited.14 Thus, counsel for the parties play the most important role in the oral hearing. Under common law systems, the promotion of settlement is traditionally considered incompatible with the role of the judge because it is seen to comprise impartiality. Settlement proposals may even constitute a ground for a challenge. Further, common law authorities fear that that the parties might disclose information during settlement negotiations that they otherwise might not have revealed.15
The International Arbitrators Procedural Discretion in the Conduct of the Arbitral Proceedings
The position of the international arbitrator is again a fundamentally different one. While the role of the national judge is predetermined by the applicable national lawthe lex forithe international arbitrator is no state organ and therefore not bound to a lex fori prescribing his or her role in or conduct of the proceedings.16 Analysing the role of the international arbitrator must therefore be performed by other terms of reference. Specifically, the international arbitrators role in the arbitral process must be viewed against the nature of the arbitral process and the parties underlying agreement to arbitrate. Indeed, it is a fundamental feature of arbitration that, in the absence of the parties agreement on such matters, the arbitrator enjoys broad discretion to determine the arbitral procedure. Even where such authority is not expressly recognized, it is internationally accepted as an implicit part of the parties agreement to arbitrate and as an indispensable precondition for an effective arbitral process.17 The international arbitrators procedural discretion under international arbitration conventions and national arbitration statutes The arbitrators broad procedural dis-
cretion is regarded as one of the major virtues of international arbitration because it ensures a degree of cultural neutrality that a local court, bound to the lex fori, would never be able to offer.18 Further, it is this broad procedural discretion that enables the arbitral tribunal to tailor the proceedings to the particular needs of the specific case and the parties cultural expectations.19 The only practical limitation on this power is respect for due process; namely, the parties right to be heard, the right to present their cases, and the right to equal treatment.20 International arbitration conventions confirm the arbitral tribunals wide authority to determine the arbitral procedure in the absence of party agreement. By way of example, Article IV (4)(d) of the European Convention on International Commercial Arbitration explicitly provides that in the absence of such agreement, the tribunal may establish directly or by reference to the rules and statutes of a permanent arbitral institution the rules of procedures to be followed by the arbitrators. The New York Convention implicitly acknowledges the tribunals procedural powers in Articles V(1)(b) and (d).21 Article III of the Convention, however, expressly requires giving effect to the parties agreement to arbitrate, which also includes the parties authorization to the arbitrators to conduct the arbitration in the manner they deem appropriate.22 Consistent with international conventions, Article 19 of the UNCITRAL Model Law provides for the arbitral tribunals broad procedural discretion in the conduct of the proceedings:
(1) Subject to the provisions of this law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. (2) Failing such agreement, the Arbitral Tribunal may, subject to the provisions of this law, conduct the arbitration in such a manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
The vast majority of arbitration statutes have followed the Model Law, expressly
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treated with equality and that each party has the right to be heard and is given a fair opportunity to present its case. The IBA Rules on the Taking of Evidence in International Arbitration 2010 (IBA Rules), containing procedural guidelines for international arbitrations, in its Preamble expressly provides that the rules are not intended to limit the flexibility inherent in the arbitral process. As has been confirmed in the commentary to the IBA Rules:
The Working Party recognised that there is not a single best way to conduct all international arbitrations, and that the flexibility inherent in international arbitration procedures is an advantage. Therefore, the Working Party felt that it was important to note specifically, in para. 2 of the Preamble, that the IBA Rules of Evidence are not intended to limit this flexibility. Indeed, as noted in that paragraph, the IBA Rules of Evidence should be used by parties and arbitral tribunals in the manner that best suits them.28
efficiency is one of its major virtues and indeed one of the reasons for the parties decision to submit the dispute to arbitration in the first place. International authorities and arbitral institutions have therefore undertaken considerable efforts to improve the cost efficiency of arbitral proceedings. As we will see below, the civil law techniques serving the same purpose are a useful source of instruction. Time and cost efficiency as key considerations for management of the arbitral process In response to growing criticism in recent years, most arbitral institutions, both with a common law and a civil law background, have given priority to developing techniques to ensure the time and cost efficiency of international arbitration. The ICC Commissions Report on Techniques for Controlling Time and Costs in Arbitration is one example of such efforts. Other institutions, such as the Centre for Efficient Dispute Resolution, have initiated similar projects.31 As a result of such efforts, arbitral institutions emphasize the necessity of proactive management and conduct of the proceedings, which is seen as key to reducing time and cost inefficiency.32 Against that background, the new Article 24(1) of the ICC Rules makes it compulsory for the tribunal to convene a case-management conference at an early stage to clarify the issues in dispute and identify appropriate procedures.33 Even before their revision, the ICC rules were known to provide a more active role for an arbitral tribunal in managing and conducting the proceedings than might be customary in common law jurisdictions.34 But even institutional rules with a common law background acknowledge the benefits of a proactive approach to the conduct of arbitration, specifically with regard to the taking of evidence. For example, Article 16(3) of the AAA International Arbitration Rules expressly authorizes the arbitral tribunal to direct the order of proof and to exclude evidence.35 The IBA Rules, explicitly promoting an efficient and economical [conduct of the] taking of
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This criticism goes to the heart of international arbitration, as time and cost
Aball Milne Kalil, P.A. is a Miami legal boutique, now in its nineteenth year, which focuses its practice on international commercial litigation, international business transactions, tax and estate planning, and domestic real estate transactions. The firms attorneys are fluent in a number of languages including English, Spanish, Portuguese and French, and have connections with a strong network of capable lawyers across the United States, Europe, Latin America and the Far East. www.aballi.com
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civil law relevance method. The relevance method, in a first step, assumes for analytical purposes the truth of claimants factual submissions and analyzes whether those, in combination with the undisputed facts, provide sufficient grounds for claimants case (Schlssigkeit). After completion of this first step, the arbitral tribunal can identify the pertinent legal requirements and whether claimant has met those. Then, in a second step, the judge assumes the truth of respondents factual allegations and assesses whether those facts, again in combination with the undisputed facts, rebut any or all of claimants claims (Erheblichkeit). From this step, the judge (or arbitrator) can derive those facts that are relevant to the resolution of the dispute; i.e., those that can affect the outcome of the case. The relevance method helps the arbitral tribunal determine the truly critical legal issues and facts and thereby expedite the proceedings.40 German arbitrators observe that experience indicates that a proper implementation of the Relevance method will in many cases result in a one-day hearing (and sometimes even less).41 Dealing with a civil law arbitral tribunal, one can assume that the arbitrators will, by their legal education, tacitly apply the relevance method during all phases of the proceedings, notably in the preparation of procedural and evidentiary orders. Efficient taking of evidence by the relevance test Under a civil law system counsel will nominate witnesses and experts in order to support their allegations and meet their burden of proof, but it is upon the judge to decide which witnesses will be heard and which other evidence is to be considered. In state court proceedings, such decision is made according to a strict relevance standard. Only such witness or expert evidence that is (1) disputed by the other side, and (2) of relevance for deciding the dispute (to be determined by application of the relevance method) will be admitted and subject to the taking of evidence. In international arbitrations, even civil-
law-oriented tribunals will be more reluctant to reject evidence offered by the parties. In order to avoid a challenge, some tribunals will find it easier to simply admit whatever evidence is proffered. Where supported by the parties, however, a careful admission of evidence that is relevant to the outcome of the dispute constitutes a useful tool in the conduct of arbitration proceedings, limiting the taking of evidence to the crucial issues of the case. Of course, arbitrators are to find the right balance between rejecting adduced evidence and the right to be heard. Experience shows that civil law tribunals are willing and able to make such decisions, thereby providing substantial time and cost savings to the parties. The use of procedural orders The main tool of the proactive arbitrator is the procedural order. Indeed, parties dealing with a civil law tribunal will likely be confronted with more procedural orders than they would be in more common-laworiented arbitrations. Under the tribunals broad procedural discretion, such procedural orders may focus on any procedural or substantive law question. The procedural order containing directions and instructions with regard to the critical legal or factual questions of the case (Hinweisbeschluss) is one useful tool for making the proceedings more efficient. Such order might list which factual or legal questions have not yet been sufficiently addressed by the parties. The order might also contain a preliminary assessment on certain legal issues, particularly where those work as determiners for further proceedings. Another useful tool is an evidentiary order (Beweisbeschluss). As we have seen above, one of the features of civillaw-oriented arbitrations is that it is the arbitrator who may, in the absence of the parties agreement on such matters, steer the taking of evidencecalling witnesses (previously offered by the parties), indicating where expert evidence would be needed, determining the order of witnesses, or rejecting certain evidence irrelevant to the resolution of the case. Frequently, an evidentiary order will be issued in preparaPage 19
Astigarraga Davis is a boutique law firm focused on international and other business disputes. The firm has an extensive cross-border practice, its lawyers having handled business disputes emanating from virtually every country in the Western Hemisphere as well as elsewhere in the world. Its clients include primarily multinational companies, financial institutions, other public and non-public companies, as well as sovereign states and their instrumentalities. The firms strengths focus on international arbitration, international litigation and financial services litigation including creditors rights, bankruptcy, and class actions. It has an international arbitration practice handling cases before the major international arbitral institutions, including the International Chamber of Commerce and the International Centre for Dispute Resolution. As a testament to its dedication to its clients, in 2011 the firm was presented with the Outstanding Client Service award for the Chambers Latin America region. With its international network of lawyers worldwide, the firm manages complex disputes in foreign jurisdictions for its clients, including in developing and executing strategies for multi-jurisdictional cases and high-profile controversies, particularly in Latin America and the Caribbean. The firm has an asset recovery team that seeks to pursue fraudsters and corrupt officials around the world to recover misappropriated assets, particularly from fraudulent transactions originating in Latin America and the Caribbean. 701 Brickell Avenue, 16th Floor, Miami Florida 33131 U.S.A. Tel: 1-305-372-8282 www.astidavis.com Contact: Jos Astigarraga Email: jia@astidavis.com
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and institutional rules remain silent on the subject.49 Yet, major arbitral institutions consider the promotion of settlement an important measure toward increasing the efficiency of the arbitral proceedings. To this end, one of the ICCs recommendations to control and reduce time and costs in arbitration is the arbitrators role in the facilitation of settlement.50 Further, the CEDR Commission on Settlement in International Arbitration makes detailed recommendations to the participants of international arbitrations as to how they can achieve an amicable settlement.51 From the experience of civil-law-oriented court and arbitration proceedings, the fear of a potential bias resulting from the arbitrator participating in and promoting settlement negotiations seems overrated.52 In some cases, a settlement may be a sensible and an efficient solution to the parties conflict. The parties, together with the arbitral tribunal, should therefore explore in advance whether to allow the arbitral tribunal to engage in settlement facilitation activities. The majority of civil-laworiented tribunals will be willing to give a preliminary view of the case and, where desired, develop a settlement proposal.
in an international arbitration should be aware of those techniques and explore the civil law approach as a possible standard for their arbitration. For international parties, what first appears to be a compromise in the choice of the seat of arbitration and the composition of the arbitral tribunal might well turn out as an advantage. Karl Prnbacher is a partner at Hogan Lovells Munich office and is head of the firms German arbitration practice. The focus of his work is on national and international arbitration and alternative dispute resolution. Dr. Inken Knief is a senior associate within the arbitration group of Hogan Lovells in Munich. Her practice is in the area of international arbitration, under various institutional rules and national arbitration regimes.
Karl Prnbacher
I. Knief
Concluding Remarks
As we have seen, the civil law approach to arbitration provides for a number of useful procedural tools designed and proven to improve the time and cost efficiency of arbitral proceedings without compromising justice. In view of those considerable advantages, parties involved Endnotes:
1 See, e.g., Siegfried H. Elsing, Procedural Efficiency in International Arbitration: Choosing the Best of Both Legal Worlds, SchiedSVZ 114, 117 (2011). 2 See John M. Townsend & Siegfried H. Elsing, Bridging the Common Law Civil Law Divide in International Arbitration, Arb. int. 59 (2002). 3 See Townsend & Elsing, supra note 2; see also
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bermittlung unverkrperter Willenserklrungen unter Abwesenden, in DeutschlanD, sterreich unD englanD 92 (2009). 15 Elsing, supra note 1, at 114, 118. 16 Bernardini, supra note 3. 17 born, supra note 7, at 1758. 18 Elsing, supra note 1, at 114, 117. 19 See also born, supra note 7, at 1786. 20 Bernardini, supra note 3. 21 See also born, supra note 7, at 1759. 22 born, supra note 7, at 1759. 23 See, e.g., Section 1041 of the German Code of Civil Procedure; Section 594 of the Austrian Code of Civil Procedure; Section 34 of the English Arbitration Act; Article 1460 of the French Code of Civil Procedure; Article 24.1 of the Swiss Federal Statute on Private International Law. 24 English Arbitration Act, Section 34(2)(g). 25 See Frederic Eisemann, Le nouveau rglement darbitrage de la Chambre de Commerce Internationale, 1 Droit et pratique Du commerce intl, 355, 362 et seq. (1975) (ICC arbitrators come from all parts of the world. Some are used to the oral and adversarial system of the common law countries. Others are more accustomed to the written and inquisitorial system as practiced on the European continent. The fundamental differences between the two systems explain, indeed justify, the concision of the provisions relating to the conduct of the proceedings.). 26 yVeS derAinS & eric A. SchwArtZ, A Guide to the icc ruLeS oF ArbitrAtion, 272 (2005). 27 See, e.g., art. 14 LCIA Rules; art. 15.1 Swiss Rules; art. 19.1 SCC Rules; art. 24.1 DIS Rules; art. 20.1 Vienna Rules.
28 Commentary on the revised text of the 2010 IBA Rules on the Taking of Evidence in International Arbitration 1999, IBA Working Party & 2010 IBA Rules of Evidence Review Subcommittee, 3 et seq. [hereinafter Commentary]. 29 Elsing, supra note 1, at 114, 116; see also Berger, supra note 4; Gerstenmaier, supra note 10; David W. Rivkin, Towards a New Paradigm in International Arbitration: The Town Elder Model Revisited, Arb. intL 372, 375 et seq. (2008); pieter SAnderS, Quo VAdiS ArbitrAtion, Kluwer Law Intl 99, 22 et seq. (1999). 30 Elsing, supra note 1. 31 See also Report of the Commission of the Centre for Efficient Dispute Resolution (CEDR), available at http://www.cedr.com/about_us/arbitration_commission/Arbitration_Commission_Doc_Final.pdf. 32 See Techniques for Controlling Time and Costs in Arbitration, Report of the ICC Comm. on Arb. 18 (15), 24 (2) (2007) [hereinafter Techniques]. 33 SteVen p. FiniZio et AL., reViSed icc ruLeS oF ArbitrAtion, 6, available at http://www.wilmerhale. com. 34 See art. 25(1) of the ICC Rules (former 20(1)); see also derAinS &SchwArtZ, supra note 26. 35 See art. 16(3) of the AAA International Rules (The tribunal may in its discretion direct the order of proof, bifurcate proceedings, exclude cumulative or irrelevant testimony or other evidence and direct the parties to focus their presentations on issues the decision of which could dispose of all or part of the case.). 36 See art. 2(3) of the IBA Rules 2010. 37 See also Gerstenmaier, supra note 10. 38 See for the relevance method, Elsing, supra note 1, at 114, 118. 39 Rivkin, supra note 29, at 372, 377 et seq. 40 Berger, supra note 3. 41 See also Elsing, supra note 1, at 114, 118. 42 See also id. 43 Id. at 114, 122. 44 Gabrielle Kaufmann-Kohler & Philippe Brtsch, Discovery in international arbitration: How much is too much?, SchiedSVZ 13, 17 (2004). 45 Kaufmann-Kohler & Brtsch, supra note 44; Kern, Internationale Schiedsgerichtsbarkeit zwischen Civil Law und Common Law, ZVGLrwiSS 109 78, 84 (2010). 46 See Kaufmann-Kohler/Brtsch, supra note 44, at 13, 16 et seq. 47 Commentary, supra note 28, at 7. 48 Id. at II.1. 49 The DIS Rules are an exception with probably the most proactive approach to the subject of promotion of settlement. Section 32.1 of the DIS Rules, following the example of Section 278 of the German Code of Civil Procedure, provides that the arbitral tribunal should seek to encourage an amicable settlement between the parties at any stage during the proceedings. 50 Techniques, supra note 32, at 843, 43. 51 CEDR Commission on Settlement in International Arbitration, Final Report Nov. 2009, 4 et seq. 52 See also Elsing, supra note 1, at 114, 118.
Demeyre, supra note 3; GAry born, internASee also born, supra note 7, at 1786.
9 Borris, supra note 3; see also born, supra note 7, at 1789 (Further, civil law procedures are frequently no less adversarial than common law procedures.). 10 Borris, supra note 3, at 92, 94; see also Klaus Gerstenmaier, The German Advantage Myth or Model?, SchiedSVZ 21, 22 (2010) (The German system of civil litigation is an adversarial system, almost as much adversarial as is the US-system.). 11 Jones v. Natl Coal Bd., 2 ALL ER 155 (1957). 12 Yuill v. Yuill, 1 ALL ER 183, 189 (1945). 13 Elsing, supra note 1, at 114, 118. 14 Philipp Riesenkampff, Die Beweisbarkeit der
for improperly terminating contractual relationships. We close out the issue with Tampa, Florida-based mediator Lynn Coles article on international mediation that eloquently points out that international arbitration and litigation are not the only results of increased globalization, but that mediation is also experiencing tremendous growth around the world. As always, we hope and trust that you will enjoy this issue. Our forthcoming summer issue will be a special issue on Canada, Mexico and the North American Free Trade Agreement. Safe travels, Alvin F. Lindsay Hogan Lovells US LLP Editor-in-Chief
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Cyprus Funds
One scheme, involving Cyprus Funds, illustrates how such international frauds operate. Eric Bartoli, an apparently wealthy South American, operated Cyprus Funds and represented that he would make investments conservatively in precious metals and U.S. and Latin American companies. Investor confidence in Bartolis abilities was bolstered by observations that he lived in a mansion and drove expensive cars. The fact that the prospectus of Cyprus Funds, ostensibly a mutual fund, listed a major U.S. bank as custodian gave investors further assurance. At times, Bartoli would even travel with bankers in wooing investors. In reality, Cyprus Funds was a Ponzi scheme, a type of fraud where investors are repaid their own money so that the investment appears successful, and more investors are attracted and swindled. This scheme originated with Charles Ponzi, who defrauded millions in the 1920s by falsely claiming he could sell international postal coupons at 100% profit. Ponzi financed his purported business through promissory notes that he always readily repaid. The business, however, was a sham. Ponzi was paying investors with their own money, rather than paying investment returns or redemptions. The U.S. Supreme Court described Ponzi as always insolvent, and became daily more so, the more his business succeeded. He made no investments of any kind, so that all the money he had at any time was solely the result of loans by his dupes.1 There have been hundreds of similar schemes. While no official statistics
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InverWorld
Another international Ponzi scheme that led to financial institution liability was called InverWorld, operated out of San Antonio, Texas. InverWorld was supposedly providing banking and brokerage services to Mexican and Latin American investors who sought the security of U.S. investments. Instead, like Cyprus Funds, InverWorld was a Ponzi scheme, investing only a bit of the funds while laundering and stealing the rest. Like the Cyprus Funds scheme, the InverWorld fraud required the assistance of banks. Millions were transferred out of InverWorlds accounts and laundered through circular transactions. Two banks involved in InverWorlds dealings learned of several red flags with regard to Inverworld, but no bank filed a suspicious activity report, and the fraud continued until the U.S. government finally stepped in. As with Cyprus Funds, the InverWorld fraud led to litigation, though investors could not recover all of their losses.
Charles Ponzi
are available, a search of a U.S. federal case database yields over 3,400 references to Ponzi. The Cyprus Funds Ponzi scheme victimized hundreds of investors in the U.S. and Latin America. The Latin American investors were attracted to the scheme in two ways. First, there was simple affinity to Bartoli himself, who married into a respectable and wealthy South American family. Second, and more importantly, Bartoli offered Latin American investors the safety and security of U.S. investments purportedly held in a major U.S. bank and denominated in stable U.S. dollars. In the end, the Cyprus Funds scam imploded, as do all Ponzi schemes, when Bartoli was unable to repay investors in a timely fashion. As such schemes fail, the fraudsters use further lies to cover their tracks, and this was no exception. Bartoli falsely told investors that redemptions had to be halted to complete an accounting in connection with a sale of the fund. Of course, no genuine accounting ever occurred. Ultimately, the investors were
Albania. In 1997, the Albanian investment funds Sude and Gjallica collapsed. The funds were only two of a rash of purported loan and investment schemes that ultimately bilked Albanians out of about $300 million, more than half of Albanias gross domestic product at the time. Two-thirds of the population had invested in one fund or another. Soon, riots led to an estimated 2,000 deaths and the complete downfall of the Albanian government. For several months after the funds collapsed, Albania was literally a state of anarchy, with no governing institutions. The social, economic, and political conditions of developing countries create a breeding ground for Ponzi schemes. In Albania, for example, the countrys institutions had only recently been released from a half-century of stifling communist control. Albanias banks and regulators were simply incapable of identifying or stemming the rising tide of fraud. The government and media had even explicitly endorsed some of the Ponzi schemes as great investments.5 The Albanian disaster was largely contained to Albania, but it is at least an instructive example of the conditions in which Ponzi schemes thrive and go unchecked. Where governments and regulators are weak, Ponzis flourish. The Caribbean, in particular, has been a hotbed of Ponzi schemes in the last decade. Between 2002 and 2008, large-scale Ponzi schemes operatedand collapsedin Antigua, Barbados, Colombia, Jamaica, Nevis, Turks and Caicos, St. Kitts, Grenada, Haiti, Dominica, and St. Lucia, among others. Jamaica was the hardest hit.6 The collapse of the OLINT and Cash Plus schemes cost Jamaica 12% of its gross domestic product in 2008.7 Just prior to their collapse, Jamaicas largest Ponzi schemes had been significant players in the Jamaican government and economy. Cash Plus sponsored professional sports teams, and OLINT was heavily involved in charitable giving. Both organizations had powerful friends. When OLINTs offices were searched for evidence of fraud, a Jamaican official publicly called the search a vulgar abuse of state power.8
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Counterclaims by Respondent states in Investment Arbitration: Two Recent Cases Leave Counterclaiming states Frustrated Again
By thomas Kendra, Paris, France
One of the most significant roles played by international arbitration is as an effective and widely publicized forum for investors, both individuals and companies, to bring claims directly against States, be it through contractual provisions with the State in question or through investment treaty arbitration, where the investor invokes the dispute resolution provisions of a treaty to enforce rights under that treaty. Such treaties grant to the world at large the possibility of bringing arbitration against the State, provided relevant criteria are met, giving rise to what Jan Paulsson termed arbitration without privity.1 While often overlooked, the flipside of this rolethat of allowing States to claim, or more likely to counterclaim, against the investor should, in theory, provide the State with a means not only to defend itself but to enforce its own rights and laws where appropriate. This possibility of a claim in arbitration by a State against an investor is relatively ignored. In the last thirty years, only about twenty States have chosen to make a counterclaim in a case before ICSID2 and when made, such counterclaims usually fail.3 Two recent cases, Paushok v. The Government of Mongolia4 and Spyridon Roussalis v. Romania,5 have seen counterclaims brought by the respondent State against the claiming investor, with both sets of counterclaims dismissed for lack of jurisdiction. Nevertheless, the decisions themselves, and the reaction they have provoked, may shed light on the potential uses of such recourse in the future. This article (1) briefly provides background by reference to previous decisions on counterclaims by respondent States, before (2) touching on the recent decisions in Paushok v. The Government of Mongolia and Spyridon Roussalis v. Romania, and
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then (3) reviewing some of the problematic issues in considering the future for such counterclaims.6 (1) A Brief Review of Respondent state Counterclaims While the theory behind respondent State counterclaims is nothing new in investment treaty arbitrations, as shown by the procedural rules themselves, practical experience reveals the difficulties that present themselves for a state to be successful. (a) A procedural feature provided for by the ICsID Convention and the unCITRAL rules The procedural basis for counterclaims by respondent States iswithout question under both the UNCITRAL Rules and the ICSID Conventionby far the most commonly used procedures for arbitration involving States. The UNCITRAL Rules, which are not designed to apply to arbitration involving States only, contain provisions on counterclaims as part of the general rules on arbitral procedure. In the 1976 rules, however, which were in force until recently and continue to apply to disputes arising under contracts or treaties made before the rules were updated, any such counterclaims could be brought only if arising out of the same contract7 as the claims themselves. Clearly, this was an obstacle to counterclaims in arbitration brought under investment treaties. In 2010, the
rules were amended to address this point and give tribunals wider discretion. Thus, under Article 21(3), the respondent may make a counterclaim or rely on a claim for the purpose of a set-off provided that the arbitral tribunal has jurisdiction over it. This increased flexibility, particularly when viewed in the light of some of the decisions set out below, may allow a broader scope for State-brought counterclaims in the future.8 The ICSID Convention is more conclusive, being specifically designed for investor-State arbitration and explicitly allowing counterclaims by States, provided the investor has consented to this in the underlying investment agreement and the subject matter of the counterclaim is closely related to the investment itself. Article 46 states: Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are within the jurisdiction of the Centre. Thus consent9 and a close relationship to the subject matter of the dispute10 (i.e., the investment) are set out as requirements for a successful counterclaim. That a State may bring an arbitration under the ICSID Convention is repeated elsewhere in the document. Article 36(1) provides that any Contracting State or any national of a Contracting State wishing to institute arbitration proceedings shall address a request to that effect in writing to the Secretary-General. The drafting of the Convention evidences the thinking behind these clauses. The travaux preparatoires describes the balance that must be struck between the interests of States and investors, pointing directly to this option availPage 27
Republic of Indonesia (1981),16 despite the fact that the case also involved a specific investment agreement, took a more restrictive approach to the respondent States counterclaims. In Amco, a U.S. company jointly ran a hotel with an Indonesian company. The two parties disagreed over their roles in the project, and the Indonesian government ended up revoking the business license of the claimant U.S. party. In its counterclaims, Indonesia alleged various breaches of Indonesian tax law. The first tribunal accepted jurisdiction over the counterclaims but rejected them on the merits because it found that there was no breach of tax law where, as it determined here, the States termination of the license was illegal. The award, however, was annulled, and the consideration of the counterclaims came before a second tribunal. This time, the tribunal did not find jurisdiction over the counterclaims, as it held that a violation of Indonesian tax law was not connected to the investment subject of the dispute, though the parties had consented to proceedings. The tribunal found: The obligation not to engage in tax fraud is clearly a general obligation of law in Indonesia. It was not specifically contracted for in the investment agreement and does not arise directly out of the investment agreement.17 Thus, the requirement that the counterclaim arise directly from the investment excludes violations based solely on domestic law. This restrictive trend is also reflected in Klckner v. Cameroon (1981),18 where the tribunal held that a State could not counterclaim for an equity violation such as misrepresentation. In that case, a joint venture company held by a German investor and the State of Cameroon went into liquidation. In its counterclaim, Cameroon alleged that the claimant had misrepresented its management capability, causing the joint venture to collapse. The counterclaims were dismissed (by both the first and, after annulment, second tribunals) as having no merit. The fact that the counterclaim argument was grounded in notions of equity rather than in the investment itself was also taken into account. As the second tribunal noted:
[T]he Award denies that the Cameroonian State could be entitled to claim compensation for the fact that it was misled by a private company; whether it was deceived or not changes nothing: it acted with either full understanding or with open eye, and if it was misled, it would have a concurrent responsibility which excludes the counterclaim. Therefore, we also seem to find ourselves here in the field of equity, relying on the notions of preclusions or estoppel.19
In the same spirit, in RSM Production Corporation v Grenada (2009),20 it was held that criminal violations (in this case, fraudulent misrepresentations) of the host States law did not fall within the set of facts arising out of the investment. In contrast to cases involving restrictive grounds for counterclaims is MINE v. Republic of Guinea21 (1986). There, Guinea counterclaimed against MINE for legal costs arising from two previous claims MINE had brought in other forums (the Belgian and Swiss courts) that should have been brought before ICSID. The tribunal accepted Guineas arguments. While heavily limited in scope, relating basically to previous aspects of the same procedure, the case nevertheless provides an example of the successful invocation of counterclaims by a respondent State. More significantly, however, the Saluka v. Czech Republic22 case involved further restriction on the type of counterclaims that could be brought. Grounded on the Netherlands-Czech BIT rather than a contract, and heard under the 1976 UNCITRAL rules, the case builds on Amco and Klckner in that it excludes violations of the public law of the host State as grounds for a counterclaim against the investor. Consent was not an issue in the case as article 8 of the BIT referred to all Disputes and hence included claims from the respondent. What was an issue was the extent to which the counterclaims were found to be connected to the investment and the subject matter of the dispute. In addition to citing Amco approvingly, the tribunal referred to commentary on the Iran-U.S. Claims Tribunal where the issue of counterclaims frequently came up in the arguments Iran
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Romania, considered in turn below. While the awards offered a detailed analysis of the conditions to be fulfilled in order for a counterclaim to get off the ground, the outcomes of both cases demonstrate the issues respondent States continue to face in this area. Paushok v. Mongolia In this case, the claimantsa Russian national, Zolotoy Vostok, and two Russian companies in which he was the sole shareholderbrought a claim against Mongolia pursuant to the Mongolia-Russia BIT, alleging, among other things, that changes to the Mongolian tax regime (including the introduction of a windfall tax) and employment law were tantamount to a violation of the treaty and an expropriation of their investment.24 The claim was heard under the 1976 UNCITRAL rules. Mongolia brought seven counterclaims against a gold-mining company, controlled by the claimants but not a party to the arbitration, alleging that the company owed windfall taxes and foreign worker fees to Mongolia, and that the company was liable
Having reviewed previous decisions in this area, we now turn to two awards in the past year that have considered this area anew. 2. Two recent cases restate the position on respondent state counterclaims The issue of counterclaims in investment treaty arbitration has arisen again in two recent awards, Paushok v. The Government of Mongolia and Spyridon Roussalis v.
for tax evasion, environmental damages, gold smuggling and violation of its obligations under a gold exploration license agreement.25 The tribunal, comprised of Marc Lalonde, Horacio A. Grigera Naon and Brigitte Stern, ruled in their award of April 2011 that the Central Bank of Mongolia acted with government authority and breached the fair and equitable standard of the Denmark-Mongolia BIT (applicable through the most-favored-nation clause of the Mongolia-Russia BIT) but dismissed the other claims. The tribunal denied jurisdiction over all of Mongolias counterclaims. In particular, taking into consideration the decision in Saluka v. Czech Republic, it explained that in considering whether the tribunal has jurisdiction to consider the counterclaims, it must therefore decide whether there is a close connection between them and the primary claim from which they arose or whether the counterclaims are matters that are otherwise covered by the general law of the Respondent.26 The tribunal concluded that the close connection criterion was not met in the present
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While in the circumstances it can be seen that the claims and counterclaims were not directly linked, the tribunal, following the practice of Saluka among others, again rejected an opportunity to handle the parties disputes in the same forum. Roussalis v. Romania The most recent case to consider the topic shows again the difficulties of bringing such claims. A dissenting opinion suggests, however, that there may be room for an alternative view and one that may yet see a relaxation of the approach. In this case, Greek businessman Spyridon Roussalis brought claims against the Government of Romania pursuant to the Greece-Romania BIT, alleging, among other things, that Romania breached the standard of fair and equitable treatment and indirectly expropriated its investment in a frozen-food warehousing business by pursuing various domestic remedies against him on the ground that his company, Continent SRL, did not comply with its post-purchase investment obligation.30 Romania brought a counterPage 30
claim against Spyridon Roussalis and his companies, alleging, in turn, that he had violated the share purchase agreement by not making the post-purchase investment.31 The tribunal, formed by Andrew Giardina, Michael Reisman and Bernard Hanotiau, in their award of December 2011, accepted jurisdiction over the claims brought by Roussalis but dismissed them all in the end, judging them to be unfounded. The arbitral tribunal, however, was divided regarding Romanias counterclaims. The majority ruled that the tribunal did not have jurisdiction over such claims. In dissent, Professor Reisman brought this area into sharp relief, voicing concern about the increasingly narrow scope given to such counterclaims. According to the majority, in order to find jurisdiction the parties must have consented to have the States counterclaims arbitrated; i.e., the allegations must fall within the tribunals jurisdiction as expressed in the BIT.32 The majority therefore took into consideration Article 9(1) of the BIT, noting that this article undoubtedly limit[s] jurisdiction to claims brought by investors about obligations of the host State. Accordingly, the tribunal held that [t]he BIT does not provide for counterclaims to be introduced by the host [S]tate in relation to obligations of the investor. The meaning of the dispute is the issue of compliance by the State with the BIT.33 Thus, for the majority of the tribunal, the Greece-Romania BIT did not contain consent for the submission of respondent State counterclaims, as the parties had not agreed to settle through arbitration their disputes concerning investor obligations. The tribunal consequently ruled that any grievances against the investor had no basis in the parties arbitration agreement and therefore were not under the tribunals jurisdiction: [T]he BIT imposes no obligations on investors, only on contracting States. Therefore . . . counterclaims fall outside the tribunals jurisdiction.34 Professor Reisman, by contrast, felt that when States consent to ICSID jurisdiction through a BIT, article 46 of the Washington Convention regarding jurisdiction on counterclaims is automatically incorporated in the proceedings resulting from this BIT.
3. Conclusion From the awards outlined above, tribunals considering a counterclaim brought by a respondent State will look closely at (1) consent, and (2) relationship to the subject matter of the dispute. Consent is, of course, essential, but the very making of an investment and submission of an investor-State dispute to arbitration could be seen as going some way towards this. Further, the question is raised as to exactly how close a link to the investment is required, particularly when balanced with the possibility that tribunals might be imposing an almost impossible test that may, as Professor Reisman feared, defeat the very objectives of international investment law. One way to remedy the issue could simply be to consider the matter from the outset, taking into account when drafting treaties the relatively strict manner in which tribunals have considered this issue. Both the issue of consent and of the required link to the investment are points that can be specifically addressed in the wording of the BIT or investment contract. Indeed, States could choose to insert wording that explicitly allows them to launch claims for breaches of the types of public laws Amco and Saluka exclude. Accordingly, some commentators have argued for a revision of BITs,36 with wording inserted to eliminate the uniquely asymmetric nature of investSpring 2012
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8 Yaraslau Kryvoi, Counterclaims in Investor-State Arbitration, LSE Law, Socy and Econ. Working Papers 8/2011. 9 ICSID Convention, art. 25(1) defines consent as the parties to the dispute consent in writing to submit to the Centre. 10 ICSID Convention, art. 25(1) defines this relationship as any legal dispute arising directly out of an investment. 11 Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, available at http://icsid.worldbank.org/ICSID/ StaticFiles/basicdoc/partB-section01.htm. 12 Adriano Gardella v. Republic of the Ivory Coast, Award, 29 Aug. 1977, ICSID Case No. ARB/74/1. 13 Benvenuti & Bonfant Co. v. the Government of the Peoples Republic of Congo, Award, 15 Aug. 1980, ICSID Case No. ARB/77/2. 14 Southern Pacific Properties (Middle East) v. Arab Republic of Egypt, Decision on Jurisdiction, 27 Nov. 1985, ICSID Case No. ARB/84/3. 15 Vohryzek-Griest, supra note 2, at 95. 16 Amco Asia Corp. v. Republic of Indonesia, ICSID Case NARB/81/1. 17 Amco Asia Corp. PanAmerican Dev. Ltd and PT Amco Indonesia v Republic of Indonesia, ICSID Case No. Arb/81/1, Decision on Jurisdiction, E(3), 10 May 1988. 18 Klckner Industrie-Anlagen GmbH v. United Republic of Cameroon and Socit Camerounaise des Engrais, ICSID Case NARB/81/2. 19 Klckner v Cameroon, ICSID Case No ARB/81/2, Decision on Application for Annulment 123, 3 May 1985. 20 RSM Production Co. v Grenada, ICSID Case No ARB/05/14, Award, 13 March 2009. 21 MINE v. Republic of Guinea, Award, 10 Jan. 1988, ICSID Case No. ARB/84/4. 22 Saluka Investments BV v. The Czech Republic, Decision on Jurisdiction over the Czech Republics
Litigation note
Grupo Radio Centro v. American Merchant Banking Group, Inc. 71 so. 3d 151 (Fla. 3d DCA 2011)
By Gregory C. Ward Chair, subcommittee on Groupo Radio Centro
The Civil Rules Committee of The Florida Bar was recently asked to consider revising some of Floridas standard litigation forms in light of the Third District Court of Appeals opinion in Grupo Radio Centro v. American Merchant Banking Group, Inc. 71 So. 3d 151 (Fla. 3d DCA 2011). In Grupo Radio Centro, the court quashed service under the Hague Convention because the summons did not indicate whether the response was to be calculated in business days or calendar days, purportedly a requirement in Mexico under the Hague Convention. Subsequent to this opinion, in November 2011, officials from the Consultora Jurdica of the Ministry of Foreign Affairs, the Permanent Bureau of the Hague Conference and the Mexican Central Authority met to discuss the Hague Convention. During this meeting, Mexican authorities recognized that time limits for responses by addressees are subject to the law of the requesting State, not the requested State, and that the Central Authority may not condition compliance on requirements of its own internal law or existing judicial decisions. This information together with other conclusions from the workshop can be viewed online at: http://www.hcch.net/upload/2011workshop_mx.pdf. In light of the foregoing, the Civil Rules Subcommittee recommended no action with respect to changing any of Floridas rules or forms. Nevertheless, until a published opinion supersedes the Groupo Radio opinion, practitioners may be at risk if the term calendar does not appear on the face of a summons served in Mexico pursuant to the Hague Convention.
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Ill-Defined Boundaries?
the Supreme Court has determined that arbitration-related gateway decisions by courts on matters of law raised in motions to vacate or confirm arbitral awards are subject to broad de novo appellate review, without the special deference afforded decisions within the jurisdiction of arbitrators.3 Uncertainty in the application of the rules to be applied in determining whether a particular dispute must be arbitrated may undermine the efficiency and predictability of the arbitral process. Apart from the significant costs that may be expended litigating gateway issues, errors by a trial courtat least in the subsequent view of appellate juristsmay have the effect of nullifying an award on jurisdictional grounds after the completion of a lengthy arbitration process. One significant recent example is Republic of Argentina v. BG Group PLC,4 where a $185-million arbitral award was vacated on the grounds that a failure to comply with a pre-arbitration duty to seek a resolution through at least eighteen months of court litigation in Argentina rendered the controversy non-arbitrable and outside the arbitral panels jurisdiction, as described in greater detail below.
ditional resistance to arbitration by placing arbitral agreements on equal footing with other contracts.5 To that end, FAA 2 states that [a] written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract [Emphasis added.]. Section 2 is a congressional declaration of a liberal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.6 The U.S. Supreme Court has, in multiple opinions, stated a series of rules defining the scope of arbitral authority over particular disputes, the most fundamental of which is that arbitrability is for courts to decide.7 The concept of arbitrability is based upon the proposition that arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.8 In deciding whether an agreement to arbitrate exists,
a court is not to rule on the potential merits of the underlying claims[,] . . . weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.9 [W]here [a court determines that] the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that [a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of any interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.10 Page 33
explained the rational underlying Prima Paints severability rule. The Court reasoned that:
2 [of the FAA] states that a written provision to settle by arbitration a controversy is valid, irrevocable, and enforceable without mention of the validity of the contract in which it is contained. Thus, a partys challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate. [A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.16
Practical Implications
The application of the arbitrability rules adopted by the Supreme Court has resulted in holdings by circuit courts of appeal, and the Supreme Court itself, that are difficult to reconcile and that suggest the existing framework remains inadequate. For example, in Granite Rock Co. v. International Brotherhood of Teamsters,20 the Supreme Court addressed a challenge to an arbitration clause based upon a dispute regarding the ratification date of a collective bargaining agreement that included an arbitration clause. A request for arbitration by a labor union under the terms of a collective bargaining agreement was resisted on the basis of a dispute over whether the collective bargaining agreement was in effect during a strike associated with the controversy for which arbitration was sought. In short, there was no dispute that a contract existed between the parties or that the agreement included an arbitration clause. Instead, a controversy existed regarding the date the collective bargaining agreement became effective. The majority of the Court rejected the dissents contention that the controversy was with respect to the merits of the disputewhich an arbitrator would typically resolveand instead determined that the matter involved a contract formation issue, which was an issue of arbitrability for the trial court to resolve.21 Eight years earlier, in Howsam, the Court had addressed another timing issue, reaching an opposite outcome. Howsam involved a claim related to a securities brokerage account. There was no dispute regarding whether a contract existed between the parties or whether that contract included an arbitration clause. Instead, the controversy turned on whether the contracts six-year time limit for asserting claims barred the cause of actions in question. In holding that the matter was for an arbitrator to decide, the Court reasoned that in the absence of an agreement to the contrary, issues of substantive arbitrability . . . are for a court to decide and issues of procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligaSpring 2012
Through its adoption of the severability rule in Prima Paint Corp. v. Flood & Conklin Mfg. Co.,12 the Supreme Court has distinguished challenges to contracts as a wholewhich are for courts to resolve from challenges to specific arbitration provisionswhich are left for arbitrators to decide. In Prima Paint, the Court affirmed a Second Circuit holding that:
except where the parties otherwise intendarbitration clauses as a matter of federal law are separable from the contracts in which they are embedded, and . . . where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud.13
Prima Paint involved the arbitrability of a claim for fraud in the inducement of a contract generally, which the Court found to be for an arbitrator to decide. In doing so, the Court explained that if the claim is fraud in the inducement of the arbitration clause itselfan issue which goes to the making of the agreement to arbitratethe federal court may proceed to adjudicate it.14 In Rent-A-Center, West, Inc. v. Jackson,15 the Supreme Court reaffirmed and
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As a consequence of Prima Paint and its progeny, an arbitrator may have jurisdiction over a cause of action that challenges the enforceability of the contract, even when the arbitrator ultimately concludes that the contract is not legally binding, so long as there is not a direct challenge to the arbitration clause upon which the arbitration is based. A court might, it follows, deem a matter arbitrable in the absence of a challenge to a specific arbitration clause, which an arbitral panel might deem to be outside of its jurisdiction under the arbitral panels own analysis of the arbitration clause. For example, in Howsam v. Dean Witter Reynolds, supra, the Supreme Court held that a challenge to the arbitrability of a claimpurportedly initiated after the expiration of the time limit for such a claim as provided for in the parties contractwas to be resolved through arbitration.17 An additional variable to be considered in delineating arbitral authority is that parties can agree to arbitrate gateway questions of arbitrability, such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy, thereby shifting to arbitrators threshold issues that would otherwise be for court disposition.18 The general presumption favoring arbitrability does not, however, apply to delegations of authority over arbitrability. Instead, clea[r] and unmistakabl[e] evidence that the parties intended to arbitrate arbitrabilitye.g., contract formation issuesis required.19
tion to arbitrate have been met, are for the arbitrators to decide.22 Notwithstanding this indication in Howsam that disputes regarding whether conditions precedent to an obligation to arbitrate have been met are for arbitrators to decide, the Circuit Court of Appeals for the District of Colombia ruled to the contrary in Republic of Argentina v. BG Group PLC in January 2012. The case involved a $185-million arbitral award against Argentina that was vacated on the grounds that the arbitral panel failed to enforce a requirement that at least eighteen months of litigation in Argentinas courts be conducted prior to the initiation of arbitral proceedings, as is provided for in the bilateral investment treaty (BIT) pursuant to which the arbitration was conducted. In accordance with the BIT, the arbitration was conducted under the UNCITRAL rules, Article 21(1) of which provides that [t]he arbitral tribunal shall have the power to rule on objections that it has no jurisdiction to hear the arbitration. The arbitral panel determined that it possessed jurisdiction over the dispute on the grounds that court proceedings in Argentina would have been futile. In rendering its award, the arbitral panel concluded that Argentina violated the principles of stability and predictability inherent to the standard of fair and equitable treatment required by the BIT.23 The D.C. Circuit nevertheless vacated the confirmation of the award by the trial court. In so doing, the D.C. Circuit purported to distinguish Howsam on the grounds that the pre-arbitration litigation requirement in the BIT was not the type of purely procedural matter that could be left to an arbitral panel to decide.24 The court reasoned that the arbitral panels express authority under UNCITRAL Article 21(1) to determine the
arbitrability of the controversy was never triggered since the applicability of the threshold requirement of pre-arbitration litigation in Argentina preceded the arbitration and did not grow out of the dispute.25 The practical consequence of the courts arbitrability analysis was that the extremely broad deference typically afforded arbitral awards was inapplicable, thereby facilitating the voidance of the massive award after years of arbitration proceedings.
Conclusion
The frequent difficulties faced by courts in applying the Supreme Courts various arbitrability rules highlight the importance of careful planning, both in drafting arbitration clauses and in determining how to pursue or defend against arbitration claims. Contracting parties strongly committed to dispute resolution through arbitration should assess carefully whether clear and unambiguous language allocating the disposition of threshold arbitrability issues to arbitrators should be included in their arbitration clauses. Prudence also dictates careful consideration of the implications of not obtaining a court determination of whether gateway issues are properly for an arbitrator to decide. The BG Group case should serve as a cautionary tale of the potentially disastrous consequences of mistakenly concluding that an arbitral panels determination of its own jurisdiction will not be subject to a plenary court review and perhaps voidance. Gustavo Lamelas is a member of the transnational litigation and international arbitration team of the Miami
G. Lamelas
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Section
10th Annual International Litigation and Arbitration Conference
Miami, Florida 23-24 February 2012
Arnie Lacayo and Annette Escobar of Astigarraga Davis; and Gerardo Rodrigues Albizu, Greenberg Traurig
Ricardo Puente, Concepcion Martinez & Bellido; and Carlos Osorio, Abali Milne Kalil
Alejandro Pignataro; Elizabeth Ortega of ECO Strategic Communications; and Edward Davis of Astigarraga Davis Photos by Carlos Osorio, Aballi Milne Kalil Santiago Cueto, Cueto Law Group; and Judith Freedberg, University of Miami School of Law
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Scene
Annette Escobar, Astigarraga Davis; Gary Davidson, Diaz Reus; and Rima Mullins, law clerk to federal Magistrate Judge Chris McAiley
Clarissa Rodriguez, Smith International Legal Consultants; Raphael R. Ribeiro of Bilzin Sumberg Baena Price & Axelrod; Quinn Smith, Smith International Legal Consultants; and a guest Luis ONaghten, Akerman Senterfitt; Monique Garcia; and David Massey, Bilzin Sumberg Baena Price & Axelrod
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tion, limitation, applicable law, and disclosurethat need to be resolved before a court can turn to the task of assessing damages. In fact, due to the fairly recent advent of these damages actions in Europe, most of the jurisprudence in this area concerns these preliminary issues, some of which we discuss below.
Applicable Law
Although the requirements of competition law itself are established by the Treaty on the Functioning of the European Union and thus are applicable throughout Europe, there are many other aspects of damages claims not determined by European law (including rules about limitation, causation and remedies) that will be governed by the applicable national laws. Therefore, in any claim for damages it is necessary to determine what national law applies to the claim. The rules used to determine the applicable law for competition actions have recently been harmonized across European member states under the Rome II regulation.3 Rome II, however, applies only to events that occurred after 11 January 2009. For infringements prior to 11 January 2009, the courts of each European member state will apply their own national rules to determine which national law (or laws) will be applicable to the claim. Determining the applicable law of a dispute in, say, the English courts, involving claimants and defendants from many jurisdictions (both from Europe and elsewhere) with respect to a price-fixing cartel that operated throughout Europe, can become very complex and an area ripe for disputes. The applicable law of the claim may, among other things, determine the availability of the passing on defense, by which a defendant can argue that the claimants passed on any overcharge applied by the cartel to its own customers and so suffered no loss. Although the availability of this defense is not yet definitively esSpring 2012
Jurisdiction
The nature of the European marketplace in which antitrust violations take place is such that the domicile of the claimants and the defendants will ordinarily span multiple jurisdictions. Although there is a uniform regime in EU member states that governs where claimants can bring their claims against defendants domiciled in Europe,4 within this regime there is considerable room for claimants to engage in forum shopping. The jurisdiction will, crucially, determine important procedural matters that vary significantly among European member states. For example, the common law jurisdiction of England and Wales provides for wide document discovery in comparison to all the other main European jurisdictions, whose civil law systems provide for very little or no documentary discovery. Another pertinent procedural issue is whether the claimants can bring a multiparty action, a position that again differs among member states. Moreover, the rules
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Contribution Claims
The generally accepted position in Europe has been that the members of a cartel are jointly and severally liable for any losses attributable to the operation of that cartel (although recently a German court has referred this question to the European Court of Justice for determination8). As a result, one member of a cartel can be sued for the entirety of the claimants damages. Typically, in Europe a defendant that is jointly and severally liable for a loss can seek to recover a contribution from any others who are jointly liable with it. Claimants do sometimes pursue their claims against only one or a small number of the cartelists for the entirety of their losses. In such circumstances, those sued will typically bring claims against the others involved in the infringement to recover a share of the damages. This provides a level of protection for individual defendants, although the threat of contribution claims can complicate, or even hinder, settlements. A settling defendant would wish to have the comfort of knowing that it does not remain exposed to contribution claims, but claimants are often unable to provide any assurances and are unwilling to provide an indemnity with respect to them. In the U.S., a defendant with a judgment against it cannot seek contribution from the other members of the cartel. The effect of this tends to be that defendants hurry to settle with the claimants in order to ensure that they are not the one left facing a judgment for the remainder of the claims.
N. Heaton
L. Patrick
Endnotes:
1 Art. 101 and 102 of the Treaty on the Functioning of the European Union. 2 Masterfoods Ltd. v. HB Icecream Ltd. [2000] ECR 1-11369. 3 Regulation (EC) No 864/2007 of the European Parliament and of the Council on the law applicable to non-contractual obligations (Rome II). 4 Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation). 5 For example, Case 13 O 23/09 [Kart] in the Regional Court of Dortmund, Germany. 6 Art. 6(1) of the Brussels Regulation. 7 See Provimi Ltd. v. Roche Products Ltd. [2003] 2 All ER (Comm) 683 and Cooper Tyre & Rubber Co. Ltd. v. Shell Chemicals UK Ltd. [2010] EWCA Civ 864. 8 Case 13 O 23/09 [Kart] in the Regional Court of Dortmund, Germany. 9 National Grid v. ABB & Others [2012] EWHC 869 (Ch.). 10 Case C-360/09 Pfleiderer AG v. Bundeskartellamt.
Conclusion
The frequency with which damages actions are brought in the European courts following antitrust infringements is expected to continue to rise. Not only are claimants increasingly aware of the opportunity to recover damages, but the ease with which they are able to do so will surely be enhanced as case law develops and uncertainties are resolved. Further, private damages actions are being encouraged by governments seeking to decrease the burden on public enforcement action. Most recently, in April 2012, the U.K. government launched a consultation on how best to promote private damages ac-
Disclosure
In a follow-on claim, claimants are often
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Introduction
On 4 August 2011, a tribunal of the International Centre for Settlement of Investment Disputes (ICSID) handed down what was arguably the most controversial decision of the year. In Abaclat and Others (Case Formerly known as Giovanna a Beccara and Others) v. Argentine Republic,1 the tribunal ruled 2-1 that despite silence on whether mass claims in a sovereign bond dispute were permissible under the ICSID Convention, ICSID Arbitration Rules, and the Argentina-Italy Bilateral Investment Treaty (BIT), there were no impediments to asserting jurisdiction.2 A strongly worded dissent issued on 28 October 2011 argued that jurisdiction did not lie in Abaclat because, among other things, the sovereign bonds in question were not investments actionable before ICSID, and Argentina did not consent to a mass claim.3 While the mass-claims ruling is unprecedented, the decision to admit sovereign bonds may prove to be the most significant aspect of Abaclat for the future of ICSID because of the type of financial instrument involved.4 Sovereign-debt crises give rise to an issue previously taken for granted: a states ability to pay. The Abaclat decision comes amid a series of ICSID rulings that constrain the policy space states have to rule for the public good in crises, exemplifying what one commentator has characterized as the titanic struggle on the future of investment law.5
for a narrow definition, closely tied to traditional foreign direct investment, while developed countries pushed for a capacious definition of investment, encompassing many types of economic activity. This debate (and a bargain between developed and developing states to allow a broad range of foreign enterprise to be covered, while simultaneously allowing states the right to opt out of specific types of investments through bilateral investment treaties)9 is why investment was not expressly defined. Historically, ICSID tribunals have been highly deferential, allowing an array of economic activity to constitute investment. 10 In his commentary, Professor Christoph Schruer references a number of factors for determining what qualifies as an Article 25 investment: (1) duration of the enterprise; (2) a measurable return to the investor; (3) shared risk; (4) the substantiality of the commitment by the investor; and (5) significance to the states development.11 Schruer did not intend these criteria to be jurisdictional requirements; instead, he viewed these elements as common to investments contemplated under ICSID.12
Recently, cases have abandoned the deferential approach to ICSIDs jurisdiction and adopted a strict interpretation of whether a given activity constitutes an investment. The oft-cited origin of the strict approach is Salini Costruttori v. Morocco, which functionally treated Schruers investment criteria as a dispositive test for jurisdiction under Article 25, noting that no economic activity lasting less than two years could constitute an investment.13 While precedent is not binding in ICSID, subsequent tribunals began referencing the Schruer-Salini factors as limits to the reach of Article 25.14 The issue of whether a sovereign-debt instrument constitutes an Article 25 investment has been previously addressed. The tribunal in Fedax v. Venezuela found promissory notes issued by Venezuela that were subsequently assigned to Fedax were an actionable investment.15 Venezuela argued that the acquisition of a promissory note through assignment was a commercial transaction that does not comport with the vision of investment contemplated by the framers of the Convention.16 In rejecting Venezuelas argument, the Fedax tribunal concluded that the promissory notes constituted investments because they were issued under fundamental public interestVenezuelas Public Credit Law.17 The Fedax tribunal did provide the caveat that purely commercial disputes fall outside Article 25s jurisdictional ambit.18 Fedax set the stage for Abaclat. In dicta, the Fedax tribunal noted that loans qualify as an investment within ICSIDs jurisdiction, as does, in given circumstances, the purchase of bonds.19 Abaclat clarifies that in all circumstances sovereign bonds qualify as investments under Article 25, irrespective of the purpose or nature of the investment.
tated by Argentinas default on roughly $100 billion in sovereign debt on 23 December 2001. Argentinas suspension of payments on a large number of Italian bonds led eight major Italian banks to formulate Task Force Argentina (TFA) to negotiate restructuring debt with the Argentinian government. After refusing several debt restructuring proposals from Argentina, TFA obtained authority from 180,000 Italian investors aggrieved by Argentinas December 2001 policies and initiated arbitration at ICSID in 2006 based on the Argentina-Italy BIT. In 2007, roughly two-thirds of the original claimants, totaling approximately $82 billion in eligible debt, accepted Argentinas exchange offer.21 The remaining claims total more than $1 billion. The first matter before the Abaclat tribunal was whether the bonds at issue constituted an investment within the meaning of the ICSID Convention and the ArgentinaItaly BIT.22 The bond instruments contained choice clauses providing for dispute resolution in New York, Switzerland and other countries. 23 Argentinas argument was that bondholders had breach of con-
tract claims that ought to be resolved in accordance with the bond instruments, not claims alleging breach of the BIT. The tribunal found that, by invoking the 2001 financial crisis as a justification for its actions and by adopting emergency legislation unilaterally modifying the terms of the bonds, Argentina had acted as a sovereign, and thus its actions amounted to more than a breach of contract.24 The Abaclat majority clashed with the dissent over the breadth of investment under Article 25. The majority explicitly rejected using the limiting Salini criteria, describing the approach as without merit.25 Instead, the panel chose a highly deferential test for whether the alleged investment fell within the spirit and aim of Article 25.26 The dissent argued that the purpose of including the term investment in Article 25 was to set an outer limita hard-core that parties may not negotiate around through BITSon disputes that can be heard under ICSID.27 After engaging in a review of the drafting history of the Convention, the dissent stated that the purpose of the Convention was to promote economic development
through foreign investment.28 The dissent advocated an ad hoc approach to admissibility of sovereign bonds, tied more closely to the purpose of the investment. There was strong disagreement regarding absolute jurisdiction over financial products with high velocity of circulation and remoteness . . . being traded within seconds at the touch of a button in capital markets, with no involvement or knowledge of the borrowing country.29 This dissent found the majority approach to be worlds apart from the direct foreign investment model, which is usually long negotiated and extensively embedded in the legal environment of the host state.30 The key message of the dissent is that while sovereign bonds are not disqualified per se as investments, there should be a strong presumption that they are, and the decision to bring these products in under Article 25 should be done on a caseby-case basis, not en masse.31
Hogan Lovells is a global law firm with more than 40 offices around the world. Building on the foundations of our previous success as two firms, Hogan & Hartson and Lovells, Hogan Lovells is dedicated and equipped to help clients across the spectrum of their critical business and legal issues. We draw from our local market knowledge and international capabilities to provide exceptional service and creative advice to our clients. www.hoganlovells.com
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sovereign-bond disputes are of paramount importance both for investors and states. The current legal regime, post Abaclat, disservices both states and investors. Current remedies protecting sovereign creditors are generally ineffective. Countries typically issue bonds under municipal law with waivers of immunity in foreign courts.32 Investors face difficulty collecting on awards won abroad against states because states typically have limited attachable assets abroad. To its credit, the Abaclat tribunal recognized the need for a legal framework to remedy wrongs for investors.33 In so doing, Abaclat departed from emerging ICSID precedent tying the definition of investment more closely to the vision of foreign direct investment contemplated by developing states in 196234 and may have made future sovereign debt restructurings significantly more complicated.35 Abaclat will likely make ICSID the venue of choice for resolving sovereign bond disputes, with a variety of important ramifications about which investors and states should be aware. First, in an environment where many developing countries are already questioning the legitimacy of ICSIDand even weighing continued participationallowing arbitration of sovereign bonds may be both bad policy and bad politics.36 Second, as investment arbitration and international financial law converge, one important question for policymakers is how arbitration of sovereign debt will impact future debt restructurings.37 One fear is that allowing arbitration of sovereign debt will encourage holdout litigation, where a majority of creditors accept a debt restructuring, but a minority of creditors chooses to sue for full repayment.38 Abaclat is significant because it exposes a chasm with respect to which state activities are fair game before ICSID. The definition of investment ought to be broad enough to accommodate the Conventions goal of encouraging private investment, but the success of ICSID is predicated on consent of parties. If countries are leaving ICSID based on the view that ICSID has overreached, perhaps it is time to revisit the objections of developing countries.39 The path to achieving multilateral consensus may be tortured,
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but it may be necessary if ICSID is to have any chance of preserving its effectiveness, efficiency and legitimacy going forward. In the absence of multilateral consensus, future ICSID tribunals ought to search for a limiting principle for Article 25 investments that balances the interests of developed and developing countries. Under a purposive test, a tribunal would look to whether the purpose of an investment was commercial or public. Not all sovereign bonds would be excluded with a purposive examination of investment. For example, bonds for general treasury or budgetary functions would not have a commercial purpose, but it is likely that bonds for a specific development project, such as infrastructure development, would meet the commercial-purpose test.40 The Abaclat tribunals application of the purposive test was sloppy: the tribunal paid cursory attention to the purpose of Argentinas sovereign bonds, broadly reasoning that since the bonds contributed to Argentinas economic development, it would be irrelevant to look into whether the funds were used as government spending or to pay down debt.41 Under such a rubric, virtually any transaction could be construed as an investment. Another method of limiting Article 25 meaningfully can be found in United States Supreme Court jurisprudence examining the nature rather than the purpose of state action. In Republic of Argentina v. Weltover, Inc., the Court held that Argentinas issuance of sovereign bonds and suspension of payments of sovereign bonds was not sovereign activity, even when undertaken for the purpose of stabilizing the economy.42 The Court stated:
[B]ecause . . . the commercial character of an act by a foreign government is to be determined by reference to its nature rather than its purpose, the question is whether the particular actions that the foreign state performs are the type of actions by which a private party engages in trade and traffic or commerce, rather than whether the foreign government is acting with a profit motive or with the aim of fulfilling uniquely sovereign objectives.43
cial and not sovereign. Under an evaluation that focuses on the nature of the transaction, it would be unlikely that the sovereign bonds at issue in Abaclat would be construed as commercial activity. In finding the nature of the transaction to be commercial, the tribunal could reason that a private corporation could carry out a restructuring similar to that implemented by a country.44 Until now, ICSID has been lauded for its efficiency when compared to national courts. In the words of ICSIDs former Secretary General, Theres never been a case in which a sovereign has failed to pay an [ICSID] award.45 This pristine record hangs in the balance as the Abaclat tribunal pens its decision on the merits and ultimately delivers an award later in 2012. The size of sovereign bonds, coupled with the volume of mass claims, may pose a threat to ICSIDs pristine record on repayment (if for no other reason than the fact that sovereign-bond crises are triggered because states are not able to pay in the first place) and have significant implications for both future sovereign-debt restructurings and the legitimacy of ICSID. Hrishikesh Hari is an associate in the Washington, D.C. office of Hogan Lovells. Mr. Hari is a 2011 graduate of Harvard Law School, where he served as editor-inchief of the Harvard Human Rights Journal.
H. Hari
Endnotes:
1 Abaclat and Others (Case formerly known as Giovanna a Beccara and Others) v. Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility (4 Aug. 2011), http://italaw. com/documents/AbaclatDecisiononJurisdiction.pdf, [hereinafter Abaclat]. 2 Alison Ross, Abaclat Sweebs OGEMID Prize Board, GLobAL Arb. reV., 7 Feb. 2012, available at http://www.globalarbitrationreview.com/news/ article/30151/abaclat-sweeps-ogemid-prize-board. 3 Abaclat, supra note 1, (Professor Georges AbiSaab, Dissenting Opinion, 46 ( 28 Oct. 2011), http:// italaw.com/documents/Abaclat_Dissenting_Opinion.pdf, [hereinafter Abaclat Dissent]; see also S.I. Strong, Enforcing Class Arbitration in the International Sphere: Due Process and Public Policy Concerns, 30 u. pA. J. intL L. 1 (2008) (showing that
The Court found that Argentina had not acted as a regulator of the market, and therefore the nature of the activity was commer-
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there are unique challenges that result from coupling cross-border dispute resolution and mass claims). 4 There is a great deal of commentary on the mass claims aspect of the Abaclat jurisdictional decision but very little on whether an Article 25 investment has been made. 5 Malaysian Historical Salvors v. Malaysia, ICSID Case No. ARB/05/10, Decision on Annulment, 62 (16 Apr. 2009) (Shahabuddeen, dissenting) (noting that jurisdictional questions mark a titanic struggle between the ideas of capital importing and capital exporting countries). 6 Lucy Reed, Jan Paulsson, & Nigel Blackaby, Guide to icSid ArbitrAtion 35 (2004) (The consent requirement may be fulfilled in a variety of ways: legislation where the sovereign agrees to submit investment disputes to arbitration; an arbitration clause in a contract between a sovereign and foreign investor; or through a bilateral investment treaty (BIT) in which the sovereign agrees to resolve disputes through ICSID arbitration. In the case where consent is invoked through a BITs offer to arbitrate, an investor accepts the offer by filing a request for arbitration. Italian investors in Abaclat accepted Argentinas offer to arbitrate investment disputes contained within the Argentina-Italy BIT.). 7 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States Art. 25(1), 27 Aug. 1965, 17 U.S.T. 1270, 1290, 575 U.N.T.S. 159, 192 [hereinafter ICSID Convention], available at http://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf. 8 See generally, Julian Davis Mortenson, The Meaning of Investment: Icsids Travaux and the Domain of International Investment Law, 51 hArV. intL L.J. 257 (2010) (reviewing the drafting history of the ICSID Convention and finding the Conventions silence on the definition of investment in Article 25 was intentional). 9 Id. 10 See, e.g., Gruslin v. Malaysia, ICSID Case No. ARB/99/3, Award, 13.5-13.6 (27 Nov. 2000), re-
printed in 5 ICSID Rep. 483 (2006); Lanco Intl, Inc. v. Argentine Republic, ICSID Case No. ARB/97/6, Preliminary Decision on Jurisdiction, P 48 (8 Dec. 1998), reprinted in 40 I.L.M. 457 (2001). 11 Christoph H. Schruer, the icSid conVention: A commentAry, Art. 25, 122 (2001). 12 Id. at 122. 13 Salini Costruttori, S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 52-57 (23 July 2001), reprinted in 42 I.L.M. 609 (2003). 14 Malaysian Historical Salvors v. Malaysia, ICSID Case No. ARB/05/10, Award on Jurisdiction, P 112 (17 May 2007)(declining jurisdiction because the venture amounted to mere commercial risk and not investment risk for the purpose of Article 25); Joy Mining v. Egypt, ICSID Case No. ARB/03/11, Award on Jurisdiction, P 57 (6 Aug. 2004), reprinted in 44 I.L.M. 73 (2005). 15 Fedax v. Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, 29 (11 July 1997), reprinted in 37 I.L.M. 1378 (1998) [hereinafter Fedax Jurisdiction]. 16 Id. 18-19. 17 Id. 42-43. 18 Id. 28. 19 Id. 29. 20 Luke Eric Peterson, Argentine Crisis Arbitration Awards Pile Up, but Investors Still Wait for a Payout, Law.com (25 June 2009), available at http:// justinvestment.org/2009/07/argentinecrisis-arbitrationawards-pile-up-but-investors-still-wait-for-a-payout/. 21 Abaclat, supra note 1, 77 (the offer allowed bondholders to choose from par bonds with the same principal but a lower interest rate than non-performing debt, discount bonds with reduced principal but a higher interest rate, or quasi-part bonds with a principal and interest rate falling between the other two bond options). 22 Id. 362-67. 23 Id. 340.
24 Id. 320-26. 25 Id. 364. 26 Id. 27 Abaclat Dissent, supra note 2, 45; Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award, 96 (Apr. 15, 2009) (noting [BITS] cannot contradict the definition of the ICSID Convention. In other words, they can confirm the ICSID notion or restrict it, but they cannot expand it in order to have access to ICSID.) 28 Abaclat Dissent, supra note 2, 50. 29 Id. 57. 30 Id. 31 Id. 59-61. 32 Abaclat, supra note 1, 82 (conceding many of the putative claimants in Abaclat stayed their lawsuits in New York to pursue a remedy before ICSID and that final judgments had already been entered in Germany and Italy). 33 Id. 40. 34 Mortenson, supra note 8, at 257. 35 Michael Waibel, Opening Pandoras Box: Sovereign Bonds in International Arbitration, 101 Am. J. intL L. 711, 718-32 (2007). 36 Come and Get Me, economiSt, 18 Feb. 2012; thomAS m. FrAnck, FAirneSS in internAtionAL LAw And inStitutionS 7 (1995). 37 Waibel, supra note 35, at 728; Abaclat, supra note 1, 41. 38 Id. 39 Come and Get Me, supra note 36. 40 Waibel, supra note 35, at 728. 41 Abaclat, supra note 1, 378. 42 504 U.S. 607 (1992). 43 Id. 44 See Fedax Jurisdiction, supra note 15, 28 45 Carolyn Kolker, When Nations Go Bust, 25 Am. LAw. 90, 92 (2003).
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Arbitration in Poland
Arbitral Awards of 10 June 1958 (sometimes referred to herein as the NYC), which replaced both the 1923 and the 1927 Geneva Conventions; and the European Convention on International Commercial Arbitration of 21 April 1961, supplementing the 1958 New York Convention in commercial relations between East and West.2
BITs
Poland is also a party to sixty-three bilateral investment treaties that were concluded after 1987, as well as the Energy Charter Treaty, but it is not a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 18 March 1965. Thus, in general, investment disputes involving Poland or Polish investors are to be settled by international arbitration tribunals appointed in accordance with the UNCITRAL Arbitration Rules (a few treaties allow the investor to submit the dispute to ICC or SCC or other permanent courts, but this should be treated as an exception). The majority of BITs, it should also be noted, envisage jurisdiction of the International Centre for Settlement of Investment Disputes upon ratification by Poland of the Washington Convention, if Poland would sign such treaty.
law and were aimed at implementation of global free-market standards into the Polish legal system. In response to a growing demand for alternative dispute resolution procedures and arbitration, the CCP was amended by the Act of 28 July 2005, and the 1985 UNCITRAL Model Law on International Commercial Arbitration has been fully incorporated into the Polish legal system, making it a modern forum for arbitrating both domestic and foreign disputes.
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Arbitrability
By an arbitration agreement, the parties are free to submit to arbitration all proprietary or non-proprietary disputes that can be subject to a court settlement. In practice, this means the parties are allowed to submit to arbitration those disputes in which they retain their freedom to dispose of the subject of the dispute (e.g., claims for payment). Some statutory provisions (lex specialis) may, however, prevent certain disputes from being subjected to arbitration; e.g., certain intellectual property disputes. Thus, the arbitration agreement and the decision on its conclusion should always be tailored to the type of contract and the parties thereto.
Interim Measures
Interim measures can be granted both by the state courts and the arbitration courts. By way of example, the rules of both the SA KIG and the SA Lewiatan contain relevant provisions in this respect. The arbitration rules of the SA Lewiatan set forth a procedure for appointment of an emergency arbitrator authorized to issue a ruling on an interim measure by the time the arbitral tribunal is constituted.11 The CCP explicitly states that interim measures can be provided even if the place of arbitration is outside the borders of the Republic of Poland or has not been determined. The decision upon interim measures is enforced by the court bailiff (who in Poland has the status of a public official but runs a private office), based on the same rules as the enforcement of the decision on the interim measures issued by the state court (or other competent authority, depending on type of the procedure).
Arbitration Agreement
An arbitration agreement can either be contained in the main contract in the form of an arbitration clause, or it can be a separate agreement of a procedural nature. The arbitral arrangement can be concluded before any disagreement between the parties arises or after a dispute emerges, although the latter case would obviously be a difficult time to do so. A simple written arbitration agreement is sufficient. The requirement of a written arbitration agreement is fulfilled also when the agreement is contained in an exchange of documents or statements made by means of communication that provide a record of their content. A reference in a contract to a document containing an arbitration clause is also deemed to be a written form, provided that the contract is in writing and the reference is such as to make that clause part of the contract. As in most jurisdictions, the provisions of the arbitration agreement are ineffective if they infringe the principle of equality of the parties; in particular, entitling only one of the parties to file a request for arbitration or a statement of claim to a state court.
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power to control the final decision of the second-tier tribunal. In this respect, the Polish arbitration law adopted the formula provided in Article 34 of the UNCITRAL Model law that allows for setting aside a defective arbitral award. Under Polish law and doctrine, the power to submit an award to judicial review cannot be excluded by an agreement. The respective provision of the Polish CCP containing the annulment procedure is of a mandatory nature. Setting aside is possible both against an award issued according to the CCP and under the applicable arbitration rules whenever the place of arbitration or place of award is Poland. The Polish Supreme Court12 has ruled that the scope of control is restricted to formal matters and is limited to assessing whether the decision as such conforms to the Polish legal order. The court is therefore not permitted to engage in investigating the award on the merits; i.e., re-determining the facts and law. As a result, it can only either cancel the award in part or in full, or dismiss the claim for annulment.
Procedure
The claim for annulment is limited in time and must be filed within three months from the date of receipt of the arbitral award. The court with jurisdiction over the claim is one that would be involved if the case had not been submitted to arbitration. In terms of scope of review, the court is limited by the partys claim. A decision of a first-instance court as to the claim for setting aside does not end the annulment procedure, a matter that has been the subject of criticism. The parties have the right to appeal the courts decision on general terms to a second-instance court. Further, a binding award of a secondinstance court can be subjected to cassation by the Supreme Court if it fulfills statutory requirements. The annulment procedure may therefore last a long time, which can considerably diminish the major advantages of arbitration.
Setting aside does not, however, cause the arbitration clause to expire, unless the parties agreed otherwise. More than that, parties are even free to submit a dispute to the same panel of arbitrators. Further conduct depends, however, primarily on the reason for annulment. If the state court decided that there was no arbitration clause, the parties will likely submit their dispute to a state court or conclude a new arbitration agreement. Or, if the award was issued by a panel of arbitrators constituted in breach of mandatory law, it is unlikely the same tribunal will be chosen.
Procedure
Recognition or enforcement are possible upon a motion of a party, filed along with an original or certified copy of the arbitral award. The claim is filed in a state courteither the Regional (rejonowy) or Circuit Court (okrgowy) that would otherwise be comSpring 2012
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10 See http://www.pisil.pl. 11 See Rules of the Court of Arbitration at PKPP Lewiatan at http://www.sadarbitrazowy.org.pl. 12 Decision of the Supreme Court of 11 May 2007, case No. I CSK 82/07; decision of the Supreme Court of 21 Dec. 2004, case No. I CK 405/2004; decision of the Supreme Court of 6 May 1936, case No. I C 1914/35; decision of the Supreme Court of 6 Jan. 1961, case No. II CR 532/59. 13 See, e.g., decision of the Supreme Court of 14 Nov. 1960, case No. II CR 1044/59; decision of a Court of Appeals in Warsaw of 29 May 2000, case No. I ACa 65/00. 14 T. Ereciski & K. Weitz, Sd arbitraowy (ArbitrAtion) 369 (Lexis Nexis, Warsaw) (2008). 15 R. Morek & W. Sadowski, Recognition and Enforcement of Arbitral Awards in Poland, in ArbitrAtion in poLAnd (The Court of Arbitration at the Polish Chamber of Commerce, Warsaw) (2011). 16 See T. Ereciski & K. Weitz,, supra note 14, at 379; R.Morek, Mediacja i arbitra (mediAtion And ArbitrAtion) 292 (C.H.Beck, Warsaw) (2006); M. aszczuk & J. Szpara, Postpowania postarbitraowe (Post-Arbitration Proceeding), in A. Szumaski, arbitra handlowy (commerciAL ArbitrAtion) 642 (C.H.Beck, Warsaw) (2010). 17 See Pawel Pietkiewicz, Legal and Organizational Framework of Arbitration in Poland, in ArbitrAtion in poLAnd (The Court of Arbitration at the Polish Chamber of Commerce Warsaw) (2011).
Why Poland?
Arbitration in Poland has become increasingly popular as a method of resolvPage 50
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case, legislation and case law subject the party wishing to withdraw to certain conditions. Anticipate termination upon drafting of the contract The contract is, above all, an instrument whereby parties define their mutual intentions regarding the commercial relationship. Parties can, therefore, specify the circumstances where they will be able to end the relationship. A termination can, in the first instance, be used as a sanction in the event of a contractual breach committed by one of the partners. Parties also may decide that they can end the contract at their discretion without having to prove the legitimacy of the decision. Provide for the possibility of sanctioning the partner in the event of a breach When one of the parties fails to perform its obligations, the law provides that the court must acknowledge these breaches and order the annulment of the contract (Article 1184, paragraph 3, of the French Civil Code). To avoid having to go before the courts, however, which is often a very long process with unforeseen hazards, the parties can decide to include a termination clause in the contract. This clause will enable the party
who is the victim of a contractual breach to end the contract. In order to be taken into account by the courts, termination clauses must be drafted with precision so that the terms are entirely unambiguous. Thus, it is necessary to state that the contract will be automatically terminated, without any court intervention, as an exception to Article 1184, paragraph 3, of the French Civil Code. Further, the beneficiary of the clause should also be specified (it may be one of the parties or both) as well as the method of notifying the other party of the breach. Similarly, enumerating the contractual breaches that will give rise to an early termination of the contract is highly recommended. These may be different for each party. Non-compliance with an exclusivity clause or repeated lack of payment for a service may thus trigger a termination clause. The parties may also decide to specify the severity of the breach required to enable termination of the contract whether total or partial non-performance, serious or not very significant. Conversely, the drafting of a general provision stating that non-performance of obligations under the contract may give rise to its termination at any time, even though legally valid, is not advisable. Besides the fact that such a provision weakens the contract insofar as it gives rise to numerous possibilities to terminate it, such a clause likely will be restrictively interpreted by judges ruling on the merits. Rules relating to contracts concluded with consumers, it should be noted, are different in that such contracts may not be manifestly unbalanced. negotiate the ability to terminate the contract at ones convenience without any breach The parties may also include a unilateral termination clause enabling them to termiPage 51
legislation and case law have created other options that may be summarized as follows: In the case of a fixed-term contract: it is necessary to prove that the party breached its contractual obligations in a sufficiently serious manner; In the case of a permanent contract: it is necessary to comply with a sufficient notice period (which notably takes into account the length of the commercial relationship and the economic dependence of the party) or to prove a sufficiently serious contractual breach. In the event of a contractual breach, the drawbacks of an action before the courts When, during the contract, one of the parties fails to perform its obligations, it is possible to initiate an action before the courts, which will acknowledge the breach and order the end of the contract. Judges, however, have sovereign power of assessment: if the breach does not necessarily give rise to a loss, they will order the end of the contract only if they consider the breach sufficiently serious. The judges will take objective elements into account (the general terms of the agreement and the specific obligations of the parties), as well as more subjective elements such as the good or bad faith of the parties. Courts have found that the aggressive, abusive and threatening behaviour of a co-contractor could justify a termination. Similarly, a significant delay has been considered a sufficiently serious breach to justify the termination of the contract insofar as several formal notices had remained unanswered. Judges ruling on the merits also ordered the termination of a works contract following the contractors non-compliance with special technical specifications. After an examination of the facts of the case, the court may decide that the breach is not sufficiently serious to justify the termination and then solely allocate damages to the claimant. The court also has the option of maintaining the contract by granting a period of grace to the debtor to allow the latter time to perform its obligations. The party choosing this option faces legal proceedings that are often unpredictable and slow.
In the event of a breach, the risks of an extrajudicial unilateral termination To avoid the above drawbacks, the partyvictim of a contractual breach can also notify of the termination without bringing an action before the courts. Indeed, case law has acknowledged the unilateral termination of a contract where a party, under fallacious pretexts, did not pay its invoices. This method has been pursued in the case of a unilateral modification (increase of the prices of the products sold) of a distribution contract. In order to adopt this course of action, however, the breach must create a serious situation requiring an immediate termination of the contractual relationship. Indeed, the party that is not at the origin of the termination will always have the option of bringing an action before a court for the latter to note the irregularity of the termination. The party terminating the contract thus faces a subsequent sanction if it cannot prove the seriousness of the breach. The validity of the contract may be ordered, as well as the allocation of damages on the ground of abusive termination. In the absence of any breach, the right to terminate a permanent contract When a contract is established for an indefinite period, it is acknowledged that the parties have the right to terminate the relationship at any time subject to compliance with a sufficient notice period pursuant to several criteria laid down by case law relating to Article 442-6 of the French Commercial Code, in particular. This principle is a consequence of the prohibition of permanent undertakings, and its purpose is to protect the partners freedom and promote free competition between commercial players. This right, however, is awarded only in the presence of a permanent contract. The signatory to a fixed-term contract who stops performing its obligations without any valid reason would incur liability, and the enforcement of the contract could be ordered in addition to the award of damages. Minimize the risks of litigation when implementing the right to terminate Whether the termination results from reSpring 2012
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return by Y of the item in question) or based on equivalents (X will offer a compensatory indemnity covering the period during which it used the stock management system made available by Y, but will obtain the reimbursement by Y of the monthly charge corresponding to the software). When the parties wish to avoid bringing an action before the courts, they should include a clause, in addition to a termination clause, determining the mutual restitutions that will be implemented by the parties. A liquidated damages provision whereby the parties will decide on the amount of and conditions in which damages could be awarded to one of them may also be included. When entering into the contract, it is also important to specify the obligations (for instance, confidentiality) that will remain applicable after the termination of the contract and that will govern the postcontractual relationship. A clause may generally provide that all the obligations will remain in force. Another recommendation is to establish a detailed list of the obligations the parties wish to be able to assert after the termination. A confidentiality commitment and a non-compete clause to become effective after the end of the contract may thus specifically be included. The contracting companies must also agree on the distribution of their liability should it be subsequently
sought by third parties due to obligations arising from the contract. Similarly, contracting companies will gain some measure of assurance by determining beforehand the beneficiary of the publication and intellectual property rights. Finally, it will be necessary to include a clause relating to the applicable law, as well as a choice-of-forum clause, by broadly mentioning that they will apply in the event of any dispute between the parties at the time of the conclusion, performance and termination of the contract.
S. Gallage-Alwis
C. Tillard
Sylvie Gallage-Alwis is a senior associate in Hogan Lovells Paris office and has extensive experience in product liability and commercial litigation. Constance Tilliard is an associate in the litigation practice of Hogan Lovells Paris office, focusing on product liability litigation and on claims arising from commercial contracts.
In practice: what to do when a party encounters financial difficulties preventing it from correctly performing its obligations?
Article L. 622-13 of the French Commercial Code prohibits the inclusion of any clause providing that the contract shall be terminated in the event of the opening of safeguard proceedings. Should such proceedings be opened against the other side, it is, therefore, mandatory to meet your obligations. The contractual breaches committed by the other party before the opening of the proceedings do not free you from your undertakings. You will nevertheless have the possibility to state your claims. In practice, it is rare that all the creditors obtain full reimbursement of their claims. To protect against such a risk, a commercial solution is to anticipate the risk of insolvency of the other party by requesting advance payments on the final amount or by establishing a system of installments for services. When a debtor encounters its first financial difficulties without safeguard measures yet being considered, it is also possible, under certain conditions, to attach goods, which will block part of the goods or bank balance of that party with respect to other creditors.
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not greater, force to international disputes. Advocates of mediation have long claimed that mediation is the most cost-effective and time-efficient ADR (alternative dispute resolution) process to resolve international disputes.2 Corporate surveys evidence mediation as the growing ADR method of choice in the business community.3 One reason is that mediation allows participants to take resolution of the case into their own hands and away from third-party courts and arbitratorsstrangers to the disputing parties. Indeed, in mediation, the parties are specifically encouraged and empowered to do so. Courts must follow the strict con-
fines of evidentiary and procedural rules and while arbitrators have greater latitude, they still are constrained by procedural and evidentiary parameters. Parties to a mediation have the opportunity to create a resolution tailored to the inimitable circumstances of their dispute, often assisted by neutral mediators who are industry experts. Some courts have discretion to shape equitable remedies. But in mediation, the parties not only can be equally creative, but can also address and resolve even potentially contentious issues. Outcomes traditional in court-related litigation and arbitrationthat of the quintessential winner and losercan be much more expansive in mediation. Mediation can involve changes in contractual provisions that would otherwise be left untouched by
a court or a panel of arbitrators. Parties in mediation can also redesign long-term contracts to adapt to political, societal, legal and ideological shifts. Mediation, it is well-established, reduces costs4 and curtails the delay endemic in litigation and arbitration. Mediation settlements also have a higher rate of compliance than decisions made by outside parties. Many ascribe this to the fact that the parties in this voluntary process ultimately control the outcome of the agreement. In other words, the parties own their decision because they are empowered by a trained neutral to create a resolution designed to be fair and capable of performance. Mediation is also unique because of its emphasis on confidentiality.5 This fact alone makes mediation appealing in commercial disputes. Mediation laws being adopted in various countries around the world all have provisions requiring confidentiality. Developing countries attempting to incentivize trade and tourism have, in particular, promulgated civil-mediation laws containing strong confidentiality provisions. In some countries, a violation of mediation confidentiality is an illegal act. 6 Within the private confines of mediation, confidential information can be disclosed, thereby enhancing communication and the exchange of otherwise personal or proprietary information. Confidentiality helps attorneys and clients to understand and identify the pivotal issues, the often undisclosed motivations, the pressure points, the risks of litigation, and the interests that canperhaps surprisinglyoften be mutual. Clients are known to disclose private events, perceptions or issues in mediation they would not want disclosed to anyone publicly. Explaining their concerns and fears, even in business and commercial disputes, is often critically important to clients in resolving the conflict, especially in certain cultural contexts. In some types of commercial situations, confidentiality can be and often is critical to the successful resolution of a dispute.
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in order to prevent armed conflicts in a world where conflict is a part of daily life in many regions. This powerful resolution brings worldwide attention to the use of mediation, not only for disputes between and among countries, but also to promote the political and societal stability necessary for the burgeoning growth of international commercial mediation. Prior to enactment of this global resolution on mediation, the United Nations, through its Department of Political Affairs, established a Mediation Support Unit (MSU) to serve as a central repository for peacemaking experience, a clearing house for lessons learned and best practices, and as training coordinator on U.N. standards and operating procedures for mediation. Between 2008 and 2011, the MSU was involved in supporting over thirty peace processes on all continents. Perhaps the most heavily funded global provider of rule-of-law programs, including developing court-related mediation, is the United States Agency for International Development (USAID). USAID asserts that its foreign assistance has the twofold purpose of furthering U.S. interests while improving lives in the developing world. The Agency carries out U.S. foreign policy by promoting broad-scale human progress while expanding stable, free societies, creating markets and trade partners for the United States, and fostering good will abroad. USAID works in 100 developing countries and in close partnership with private voluntary organizations, indigenous groups, universities, U.S. businesses, international organizations, other governments, trade and professional associations, faith-based organizations, and other U.S. government agencies. USAID has working relationships, through contracts and grant agreements, with more than 3,500 companies and over 300 U.S.-based private voluntary organizations.8 Under its general framework of Democracy and Governance, USAID has become one of the leading governmental funders of justice reform programs, including mediation.9 The European Union (EU) Commission is another international governmental
funder of developing mediation programs. The EUs European Directive on Commercial Mediations, passed in 2008, made certain attributes of enforcement of mediation in civil and commercial settlements uniform throughout the European Union. The objective of mediation is for the parties to settle their disputes amicably without reference to a tribunal, and the European Directive makes clear that mediation should not be regarded as a poorer alternative to judicial proceedings.10 The Directive is limited to cross-border disputes among its member states, and at least one of the parties must be domiciled or habitually reside in a member state in order for the Directive to apply. Partnering with USAID, the EU recently completed its funding of a country-wide mediation system in Kosovo. The International Finance Corporation (IFC) of the World Bank Group is the largest global financier. As the privatesector arm of the World Bank Group, it promotes sustainable private-sector investment in economically transitioning countries by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. The IFC also provides technical assistance and advice to governments and businesses.11 Its 178 member countries provide its share capital and collectively determine its policies. The IFC views commercial litigation as a potentially unavoidable consequence of growth for new businesses and sees expensive, time-consuming court proceedings as an increasing burden to small and medium enterprises. Thus, it is has helped to establish several court-related mediation programs and has worked to develop two mediation models suited to the legal framework and court administration processes of specific countries, including Bosnia and Herzegovina, Macedonia, Serbia, and Pakistan. The business momentum for mediation is rapidly building. As previously noted, mediation is overwhelmingly chosen over other ADR methods across different jurisdictions.12 A number of recognized inPage 57
in one part of the world and conducts certain aspects of the operation while the other partner (or partners) conducts other aspects from another country on the other side of the world. 2 For a comprehensive discussion of the comparative costs of arbitration and mediation, see Timothy Martin, International Mediation, Contemporary Issues in International Arbitration and Mediation, The Fordham Papers, 2010, available at http://www. timmartin.ca/fileadmin/user_upload/pdfs/Int_Mediation_Evolving_Market _Martin2011_.pdf. 3 See Herbert Smith, The inside track how bluechips are using ADR, November 2007, for corporate survey results reporting preferences for mediation, available at http://www.hks.harvard.edu/m-rcbg/ CSRI/ga/smith_adr.pdf. 4 See Giuseppe De Palo, Ashley Feasley, & Flavia Orecchini, Quantifying the Cost of Not Using Mediation a Data Analysis, available at http:// www.europarl.europa.eu/document/activities/cont/ 01105/20110518ATT19592/20110518ATT19592EN. pdf. The EU break-even point for time is 19% mediation success rate, and the break-even point for costs is 24%. Additionally, it is important to note that the study found the average cost to litigate in the European Union is 10,449 while the average cost to mediate is 2,497. Therefore, when mediation is successful, European citizens can save over 7,500 per dispute. 5 Although confidentiality can be used advantageously in arbitration, until recently many of the institutional rules did not expressly provide for confidentiality. Therefore, parties involved in arbitration are advised to include provisions in their arbitration clause to ensure confidentiality. 6 Some countries mediation laws not only provide that is mediation confidential, but also make divulging mediation information illegal. See, e.g., the Jordan Mediation Law of 2006 and the Kosovo Mediation Law of 2009. 7 In particular, ADR processes are of significant importance to justice systems when effective establishment of alternative means of dispute resolution can significantly reduce the number of minor disputes before the civil courts, helping to improve the availability of judges for cases that must be tried. 8 USAID, http://www.usaid.gov/our_work/democracy_and_governance/ (last accessed April 3, 2012). 9 The author has worked as a mediator specialist designing court-related mediation systems for USAID in Bulgaria, Jordan and Kosovo. 10 Steven Friel and Christian Toms, The European Mediation DirectiveLegal and Political Support for Alternative Dispute Resolution in Europe, bLoomberG LAw reportS, Vol. 2, No. 1, available at http://www. brownrudnick.com/nr/pdf/articles/Brown_Rudnick_ Litigation_European_Mediation_Directive_Friel_ Toms_1-2011.pdf. 11 IFC, http://www1.ifc.org/wps/wcm/connect/corp_ ext_content/ifc_external_corporate_site/about+ifc (last accessed April 3, 2012). 12 See Herbert Smith, supra note 3.
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ABA International members come from more than 90 countries, and include private practitioners from across the globe as well as in-house counsel, academics and lawyers in the public sector.
ambar.org/ILFall2012
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American Arbitration Association (AAA) (www.adr.org); and International Centre for the Settlement of Investment Disputes (ICSID) (www.worldbank.org/icsid).1
have acceded to the New York Convention (the Unites States is one of them), it is particularly important that the place of arbitration is within the territory of a party to such Convention in order to facilitate enforcement of the award;2 The parties should avoid jurisdictions allowing broad judicial intervention in arbitration proceedings, or providing for broad grounds for vacating the award; The place of arbitration should be geographically convenient and provide adequate facilities, services and support; The parties should carefully assess the availability of discovery and testimonial evidence pursuant to the laws of the place of arbitration; The parties may wish to consider whether the forums laws applicable to the arbitration contain some procedural safeguards such as the right to consolidate separate arbitration proceedings if necessary, the availability of injunctions or provisional remedies, and perhaps the arbitrators ability to decide questions concerning their own jurisdiction. As noted at the outset, Latin Americas increased receptivity towards arbitration is relatively recent. Local courts, arbitrators, litigators and parties to arbitration proceedings have not all had time to interpret and apply these new bodies of law, and so we cannot yet fully gauge their practical impact on arbitration. Accordingly, with regard to venue, it is still too soon to know how much certainty and comfort these commendable legislative efforts can bring to U.S. parties involved in Latin American transactions. For the time being, we consider it good practice in Latin American deals to attempt to select a seat that is located in the United States, such as Miami or New York; or if the nonU.S. party objects, then at least the Latin American capital city where the agreement is primarily linked, as long as the country in question is a signatory to the New York Convention and/or the Panama Convention.
selection of Arbitrators
Except as mentioned below, the method of selecting arbitrators does not vary significantly based on the geography of the transaction (Latin America or other). Some common recommendations include: (1) designate the number of arbitrators in the arbitration clause [one arbitrator is usually recommended for arbitrations involving smaller amounts of money ($2 to $4 million), and three are generally recommended for more complex and/or higher-stakes cases]; (2) avoid naming arbitrators in
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Law Firm Management Firm structure and governance; financial and personnel management; records information management; work flow processes and more Law Office Technology Technology utilization, tips and trends Law Firm Manager Training On-site training includes: - Staff selection and supervision; - Performance measurement; - Bookkeeping functions, including trust accounting; - Proper docketing, calendaring and conflict checking; and - Overall office management responsibilities On-site Consulting In-depth review of the efficiency and effectiveness of the firms administrative practices
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an arbitral award, such as an arbitrary and capricious award, an award in contravention of public policy, or an award entered in manifest disregard of the law.5 While domestic laws in Latin America differ as to the grounds for nullifying arbitral awards, as a general rule Latin American courts will vacate an arbitral award issued in their respective countries if: (1) the award decided issues that were not submitted to arbitration by the parties; (2) the award was issued beyond the deadline agreed by the parties; or (3) the award was rendered in violation of due process or due to a gross procedural mistake. Other grounds provided for under Latin American arbitration laws for vacating arbitral awards include non-arbitrability of the relevant dispute; violation of the public order by an award; the nullity of the arbitration agreement and/or of the parties subsequent agreement, or compromiso, selecting the arbitrators and submitting to arbitration; misconduct of the arbitrators; insufficiency of the award in resolving all the matters submitted to arbitration; and the rendering of an award ex aequo et bono (i.e., based on principles of equitable justice and without submission to the laws of the relevant country) where the parties did not grant the arbitrators such powers. Finally, the New York and Panama Conventions also offer grounds for a court to
refuse to enforce an arbitral award. Under the New York and Panama Conventions, a court may refuse to confirm and enforce an arbitral award only after finding proof of one of the following seven grounds: (1) the parties are under some incapacity with respect to the applicable arbitration agreement, or the agreement is otherwise invalid; (2) the party against whom the award is invoked was not given proper notice of the arbitration or appointment of an arbitrator or was otherwise unable to present its case; (3) the award exceeds the scope of the terms of the submission to arbitration; (4) the composition of the arbitral authority or the arbitral procedure was not in accordance with the parties agreement; (5) the award has not yet become binding on the parties; (6) the subject matter of the award is not capable of settlement by arbitration under the law of the court where confirmation and enforcement are sought; or (7) the confirmation or enforcement of the award would be contrary to public policy.6
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The arbitration shall be conducted in the [insert language of arbitration] language. The arbitration panel shall award the prevailing party its attorneys fees and costs, arbitration administrative fees, panel member fees and costs, and any other costs associated with the arbitration. The parties agree that notifications of any proceedings, reports, communications or any other document shall be sent as set forth in Section __ of this Agreement. The arbitration panel may only award damages as provided for under the terms of the Agreement and in no event may punitive or special damages be awarded. The arbitral award shall be reasoned and in writing, and not subject to any review or appeal. The arbitration panel shall have the exclusive right to determine the arbitrability of any disputes. In the event of any conflict between the AAA Rules and any provisions of this Agreement, this Agreement shall prevail.
Conclusion
International commercial arbitration continues to be a viable and effective alternative for the resolution of disputes, and a carefully drafted international arbitration clause will help ameliorate some of the challenges a party may encounter if it ever needs to move for enforcement an against a non-complying party. Richard C. Lorenzo is a partner with the law firm of Hogan Lovells US LLP, in Miami, Florida, and is a member of the firms international arbitration practice group. He is the incoming Chair of the International Law Section of The Florida Bar. Mara Eugenia Ramrez is Counsel with the law firm of Hogan Lovells US LLP, in Miami, Florida, and is a member of the firms international arbitration practice group.
R. Lorenzo
M. Ramirez
Endnotes:
1 Disputes before ICSID are between foreign nationals and sovereign states that have signed the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention). 2 In Latin America, only Argentina, Cuba, Ecuador, Guatemala and Venezuela have made the reciprocity reservation. Therefore, when trying to enforce a foreign arbitral award in these countries, it will be especially important that the award be issued in a country that was a party to the New York Convention. 3 Commonly used appointing authorities include the major arbitration institutions discussed above (ICC, AAA and others). These institutions may select arbitrators from their own lists of arbitrators, taking into account the specific characteristics of the dispute and any requirements of the parties as delineated in the arbitration clause. The selection of arbitrators by these institutions is usually made either by proposing a list of arbitrators to the parties, who can then delete names and rank the remaining names (the list system), or by directly selecting the arbitrator(s) from the list. 4 See 9 U.S.C. 10. 5 See, e.g., Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456 (11th Cir.1997). 6 See art. 5 New York Convention; Art. 5, Panama Convention.
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competent court. At the date of writing (May 2012), the only jurisdictions to have adopted the 2006 Model Law are Australia, Brunei, Hong Kong, Costa Rica, the republic of Georgia, Ireland, Mauritius, New Zealand, Peru, Rwanda, Slovenia and Florida (in the United States).25 Additionally, in March 2012 the Singapore Ministry of Law announced its intention to amend the Singapore International Arbitration Act to, inter alia, provide for orders of emergency arbitrators (including those of both SIAC and the ICC) to be enforceable in Singapore.26 In most jurisdictions, however, an emergency arbitrators order will be unenforceable. An applicant for interim or conservatory measures may therefore prefer to have a court order for reasons of enforceability. Further, there is an argument that the availability of interim or conservatory measures from an emergency arbitrator would adversely impact a partys ability to obtain similar relief from a national court. Although Article 29(7) provides that [t]he Emergency Arbitrator Provisions are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority, it is for the court in question to decide on its own jurisdiction to grant interim or conservatory measures. In the case of England and Wales, the relevant statutory provision is s.44(5) of the Arbitration Act 1996, which states that in any case the court shall only act if or to the extent that the arbitral tribunal, and any arbitral or other institution vested by the parties with power in that regard, has no power or is unable for the time being to act effectively. Future respondents to applications under s.44(5) may argue that the English court has no power to act because the ICC is able to act effectively by appointing an emergency arbitrator. Once the emergency arbitrator proceedings are complete, the emergency arbitrator may not act as arbitrator in the same dispute.27 This may have its advantages, in that it avoids the possibility of the emergency arbitrator pre-judging the dispute. There may also be the disadvantages of a lack of continuity and some duplication of cost. In this respect, the emergency arbitrator
provisions may be contrasted with Article 9 of the LCIA Rules,28 which provide for expedited formation of the arbitral tribunal rather than appointment of an emergency arbitratorin cases of extreme urgency. In view of these issues, parties entering into an arbitration agreement under the ICC Rules may not wish to apply those provisions if it is likely the parties can obtain interim or conservatory measures from a national court within a reasonable time frame. In most instances, the national court route is likely to be quicker and cheaper than the emergency arbitrator route, and the resulting order will be more readily enforceable. The emergency arbitrator provisions may be beneficial where the national courts at the seat of the arbitration are unlikely to grant effective interim relief. This will need to be considered when entering into the arbitration agreement.
Multiple Contracts
Similarly, the 1998 Rules were silent on the question of whether a single request for arbitration could be filed on the basis of two or more contracts. As a matter of practice, however, such Requests for Arbitration were allowed to proceed where certain criteria were met:36 All contracts must have been signed by the same parties.37
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In other words, the ICC Court had authority to consolidate a new arbitration with an existing arbitration where the parties were the same and where the two cases related to the same legal relationship (which has been understood to mean the same economic transaction39). This was an extremely narrow test, capable of application in only very limited circumstances. In addition, the ICC Court would allow arbitrations to be consolidated where all parties agreed to consolidation.40 By contrast, the new test for consolidation under Article 10 of the 2012 Rules is broader and gives the ICC Court more discretion:
The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where: the parties have agreed to consolidation; or all of the claims in the arbitrations are made under the same arbitration agreement; or where the claims in the arbitrations are made under more than one arbitration agreement, the arbitrations are between
In deciding whether to consolidate, the Court may take into account any circumstances it considers to be relevant, including whether one or more arbitrators have been confirmed or appointed in more than one of the arbitrations and, if so, whether the same or different persons have been confirmed or appointed. Paragraph c essentially reproduces the requirements of the old Article 4(6), and paragraph a codifies the Courts practice of allowing consolidation where all parties agreed. The main innovation is therefore paragraph b: arbitrations may be consolidated where all of the claims in the arbitrations are made under the same arbitration agreement. This is consistent with the principle that multi-party and multicontract arbitrations should proceed only where this was the intention of the parties. Consolidation may now be considered at any stage where two arbitrations are pending before the ICC, not just at the time when the second Request for Arbitration is filed. In practice, however, consolidation may be more readily granted before the arbitrators in the second case have been ap-
Consolidation of Arbitrations
The 1998 Rules did expressly deal with consolidation of arbitrations. Article 4(6) provided that:
When a party submits a Request in connection with a legal relationship in respect of which arbitration proceedings between the same parties are already pending under these Rules, the Court may, at the request of a party, decide to include the claims contained in the Spring 2012
Case Management
Case management assumes increased importance in the 2012 Rules. A series of
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20 App. V, art. 6(4). 21 App. V, art. 7(3). 22 Art. 29(3). 23 Art. 33. 24 Art. 29(2). 25 Details of the States that have enacted the 2006 Model Law are available at http://www.uncitral.org/ uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html. 26 See http://app2.mlaw.gov.sg/News/tabid/204/ Default.aspx?ItemId=634. 27 App. V, art. 2(6). 28 Available at http://www.lcia.org/Dispute_Resolution_Services/LCIA_Arbitration.aspx. 29 Art. 6(4)(i) (Emphasis added.). 30 Art. 6(4)(ii) (Emphasis added.). 31 Art. 10 of the 1998 Rules. 32 Anne Marie Whitesell & Eduardo Silva-Romero, Multiparty and Multicontract Arbitration: Recent ICC Experience, icc intL ct. Arb. buLL.: SpeciAL Supp. (2003) 7, 11; derAinS & SchwArZ, supra note 9, at 71. 33 Art. 6(5). 34 Art. 23(3). 35 derAinS &SchwArZ, supra note 9, at 71. 36 Whitesell & Silva-Romero, supra note 32, at 15; derAinS & SchwArZ, supra note 9, at 100. 37 In exceptional circumstances, the ICC Court allowed the dispute to proceed as a single arbitration in a case where it was clear that the signatories belonged to two groups of companies. See Whitesell & SilvaRomero, supra note 32, at 15. 38 Id. at 15. 39 Id. at 16. 40 Id. at 16; derAinS & SchwArZ, supra note 9, at 59. 41 For details of the debate as to whether independence in the 1998 Rules encompassed impartiality, see derAinS & SchwArZ, supra note 9, at 116-20. 42 See http://www.iccwbo.org/court/arbitration/index.html?id=34543. 43 Art. 22(1). 44 Art. 22(2). 45 Art. 24(1). 46 Art. 24(2). 47 Art. 24 (3). 48 Art. 22(4). 49 Art. 37(5). 50 Art. 3(2) of both the 1998 and 2012 Rules. 51 Art. 27. 52 Art. 22(3). 53 Art. 1(1) of the 1998 Rules; Art. 1(2) of the 2012 Rules. 54 Art. 13(4).
Endnotes:
Conclusion
The 2012 Rules have generally been received favorably. That the ICC has sought to address criticisms of the arbitral process as too slow and expensive has, in particular, been welcomed. The provisions on multiparty and multi-contract arbitration have also met with approval, as they will enable arbitration to meet the demands of modern business transactions more effectively. The emergency-arbitrator provisions, on the other hand, have encountered some scepticism.
1 Available at http://www.arbitrationonline.org/ docs/2010_InternationalArbitrationSurveyReport. pdf, at 23. 2 Available at http://www.iccwbo.org/court/arbitration/id4199/index.html. 3 Art. 29(6) provides that the emergency-arbitrator provisions do not apply to arbitration agreements concluded before 1 January 2012, unless otherwise agreed. 4 Article 6(1). 5 [2009] SGCA 24. 6 Art. 1(2). 7 Art. 29(1). 8 Art. 29(7). 9 yVeS derAinS And eric A. SchwArtZ, A Guide to the icc ruLeS oF ArbitrAtion 10 (2005). 10 App. II, Arbitration Rules of the Stockholm Chamber of Commerce, 1 Jan. 2010, available at http:// www.sccinstitute.com/skiljedomsregler-4.aspx. 11 Rule 26.2 and sched. 1, SIAC Rules 4th Edition, 1 July 2010, available at http://www.siac.org.sg/cms/ index.php?option=com_content&view=article&id= 210&Itemid=130. 12 App. V, art. 1(1). For a list of practical considerations for submitting an application for emergency measures, see http://www.iccwbo.org/court/arbitration/index.html?id=46940. 13 App. V, art. 7(1). 14 App. V, art. 7(2). 15 App. V, art. 1(5). 16 App. V, art. 2(1). 17 App. V, art. 5(1). 18 App. V, art. 5(2). 19 App. V, art. 6(1).
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The Florida Bar Continuing Legal Education Committee and the International Law Section present
Audio CD
Recorded February 24, 2012 at J.W. Marriott Marquis, Miami
Course No. 1422C
12:30 p.m. 1:45 p.m. Luncheon (included in registration fee) 1:45 p.m. 2:45 p.m. Breakout Sessions What You May Not Know About Litigating in Latin America Moderator: Gustavo Lamelas, DLA Piper (US) LLP, Miami What You Need to Know about Enforcing Your Arbitral Award Abroad Moderator: C. Ryan Reetz, DLA Piper (US) LLP, Miami 2:45 p.m. 3:00 p.m. Break 3:00 p.m. 4:00 p.m. Breakout Sessions Cross Border Enforcement: The Role of Prosecutors, Regulators, and Defense Attorneys Moderator: Matthew Menchel, Kobre & Kim, LLP, Miami The Next Generation of Investor-State Arbitration: A Review of the Logical Steps Moderator: Alberto Wray, FoleyHoag LLP, Washington, D.C. and Quito, Ecuador 4:00 p.m. 4:15 p.m. Break
4:15 p.m. 5:15 p.m. Plenary Session Ethics Issues in International Litigation: Fee Sharing, Suit Financing Moderator: Martin Kenney, Martin Kenney & Co., Tortola, British Virgin Islands 5:30 p.m. 7:00 p.m. Reception (included in registration fee) J.W. Marriott Marquis
CLE CREDITS
CLER PROGRAM
(Max. Credit: 11.0 hours) General: 11.0 hours Ethics: 1.0 hour
CERTIFICATION PROGRAM
(Max. Credit: 11.0 hours) Business Litigation: 8.0 hours Civil Trial: 8.0 hours Criminal Appellate: 1.0 hour Criminal Trial: 1.0 hour International Law: 11.0 hours
ELECTRONIC MATERIALS: Every CLE course will feature an electronic course book in lieu of a printed book for all live presentations, live webcasts, webinars, teleseminars, audio CDs and video DVDs. This searchable, downloadable, printable material will be available via e-mail several days in advance of the live course presentation or thereafter for purchased products. We strongly encourage you to purchase the book separately if you prefer your material printed but do not want to print it yourself. Effective July 1, 2010.
TO ORDER AUDIO CD OR COURSE MATERIALS BY MAIL, SEND THIS FORM TO The Florida Bar, Order Entry Department: 651 E. Jefferson Street, Tallahassee, FL 32399-2300 with a check in the appropriate amount payable to The Florida Bar or credit card information filled in below. If you have questions, call 850/561-5831. Name ____________________________________________________________________________ Florida Bar # __________________________ Address _______________________________________________________________________________________________________________ City/State/Zip _______________________________________________________________ Phone # ____________________________________ Email Address __________________________________________________________________________________________________________ ABF: Course No. 1422C
Check enclosed made payable to The Florida Bar Credit Card (Advance registration only. Fax to 850/561-5816.) MASTERCARD VISA DISCOVER AMEX
Signature: _____________________________________________________________________________________Exp. Date: ____/____ (MO./YR.) Name on Card: ______________________________________________________________ Billing Zip Code: ____________________________ Card No. ______________________________________________________________________________________________________________ TO ORDER AUDIO CD OR COURSE MATERIALS, fill out the order form above, including a street address for delivery. Please add sales tax. Tax exempt entities must pay the non-section member price. Please include sales tax unless ordering party is tax-exempt or a nonresident of Florida. If this order is to be purchased by a tax-exempt organization, the media must be mailed to that organization and not to a person. Include tax-exempt number beside organizations name on the order form.
AUDIO CD
(includes electronic course material) $345 plus tax (section member) $395 plus tax (non-section member)
(1422C)
TOTAL $ _______
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MeMber benefits
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inSuRAnCE
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Spring 2012
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PAID
Section Calendar
Mark your calendars for these important dates.
For more information, visit www.internationllawsection.org. February 28, 2013 2:00 p.m. - 6:00 p.m. half-day: International Business Transactions Conference (IBTC) Miami 6:30 p.m. - 8:30 p.m. Opening Cocktail March 1, 2013 All Day: International Litigation and Arbitration Conference (ILAC) Miami 6:00 p.m. - 8:00 p.m. Closing Cocktail / Vis opener March 2, 2013 All Day: the Florida pre-competition for the Annual Willem C. Vis International Commercial Arbitration Moot (The Vis Moot) Miami 6:00 p.m. - 8:00 p.m. Vis Moot Closing Cocktail October 16-20, 2012 American Bar Association section of International Law (ABA International) 2012 Fall Meeting Fontainebleau Miami Beach *** April 6-9, 2014 International Council for Commercial Arbitration (ICCA) 22nd Congress Miami www.iccamiami2014.com
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