Litigation & Dispute Resolution

Litigation & Dispute Resolution 2017 Sixth Edition

Contributing Editor: Michael Madden GLOBAL LEGAL INSIGHTS – LITIGATION & DISPUTE RESOLUTION 2017, SIXTH EDITION

Contributing Editor Michael Madden

Production Editor Andrew Schoﬁ eld

Senior Editors Suzie Levy Rachel Williams

Group Consulting Editor Alan Falach

Publisher Rory Smith

We are extremely grateful for all contributions to this edition. Special thanks are reserved for Michael Madden for all his assistance.

Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk

ISBN 978-1-911367-69-7 ISSN 2049-3126

This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualiﬁ ed professional when dealing with speciﬁ c situations. The information contained herein is accurate as of the date of publication.

Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY August 2017 CONTENTS

Preface Michael Madden, Winston & Strawn London LLP

Armenia Aram Orbelyan, Narine Beglaryan & Vahagn Grigoryan, Concern Dialog law fi rm 1 Australia Colin Loveday, Richard Abraham & Sheena McKie, Clayton Utz 11 Bermuda David Kessaram, Steven White & Sam Riihiluoma, Cox Hallett Wilkinson Limited 24 Botswana Loreen Bonner, Bonner Attorneys 35 Brazil Renato Stephan Grion & Guilherme Piccardi de Andrade Silva, Pinheiro Neto Advogados 42 British Virgin Islands Scott Cruickshank & Matthew Freeman, Lennox Paton 50 Canada Robert W. Staley, Jonathan G. Bell & Jessica M. Starck, Bennett Jones LLP 64 Cayman Islands Ian Huskisson, Anna Peccarino & Neil McLarnon, Travers Thorp Alberga 74 China Cui Qiang & Li Qishi, Commerce & Finance Law Offi ces 82 Egypt Sarah Rizk & Ashraf Ali, Mena Associates in association with Amereller Legal Consultants 90 England & Wales Michael Madden & Justin McClelland, Winston & Strawn London LLP 98 Finland Markus Kokko & Niki J. Welling, Borenius Attorneys Ltd 122 France Olivier Laude, Victor Champey & Olivier Guillaud, Laude Esquier Champey 130 Germany Meike von Levetzow, Noerr LLP 145 Hong Kong Stephen Chan & Richard Healy, Oldham, Li & Nie 155 Hungary Péter Gárdos, Erika Tomori & András Nagy, Gárdos Füredi Mosonyi Tomori Law Offi ce 165 India Ananya Kumar & Kunal Chaturvedi, J. Sagar Associates 175 Italy Micael Montinari, Luca Salamone & Filippo Frigerio, Portolano Cavallo 185 Japan Shinya Tago, Takuya Uenishi & Landry Guesdon, Iwata Godo 196 Liechtenstein Thomas Nigg, Eva-Maria Rhomberg & Domenik Vogt, GASSER PARTNER Attorneys at Law 209 Mexico Miguel Angel Hernandez-Romo Valencia & Miguel Angel Hernandez-Romo, Bufete Hernández Romo 218 Nigeria Abimbola Akeredolu & Chinedum Umeche, Banwo & Ighodalo 225 Poland Katarzyna Petruczenko, Marcin Radwan-Röhrenschef & Anna Witkowska, RöHRENSCHEF 241 Russia Anastasia Astashkevich & Roman Shtykov, Astashkevich and Partners 251 South Africa Gavin Rome SC, Ziyaad Navsa & Sechaba Mohapi, Group One Chambers 258 Switzerland Balz Gross, Claudio Bazzani & Julian Schwaller, Homburger 268 Taiwan Hung Ou Yang, Hung-Wen Chiu & Jia-Jun Fang, Brain Trust International Law Firm 283 Turkey Orçun Çetinkaya & Burak Baydar, Moroğlu Arseven 289 Ukraine Oleksandr Zavadetskyi, Zavadetskyi Advocates Bureau 296 UAE Hamdan Al Shamsi, Hamdan AlShamsi Lawyers and Legal Consultants 305 USA Rodney G. Strickland, Jr., Matthew R. Reed & Anthony J. Weibell, Wilson Sonsini Goodrich & Rosati, P.C. 316 PREFACE

lthough 2016 will be remembered by most in the UK as the year in which the country voted to leave the European Union, Ato many lawyers it will be remembered as the year in which we saw the court performing its essential function as one of the three powers that balance against each other to ensure a healthy constitution. As we mention in the England and Wales section of this Insight, the High Court had no hesitation in telling the Prime Minister that she was acting outside her powers. A similar confrontation unfolded in the US following President Trump’s attempt to impose travel bans. We have also seen Kenya’s High Court overturning a government order to close the world’s biggest refugee camp, home to more than 300,000 Somali refugees, some of whom had lived there for more than 20 years. Lawyers around the world should never forget that they form part of an establishment whose function is to safeguard the constitution and to ensure that the rule of law is maintained. In this constantly changing environment it is re-assuring to know that within this profession there are some exceptionally gifted, committed and conscientious members who like to ensure that similar checks and balances operate in their respective jurisdictions and promote the ordinary functioning of the constitution and protect the rights of the individual. Editing this year’s edition of Global Legal Insights – Litigation and Dispute Resolution is a humbling reminder of the excellent members of our great profession around the world. We all have so much to learn from each other and I am delighted in the contribution that the Insight plays in sharing knowledge and experience and in encouraging countries to strive for the fairest and most efﬁ cient and effective legal systems. I am particularly pleased to have received contributions this year from Egypt, Hungary, India, Mexico, South Africa, Taiwan and Ukraine. These seven new contributions in themselves demonstrate the global reach and interest in the Insight. As a general popular disillusionment appears to be unfolding in many parts of the world, it is good to see that healthy communications continue between lawyers committed to fair and efﬁ cient judicial systems. I do hope that you enjoy reading (or at least dipping in and out of) the book and I would like once again to pay my thanks to all those who have contributed and worked very hard to secure its publication. As always, I welcome any feedback that you may have on this Global Legal Insight.

Michael Madden Winston & Strawn London LLP Armenia

Aram Orbelyan, Narine Beglaryan & Vahagn Grigoryan Concern Dialog law firm

Efﬁ ciency of process The Court System of the Republic of Armenia (Armenia) is a three-stage judicial system, and all cases except matters of constitutional justice, which are subject to the separate Constitutional Court, are handled by the said judicial system. The system is as follows:

Court of Cassation (Criminal chamber, Civil and Administrative chamber)

Administrative Court Criminal Court of Civil Court of Appeal of Appeal Appeal

Administrative Court Courts of General Competence (over civil and criminal matters)

The system is described in detail in the Constitution and the Judicial Code. Separate codes for procedures (criminal, civil, administrative) and the law on bankruptcy regulate the particularities of different processes in the courts. The Court of General Competence of Armenia hears all criminal and civil cases, including commercial and bankruptcy cases. The Administrative Court of Armenia is a specialised court with jurisdiction to examine cases arising from public legal relationships, with the key role of overseeing the activities of administration (executive power). The Civil Court of Appeal and the Criminal Court of Appeal of Armenia review appeals to acts of the Courts of General Competence, and the Administrative Court of Appeal reviews appeals to acts of the Administrative Court. The Court of Cassation is the highest juridical instance that is eligible to examine all claims except those concerning constitutional jurisdiction. As a general rule, if the claim meets the formal requirement of proper procedural code (includes required data, the listed documents are enclosed, the action is signed, etc.) it

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is accepted to the hearings. Appeal complaints are accepted to hearings under the same grounds. Acceptance of a cassation complaint is a sophisticated issue as this court’s purposes are enshrined in the Constitution (to ensure uniform application of legislation and eliminate fundamental violation of human rights and freedoms). In general, the Court of Cassation accepts complaints which comply with formal requirements as well as the court’s purposes. Regulations related to acceptance of cassation complaints were recently subject to review of the Constitutional Court (e.g. ՍԴՈ-1334 and ՍԴՈ-1363) and it is anticipated that the practice will be changed accordingly, i.e. the number of acceptances to hearings will increase if the formal requirements are provided. In the fi rst instance courts (except for the criminal procedure and bankruptcy peculiarity, which are enshrined in the Criminal procedural code and Law on bankruptcy respectively), the case passes the following main stages after acceptance of the claim: (a) preliminary hearing; (b) trial; (c) judgment and publication of the decision. The Appeal Court examines the case within the scope of the complaint and evidences, not accepting any evidences or positions which were not presented in the fi rst instance court. As far as court hearings shall be public, the Appeal Court assigns hearing (one or two) of the case, has a stage of judgment and publishes its decision as well. The decision of the Appeal Court may be subject to cassation complaint and, if accepted for review, one court hearing, and publication of the fi nal and non-appealable decision, take place. The prescription period is recognised by Armenian legislation. Nonetheless, the motion to apply the prescription period shall be reviewed by the court simultaneously with the review of the case in total, i.e. the declaration of application of the prescription period does not cease the procedure in court immediately. Alternative dispute resolution is recognised by Armenian legislation. Details on Mediation and ADR in the proper charters are presented below. Availability of ADR mechanisms Armenian law recognises mediation and arbitration. While arbitration has been present in legislation for many years, formal mediation is quite new (and was introduced in 2015). Arbitration is widely accepted in specifi c areas (mostly used by banks and credit organisations as faster ways to deal with non-performing loans), however in general there is still a lack of practice in arbitration. On the other hand, there are several arbitration institutions with their lists of rather experienced arbitrators. The legislation does not stipulate requirements for arbitrators to have special permission or background. The arbitration process is regulated by a separate Law on arbitration as well as internal regulations of arbitration centres (and regulations for ad hoc arbitration) and agreement of the parties. Normally it comprises stages similar to court stages; however, it is less formal and faster. If not agreed otherwise by the parties, the arbitral award will not be appealable, and will be fi nal and binding: it can be reviewed on very limited grounds by a court (e.g. absence of arbitration agreement or other grave breach of procedure). For mediation, if the parties want to have their conciliation approved by court, the mediator must be the one with an acting mediator licence. Many legal and non-legal specialists have recently applied and become licensed as mediators; however, since mediation is new, there is not suffi cient data to elaborate the effectiveness of the latter. Parties may also use out-of-court mediation, and in some limited cases this decision will also be verifi ed by court.

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In any case, if the mediation is not successful, the parties shall continue their dispute resolution via arbitration or court. E-justice availability as a tool to increase the effi ciency of justice and access to justice Currently, there is no online fi ling of lawsuit applications in courts available. The system was developed by the Judicial Department and the Ministry of Justice with the fi nancial and technical assistance of Concern Dialog law fi rm as well as the EU Delegation, and has been tested. Some legislative and regulatory concerns are still hindering the application of the system. Provided that legal requirements are based on paper lawsuit applications, the online application process will probably require a minor legal reform. In contrast, arbitrations are easier and, in practice, accept online fi ling via email or specially developed platforms. Meantime, data on all cases in the courts are published (except for data on cases subject to close hearings) in the Online Armenian Judicial System known as Datalex and available at http://datalex.am. It is available only in Armenian, and a party can nearly always follow its application and procedure (e.g. acceptance, hearing dates, some intermediate judicial acts, fi nal decision text, information on appeal and cassation claims, etc.) online, as well as trace and examine relevant cases. Other resources publishing court decisions and containing sophisticated search and indexing mechanisms are also available, i.e. there are: (a) non-paid offi cial resources http://arlis.am and http://www.court.am; and (b) private and paid resources http://www.armlaw.am and Irtek http://www.irtek.am, both of which contain decisions of the Court of Cassation and of the Constitutional Court.

Integrity of process The principles of natural justice are implemented in Armenia’s legal system. The Constitution of Armenia safeguards everyone’s right to a public hearing of his case in order to have his violated rights restored and to have charges against him determined by an independent and impartial court, within a reasonable period, under equal conditions, with due respect for all the requirements of fairness. In accordance with the internationally recognised right of judicial protection (access to justice), which is the fundamental rule of natural justice, the Judicial Code of Armenia states that everyone has the right to judicial protection of his rights and freedoms and no-one may be deprived of the right to have his case publicly examined by a competent, independent, and impartial court within a reasonable time, under equal conditions, with due respect for all requirements of fairness. The legislation of Armenia contains some mechanisms to protect the principle of nemo judex in causa sua. If a party to arbitration believes that the judge is partial, they can bring a self- recusal motion, which must be decided by the judge, with the consideration of arguments brought in the motion. If the judge is biased, or the situation can be perceived as biased, he/ she is expected to abandon the case and pass it to another judge on their own initiative or by the motion of the party. If the party is not satisfi ed with the decision of the court rejecting the self-recusal, he/she can recall it as grounds for appeal of the fi nal decision. As for opportunity to be heard, the court resolves the applications and motions on all issues relevant to the consideration of the case fi led by the participants of the case after having heard the opinions of other participants of the case. In Armenia, everyone has the right to exercise his right to judicial protection either through a representative or advocate, or personally (right to legal representation).

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The judiciary of Armenia is autonomous and self-governed. The independence of the court is declared by the Constitution, Judicial Code and procedural codes. The Judicial Code states that the judge is independent and not accountable to anyone and, among other things, is not required to give any explanation, save for cases provided by law. Additionally, a judge may not be a member of any party or otherwise engage in political activities. In all circumstances, a judge must demonstrate political restraint and neutrality. A judge must not tolerate any interference with the administration of justice, regardless of whether it is performed by representatives of the legislative or executive powers, other public offi cials, or ordinary citizens. The guarantee of judges’ independence is the rule that a judge must immediately inform the Ethics Committee about any interference with his activities related to the administration of justice and the performance of other powers stipulated by law, if such interference is not provided by law. If the Ethics Committee fi nds that the judge’s activities have been interfered with in a way that is not provided by law, it must petition the competent authorities to hold the guilty ones liable. Any such act is subject to criminal prosecution. For public servants, it gives rise also to disciplinary liability, up to and including dismissal from offi ce or service. In addition, during his term of offi ce and after the termination thereof, a judge may not be interrogated as a witness about a case tried by him. The basis of the principle of the impartiality of the court is stated in the Constitution, which declares that everyone shall have the right to a fair and public hearing [...] by an independent and impartial court, and that a judge shall be independent, impartial and act only in accordance with the Constitution and laws. According to the Judicial Code, when exercising his powers, a judge must refrain from displaying discrimination with speech or conduct, as well as making such an impression. The requirement for judges to be impartial in specifi c cases is refl ected in the criminal and civil procedure codes. Armenia’s legal system integrates a number of impartiality guarantee mechanisms and institutions, foreseen by the Judicial Code. Among them are, inter alia: 1. non-dismissibility of judges; 2. salary; 3. pension / social security prerogatives; 4. special procedures of judicial control in criminal prosecution against a judge; 5. political impartiality; 6. impossibility of parallel jobs (judges still can engage in volunteer activities or undertake paid educational or scientifi c work); and 7. complex appointment procedures.

Privilege and disclosure Disclosure Armenian legislation protects confi dential information as well as personal data. Thus, confi dential information (commercial, bank, state, offi cial, notary, family and private life, etc.), including personal data (data allowing a natural person to be identifi ed directly or indirectly) may be disclosed in the scope of pre-court or court procedures either by the consent of its owner or by the court decision thereon.

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The Administrative Court, unlike the others, is entitled by its own ex offi cio authority to initiate a request to provide evidences containing confi dential information. The other courts may not initiate this kind of procedure, but they are entitled to review the petitions of participants on providing confi dential data to the court, and may decide accordingly. A participant of this procedure who is allowed to bring such a petition must prove/show that he/she is not able to receive data without the court’s approval, as well as the relevance of the evidence or data to the case. The confi dential data may be requested and received under the court’s decision by its owner regardless of whether the latter has status or not in the scope of case. In general, cases are considered in open hearings, but closed-door hearings are allowed if the court accepts the relevant petition of a party, which latter can present for protection of confi dentiality of adoption, privacy of citizens of their families, as well as protection of commercial or other secrets. Closed-door hearing allows public access to information about the case to be banned as well, i.e. one can fi nd merely information about the number of case and parties at www.datalex.am. Privilege No-one is obliged to give testimony against himself/herself, his/her spouse and immediate relatives. The Attorneys at law (advocates), the Defender of human rights, judges, arbitrators, mediators and confessors cannot testify in the scope of civil (including bankruptcy), administrative and criminal procedures. In addition, representatives of mass media are entitled not to answer if it may disclose the source of their information. The Armenian law on Advocates and Advocates’ Activities enshrines a number of guarantees of confi dentiality as well, e.g. it is banned: (a) to disclose any information unless the client agrees; (b) to confi scate (take) from the advocate materials concerning legal support provided and to use them as evidence; or (c) to investigate advocates’ apartments, vehicles, offi ces and offi ces of law fi rms, as well as to examine the advocate while he/she performs his/her professional duties.

Costs Applications require state fees (symbolic amounts for cases related to non-monetary, or not subject to monetary evaluation, and percentages of 2–3% for cases of a monetary nature, depending on the instance of the court it is presented to). Some cases are exempt from state fee (e.g. lawsuit applications of employees in labour matters); the law also provides a possibility to postpone the state fee if the party is unable to pay at that moment; however, he/she needs to submit a motion and ground his/her inability to pay the state fee. Moreover, the recent practice indicates that the courts are stricter in approving such motions. Normally, the losing party is obliged to recover the fees paid. In the structure of costs, attorney fees are also included; however, while amounts of other costs are based on the factual amounts paid by the parties, attorney fees are considered to be satisﬁ ed in “reasonable amounts” and only if proved. Parties need to present proofs about the mechanism of attorney cost calculations or the factually paid sums (e.g. payment receipts are provided). Considering different factors, at its discretion, the court will, however, decide a reasonable sum, which the losing party will have to compensate to the winning party. There are no securities for costs available; however, the institution of interim measures, though very limited, may serve such purpose.

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Similarly, there are no other mechanisms available for capping costs or limiting recoverability of costs (the only one applicable is the attorney fee). There are no other options available to litigants in funding the litigation; however, they are free to ﬁ nd third party founders. Some internationally funded projects have ﬁ nanced strategic litigation cases; however, recently most such projects have closed.

Litigation funding Any costs related to the procedure may be subject to recovery under Armenian legislation. Nonetheless, the claim may be approved if the costs, except for the state fee (the state fee is approved in compliance with the amount of satisfi ed demand), are reasonable. There are not any criteria to defi ne whether costs are reasonable or not under the law, but a judge decides at his/her discretion. In practice, recovery amount of costs (attorney’s fee, translator’s fee, expertise, etc.) are derived from average market prices, the time consumed for fulfi lment of tasks and the character of the case, etc. The attorney’s fee may be recovered if payment thereof has already been made or shall be made in future. Thus, contingency fee arrangements are subject to approval by the court but, again, in the scope of reasonable amount thereof. Practically, this model is mostly applied for debt collection services and usually the courts approve refund of the whole sum enshrined in the agreement. Recovery of litigation costs may be either subject to the hearing in the scope of the main hearing, or be the subject of a separate claim. The latter has a few legal issues such as the legal character of the demand, legal grounds in material law, etc.; the positions are not yet similar. In the scope of main hearings, legal costs may be sought in the court for representation in relation to which they have arisen, e.g. costs for an appeal complaint may be presented directly to the appeal court. Postponement of payment of the state fee may be applicable as well if the claimant is able to prove inability to pay it. Legal services can be paid either by the Client or by the third party. The number of organisations that provide fi nancing for strategic cases is decreasing, and now it is almost zero. Meanwhile, pro bono legal services are discussed by different structures with the aim of development of this sector as well. Today, pro bono legal services are mostly provided by the Offi ce of the Public Defender and include support in criminal, civil, administrative and constitutional procedures of socially vulnerable classes.

Interim relief In the civil procedure of Armenia, the range of injunctive relief is provided by Article 98 of the Civil Procedure Code. The following are the means of relief: 1. imposing an arrest on the defendant’s property or ﬁ nancial assets in the amount of lawsuit; 2. prohibiting the committal of certain actions by the defendant; 3. prohibiting the committal of certain actions by other persons in relation to the object of the dispute; 4. preventing the sale of property, in case of bringing a case concerning the lifting of the arrest on the property; and 5. imposing an arrest on the plaintiff’s property which is in the defendant’s possession.

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In administrative procedure there is means of relief, which is not similar to the means provided by the Civil Procedure Code. According to the Administrative Procedure Code of Armenia, the court can temporarily satisfy the action. To apply one, the plaintiff needs to ground the necessity of the security measure. In practice, motions for reasonable security measures are satisﬁ ed. When necessary, the court is entitled to apply several means of securing the action. In the countermeasure, by motion of a person participating in the case, the court is entitled to replace one provisional remedy with another, and by motion of a participating party, can terminate the provisional remedy. The issue of termination of a security is resolved at court session. As a protective measure, the defendant can demand the plaintiff pay an amount equal to its damages as a security to the court deposit, as well as apply to the same court demanding the damages caused by the interim measure. The Republic of Armenia is a party to the CIS Convention on legal assistance and legal relations in civil, family and criminal cases and has reciprocal agreements with a number of countries. The mentioned treaties regulate the enforcement of worldwide freezing orders. Also, normally, when Armenian courts give freezing orders, it relates not only to a defendant’s funds in Armenia, but also worldwide funds. Nevertheless, the decision of the Armenian court must be recognised by the courts of the countries in which these funds are kept in order to have the corresponding funds frozen.

Enforcement of judgments The Republic of Armenia is a party to the CIS Convention on legal assistance and legal relations in civil, family and criminal cases and has reciprocal agreements with a number of countries, for instance with Greece, Iran, Bulgaria, Romania, Georgia, UAE and Lithuania. With the countries with which Armenia doesn’t have any agreements, the enforcement of judgments/awards is performed on a reciprocal basis. According to the Law on Compulsory Enforcement, in cases provided for by international treaties of the Republic of Armenia, the writ of execution on enforcement of judgments and decisions of courts of foreign states shall be issued by the court of the Republic of Armenia which has taken a decision on the recognition in the Republic of Armenia of the judgment, and decision of the court of the foreign State concerned. Normally, parties are expected to fulfi l their obligations without waiting for compulsory enforcement. However, after the entry into force of the fi nal judicial act, or the decision on an interim measure, the party may apply to the court for a judicial enforcement order (enforcement writ), which he/she can present to the State Service of Compulsory Enforcement. The time limit for enforcement is two months after the opening of the enforcement case, and is established for carrying out enforcement actions, except for cases provided by law, which can be prolonged in limited cases. Normally, enforcement procedures do not take long, especially when they concern the application of interim measures: once the property of the plaintiff is identifi ed, it is attached, or if it concerns injunction, the State Service of Compulsory Enforcement simply orders the injunction and follows up its performance. If enforced, the fees (some 5%) are collected additionally and held from the collected amount before transferring the adjudged amount to the winning party. If the creditor takes back the enforcement writ, he bears the enforcement fee (from 1−5%, depending at which stage it is done).

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The grounds for avoiding enforcement are stated in Article 42 of Law of The Republic of Armenia on compulsory enforcement of judicial acts. For instance, among them are cases where: 1. the claimant has renounced the levy of execution; 2. the claimant and the debtor have entered into a settlement agreement, and it has been approved by the court; 3. the claimant or debtor-citizen has died, and claims or obligations established by the judicial act may not pass to his or her successor; 4. the judicial act, based on which the writ of execution has been issued, has been reversed; 5. the debtor-legal person has been declared bankrupt by a court judgment; or 6. the debtor-legal entity has been dissolved. The parties are free to come to a peaceful settlement of their dispute and conclude a conciliation agreement, which is later confi rmed by the court and published as a judicial act. There, the parties can also regulate reciprocal arrangements for enforcement of the agreement. Another option is (and it only concerns the order of fulfi lment of the judicial act), the possibility of the parties to agree on the order of realisation of the judicial orders. This concerns cases where the fi nal judicial act is present, and parties, of their own will and agreement, want to regulate the order of fulfi lment of the obligations under the respective judicial act. If the agreement is violated, the State Service of Compulsory Enforcement will be called to apply the decision of the court. If the plaintiff is insolvent, and the State Service of Compulsory Enforcement fi nds out, it will stop the enforcement and invite the creditor to initiate a bankruptcy case. If the obligation is already performed and proof is provided, the enforcement service will only enforce the service fee confi scation. For the non-performance of a judicial act, the Armenian Criminal Code provides criminal charges both for Compulsory Enforcers and persons intentionally avoiding enforcement. As for enforcement of awards, the Law on Compulsory Enforcement states that writs of execution for compulsory enforcement of awards of arbitral tribunals shall be issued by the competent court of the Republic of Armenia. The court shall have the right to refuse issuance of the writ of execution based on the grounds provided for by the Law of the Republic of Armenia on commercial arbitration. Armenia’s legislation does not provide special garnishee proceedings but it has mechanisms which are similar to garnishee proceedings. When a Compulsory Enforcer imposes attachment on a debtor’s monetary funds, he or she send messages to the banks and employer of the debtor and asks for freezing of funds and future payments to the debtor until the fi nal judgment comes into force.

Cross-border litigation An Armenian court can send judicial orders outside its territorial jurisdiction, in order to accomplish several actions. This is limited to the territory of the Republic of Armenia. For foreign matters, Armenian courts may seek the help of a foreign country on assistance matters, such as ﬁ nding the contents of the foreign law. Other kinds of cooperation are based solely on international treaties, as explained in the previous section, or on diplomatic cooperation, provided that civil procedure is based on competition and parties provide the court with proofs (the obtaining of the proofs by the court is only possible in limited cases,

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where the party so requests by written motion, and grounds why he/she cannot acquire them himself/herself). Enforcement of judicial orders abroad is possible, again based on international treaty or diplomatic means. There is little practice in relation to the application of Armenian judicial orders abroad; it can take a couple of months. Generally, it is up to the parties to pursue the acquired judicial acts in foreign jurisdictions for their application.

International arbitration Armenia is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which makes it possible to recognise and enforce foreign arbitral awards in Armenia, as well as local arbitral awards in other NY Convention member- countries. Relevant procedures are incorporated in procedural codes and in the law on regulating arbitration. Based on the international instruments, as well as local procedural legislation, recognition and enforcement of foreign arbitral awards is done without major difﬁ culties, although there is not much practice on this side either.

Mediation and ADR Mediation is a very new institution in Armenia. Parties can apply for mediation at any moment. If the agreement provides for mediation, the court cannot decide the case until mediation is over. The mediation length completely depends on the will of the parties. To mediate, a specialist (not necessarily with a legal background) needs to acquire a mediator certifi cate from the Ministry of Justice. Mediation is a paid service, but to strengthen the new institution, the Armenian legislator has provided free mediation hours by law. These are the fi rst four hours. After the amendments, many specialists have applied and received mediator certifi cates; however, there is still no widespread practice of mediation.

Regulatory investigations Governmental authority regulates the economic activities of proper areas, including protection of consumers’ rights; the regulatory investigations thereof are implemented as administrative procedure under administrative law. Decision is made by governmental or municipal authority and may be reviewed by the Administrative Court. Normative legal acts of governmental and municipal authorities (including the Central Bank, State Commission for the Protection of Economic Competition and the Public Services Regulatory Commission) may be reviewed by the Administrative Court subject to their compliance with legal acts which hold higher position in the hierarchy thereof (except for the Constitution). The Administrative Court is entitled to review notaries’ activities, as well as activity of the body responsible for overview and providing protection of personal data.

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Aram Orbelyan, Ph.D. Tel: +374 93 662726 (mob) / Email: [email protected] Aram Orbelyan has led the litigation and arbitration practice at Concern Dialog law ﬁ rm since 2014. Aram Orbelyan holds a Law degree and Ph.D. in Law from MGIMO University, and has served as deputy minister of justice of Armenia from 2011–2014, where he was responsible for reform of civil and civil procedure legislation, as well as the implementation of e-government systems in Armenia. In addition to his attorney practice he lectures at the French University of Armenia (UFAR), School of Advocates and Justice Academy, and is a consulting number of international organisations and state agencies on reform issues (mostly the justice sector, human rights, good governance issues). Aram Orbelyan is in the arbitrators list of ICSID, arbitrator at ADR partners and Optimus Lex arbitration centres; he was also elected President of the Arbitrators Association of the Republic of Armenia (in 2017).

Narine Beglaryan Tel: +374 60 278888 / Email: [email protected] Narine Beglaryan is a Partner with Concern Dialog law fi rm. She joined the fi rm in September 2013. She specialises in Banking law, Contract law, Corporate law, as well as in court representation of administrative and civil cases. At present, she specialises in the spheres of Combat against Money Laundering and Financing of Terrorism. Prior to joining Concern Dialog law fi rm, she worked with Armentel CJSC as the legal representative of the department of legal support to the business, and with BTA Bank CJSC as the chief lawyer of the legal offi ce of the bank. Narine Beglaryan graduated from the Moscow New Juridical Institute with a degree as a Certifi ed Specialist in Civil Law. Narine is qualifi ed to practise law in the Republic of Armenia since 2007 and has been the Attorney of the Chamber of Advocates of RA since 2012.

Vahagn Grigoryan, Ph.D. Tel: +374 60 278888 / Email: [email protected] Vahagn Grigoryan joined Concern Dialog law fi rm in June 2017. He holds the position of Senior Associate. He is specialised in Civil Law and Court Representation in Civil Cases. Vahagn Grigoryan holds a Law degree and Ph.D. in Law from Yerevan State University. Prior to joining Concern Dialog law fi rm he worked at Brave law fi rm as a lawyer (2010–2017), and the “Center of legislation development and legal researches” fund of the Ministry of Justice of RA. In addition to his attorney practice, he lectures at the Yerevan State University (YSU) Faculty of Law and Justice Academy. He took part in drafting new editions of several legal acts such as the Civil Procedure Code of RA and the Judicial Code of RA.

Concern Dialog law ﬁ rm 1 Charents str., Ofﬁ ce 207, Yerevan, 0025, Armenia Tel: +374 60 278888 / URL: www.dialog.am

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Colin Loveday, Richard Abraham & Sheena McKie Clayton Utz

Effi ciency of process Australia has a federal system of government, in which powers are divided between a central government and individual States. Each State and Territory is a separate jurisdiction and has its own hierarchy of courts. The High Court of Australia unites the various court hierarchies. It is the ultimate court of appeal for all Australian courts. State and Territory Supreme Courts hear monetary claims above a certain threshold (typically, from A$750,000), or claims for equitable relief. Each State Supreme Court has an appellate division, or Court of Appeal, which hears appeals from the Supreme Court and lower courts in the State system. Most of the States have two further levels of inferior courts. In addition, some States have established specialist courts of limited statutory jurisdiction, designed to hear specifi c categories of disputes. The jurisdiction of the Federal Court of Australia (Federal Court) covers almost all civil matters arising under Australian federal law. All civil matters are heard by a judge alone. Appeals from a single judge are heard by the Full Federal Court – a court constituted by three Federal Court judges. The Federal Circuit Court hears less complex disputes. There are also a range of tribunals created under Commonwealth law. For example, the Administrative Appeals Tribunal. In the Federal and several State jurisdictions, legislation has been enacted to impose pre- litigation requirements on persons involved in civil disputes. While generally a failure to comply with pre-litigation requirements will not invalidate the proceedings, the court may take this into consideration when awarding costs associated with the proceedings. In the Federal Court, the parties to a dispute are required to fi le a “genuine steps statement”, which outlines the steps taken to attempt to resolve the dispute. Proceedings are commenced by way of originating process. Once service has been effected and the defendant entered an appearance, the parties exchange pleadings (such as a statement of claim and defence), which serve to defi ne the issues in dispute. Once the parties have closed their pleadings, the parties will give discovery (or ‘disclosure’). Subpoenas may be used to obtain documents from third parties. In most jurisdictions, discovery and inspection takes place before the parties serve the evidence on which they intend to rely at trial. Each party will then prepare its evidence for use at the fi nal hearing, often utilising written witness statements or affi davits in place of oral evidence in chief – there is no deposition procedure in Australia. Where relevant, parties may also engage expert witnesses to give

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evidence concerning fi elds of specialised knowledge. Most Australian jurisdictions have Codes of Conduct with which expert witnesses must comply. Occasionally, the court will direct both parties’ experts to prepare a joint report, setting out their areas of agreement and disagreement. Throughout the proceedings, the parties will attend court at regular intervals for case management. At directions hearings, orders will be made to govern the conduct of the matter. Once all the parties’ evidence has been prepared and all the interlocutory disputes resolved, the case proceeds to a fi nal hearing. Most civil cases are heard by a judge sitting alone, who will usually deliver a written judgment. Australian courts have broad case management powers which are generally defi ned by the relevant court rules. Judges have a wide discretion to manage cases as they see fi t to ensure that the real issues in dispute are identifi ed and the matter is progressed to trial as soon as possible. Australian court systems have, over time, introduced methods of court-instigated ‘management’ of litigation. The reforms have involved shifting control of aspects of the conduct of litigation from lawyers to the courts, and a focus on case management orders designed to “… facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings” (described as the “overriding purpose rule”). While parties may apply to the court for a wide range of interim orders, including orders for evidence, discovery, the issue of subpoenas and the referral of the matter to mediation, parties must have regard to the overriding purpose. In a 2013 per curium decision, the High Court of Australia made clear its view that it is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose and “unduly technical and costly disputes about non-essential issues are clearly to be avoided”. Australian courts have wide discretion to impose sanctions (which may include adverse costs orders) on a party that has not complied with court orders or directions. Each court has its own case allocation system. The Federal Court has adopted the individual docket system where cases are allocated to judges and the case will ordinarily stay with the same judge from commencement until it is fi nalised. Cases requiring particular expertise are allocated to a judge who is a member of a specialist panel. The Docket judge monitors the parties’ compliance with the court’s directions, deals with interlocutory issues and ensures that the proceedings progress according to timetable. The judge may direct the parties to participate in alternative dispute resolution processes, such as referrals to mediation. In many State and Territory courts, cases are allocated to judges in particular divisions or lists according to the subject matter of the claim. For example, the Supreme Court of New South Wales has established a Commercial List to deal with disputes arising out of commercial transactions involving substantial amounts of money or issues of importance to trade and commerce. The list system provides litigants with judges with specialist expertise and access to a relatively high level of case management where needed. The Federal Court and most state Supreme Courts have also instituted specifi c “Fast Track” or Expedition Lists. The principal object of these lists is to ensure that urgent matters can be heard and determined quickly. The case management principles applied in the fast track lists are innovative. Their primary objective is to speed appropriate matters through the court lists and limit parties’ exposure to delay and wasted costs by adhering to strict time limits. Recent practices which have

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been adopted in appropriate cases include limited discovery, interlocutory applications without hearing (otherwise known as ‘on the papers’) and stop-watch hearings. The Australian class action regime has become a key feature of the Australian legal landscape. Outside of North America, Australia is the place where a corporation is next most likely to fi nd itself defending a class action. The Australian class action regime comprises essentially identical rules in the federal court system and the courts of New South Wales and Victoria. This regime has some important features: (a) There is no certifi cation requirement – that is, no threshold requirement that the proceedings be judicially certifi ed as appropriate to be brought as a class action. Once a class action has been commenced, it continues until fi nally resolved by judgment or settlement, unless the defendant can convince the court to terminate the proceedings on certain limited grounds. (b) There is no requirement that common issues predominate over the individual issues. (c) The Australian rules expressly allow for the determination of “sub-group” or even individual issues as part of a class action. (d) A representative plaintiff can defi ne the class members by description. This means that a person who meets the criteria set out in the class defi nition will be a class member unless they “opt out” of the proceedings. If a class member fails to opt out by the specifi ed date, they are a class member in the proceedings. Thus, a person may be a class member and thus bound by the outcome of the proceedings without their knowledge or consent, simply on the basis that they fall within a class defi nition. Despite a slow adoption of the procedure (which was fi rst introduced in 1992), class actions are now fi rmly embedded in the Australian legal landscape. Developments in the class action landscape cannot be viewed without considering the developments in litigation funding in Australia (discussed further below). A key driver of the Australian class action industry has been the emergence of the litigation funding enterprises.

Integrity of process Application of rules of natural justice, independence and impartiality of the judiciary. There are three arms of government in Australia – the legislature (responsible for debating and voting on new laws), the executive (responsible for enacting and upholding laws) and the judiciary (responsible for enforcing laws). The judiciary is independent of the other two arms and it is part of the judiciary’s role to decide upon whether the other two arms of government act within their powers. The separation of powers is mandated by Australia’s Constitution. Courts in Australia apply the rules of natural justice. Natural justice has been deﬁ ned as a condition governing the exercise of a statutory power. In adjudicating the exercise of a statutory power, a court will have regard to whether the procedure adopted in exercising that power was reasonable and fair – the concept of “procedural fairness”. The elements of procedural fairness include providing prior and adequate notice of a decision, sufﬁ cient information and a reasonable opportunity or real chance to present a case to a tribunal or make representations to a decision-maker, and whether or how a hearing should be held. See also the speech of Justice Alan Robertson (4 September 2015, see http://www.fedcourt. gov.au/publications/judges-speeches/justice-robertson/robertson-j-20150904).

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Privilege and disclosure In broad terms, the uniform Evidence Acts govern privilege issues on occasions when evidence is adduced at trial, while the common law governs questions concerning privilege which arise pre-trial. At common law, there are three elements necessary to establish legal professional privilege over communications passing between a legal adviser and client: • the communication must pass between the client and the client’s legal adviser; • the communication must be made for the dominant purpose of enabling the client to obtain legal advice, or for the purpose of actual or contemplated litigation; and • the communication must be confi dential. The uniform Evidence Acts create a privilege for confi dential communications made or prepared for the dominant purpose of a lawyer providing: (a) legal advice; or (b) professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is, or may be, or was, or might have been, a party. “Dominant” in this context means the ruling or prevailing purpose. The purpose or intended use for which a document is brought into existence will be a question of fact. Legal professional privilege may be waived or lost where there is conduct inconsistent with the maintenance of the privilege. A third stream of privilege exists in the form of “without prejudice privilege”. This involves communications between parties which are generally aimed at settlement. These communications cannot be put into evidence without the consent of parties in the event that negotiations are unsuccessful. Disclosure, or ‘discovery’, is an interlocutory procedure whereby a party is able to obtain from an opponent the disclosure and subsequent production of documents which are relevant to a fact in issue in the proceedings. Disclosure must be made of the existence of all documents which the party has in its possession, custody or power. General discovery involves discovery of all documents relevant to a fact in issue. While most jurisdictions permit an order for general discovery to be made, the courts and the parties may seek to limit the documents to be discovered to those falling within a particular category or class. In the Federal Court, a party must not apply for an order for discovery unless it will facilitate the just resolution of the proceedings as quickly, inexpensively and effi ciently as possible. In practice (depending on the complexity of the case), discovery may still be very large, expensive and time-consuming for all parties. In most jurisdictions, where an order for discovery is made by the court, the parties are required to compile and exchange lists of discoverable documents. Documents that are not relevant to a fact in issue do not need to be disclosed. After the lists have been exchanged, the documents will be produced for inspection by the other party. In large and complex cases, discovery will often be exchanged on an electronic basis, in accordance with a pre-agreed protocol. Documents obtained on discovery are not able to be used for any purpose other than the proceedings in which they were disclosed. The “Harman Undertaking” is the implied

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undertaking given to the court by any party obtaining documents on discovery (or by virtue of some other compulsory process) that it will not use such documents (or any other information gained from them) for any collateral purpose. The court rules in each jurisdiction provide that a party to proceedings can apply for an order for discovery against a non-party. In the alternative, a party may choose to seek documents from a non-party by way of subpoena. While a party cannot seek general disclosure from a non-party through a subpoena, it can request documents that relate to narrowly defi ned categories – the issuing party can only legitimately ask for documents which are relevant to the issues in dispute in the proceedings. Whether a subpoena has legitimate forensic purpose turns on whether the documents would materially assist the issuing party in relation to the proceedings. If a subpoena is in terms which are too broad, it is liable to be set aside. Commercial litigation often involves the disclosure of commercially sensitive documents. While confi dentiality is not a basis for resisting production, parties will often enter into confi dentiality and non-disclosure agreements to manage the exchange of such documents (for example, by agreeing to limit access to commercially sensitive documents to a party’s external legal counsel, or a tightly controlled group of individuals for the purposes of obtaining instructions). If a case proceeds to hearing (at which stage confi dential documents may be put into evidence or otherwise disclosed in court) the parties can apply to the court for suppression and non-publication orders.

Costs and funding Australian courts have broad discretion over the costs of all proceedings. In effect, a court may make whatever order as to costs is justiﬁ ed in the circumstances, however, there are general court rules that govern the exercise of that power. Ordinarily, costs follow the event, which means a successful litigant receives costs in the absence of special circumstances justifying some other order. A party is usually entitled to costs of any issue on which it succeeds, assessed on an ordinary basis. The onus is on the unsuccessful party to show the presence of “special circumstances” sufﬁ cient for the court to depart from the rule that costs follow the event. There are two main classes of costs: (a) those that arise by virtue of the retainer with the client and are governed by contract (“solicitor/client” costs); and (b) those that arise by order of the court, which may either be on an ordinary basis (“party/ party” costs) or an indemnity basis (“solicitor/client” costs). Indemnity costs are usually awarded against a party in circumstances where that party has engaged in unreasonable behaviour in connection with the conduct of the proceedings. Class action proceedings are unique in many ways. One of the characteristics peculiar to class actions is that a successful respondent can only recover costs against the lead applicant, as group members are immune from having costs orders awarded against them. This immunity is underpinned by important policy considerations, including affordable access to justice. However, it means that respondents will often be forced to defend an action at considerable costs with no ability to recover those costs if they are successful. That dynamic can impact many aspects of the proceedings, including settlement negotiations. It shifts the balance of power in favour of applicants.

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An offer of settlement may entitle the party making the offer to obtain costs on an indemnity basis. The offer may not be the only issue that determines the court’s decision on this issue, but it is certainly a key factor. There are two types of offers of settlement, namely: (a) more “informal” offers – commonly referred to as Calderbank offers; and (b) offers made in accordance with the court rules – referred to as offers of compromise. A Calderbank letter refers to an informal offer of compromise made on a “without prejudice” basis between the parties, in accordance with the principles set out in Calderbank v Calderbank [1975] WLR 586 and subsequent authorities. Although such letters are “without prejudice”, the courts may have regard to them on the question of costs and can order a party who rejected the offer of settlement to pay the successful party’s legal costs: (a) on an ordinary basis, up to the time the offer was made; and (b) on an indemnity basis, from the date the Calderbank offer was made (unless the party who rejected the offer can establish that it was reasonable to reject it). The provisions regarding (formal) offers of compromise are found in the court rules. Although the court retains a discretion to decide whether or not to award costs, the rules provide that, subject to this discretion, the rejection of a more favourable offer made in compliance with the rules will entitle the offeror to a higher proportion of costs from the day the offer was made. Security for costs orders is usually sought where the defendant alleges that the plaintiff will not hold enough funds to satisfy a costs order. The defendant asks the court to order the plaintiff to provide “security” to “protect” the defendant from this occurrence. The usual forms of security include: (a) money paid into court; (b) payment into an interest-earning bank account under the control of a third party or solicitor for the plaintiff, who has given an undertaking regarding the circumstances when the money will be released; (c) a bank guarantee in favour of the court to be held by the court until further order; or (d) a deed of guarantee pursuant to which another entity agrees to guarantee payment of the amount to satisfy the costs order. The making or refusal of an order for security for costs is discretionary. The court must consider and weigh the totality of the circumstances. Where an applicant or plaintiff fails to pay security in accordance with a court order, the court will order that the proceedings be stayed until the security is given. Security for costs applications have had a chequered history in class action litigation. The Full Federal Court decision of Madgwick v Kelly (2013) 212 FCR 1 has made it clear that security for costs applications are not prohibited in representative proceedings. Australian lawyers are currently prohibited from entering into contingency fee arrangements with their clients under which their professional fees are calculated by reference to the amount of any judgment or settlement received by the client. While there have been recent calls to remove the prohibition on contingency fees for lawyers, legislative reform in this area is yet to occur. Importantly, the prohibition on contingency only applies to lawyers. Litigation funders are

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not so constrained, and have found a very profi table role in the Australian legal (and in particular, class action) market. Australian lawyers are, however, permitted to enter into conditional costs agreements (where payment is conditional upon a successful outcome) which involve the payment of a premium or “uplift” fee calculated against legal fees (rather than by reference to any judgment or settlement amount). Such “no win, no fee” arrangements are common in Australian class actions. Litigation funding agreements are commercial arrangements under which the funder agrees to pay the fees and out of pocket expenses of the lawyer representing the plaintiffs. The funder will also agree to satisfy any adverse costs orders. In return for accepting this risk, the funder will take a portion of any judgment or settlement, usually one-third to two-thirds, calculated after the costs of the proceedings have been reimbursed. While initially a matter of some debate, the validity of litigation funding was established by the High Court in 2006 and subsequently reaffi rmed in 2012. The fl ourishing litigation funding industry that has emerged as a result of the light- touch legislative scheme in Australia has been active, particularly in class actions and in an insolvency context. Concerns have been raised as to whether the current regulatory arrangements can ensure the proper protection of consumers, management of confl icts, and proper fi nancial supervision and capital adequacy. These concerns may drive regulatory reform in this area. Despite the light-touch legislative scheme and High Court authority in favour of litigation funding, the growth of the industry has not occurred unchecked. For example, the Victorian Court of Appeal recently held that a particularly novel funding model amounted to an abuse of process, and stayed the proceedings as a result. Recent changes to the Federal Court Class Actions Practice Note requires visibility to be given to the Court, class members and the other parties to litigation funding agreements. Details of costs agreements must also be provided to the Court and class members. A well-known feature of plaintiff fi rms in class actions in Australia is the “no win, no fee” retainer its solicitors often enter into with group members in a class action, who otherwise could not afford to fund the litigation. In the result of a win, the retainer agreement often contains provision for the payment of an “uplift” fee, in addition to professional costs. Subject to the court supervision inherent in the class action regime in Australia, this arrangement is permissible. Usually in litigation in Australia, where a respondent does not expect to be able to recover costs from a plaintiff, it has an option to make an application for security for costs. The involvement of third-party funders with no pre-existing interest in the proceedings, but who stand to benefi t substantially from any recovery from the proceedings, is a material consideration in the courts considering whether to grant security for costs. The courts proceed on the basis that funders who seek to benefi t from litigation should bear the risks and burdens that the process entails.

Interim relief Australian courts have a wide discretion in determining whether to grant injunctive relief. An injunction is a court order that restrains a person from performing a particular act (prohibitory injunction) or requires a person to perform a speciﬁ ed act (mandatory injunction). Injunctions may have an effect for a limited time, or permanently, and may be

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granted before proceedings are commenced, during a proceeding, or as fi nal relief. When seeking an interlocutory injunction, an applicant is required to prove that there is a serious question of law to be tried, and that the balance of convenience favours the granting of the injunction sought. The court will have regard to factors including whether damages would otherwise be an adequate remedy and whether the grant of an injunction would preserve the status quo. Typically, such applications are made on ex parte basis and without notice to the other party. With very few exceptions, the court will refuse to grant an interlocutory injunction unless the plaintiff provides what has become known as “the usual undertaking as to damages”. In essence, this is an undertaking to compensate the defendant for any damage suffered as a consequence of the injunction, if it turns out that the injunction should not have been granted (because the plaintiff fails to prove its case at the fi nal hearing). Courts may also grant other interim orders including freezing orders (sometimes referred to as “Mareva orders”), and search orders (known as “Anton Piller orders”). Orders for preliminary discovery are generally made where the applicant has made reasonable inquiries but still has insuffi cient information for the purpose of determining a prospective defendant’s liability or whereabouts for the purpose of commencing proceedings, or deciding whether or not to commence proceedings against the prospective defendant.

Enforcement of judgments Successful plaintiffs have a range of mechanisms available for the enforcement of judgments. The most common mechanism for enforcing a judgment against companies is issuing a statutory demand. If the judgment debtor company does not respond to a statutory demand within 21 days, the successful plaintiff can apply to the Supreme Court to have the company wound up on the basis that it is insolvent (unable to pay its debts). Where the judgment debtor is an individual, there are a range of mechanisms including applying to have the judgment debtor declared bankrupt; garnishee orders to have money taken from the judgment debtor’s bank accounts or wages; and writs authorising the sheriff to seize and sell property belonging to the judgment debtor. The enforcement of foreign judgments in Australia is governed by a statutory regime and common law principles. Enforcing a foreign judgment in Australia depends on where the judgment was issued and the type of judgment that was issued. Australia is not a party to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971. However, Australia has reciprocal arrangements for the enforcement of judgments with a number of countries. Australia has a statutory scheme in the Foreign Judgments Act 1991 (Cth) for the recognition and enforcement of judgments entered in foreign countries with which Australia has reciprocal arrangements. The Foreign Judgments Regulations 1992 (Cth) list the countries to which the statutory scheme applies. The Foreign Judgments Act applies to enforceable money judgments that are obtained either on a ﬁ nal or interlocutory basis. Non-monetary judgments must be enforced at common law. Where no international treaty or statutory arrangement operates, a foreign judgment may be enforced under common law principles. A judgment may be enforceable at common law provided the Australian court is satisﬁ ed the foreign court exercised jurisdiction in the international sense, which includes in circumstances where:

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(a) the defendant voluntarily submitted to the foreign court’s jurisdiction; or (b) the defendant was ordinarily resident in the foreign jurisdiction, or present in the foreign jurisdiction at the time that the defendant was served with the originating process. Provided that the relevant Australian court is satisﬁ ed that the jurisdiction of the foreign court to make the order can be shown, prima facie, the judgment will then be entitled to recognition at common law. Generally, the only objections that the defendant can raise against enforcement of the judgment are that: (a) the judgment was obtained by fraud; (b) the foreign court acted contrary to natural justice; or (c) the foreign judgment is contrary to Australian public policy.

Cross-border litigation Australian courts may make two kinds of transnational freezing orders: (a) orders which apply to foreign assets in aid of Australian judicial proceedings (sometimes called worldwide orders); and (b) orders which apply to Australian assets in aid of foreign judicial proceedings. In relation to the fi rst category, Australian courts have jurisdiction to make freezing orders and ancillary orders against those over whom they have personal jurisdiction, even if they reside overseas and even in relation to overseas assets. An important long-arm service rule provides: “An application for a freezing order or an ancillary order may be served on a person who is outside Australia (whether or not the person is domiciled or resident in Australia) if any of the assets to which the order relates are within the jurisdiction of the court”. In order to prevent harassment of a respondent in multiple actions around the world, the Australian example form of freezing order contains several undertakings that must be given by the claimant to the court. These refl ect “Dadourian guidelines” laid down by the English Court of Appeal. In relation to the second category, the primary elements for obtaining such an order from an Australian court are: (a) a foreign judgment or “good arguable case” in a foreign court; (b) a suffi cient prospect of registration or enforcement of the foreign judgment or prospective judgment in the Australian court; (c) a danger that the foreign judgment will go unsatisfi ed; and (d) satisfaction of discretionary matters (such as the effects on the respondent and third parties and the diligence and expedience of the applicant in bringing the application). For example, in Davis v Turning Properties Pty Ltd (2005) 222 ALR 676, a freezing order was granted in support of a freezing order from a Bahamas court made over the defendant’s assets worldwide, including its assets in Australia. It was the fi rst time that such an application had been made in Australia. Australia is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965, which governs the international service of process on a defendant who resides in Australia. The primary method for taking evidence in Australia for a foreign proceeding is through the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Evidence Convention).

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Australian authorities will not accept any Letters of Request that require a person to state what documents relevant to the proceedings are or have been in their possession, or produce any documents, other than particular documents speciﬁ ed in the Letter of Request which the requested court believes to be in their possession. Given the strict statutory regime regarding pre-trial discovery in Australia, any veiled request for pre-trial discovery that circumvents that process is likely to be rejected. Australian law also permits the taking of evidence without compulsion and the giving of evidence by video link testimony, provided it is otherwise consistent with evidentiary requirements of the relevant court. Australian courts will generally respect an exclusive jurisdiction clause if it is consistent with the construction of the relevant contract. However, an exclusive jurisdiction clause does not necessarily prevent an Australian court from exercising jurisdiction where there is a strong case for the court to do so, namely, where the party would be deprived of a legitimate juridical advantage available in an Australian court.

International arbitration Australia offers an established and hospitable environment for international commercial arbitration, with highly experienced legal practitioners and arbitrators. Australia has been a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) since 1975, is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention) and was one of the fi rst countries to adopt the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) in 1989. International arbitration is governed by Commonwealth legislation: the International Arbitration Act 1974 (Cth) (IAA). The IAA incorporates the UNCITRAL Model Law. Unless parties have excluded the Model Law by an agreement in writing, the Model Law will apply to international arbitrations seated in Australia. If parties exclude the Model Law, the arbitration will still be governed by the IAA as the curial law. In addition to giving force of law in Australia to the Model Law, the IAA implements the New York Convention and the Washington Convention. In 2010, amendments were made to the IAA to enhance the effi cacy and cost-effectiveness of international commercial arbitration. For example, one amendment specifi ed that Australian courts have no residual discretion to refuse enforcement of an arbitral award on any grounds other than that provided in ss8(5) and 8(7) (which reproduce the grounds embodied in Art 5 of the New York Convention). While Australian courts have in the past taken a rather conservative approach to the enforcement of foreign arbitral awards, they are developing a strong track record of enforcement. International arbitral awards are now almost universally enforceable in Australia without the need to reopen the substance of the dispute in court. In 2013, the Australian Commercial Disputes Centre (ACDC) and the Australian International Disputes Centre (AIDC) became the Australian Disputes Centre (ADC), aiming to provide an alternative dispute resolution (ADR) centre of excellence that is the “fi rst choice for businesses, government and the community to resolve or learn how to resolve confl icts and disputes”. The ADC has a history of co-operation with leading ADR providers including the Australian Centre for International Commercial Arbitration (ACICA) and the Chartered Institute of Arbitrators (Australia) Limited (CIArb).

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ACICA is the sole default appointing authority competent to perform the arbitrator appointment functions under the IAA. ACICA has a standard set of arbitration rules (including an expedited option) which are to a large degree based on the UNCITRAL Arbitration Rules 1985. However, these Australian rules are not compulsory and parties are free to (and commonly do) use foreign procedural rules. In 2010, a scheme of uniform Commercial Arbitration Acts based upon the UNCITRAL Model Law was also introduced to apply to domestic arbitration. The new scheme was adopted to minimise court intervention and promote ﬁ nality in arbitral awards, while simultaneously endeavouring to enhance the arbitration process.

Mediation and ADR Alternative dispute resolution mechanisms, including arbitration and mediation, are increasingly popular in commercial matters in Australia. Indeed, some of the Australian courts are now directing parties to use specifi c alternative dispute resolution mechanisms to attempt to resolve or narrow issues in dispute. In addition, there are a number of tribunals in each jurisdiction which have been established to deal with disputes in a specifi c area and provide affordable alternative dispute resolution mechanisms. There has been an increasing focus by the judiciary on the costs of litigation, which in turn has promoted a greater use of alternative dispute resolution in Australia. In the Federal Court, the parties to a dispute are required to fi le a “genuine steps statement”, which outlines the steps taken to constitute a sincere and genuine attempt to resolve the dispute. In the Commercial List of the Supreme Court of New South Wales, it is common for the court to order that the parties mediate before the matter is set down for hearing. Many contractual agreements now contain alternative dispute resolution clauses which require the parties to attempt to resolve the dispute in a specifi c way, prior to the commencement of proceedings. In Australia, the court may order that the proceedings be stayed until such time as the process referred to in the dispute resolution clause is completed. A dispute resolution clause may, however, be deemed to be unenforceable where the clause is found to be so vague as to be uncertain in terms of setting out the method by which to resolve the dispute. An arbitration award is binding on the parties and will be enforced by the Australian courts. An application for enforcement can be made to the courts in Australia. The relevant legislation applicable will depend on whether it is classifi ed as domestic arbitration or international arbitration. In practice, the arbitrators of choice for major commercial arbitrations in Australia are usually retired judges of the High, Federal or Supreme Courts. One consequence of this is that the conduct of the arbitration can sometimes involve many of the formalities of a legal proceeding. There are no laws or rules that govern the conduct of alternative dispute resolution mechanisms such as mediation or expert determination. Settlement agreements reached at mediation do not require court sanction and will be binding and enforceable upon the parties if a valid contract has been formed. Whether an expert determination is binding and enforceable will depend on the process adopted by the parties and the terms of the particular clause. The major dispute resolution institutions in Australia are ACICA and the Australian Disputes Centre, which provides a range of training, professional development, case management and consultancy services in relation to alternative dispute resolution.

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Regulatory investigations Australia has important Federal regulatory authorities, which have their own prescribed areas of responsibility, including: 1. the Australian Competition and Consumer Commission (ACCC) is the federal regulatory authority responsible for ensuring individuals and businesses comply with Australian competition, fair trading, and consumer protection laws; 2. the Australian Securities and Investments Commission (ASIC) oversees Australian corporations and fi nancial markets. In particular, ASIC regulates the provision of consumer credit, fi nancial products and fi nancial services; 3. the Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian fi nancial services industry, which is responsible for regulating the conduct of banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies, and most of the superannuation industry; 4. the Therapeutic Goods Administration (TGA) is Australia’s regulatory agency for therapeutic goods including medicines, medical devices, blood and blood products. There are also various state-based regulators that govern fair trading, product safety and electrical and gas products and services. Each of the regulators has its own powers to request documentation or conduct investigations, to a greater or lesser degree. For instance, the ACCC has powers to conduct investigations including powers of search, seizure and entry, to require the production of information or documents, or to appear to give evidence on oath or affi rmation, as well as to institute proceedings for contravention of the Competition and Consumer Act.

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Colin Loveday Tel: +61 2 9353 4193 / Email: [email protected] Colin Loveday is internationally recognised as an experienced litigation lawyer specialising in complex commercial litigation, the defence of class actions and product liability claims. He is one of the leaders of the Clayton Utz Class Actions team and head of the national Product Liability group. Colin has defended some of Australia’s most high-profi le class actions involving complex consumer product and fi nancial services claims. He has worked extensively with lawyers in other jurisdictions in the co-ordinated defence of multinational claims, developing international defence strategies and working with international expert witnesses. He also advises corporations and fi nancial institutions on securities class actions and in regulatory investigations and inquiries. Colin is regularly voted by peers as one of Australia’s “best lawyers”, including in Litigation (2013) by Best Lawyers Australia.

Richard Abraham Tel: +61 2 9353 5729 / Email: [email protected] Richard Abraham is a Senior Associate in Clayton Utz’s Commercial Litigation practice group and is a member of the national Product Liability group. Richard has assisted in the defence of a number of class action proceedings for clients across a number of industries. Richard has advised on white-collar crime, fraud, anti-corruption and regulatory issues, and has been involved in a number of general commercial disputes, including matters before the NSW Court of Appeal. Richard has contributed to a number of publications and presentations regarding Australian product liability law, pharmaceutical and device regulation, as well as Australian practice and procedure.

Sheena McKie Tel: +61 2 9353 5732 / Email: [email protected] Sheena McKie is a Senior Associate in the Sydney ofﬁ ce of Clayton Utz. Sheena has been involved in a broad range of product liability and general commercial matters, including advisory and contentious work. Sheena’s advisory work centres on product safety issues, including product recalls, as well as regulatory work for clients in the pharmaceutical and medical device industries. Sheena has experience in the running of both small and large-scale commercial litigation matters, including class actions, in the Supreme Court of NSW and Federal Court of Australia.

Clayton Utz Level 15, 1 Bligh Street, Sydney, New South Wales, Australia Tel: +61 2 9353 4000 / Fax: +61 2 8220 6700 / URL: www.claytonutz.com

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David Kessaram, Steven White & Sam Riihiluoma Cox Hallett Wilkinson Limited

Effi ciency of process The main methods of resolving large commercial disputes in Bermuda are: (a) litigation in the Supreme Court of Bermuda (the Supreme Court); (b) arbitration under the UNCITRAL Model Law; and (c) mediation. The Supreme Court is a court of fi rst instance with unlimited jurisdiction. It regularly hears a wide variety of commercial disputes and has jurisdiction to grant an array of remedies, such as for damages, specifi c enforcement of contracts, injunctive relief, restitution, and receivership orders. Actions in the Supreme Court typically relate to disputes between commercial entities (companies or partnerships) or internal disputes between shareholders and partners, etc. Any person, whether corporate or an individual, can invoke the jurisdiction of the Supreme Court whether resident in Bermuda or resident abroad. A non-resident person may be required in certain circumstances to provide security for the costs of the action to the defendant. The Supreme Court has (what is popularly known as) long-arm jurisdiction against persons, corporate or otherwise, not resident in Bermuda. This jurisdiction can be invoked only in cases where the subject matter of the action falls within defi ned categories. The types of disputes commonly heard in this court are claims and counterclaims arising out of: • trade and commerce; • banking and fi nancial services; • insurance and reinsurance; • purchase and sale of commodities; and • applications made under the Companies Act 1981. The above actions are heard and determined in the division of the Supreme Court known as the Commercial Court, which was established in 2006. The judges in the Commercial Court are experienced in commercial matters and decide cases without a jury. The Commercial Court has dedicated courtrooms and administrative support provided by the Registrar of the Supreme Court. The current Commercial Court judges are Chief Justice Ian Kawaley and Mr Justice Stephen Hellman. A small pool of senior members of the local Bar also sit as assistant judges from time to time. The system is generally well-regarded for its independence and effi ciency. In appropriate cases where there is a need for an urgent interim remedy, e.g., an order for an injunction to prevent a harmful and allegedly wrongful act, the Supreme Court will react quickly to preserve the status quo on terms until both sides can be heard as to the continuation of the interim remedy. Litigation is adversarial in nature. In regulating the conduct of adversarial litigation, however, the Supreme Court applies a set of principles known as the Overriding Objective to ensure that cases are dealt with fairly and justly. Proof of the facts at trial is on a balance

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of probabilities. The Bermuda legal system is founded upon the English common law, and decisions of the English Court of Appeal and Supreme Court are highly persuasive authority in the Bermuda Courts. Much of Bermuda’s statute law is derived from English legislation, as are the Rules of the Supreme Court (RSC), which were last updated in 2006 and govern civil procedure. Bermuda legislation is modernised and updated regularly to enhance the jurisdiction’s attractiveness as an effi cient and benefi cial place to carry on business and to ensure that Bermuda retains its reputation as a leading offshore jurisdiction. The Court of Appeal for Bermuda hears appeals from the decisions of the Supreme Court. It sits three times a year in Bermuda and comprises the President and two Justices of Appeal; typically these sittings will take place in April, June and November, although the precise dates may vary each year and are published on the Bermuda Government website at www. gov.bm. The current President of the Court of Appeal is Sir Scott Baker, a former Lord Justice of the Court of Appeal of England and Wales. The ultimate appellate court is the Judicial Committee of the Privy Council which sits in London. In civil cases, a party may appeal to the Privy Council as of right against any fi nal order where the sum at issue is, or is equivalent in value to, more than $12,000. The judges of the Privy Council are eminent judges who also sit in the Supreme Court of the UK. Decisions of the Privy Council are binding on the Supreme Court and Court of Appeal whether on appeal from Bermuda or from any other common law jurisdiction where the common law or statutory provisions in question are the same as those in Bermuda; see Grayken v Grayken [2011] Bda LR 15.

Integrity of process Bermuda is the oldest British Overseas Territory. The Governor of Bermuda, appointed by the British Foreign Offi ce, acts as the representative of the Queen and thereby as de facto head of state. The judges of the Supreme Court are appointed by the Governor and are renowned for their independence and impartiality. These judges are drawn from the ranks of senior members of the Bermuda Bar and the Commonwealth Bars and Judiciary. The Bermuda Bar is regulated by the Bermuda Bar Act 1974 and its governing body is the Bermuda Bar Association. The Bermuda Bar follows many of the traditions of the English Bar and adopts a similarly stringent Code of Professional Conduct. However, unlike England (which still maintains a distinction between barristers and solicitors) there is a fused legal profession in Bermuda similar to that in Canada and some Australian jurisdictions. All lawyers admitted to practice in Bermuda (called “Barristers and Attorneys of the Supreme Court of Bermuda”) have the right of audience before the Bermuda courts. The Bermuda Bar comprises Bermudian lawyers who have met certain minimum qualifi cation and training requirements, and lawyers from Commonwealth jurisdictions who have been approved by the Bar Association for the grant of the right to work in Bermuda. English Queen’s Counsel are admitted to practice at the Bermuda Bar on a temporary basis in individual and appropriate cases. No requirements exist in relation to foreign lawyers appearing on behalf of a party in arbitration proceedings being conducted in accordance with the UNCITRAL Model Law in Bermuda. Any duly qualifi ed legal practitioner who has been instructed by a party to represent him in the arbitration can participate in international commercial arbitration proceedings in Bermuda. If the party to the arbitration chooses, he can also be represented by a layperson.

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Privilege and disclosure Standard disclosure Parties to commercial litigation in the Supreme Court must disclose all documents in their possession, custody or power that relate to any matter in question between them in the litigation. This obligation is mutual between the parties and arises after the close of pleadings until trial. However, the parties can agree to dispense with or limit their discovery obligations. The parties must exchange lists of all relevant documents and permit the other party to inspect and take copies of them. The time period set by the rules of court is 14 days after the close of pleadings. However, this period can be extended by agreement between the parties or by order of the court. If a party fails to disclose all relevant documents in its possession, it is usual for the other party to request a verifi cation of its list of documents by affi davit. If this is not complied with, the party can apply to the court for an order for a verifying affi davit. A failure to comply with discovery obligations can ultimately result in the striking-out of the claim or defence and entry of judgment as may be appropriate in the circumstances. Outstanding matters relating to discovery are usually dealt with by the court on the application of a party at the summons for directions stage. Specifi c disclosure A party can apply to the court for discovery of specifi c documents or specifi c classes of documents, if it is considered that the other party failed to comply with its discovery obligations. This application is made by summons that is returnable before a judge and supported by an affi davit stating the evidence on which the application is based. Such an application may be made at any time following ordinary discovery. Privileged documents Under Bermuda law there are three main types of privilege: • Legal advice privilege. • Litigation privilege. • Without prejudice correspondence. Legal advice and litigation privilege attaches to documents produced internally within an organisation in connection with obtaining advice from in-house legal advisers and written communications with outside lawyers. However, for litigation privilege to apply, the correspondence must have been made for the purposes of litigation or in contemplation of litigation. Letters and oral communications between the parties to actual or contemplated litigation, which are made or written for the purposes of settling the dispute and are expressed to be written or made without prejudice, cannot be admitted into evidence. Other non-disclosure situations The disclosure of confi dential information can be compelled in litigation where disclosure is necessary to dispose of the case fairly. Relevance alone may not be a suffi cient ground to order disclosure. In general, the court seeks to balance the private interest in preserving confi dence against the public interest in seeing that justice is done.

Costs and funding Costs The general rule in Order 62 of the RSC is that costs follow the event (i.e. the unsuccessful

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party pays the successful party’s costs.) However, there can be circumstances in which the costs of separate issues in the trial are subject to different costs orders. A typical costs order is “costs in the cause’’. This means that whichever party succeeds at trial obtains its costs of the application in which the order was made. Another typical costs order is “costs of the [claimant or defendant] in any event’’. This order is made where the court is satisfi ed that the claimant or defendant ought to have its costs of a certain application regardless of which party prevails at trial. It should be noted, though, that the Court’s discretion on costs is wide and can take into account a variety of factors including taking a view as to how litigation should have been conducted. In the recent case of David R. Whiting v Torus Insurance (Bermuda) Ltd [2015] Bda LR 18, a successful claimant who claimed damages of $300,000 but was awarded only $1,909 was left to bear his own legal costs. The judge awarding the costs of an application to a party can make a summary assessment of the amount of the costs of the application to be paid. However, it is more common for costs to be assessed at the end of the trial after judgment. In the absence of an agreement by the parties as to the amount of costs to be paid under a costs order, the Registrar of the Supreme Court, in the role of Taxing Master, assesses the claim for costs following the production of an itemised bill of costs by the party claiming its costs. These assessments are called taxation proceedings. The taxation of costs is an exercise which involves the Taxing Master determining what legal costs were reasonably incurred for the purposes of obtaining the result achieved. The use of without-prejudice offers is commonplace in circumstances where a payment into court is not permissible under the rules of court. A payment into court is appropriate in civil cases, where monetary damages are claimed for breach of a contract or commission of a tort, and the defendant wishes to limit his exposure to the payment of the claimant’s legal costs. The effect of an offer to settle puts the offeror in an advantageous position during the costs assessment, if the successful party recovers no more than the amount offered. Interest is awarded on costs from the date of the order for costs. However, these costs do not need to be ascertained at the date of the order but only quantifi ed when assessed (taxed). The statutory rate at which interest is awarded is currently 3.5% per year. Funding The usual fee structure between a lawyer and his client is for invoices based on the time spent performing the client’s work, charged at an agreed hourly rate. In some cases, a lump sum can be agreed at the outset as the lawyer’s remuneration. The Barristers Code of Professional Conduct does not permit Bermuda lawyers to enter into contingent fee arrangements. However, this rule does not apply to undefended debt collections, where a Bermuda lawyer can charge a percentage of an undefended debt as his fee for its collection. The matter of contingent fees is currently under review by the Bermuda Bar Association. Litigation is usually funded by the parties to the litigation out of their individual fi nancial resources. Legal aid is not available in commercial litigation cases. Some large-scale litigation is conducted in Bermuda with funding from third-party funders. Although after-the- event insurance is not available in Bermuda from local insurance sellers, insurance to cover these risks in Bermuda litigation can be purchased from UK insurers.

Interim relief The Bermuda procedural rules provide a number of ﬂ exible remedies to preserve and detain property pending a substantive hearing, and for a party to apply for a case to be dismissed before trial. These remedies include:

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Strike-out orders Under the RSC Order 18, a claim can be struck out before trial. The usual ground for striking out a claim is that it fails to disclose a reasonable cause of action. The basis of this application is equivalent to a demurrer (that is, a plea in a lawsuit that objects to or challenges the suffi ciency of a pleading fi led by an opposing party). A statement of claim must plead all the essential elements of a cause of action under Bermuda law. For example, a claim in tort must plead the duty of care, the breach and loss or damage arising from the breach. A failure to plead any one of these elements gives rise to an application to strike out. Other grounds for striking out a claim exist under the Rules of Court; for example, that the claim is an abuse of the process, or is frivolous or vexatious. Applications to strike out are usually made at an early stage of the proceedings (for example, after the statement of claim is served). The application is made by summons, returnable before a judge in chambers. If the ground relied on is a failure to disclose a reasonable cause of action, no evidence is served in support of the application, as the defects of the statement of claim are usually apparent on its face. However, other grounds for striking out require the service of evidence in support. The evidence is given by way of an affi davit. The fi rst hearing of the summons to strike out is usually treated as a directions hearing at which a timetable for the fi ling of evidence (if any) and the return hearing are provided for. Summary judgment The summary judgment procedure under RSC Order 14 is another means of disposing of a claim without a full trial. Summary judgment may be granted in favour of the claimant in circumstances where it can be established on affi davit evidence usually at an early stage of the action: • that there is no defence to the claim or part of a claim; and • that the defence is only as to the quantum of damages. The applications are also made by summons supported by an affi davit verifying the relevant facts. Summary judgment applications are usually made following service of the statement of claim. On the hearing of the application, judgment may be given for the claimant. However, if the court has doubts as to whether the defendant has a defence to the claim, leave to defend may be given on condition that the defendant pays the amount in dispute into court. Summary judgment can also be given in favour of a defendant on any counterclaim made against the claimant. Security for costs RSC Order 23 provides for a defendant sued in the Supreme Court to obtain security for its legal costs in defending the claim. The usual grounds for this application are where: • the claimant resides abroad; or • the claimant is suing in a representative capacity as a nominal claimant on behalf of some other person and may not be able to satisfy an order for costs made against him. An application for security for costs is made by summons supported by an affi davit stating the material facts. Orders for security for costs usually provide for a percentage of the estimated legal costs (around two-thirds, although this is not a hard and fast rule) up to the date of the summons for directions, to be secured in favour of the defendant. If granted by the court, the security can be provided by: • letter of credit issued by a local bank; • bond given by a third party acceptable to the defendant; or

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• the claimant’s fi rm of lawyers giving an undertaking to the defendant to satisfy any costs order up to a certain level. A claimant cannot obtain security for costs against a defendant. The Supreme Court has jurisdiction to make third-party costs orders where, for example, the named defendant ordered to pay the plaintiff’s costs is without fi nancial resources. In such circumstances the Court may order a third party who directed/controlled the defence of the claim for its benefi t to pay the plaintiff’s costs. (This risk of being held liable to satisfy the costs incurred by another does not apply to pure funders.) Notice of a claim for third-party liability is usually given by letter and sent to the third party as soon as possible. The third party may be joined as a party at the conclusion of proceedings; see Phoenix Global Fund Ltd v Citigroup Fund Services (Bermuda) Ltd [2007] Bda LR 61. The Commercial Court’s jurisdiction to make such orders extends to ordering disclosure of documents which might lead to the identifi cation of further funders; see The Majuro Investment Corporation v Timis & ors [2016] SC (Bda) 22 Com [unreported]. Interim injunctions Interim injunctions are available in the Supreme Court in Commercial Court actions. They aim to preserve the subject matter of the proceedings or to prevent a defendant from dissipating his assets in order to render nugatory any judgment obtained against him in Bermuda (Mareva injunctions). Mareva injunctions can be accompanied by disclosure orders regarding the defendant’s assets and are limited to the amount claimed in the action. They can also permit ordinary business expenses and the cost of defending the action to be paid from the assets, if no other assets are available for that purpose. The Court must be satisfi ed that a prima facie case exists for granting the interim relief sought. Following the fi ling of the application, an interlocutory injunction can be granted on an urgent basis. These orders can be made without notice to the defendant where circumstances so require to ensure their effi cacy. An injunction is usually sought without notice to the defendant, for example, where there is reason to believe that the defendant will immediately seek to transfer his assets out of the jurisdiction if made aware of the commencement of proceedings. The test to be applied to whether an injunction should be granted generally follows the well-established American Cyanamid principles, including: consideration of whether there is a serious issue to be tried; the determination of where the balance of convenience lies; and whether damages would be an adequate remedy. The Commercial Court recently applied these principles in Oung Shih Hua James v Paladin Ltd [2014] Bda LR 75, to the question of whether directors purported to have been removed at a special general meeting should be restrained from acting. The court determined that the question of whether the meeting was properly called was a serious issue and that the balance of convenience lay in preserving the status quo between ‘rival boards’. The court in that case also ordered an expedited trial, as it was held to be in the interests of justice generally and the reputation of Bermuda and the Hong Kong Stock Exchange, for a dispute about who controls a company to be resolved at the earliest opportunity. The court can, in an appropriate case, grant a mandatory injunction instead of the usual prohibitory injunction to compel a defendant to perform an act or function. Where the order is made without notice to the defendant, the usual course in challenging the order is to apply to set the order aside. If that fails, an appeal against the order can be lodged. Interim attachment orders Interim orders are available in the Commercial Court to preserve the subject matter of an action brought in the court or to prevent the defendant from dissipating its assets, with the

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intention of making itself judgment-proof. In making this order the court must be satisfi ed that a prima facie case exists for making the orders sought. Examples of such orders are Mareva injunctions (freezing orders) and Anton Piller orders to preserve evidence. In cases of emergency, the orders can be made without notice to the defendant and, depending on the availability of a judge, shortly after the application is fi led. An injunction to prevent the dissipation of assets of a defendant can be granted in support of proceedings continuing in another jurisdiction or in support of arbitration proceedings. An injunction to prevent the dissipation of assets does not create any security over those assets in favour of the claimant. If the claimant is claiming a proprietary right in the asset in question, this right, if confi rmed by the judgment at trial, is preserved by the injunction. As a precondition to obtaining an interlocutory injunction, a claimant must give an undertaking to be responsible for any loss or damage to the defendant caused by the injunction, if the court subsequently decides that the injunction ought not to have been granted. The court can order a claimant who obtained an interim injunction to fortify his undertaking in damages by providing security for the undertaking. Interim orders are also available for the detention, custody or preservation of any property that is the subject of an action in the Commercial Court. The court can also order an inspection of the property in question, as well as samples of and experiments taken on the property.

Enforcement of judgments Local judgments Enforcement of a money judgment is by way of a writ of execution against the assets of the judgment debtor; for example, by seizure and sale through the Provost Marshall General (offi cer of the court responsible for the execution of judgments). Judgments that require the defendant to do or refrain from performing a certain act can be enforced by sequestration or committal proceedings. An application for sequestration or committal is appropriate in circumstances where a person who is required by a judgment or order to do an act within a time specifi ed refuses or neglects to do it; or disobeys a judgment or order requiring him to abstain from doing an act. An application for sequestration or committal must be made by notice of motion, which must be served personally on the respondent. The notice must be supported by an affi davit explaining the circumstances of the judgment and the failure of the respondent to comply with its terms. An order that requires the defendant to deliver a chattel to the claimant can be enforced by a writ of delivery. A writ of specifi c delivery is appropriate in circumstances where there is no option given to the defendant to retain the chattel and pay the assessed value of the item. Foreign judgments Only foreign judgments or arbitration awards for the payment of a sum of money can be enforced in Bermuda. Court judgments are enforced by registration under the Judgments (Reciprocal Enforcement) Act 1958. This is a relatively quick and simple process. However, the 1958 Act only applies to the territories listed in a schedule to the act (all of which are British Commonwealth countries). Judgments from countries not covered by the act can be enforced by a common law action on the foreign judgment, in accordance with the principles established in Muhl (Superintendent of Insurance of the State of New York, as liquidator) of Nassau Insurance Co v Ardra Insurance Co Ltd [1997] Bda LR 36 (which in turn followed the principles of English private international law governing the recognition and enforcement of foreign judgments).

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At common law, the judgment creditor will be required to issue proceedings in Bermuda replicating the foreign proceedings. Thereafter, the judgment creditor must apply for summary judgment on the foreign judgment; this is the procedure set out in Young v Hodge [2001] Bda LR 70. If there is no dispute then, in practice, the application may result in a default judgment, since the application will not be contested, or summary judgment if the summary judgment application is met with an appearance. The grounds available for resisting the enforcement of a judgment at common law are strictly limited as follows: • want of jurisdiction of the foreign court in the international sense; • the judgment was obtained by fraud; • enforcement would be contrary to public policy; or • the proceedings in which the judgment was obtained were conducted in a manner contrary to natural justice. Arbitration awards are enforceable in accordance with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which Bermuda is a party.

Cross-border litigation Governing law and jurisdictions clauses The Commercial Court generally respects the governing law of contracts. Certain matters relating to claims under the contract are treated as procedural and governed by Bermuda law if enforced in the Bermuda Commercial Court; for example, whether a claim under a contract is time-barred pursuant to the Limitation Act 1984. The Commercial Court will also enforce the choice of jurisdiction clause in a contract and will stay any proceedings brought in breach of an exclusive jurisdiction clause. The Commercial Court will not give leave to serve a defendant overseas in proceedings commenced in Bermuda in breach of an exclusive jurisdiction clause unless the claimant proves that it is just and proper to allow the proceedings to continue. An example of this is where there is a revolution in the foreign country and, as a result, the court which was agreed to have exclusive jurisdiction is a different court. Service Bermuda is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Service on a Bermuda incorporated company in Bermuda is effected by leaving the documents to be served at the company’s registered ofﬁ ce. In the case of a non-resident insurance undertaking, the documents must be left at the principal ofﬁ ce of the undertaking. Service of originating process on an individual is effected by handing the documents to the individual. Taking evidence Bermuda is not a party to the Hague Convention on the Taking Abroad of Evidence in Civil and Commercial Matters (Hague Convention). However, Bermuda allows the taking of evidence in Bermuda for use in foreign proceedings in accordance with local legislation, which is broadly similar to the Hague Convention. The procedure requires an application to be made to the Supreme Court exhibiting a letter of request from the foreign court to the Supreme Court. The letter must request the attendance of the witness before a named examiner at a certain place at a certain time, or require the attendance of the custodian or records of a company whose documents are sought to

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be adduced in evidence. The application is made without notice. The order requiring the witness’s attendance usually contains a penal notice and is served personally on the individual. The commissioner appointed by the order records, certiﬁ es and transmits the evidence to the foreign court. Insolvency proceedings The Commercial Court will recognise a foreign liquidator’s ability to gather in assets in Bermuda. The Court will also ensure judicial cooperation in cross-border cases on a common law basis where the relief being sought is also available under the laws of the assisting jurisdiction; see Singularis Holdings Limited v Pricewaterhouse Coopers [2014] UKPC 36. The Commercial Court, however, generally has no jurisdiction to wind up foreign companies; see PricewaterhouseCoopers v Saad Investments Company Limited [2014] UKPC 35.

International arbitration The main method of ADR in Bermuda for international commercial disputes is arbitration, in accordance with the Bermuda International Conciliation and Arbitration Act 1993. The 1993 Act provides for arbitration in accordance with the UNCITRAL Model Law (the Model Law appears as Schedule 2 to the Act). This form of ADR is used predominantly in the insurance and reinsurance sector. Approximately 90% of insurance and reinsurance disputes that are not settled are resolved in arbitration proceedings. Commercial contractual disputes usually contain arbitration clauses, with or without mediation as a precursor. ADR, however, does not form a part of court procedures. It only applies if the parties agree. If a clause in a contract requires ADR, the Commercial Court will enforce it by staying any court proceedings brought in breach of it; see DuPont Scandinavia AB (ARA-bolagen AB) v Coastal Bermuda [1987] Bda LR 74. The Commercial Court also has the power to act to appoint and/or remove arbitrators in certain circumstances; see Management Inc v Everest Capital Inc [1999] Bda LR 22. Evidence in arbitration proceedings can be oral or documentary, in whole or in part. The evidence adduced is confi dential and cannot be disclosed to third parties without the consent of the parties or where legally compellable. Documents disclosed and admissions made in mediation proceedings are usually the subject of written confi dentiality agreements. If not expressly agreed, a Bermuda court implies an obligation of confi dentiality to documents deployed and admissions made in mediation proceedings. The award of costs in commercial arbitrations is at the discretion of the arbitral tribunal. Its discretion is exercised in the same way as the court’s discretion as to costs in litigation; for example, the unsuccessful party is usually ordered to pay the successful party’s costs. These costs can include the costs of the arbitrators and the costs for the use of the venue. The Bermuda branch of the Chartered Institute of Arbitrators can act as an appointing authority, if required. The address and contact details of the Bermuda branch of the Chartered Institute of Arbitrators are as follows: The Chartered Institute of Arbitrators Bermuda Branch Clarendon House 2 Church Street Hamilton HM 11

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Bermuda Tel: +1 441 295 1422 Fax: +1 441 292 4720

Mediation and ADR Domestic arbitrations are conducted in accordance with the Arbitration Act 1986, which is modelled on the Arbitration Acts 1950 and 1979 (UK). Mediation can also be used as a means to resolve disputes, but in practice it is not common in Bermuda. The exception is in respect of employment disputes, where mediation conducted by the Department of Workforce Development is a mandatory precursor to a referral to the Employment Tribunal.

Regulatory investigations The Bermuda Monetary Authority (BMA), established in 1969 as an independent statutory authority, regulates the principal business activities in fi nancial services operating in or from Bermuda. The areas covered include banking, insurance, investment business, trust business and mutual funds. The regulatory regime in these areas is not uniform, as the BMA’s powers are derived from sector-specifi c legislation such as the Insurance Act 1978 (for insurance and reinsurance companies), the Investment Business Act 2003 (for investment businesses) and the Trusts (Regulation of Trust Business) Act 2001 (for trust companies). The BMA has wide powers to carry out on-site visits, gather information and investigate suspected breaches. Enforcement powers include the power to impose restrictions on licences, to give directions, to take protective measures such as to obtain injunctions, to take disciplinary measures such as imposing civil penalties (fi nes), and a process of public ‘naming and shaming’. In terms of these disciplinary measures, under each statute there is generally a process which comprises the issue of a warning notice by the BMA, followed by an opportunity for the regulated entity to make written representations, and then a decision notice is issued by the BMA. Sector-specifi c statutory tribunals exist as an avenue of appeal but do not amount to a full rehearing. A further right of appeal, on points of law only, lies to the Supreme Court. This is a developing area of law and in 2015 and 2016 the Banking Appeal and Insurance Appeal Tribunals sat for the fi rst time. In general, regulation has been relatively ‘light touch’ and collaborative in nature in Bermuda. However, in March 2016 the BMA announced a toughened stance on enforcement action, and in particular announced a policy of publicising the details of breach and the identity of the regulated entity in each case; see www.royalgazette.com/business/article/20160324/ bma-to-go-public-on-enforcement-actions.

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David Kessaram Tel: +1 441 294 1504 / Email: [email protected] David Kessaram is a Director and Head of Litigation at CHW. He is widely recognised for his expertise in commercial litigation, trust litigation, insurance and reinsurance arbitration and litigation and professional negligence matters. He is a Fellow of the Chartered Institute of Arbitrators, an honorary member of the Centre for International Legal Studies, a member of the Honourable Society of the Middle Temple, and was appointed as an Assistant Supreme Court Judge in 2016. He is the author of the Trust Litigation chapter of Offshore Commercial Law in Bermuda (Wildy, Simmonds & Hill, 2013), co-author of the Bermuda chapter of Offshore Financing: Security and Insolvency (Sweet & Maxwell, 1997) and author of the Bermuda chapter of International Execution against Judgment Debtors (Sweet & Maxwell, 1993). He is described in Chambers Global as “a Bermuda market veteran with a very strong reputation amongst sources”, and recommended in The Legal 500 for “his expertise, wisdom and experience”.

Steven White Tel: +1 441 294 1547 / Email: [email protected] Steven White is a Senior Associate in the Litigation Department at CHW. He has considerable experience in dealing with shareholder disputes, insolvency/ restructuring issues, asset-tracing, regulatory matters, and corporate and commercial disputes generally. Prior to relocating to Bermuda in 2014, Steven was a barrister at the English Bar where he built up a successful commercial and employment disputes resolution practice. He is described in The Legal 500 (UK) as “go to counsel”, and as a barrister who “cuts through matters without fence sitting” and is “not afraid to tackle diffi cult issues”. He is an Associate Member of the Chartered Institute of Arbitrators and a member of the Honourable Society of the Inner Temple. He works regularly with fi rms in the UK and US, fi nancial institutions and corporate and commercial clients with respect to multi-jurisdictional disputes. He is recommended in The Legal 500 for Bermuda.

Sam Riihiluoma Tel: +1 441 294 1505 / Email: [email protected] Sam Riihiluoma is an Associate within the Litigation Department at CHW. He has experience advising clients in a wide range of civil litigation areas including debt recovery, contractual disputes, regulatory matters (banking), personal injury, and estates and trusts disputes.

Cox Hallett Wilkinson Limited Cumberland House, 9th ﬂ oor, 1 Victoria Street, Hamilton, PO Box HM1561, Bermuda Tel: +1 441 295 4630 / Fax: +1 441 292 7880 / URL: www.chw.com

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Loreen Bonner Bonner Attorneys

Efﬁ ciency of process The importance of judicial efﬁ ciency in any state can never be overstated. Judicial processes have severe impacts on the lives of people, as people look up to the judiciary to bring permanent solutions to their disputes. The introduction of judicial case management in Botswana has addressed the issues of backlog and delays in resolving cases. Judicial case management means the pace of cases is now in the hands of the court, and not in the hands of litigants and their lawyers. The Rules of the High Court and the Magistrates’ Court were amended to make provision for case management. Botswana has also witnessed the introduction of the electronic Court Record Management System (CRMS) which aims to have an automated record of each active case in the Court of Appeal, High Court and Magistrates’ Court. CRMS facilitates expeditious case disposal.

Integrity of the legal process Natural justice is a bedrock of any democracy and civilised legal system. The two main fundamental rules of natural justice are audi alteram partem (hear the other side) and nemo judex in causa sua (no man can judge in his own case). These rules of natural justice apply to decisions of all governmental agencies and tribunals and all courts, which may be declared null if found in contravention of natural justice. A well-functioning democracy needs an independent judiciary. The judiciary is an independent arm of government created to do justice between citizen and citizen, and between citizen and the state without fear or favour. The judges and the magistrates are tasked with the duty to administer justice without any fear or infl uence from the Executive or Parliament. Chief justice Dibotelo has summarised the notion of judicial independence in Botswana as follows: “The Independence of the judiciary is neither an esoteric pronouncement nor privilege for the comfort of judicial offi cers but a right and a practical measure for the benefi t of citizens in a democratic state such as ours to ensure that courts are true and genuine arbiters of cases brought before them; whatever a litigant’s standing or position in society, we are all deemed equal before the law.”1 Judicial impartiality encompasses the idea that judges must be fair and base their decisions purely on the law and facts, and not yield to any external pressures. The independence of the judiciary is entrenched in our Constitution, which lays down the procedure for setting- up courts in Botswana, their jurisdiction, composition and the appointment and tenure of judges. Section 122 of the Constitution of Botswana provides that judges’ salaries shall

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be paid from the Consolidated Fund and shall not be altered to their disadvantage. This constitutional provision ensures that the judges’ salaries are not arbitrarily reduced in order to inﬂ uence them.

Disclosure and privilege Disclosure refers to the stage of the litigation process when each party is required to disclose to the other party the documents that are relevant to the issues in dispute. Disclosure is intended to ensure that the parties show their hands in respect of documentary evidence at an early stage. In Botswana, parties are obliged to make full and prompt disclosure of all documents in their possession before the matter goes to trial, except for privileged documents. Courts have the power to inspect documents to ascertain whether they are privileged.2 The importance of discovery in court proceedings was buttressed in the case of Gaetsaloe v Debswana Diamond Co (Pty) Ltd 2012 BLR 148, where the court stated that the purpose of disclosure is to provide the parties with the relevant materials and documents before the hearing so as to assist them in assessing the strengths and weaknesses of their respective cases, and this provides a basis for fair disposal of proceedings at the hearing. Each party is therefore enabled to adduce documentary evidence in support of his case or as rebuttal of the case against him. Disclosure will eliminate the element of surprise at the hearing in relation to documentary evidence produced on the date of the hearing. Communications and documentation exchanged between a lawyer and a client are privileged and cannot be disclosed to any third party including a court. In Botswana, as a general rule, communications between an attorney and his client are protected from disclosure provided that certain requirements are met. The requirements are as follows: (a) the attorney must have been acting in a professional capacity at the time; (b) the attorney must have been consulted in conﬁ dence; (c) the communication must have been made for the purpose of obtaining legal advice; (d) the advice must not facilitate the commission of a crime or fraud; and (e) the privilege must be claimed. It is clear from the above that attorney-client privilege is the foundation of our legal profession, and it seeks to enable individuals who seek legal counsel to do so freely without fear of being exposed by their attorneys.

Costs At the conclusion of every case, the courts have to deal with the allocation of costs. As a general rule, the successful party is entitled to his costs.3 The awarding of costs lies solely at the discretion of the court. The general rule, however, must be followed unless there are special circumstances justifying the exercise of its discretion; otherwise, the costs follow the event, and the successful party is entitled to an order that the loser pays the costs he has incurred in the litigation. The purpose of awarding the costs is to indemnify him for the expense to which he has been put, having been unjustly compelled to initiate or defend proceedings. In Botswana, costs are awarded on attorney and client scale, party-to-party scale, and costs de bonis propriis (out of his own private pocket). In some instances, judges do not make orders as to costs; in this case each party will bear their own costs. Attorney and client costs are costs payable by a client to his attorney. The liability of a client to pay

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costs to his attorney stems from a contract to provide legal services between them, and it is unrelated to the outcome of the court proceedings. In the case of Nel v Waterberg Landbouwers Ko-op Vereeniging 1846 AD 597, Tindal J summarised circumstances which can lead to an award of costs on attorney and client scale as follows: “The true explanation of awards of attorneys’ client costs not expressly authorised by statute seems to be that, by reason of special consideration arising either from the circumstances which give rise to the action or from the conduct of the losing party, the court in a particular case considers just, by means of such order, to ensure more effectively that it can do by means of a judgment for party and party costs that the successful party will not be out of pocket in respect of the expense caused to him by the litigant.” In Botswana, courts award costs on attorney and client scale in serious cases such as vexatious, unscrupulous, dilatory or mendacious conduct by the party to the proceedings. In the case of Muzila Muzila v University of Botswana and Sharon Silverts, Misca 005/2001 the Applicant’s afﬁ davit was rude and used insulting language, and the court awarded costs on attorney and client scale. In some cases, attorney and client costs may be made in terms of the parties’ express agreement regarding their liability of costs. If such agreement is valid and enforceable, the courts are generally bound to give effect to the parties’ agreement for awarding costs on attorney and client scale. As alluded to earlier, the courts can grant costs on a party-to-party scale. This scale differs from the attorney and client costs in that they do not include all the costs which the party to litigation may have incurred, but only costs incurred in the actual litigation and duly taxed by the Registrar or the Clerk of court. The costs are aimed at indemnifying that party against the expense to which he has been put by the litigation. Botswana courts also awards costs de bonis propriis. The award of costs de bonis propriis is only applicable when a person litigates in a representative capacity. The general principle is that a party who litigates in a representative capacity cannot be ordered to pay the costs de bonis propriis unless he or she is guilty of improper conduct. In the case of Mothebe v Barclays Bank of Botswana Ltd 1997 BLR 123 CA, court held that costs de bonis propriis should only be awarded in the most serious cases of dishonesty, wilfulness or negligence.

Litigation funding These past few years, Botswana has witnessed the emergence of private companies providing legal insurance cover.4 The legal insurance companies provide in-house legal advisors to assist their clients without going to court. If a client’s matter has to be taken to court, the insurance company will refer the matter to their capable and experienced panel of lawyers. The legal insurance companies have limitations in that they do not cover all cases, and their clients do not have the option to appoint attorneys of their choice to represent them. In most cases when dealing with divorce matters, the legal insurance companies tend to cover their clients if the divorce is uncontested. The government of Botswana established a permanent independent public entity, to be known as Legal Aid Botswana, to provide state-funded legal aid to the indigent in Botswana. Legal Aid Botswana was established by an Act of Parliament to provide free legal services and presentation to underprivileged members of the community who cannot afford private

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legal representation. Legal Aid Botswana attempts to bridge the gap between the rich and the poor by providing access to justice to underprivileged members of the community. Legal Aid assists litigants who have prospects of success in their claims, and the litigants must be willing to accept reasonable settlement offers of their cases.

Interim relief Interim relief consists of remedies which are temporary or interlocutory. They are usually granted at the stage of pre-trial proceedings and designed to protect the interests of litigants pending fi nalisation of the matter. A party to proceedings can approach courts to prevent an infringement or stop an infringement from continuing pending fi nal determination of the matter. Interim reliefs are powerful and extraordinary and can be granted when an applicant has satisfi ed all requirements.5 Briefl y, these requisites are that the applicant for such temporary relief must show: (a) that the right which is the subject-matter of the main action and which he seeks to protect by means of interim relief is clear or, if not clear, is prima facie established though open to some doubt; (b) that, if the right is only prima facie established, there is a well-grounded apprehension of irreparable harm to the applicant if the interim relief is not granted and he ultimately succeeds in establishing his right; (c) that the balance of convenience favours the granting of interim relief; and (d) that the applicant has no other satisfactory remedy.

Enforcement of judgments After obtaining judgment, the successful party seeks to enforce and execute that judgment. It is common cause that commercial transactions now transcend state boundaries, giving rise to the issue of recognition and enforcement of foreign judgments. The Recognition and Enforcement of Foreign Awards Act6 regulates the recognition and enforcement of arbitration awards in Botswana. Foreign awards may be recognised and enforced in Botswana provided that the country in which the award was made is a designated country, the President having been satisﬁ ed that substantial reciprocity of treatment is extended to the judgments of the High Court of Botswana in that country.7 In Botswana, foreign judgments can be enforced in the following ways: 1. Direct enforcement under statute. 1.1 By registration under Part 1 of the Judgments (International Enforcement) Act.8 1.2 By registration (maintenance orders) under Part III of the Judgments (International Enforcement) Act and Enforcement Act under the Maintenance Orders Enforcement Act.9 2. At Common Law by action on the judgment. 3. Under the Recognition and Enforcement of Foreign Awards Act which gives effect to the New York Convention on the Recognition and Enforcement of Foreign awards adopted in New York on 10 June 1958. A foreign award can be recognised and enforced in Botswana, provided that the country in which the award was made is a designated country, the President having been satisﬁ ed that, ‘substantial reciprocity of treatment’ is extended to the judgments of the High Court of Botswana in that country, and that the award has been registered with the High Court.

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Section 5 (1) of the Judgements (International Enforcement) Act provides that every foreign judgment sought to be enforced in Botswana must be registered within six years from the date of judgment and the judgment registered must be ﬁ nal and conclusive.

Cross-border litigation We live in an age of intense international trade involving cross-border transactions, as well as the existence of efﬁ cient mechanisms for the international enforcement of judgments. Botswana courts have jurisdiction to make an order of attachment of assets of a defendant pending the determination of an action in a foreign court. In the case of Concorde Leasing Corp Ltd v TPR (Pty) Ltd,10 an application was made for the attachment of a grader; pending determination of an action to be brought in South Africa, it was held that the court had jurisdiction to grant an interim order of this nature.11 Our courts have the power to order examination of a witness before a special examiner, either in Botswana or elsewhere, for discovery and interrogatories.12

International arbitration The Botswana Institute of Arbitrators is the main body that conducts alternative dispute resolution in Botswana. It is not mandatory to use arbitration bodies in Botswana unless stipulated in the parties’ contract. According to the Arbitration Act,13 the courts are entitled to grant preliminary or interim relief in proceedings pertaining to arbitration. Our courts also have the power to remove an arbitrator, upon motion, when a ground of recusal is found to exist or when the arbitrator has misconducted the proceedings.14

Mediation and Alternative Dispute Resolution (ADR) ADR and mediation allow parties to a dispute to ﬁ nd a quick solution with assistance of a neutral third party, without going through the expensive and long court process. In labour disputes, the parties are required by law to go to mediation15 before arbitration, and subsequently the Industrial Court. In 2015, an Alternative Dispute Resolution Centre of Botswana was launched to provide alternative dispute resolution services.

Regulatory investigations Most regulatory bodies attempt to make provisions that exclude the jurisdiction of courts in Botswana. While courts are reluctant to interfere with the administrative acts of regulatory bodies and agencies, they can be called upon to review the acts of the agencies. The courts will review and intervene with such action in three circumstances: • First, where the decision-maker acts illegally, contrary to the statute empowering him to act. • The second ground for intervention by the court is where the decision made is grossly unreasonable, to the extent that a review court can only say that no person acting reasonably could ever have come to that decision. In other words, when the review court comes to the conclusion that the decision-maker was irrational. • Lastly, intervention will occur where it is shown that the decision-maker acted procedurally and the decision-making process was unfair. Essentially, a regulatory body must apply its mind to the matter in accordance with the terms of the prevailing statute and the tenets of natural justice. In the case of Attorney

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General and another v Kgalagadi Resources Development Company (Pty) Ltd 1995 BLR 234 (CA), it was stated that courts will exercise a restraining infl uence whenever a decision has been arrived at arbitrarily or capriciously; or as the result of mala fi de or unwarranted adherence to a fi xed principle; or in order to further an ulterior or improper purpose; or where the decision took into account irrelevant considerations and ignored relevant ones.

* * *

Endnotes 1. Address by Honourable Chief Justice Dibotelo at the ofﬁ cial opening of the legal year on Tuesday 2nd February 2016. 2. Rule 9 (2). 3. Civil Procedure and Practice in the High Court of Botswana, G.M. Kakuli, Bay Publishing, 2005. 4. The companies include Legal Wise, Legal Guard, Mosele Legal Services and Capricorn Legal. 5. Civil Procedure and Practice in the High Court of Botswana, G.M. Kakuli, Bay Publishing, 2005. 6. Cap 11:04. 7. Judgements (International Enforcement) Act section (3)1. 8. Cap 11:04 (Act 16,1981). 9. Cap 29:04. 10. 1979-80 BLR 122. 11. Private International Law in Commonwealth Africa, Richard Frimpong, Oppong, Cambridge University Press. 12. Ibid. 13. Cap 06:01. 14. Section (13) (1) of the Arbitration Act 06:01. 15. Trade Disputes Act 2016.

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Loreen Bonner Tel: +267 311 4598 / Email: [email protected] Loreen Bonner is a Managing Partner at Bonner Attorneys. The law ﬁ rm was established in April 2017 and is based in Gaborone, Botswana. She represents public companies and individuals in all courts of Botswana. Loreen has experience in commercial and civil litigation, providing legal advice and an array of legal services to clients; negotiating, drafting and reviewing contracts for individual and companies. She worked at DITSHWANELO – The Botswana Centre for Human Rights in 2013 where she dealt with labour and employment disputes, and family law matters, particularly custody and maintenance cases. She joined Masire Legal Consultants in April 2014 and worked as an Associate Attorney where she handled family law matters, labour and employment disputes, administration of estates, debt collection and conveyancing.

Bonner Attorneys Plot 19380, Phase 2, Gaborone, Botswana Tel / Fax: +267 311 4598

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Renato Stephan Grion & Guilherme Piccardi de Andrade Silva Pinheiro Neto Advogados

Effi ciency of process Improving the effi ciency of the Brazilian judicial process has been a major concern for the Brazilian legal community. Not only practitioners, but also members of the Judiciary, scholars, legislators and society in general have long recognised the need to improve and modernise Brazil’s dispute resolution framework. Even the Brazilian Federal Constitution now provides the reasonable duration of a lawsuit as a principle. Over the last decade, Brazil has taken a number of signifi cant legal and practical measures to improve and modernise its laws in order to create a framework for a more rational and effi cient dispute resolution system. Several statutes, laws and rules have been altered, amended and/or enacted in order to reach that aim. Probably the most notable example of this process is the new Code of Civil Procedure that was enacted on 16 March 2015 and entered into force on 16 March 2016. One of the main objectives of this new Code is to deal with the problem of excessive repetition of cases (matters with the same cause of action or raising the same legal issues) that clog the Brazilian courts. A recent report from the Brazilian National Council of Justice indicated that there were about 74 million lawsuits pending judgment in Brazil at the end of 2015. The new Code of Civil Procedure also aims at improving the structure of Brazilian civil procedure in several ways, with good examples being: (i) fewer formalities and appeals, in order to speed up civil litigation; (ii) modernisation of provisions related to alternative dispute resolution methods, especially arbitration, mediation and conciliation; (iii) redesigning of rules related to international cooperation and the enforcement of foreign awards; (iv) more fl exible rules in order to allow the parties to adapt the procedure to their particular needs; and (v) establishing certain rules allowing and regulating the use of technology in the judicial process. The Brazilian legal system derives from the civil law tradition (Roman-Germanic), but is also infl uenced by common law institutions (e.g, writ of mandamus and writ of habeas corpus). Legislation is the main source of law. Only where legislation is silent may the courts have recourse to other sources to resolve disputes. Recently, however, Brazil has established specifi c circumstances under which some higher court decisions are considered binding on the lower courts. Constitutional Amendment No. 45 of 2005, for instance, introduced a partial system of stare decisis called súmulas vinculantes (binding precedents), according to which the Federal Supreme Court (“STF”) was then allowed to distil its thinking on a certain matter and to issue binding precedents to impose legal force on all divisions of the judicial system and the public administration. In case of noncompliance with the súmula vinculante, STF was authorised to determine

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directly the invalidity of the defi ant acts through a remedy called reclamação. The new Code of Civil Procedure now establishes that other higher court decisions also have a binding nature, such as decisions rendered on the subject of constitutionality control and decisions rendered to solve repetitive cases or repetitive appeals. In addition to the súmulas vinculantes, all these decisions will be treated as binding precedents, meaning that any defi ant act will be voidable through the reclamação remedy. The Brazilian judicial system is composed of common and specialised jurisdictions, each subordinated to specifi c higher courts, but all are subject to: (i) the Superior Court of Justice (STJ) on federal law matters; and (ii) the STF on constitutional matters. The Brazilian Constitution divides the judicial system into Federal – specialised or common – and state courts, each with different jurisdiction. Given the federal structure of the country, the judicial branches of the states are granted the power to judge. The rules of judicial organisation are provided for in the Federal Constitution and in procedural laws and internal rules of the courts, and normally regulate jurisdiction based on the amount in controversy, the persons involved, and the subject matter. The Federal Constitution establishes the core principles applicable to judicial proceedings, such as due process of law, the right to a full defence (i.e., the right of a party to present its case in a fair and a thorough manner), the right to independent and impartial judges, the guarantee of a “regular judge” or a “court of law”, the inadmissibility of evidence obtained by illegal means, the right of public trial, a reasoned judicial decision, and a process with reasonable duration. None of these guarantees and rights are absolute; they might be reduced or restricted in some manner to assure that another guarantee or right is also being secured, depending on the specifi c case. It is also worth mentioning that almost all judicial lawsuits in Brazil are now processed electronically. The recent enactment of the new Brazilian Code of Civil Procedure is expected to improve the effi ciency of judicial proceedings in Brazil. The attainment of these goals, however, is yet to be confi rmed, since only time will tell if the changes brought about by the new Code will be successful or not. In this context, the use of arbitration and other alternative dispute resolution methods in Brazil has been growing consistently, as will be addressed further in specifi c topics below.

Integrity of process Lack of integrity in judicial proceedings in Brazil is not generally perceived as a problem. The nomination of lower court judges derives from an impartial and objective selection process (i.e. exam), and these judges may ascend to appellate courts according to several criteria, including seniority, productivity and merit. There are few exceptions to this general rule of selection, which apply mostly to the nomination of justices for appellate courts and higher courts. In order to promote the independence and impartiality of the Judiciary, the Brazilian National Council of Justice was created on 30 December 2004, through Constitutional Amendment No. 45. The Council of Justice consists of a judicial agency responsible for carrying out administrative and ﬁ nancial supervision of the Judiciary and the performance of judges. Generally, under Brazilian law, judges must apply statutory law and are bound to follow the rules of civil procedure at all times. Therefore, they are not allowed to adjudicate a dispute according to rules of natural justice, for example. In very speciﬁ c situations, however − in

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particular, when the law is silent about a speciﬁ c matter − judges are allowed to decide according to analogy, socially accepted customs, and general principles of law.

Privilege and disclosure As a rule, which has some specifi c exceptions (e.g., family-related lawsuits), all lawsuits are public in Brazil and the case fi les can be accessed by any interested party. Whenever an exception to this general rule is applicable, parties may request the proceeding in matter to be processed under court secrecy. An important exception to this rule relates to judicial proceedings fi led in connection with arbitrations. Such proceedings are processed in camera, provided that the interested party is able to demonstrate that the arbitration to which the case is related is also subject to confi dentiality. Under Brazilian law, parties and witnesses may refuse to provide some types of sensitive information. Parties and witnesses may refuse, for example, to provide information that they need to keep confi dential due to their professional status, or information that could put their family members at risk. Full disclosure and discovery are not a part of Brazilian civil proceedings. Nonetheless, Brazilian procedural law provides a proceeding specifi cally designed for a party to request the forced disclosure of documents. The party should specify, in detail, which documents are being requested and what their purpose is within the context of the case, demonstrating which facts may be proven or disproven through the documents in question. In addition to all that, the interested party will also have to demonstrate on what grounds it bases its assertion that the requested documents actually exist and are actually in the opposing party’s possession. The opposing party will have a legal obligation to provide the requested documents when: (i) there is a specifi c legal provision that imposes such obligation; (ii) the requested party has made reference to such document in order to constitute it as evidence; and (iii) the document is common to both parties. According to the new Brazilian Code of Civil Procedure, the requested party may refuse to exhibit a document when: (i) it relates to his or her private life; (ii) the exhibition violates his or her duty of honour; (iii) the exhibition could create dishonour to the party or to a third party; (iv) the exhibition could cause the publicity of confi dential facts; (v) there are any other justifi ed reasons, pursuant to the court’s opinion; and (vi) the law expressly allows the party to object to the request, in that specifi c situation. The third party is legally bound to present any document demanded by the court which is under his or her possession (Article 401 of the new Code of Civil Procedure). However, the restrictions and procedural defences explained above must be considered in this case too. In arbitration proceedings seated in Brazil, the parties are free to agree upon the admissibility, scope, and extension of disclosure and discovery proceedings, since Federal Law No. 9,307/1996 (the Brazilian Arbitration Act) provides parties with such an autonomy. Article 133 of the Brazilian Federal Constitution provides protection to attorneys in the exercise of their profession and this is refl ected in the Code of Ethics of the Brazilian Bar Association. Regarding professional privilege, there are express and specifi c provisions on the matter contained in the Brazilian Bar Association Statute (Federal Law No. 8,906/1994). These provisions establish rules related to attorney-client privileged relationships, and grant attorneys the right to protect and refuse to disclose the information received from their clients. This also includes documents related to the case at bar, prepared in relation to or in preparation for litigation (judicial or arbitral), or concerning previously rendered legal advice.

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Costs The party who initiates proceedings must bear the related costs, which can vary signifi cantly depending on the venue. As Brazil is a federal republic, each of the 26 Brazilian states and the Federal District may determine the costs for fi ling a new claim, usually calculated as a percentage of the amount in dispute and varying generally from 0.5% up to 6%. Some states, for example São Paulo, may provide a cap for fi ling costs. In addition, the party who fi les an appeal must bear the related costs, which may also vary considerably depending on the relevant Court of Appeals (generally from 1% to 5% of the value of the claim). In the past few years, some Courts of Appeal in different states have increased this percentage, in an attempt to stop the overload of appeals. Upon a fi nal decision, the defeated party is, in most cases, sentenced to pay the winning party all court costs and expenses incurred during the proceedings, including an additional amount that usually varies between 10% and 20% of the amount under discussion as attorneys’ fees to the winning party’s legal representative(s). It is important to clarify that such fees are payable to the winning party’s attorneys (and not to the winning party itself) because of their success in the lawsuit, and should not be confused with the fees relating to the contract agreed upon between the party and its lawyers. As regards foreign parties, according to Article 83 of the new Code of Civil Procedure, a non-resident individual or company without real estate assets in Brazil, besides bearing the related fi ling costs, must also post a bond when fi ling a lawsuit. This requirement aims at ensuring proper reimbursement of costs and payment of legal fees in case the non-resident individual or company is defeated in the process. There are, however, some exceptions to said requirement.

Litigation funding Brazilian law does not address the issue of funding as regards litigation.

Interim relief The new Code of Civil Procedure has implemented relevant changes when it comes to the possibility of parties seeking interim relief. According to Article 294 of said Code, the interested party may seek interim relief based on either urgency (tutela de urgência) or clear evidence (tutela de evidência). While the former is intended to prevent imminent damages, the latter aims at anticipating the results of a probable ruling. To obtain interim relief based on urgency (tutela de urgência), the party must demonstrate: (i) the likelihood of its right(s); and (ii) a risk of damage or a risk to the practical result of the proceedings. On the other hand, interim relief based on evidence (tutela de evidência) may be granted if: (i) the plaintiff has strong and demonstrable grounds on the merits of the case or if the respondent does not present enough grounds to object to the plaintiff’s requests; (ii) the defendant is making use of delaying tactics; (iii) there is no controversy on the issue; or (iv) the issue in dispute is the subject of settled case law. Lastly, it is worth mentioning that, as regards arbitration proceedings, arbitrators have the same discretionary powers granted to a state court judge to analyse and grant interim relief measures. They also have the authority to review, reconsider or maintain any interim relief granted by state courts before the constitution of the arbitral tribunal. A recent amendment to the Brazilian Arbitration Act included new provisions (Arts. 22-A and 22-B) on the matter.

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Enforcement of judgments According to the Brazilian Constitution, the enforcement of foreign decisions in Brazil − whether arbitral or judicial, fi nal or partial − will only be possible if the interested party obtains the recognition of the decision by the Brazilian STJ. Recognition proceedings before the STJ are regulated concomitantly by the new Brazilian Code of Civil Procedure, Decree- Law No. 4,657/1942 − known as the Law of Introduction to the Rules of Brazilian Law − and the STJ’s internal rules. In case of a foreign arbitral award, the Brazilian Arbitration Act is also applicable, as well as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Depending on the specifi c case, other conventions may also apply. The STJ does not examine the merits of the relevant dispute, but may deny recognition whenever it interprets that the content of the decision is contrary to Brazil’s national sovereignty, the dignity of the human person, and/or Brazil’s public policy. In general, the STJ will deny recognition if it fi nds that: (i) the award was not issued by a competent authority; (ii) the respondent was not duly notifi ed about the commencement of the proceedings; (iii) the award is not effective in its country of origin; (iv) the award is contrary to previous decisions rendered by Brazilian courts which have already become res judicata; (v) the award and relevant documents are not accompanied by full translations into Portuguese; or (vi) the award violates Brazil’s national sovereignty, the dignity of the human person and/or Brazil’s public policy. Case law shows that the STJ has a strong tendency to recognise foreign decisions, arbitral or judicial, this having been the case in the wide majority of cases so far. Once the STJ issues the writ of enforcement − or, depending on the case, the exequatur − the interested party may present it to a competent federal lower court, which will initiate enforcement proceedings.

Cross-border litigation Cross-border litigation in Brazil is on the rise. Not only have companies been expanding globally in the past few decades, but people, goods, money and data are also circulating faster, regardless of traditional borders. As a result, disputes in Brazil with foreign elements are becoming more and more common. Some of the basic concepts concerning cross-border litigation in Brazil can be found in the Law of Introduction to the Rules of Brazilian Law, which dates from 1942, as previously mentioned. Although several projects seeking to modernise choice of law methods have been presented to the Brazilian Congress, no major modiﬁ cations are foreseen in the near future. Amongst the most important provisions in the Law of Introduction to the Rules of Brazilian Law, Article 9 determines that contracts are governed by the law of the country in which they were entered into by the parties. It is still a matter of controversy in Brazil whether the parties can freely choose a law governing an agreement in all circumstances. Regarding arbitration, the situation is much clearer. According to Article 2, §1º, of the Brazilian Arbitration Act (“BAA”), if parties choose to submit conﬂ icts to arbitral jurisdiction, the choice of law made in the contract is thereby reputed valid and shall be observed by the arbitral tribunal (or sole arbitrator, as the case may be). It is worth noting that any foreign judgment or award (i.e., issued outside of Brazil), must be submitted to a recognition procedure (homologação de sentença estrangeira) before the

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STJ prior to enforcement proceedings in Brazil. The STJ is not entitled to review the merits of the decision, as stated above. It is worth mentioning that the new Code of Civil Procedure, in its Article 25, now recognises the parties’ autonomy to choose an exclusive forum (outside Brazil) for the resolution of disputes in international contracts.

International arbitration The Brazilian Arbitration Law was enacted in 1996, but arbitration has only started to become a real choice in contracts after 2001, when the STF decided on the constitutionality of some fundamental principles set out in said law. Today, arbitration is a reality and is widely used, especially in complex contracts and transactions. Brazil is party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and its 1996 Arbitration Act is inspired by the UNCITRAL Model Law. In this sense, Brazilian law is recognised to be modern and arbitration-oriented, which has been confi rmed through many decisions already issued by Brazilian courts. More recently, the new Code of Civil Procedure brought some important changes to arbitration, as the concept of arbitral letter (carta arbitral), an instrument created to permit arbitral tribunals to request direct assistance of national courts, for example, to enforce provisional measures and other decisions arising out of arbitration proceedings. In May 2015, the Brazilian Congress enacted Federal Law No. 13,129/2015, which amended and expanded certain aspects of the Brazilian Arbitration Act and included important arbitration-related provisions in other legal statutes. A series of pro-arbitration changes are now part of the Brazilian Arbitration Act, namely: (i) governmental entities may participate in arbitration proceedings; (ii) arbitral tribunals − and sole arbitrators − now have the undisputed right to render partial arbitral awards; (iii) state courts have jurisdiction to analyse interim relief and precautionary measures requests before the constitution of the arbitral tribunal which, once constituted, may uphold, amend or revoke the previously granted measures; (iv) the inclusion of arbitration clauses in the bylaws of companies shall be admitted, and dissenting shareholders have the right to sell their shares; (v) the institution of arbitration interrupts the statute of limitations backdating the referred interruption to the date on which the request for arbitration was fi led; and (vi) the confi dentiality regime assigned to arbitration shall be extended to acts performed by national courts related to an arbitration procedure.

Mediation and ADR Along with the reform of the Brazilian Arbitration Act, a Mediation Act also came into force in 2015 (Federal Law No. 13,140/2015), regulating mediation within the Brazilian legal system for the ﬁ rst time. It should be noted that, before the enactment of the Mediation Act, some institutions specialised in alternative dispute resolution mechanisms were already prepared to administer mediation procedures in accordance with their own internal rules and were already in a position to provide interested parties with qualiﬁ ed bodies of mediators. Nonetheless, the absence of comprehensive legislation on the topic was considered by some as a source of insecurity and unpredictability that dissuaded parties from resorting to this alternative method of dispute settlement. In that scenario, the new Mediation Act established important rules on the use of mediation in Brazil and provides parties with an adequate level of predictability and assurance as to

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the institute’s advantages, procedures, possible consequences, etc. The enactment of the act is, therefore, in line with a new social and legislative culture that is currently growing in Brazil, focused on embracing consensual dispute resolution methods, in large part derived from the reform brought about by the new Brazilian Code of Civil Procedure.

Regulatory investigations Brazilian law is known to be extremely protective in certain ﬁ elds, especially when it comes to labour and consumer affairs. Employees and consumers tend to be considered, by judicial and administrative authorities, as vulnerable parties who are at a disadvantage in relation to employers and suppliers/service providers. As a result, companies doing business in Brazil should be aware that they may be subject to administrative proceedings and investigations on these subjects, as well to as individual and collective lawsuits deriving from these investigations. In addition to the above, it is possible to observe that, in the past few years, compliance programmes have become a fundamental aspect of doing business in Brazil, notably in relation to anti-corruption and antitrust matters. An example of this is the fact that, inspired by the US Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010, the Brazilian Congress has recently enacted Federal Law No. 12,846/2013 − known as the Brazilian Anti-Corruption Law. In summary, the new law contains provisions that intensify the ﬁ ght against corruption in the Brazilian public sector, increasing the investigative powers of Brazilian authorities and setting forth rigorous penalties for companies involved in acts of corruption.

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Renato Stephan Grion Tel: +55 11 3247-8965 / Email: [email protected] Renato Stephan Grion is a partner at Pinheiro Neto Advogados, based in São Paulo. Mr. Grion concentrates his practice on commercial disputes before international and domestic arbitral tribunals, as well as on commercial mediations. He handles arbitration and mediation cases before virtually every major institution, including the ICC and other leading arbitration and mediation centres in Brazil and abroad. He also represents Brazilian and international clients in litigation in Brazil involving disputes over the enforcement of arbitral awards and arbitration agreements, as well as other transnational disputes.

Guilherme Piccardi de Andrade Silva Tel: +55 11 3247-8451 / Email: [email protected] Guilherme Piccardi de Andrade Silva is an associate at Pinheiro Neto Advogados. He holds a degree in law from the Pontiﬁ cal Catholic University of São Paulo (Pontifícia Universidade Católica de São Paulo – PUC/SP) and focuses his practice on arbitration, civil and commercial litigation and international law.

Pinheiro Neto Advogados Rua Hungria, 1100, 01455-906, São Paulo – SP, Brazil Tel: +55 11 3247 8400 / Fax: +55 11 3247 8600 / URL: www.pinheironeto.com.br

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Scott Cruickshank & Matthew Freeman Lennox Paton

Effi ciency of process The Territory of the Virgin Islands (as it is offi cially known) is a largely self-governing British Overseas Territory comprising several islands located approximately 60 miles due east of Puerto Rico at the north-eastern corner of the Caribbean Sea. The islands are referred to as the British Virgin Islands in order to distinguish them from their US neighbour. The principal islands of the British Virgin Islands (the “BVI”) are Tortola and Virgin Gorda, between them housing a population of around 28,000. The BVI has become one of the world’s leading fi nancial centres, with over 800,000 international business companies (“BVIBCs”) registered in the BVI, as well as signifi cant numbers of mutual and hedge funds, captive insurance and trust companies.

Integrity of process The Islands’ success rests largely upon an effi cient and modern legislative regime for corporate activity and insolvency, the absence of taxation on BVIBCs, and the existence of a politically stable climate, with an independent and incorruptible judiciary. It is common to speak of the “twin pillars” of its economy being fi nancial services and tourism. The BVI retains the Privy Council as its fi nal appellate court. The BVI has a common law system, based upon English law. It has its own legislative framework and has adopted some UK legislation (particularly with respect to the implementation of international treaties). English common law was extended to the BVI by the Common Law (Declaration of Application) Act (Cap 13). The result is that English authorities, whilst not strictly binding as precedents, are persuasive and, subject to there being any differing Eastern Caribbean Supreme Court authorities, are routinely relied upon by the BVI Court. Authorities of other Commonwealth or common law jurisdictions, such as Canada and Hong Kong, are also frequently cited. The Superior Court of Record for the BVI is the Eastern Caribbean Supreme Court (“ECSC”), which also serves as the Superior Court of Record for two other British Overseas Territories (Anguilla and Montserrat) and six independent Member States of the Organisation of Eastern Caribbean States (“OECS”) (Antigua and Barbuda, the Commonwealth of Dominica, Grenada, St Christopher and Nevis, St Lucia and St Vincent and the Grenadines). For some time, moves have been afoot to integrate the Magistracy within the ECSC court system. The ECSC consists of: 1. the High Court of Justice; and 2. the Court of Appeal.

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In 2009 the BVI became home to the new Commercial Division of the High Court of Justice, with its ﬁ rst judge being the highly regarded English silk, Mr Justice Edward Bannister Q.C. Mr Justice Bannister retired in March 2015 and was replaced by Mr Justice Barry Leon. Mr Justice Leon was previously a leading Canadian international arbitration practitioner. A number of other prominent judges have sat in the Commercial Division in 2015 and 2016: Hon. Sir Bernard Eder Q.C., Mr Justice Jules Sher Q.C., Mr Justice Gerhard Wallbank, Mr Malcolm Davis-White Q.C. and Gerard Farara Q.C. With the Commercial Court judge being a notable exception, the judges of the ECSC are drawn from the other Caribbean Islands. They are appointed by the Chief Justice, with the concurrence of the heads of every OECS State. To ensure their independence, a protocol has developed of judges being deployed in jurisdictions other than those in which they practised or were raised. From time to time, deputy judges of the ECSC will be appointed and they are usually drawn from the practising Bar; they too are required to sit in jurisdictions other than those in which they practise. The Court of Appeal is an itinerant court, whose sittings rotate between the nine members of the OECS. Typically, the Court of Appeal will sit three times a year in Tortola (BVI), in January, May and September, although more urgent matters may be dealt with when the Court is sitting in other places as the need arises. Beyond litigation, other forms of dispute resolution exist, but these are encountered less frequently in international practice. For instance, a person dissatisﬁ ed with decisions of the BVI Financial Services Commission may bring an appeal to be heard by the Financial Services Appeals Board. Alternatively, small contractual claims of under US$10,000 in value may be litigated before the Magistrate’s Court.

Privilege and disclosure The CPR is loosely modelled on the civil procedure rules currently in force in England. The rules in relation to the disclosure of documents once proceedings have started are similar, but with important differences. Disclosure does not happen automatically as part of its case management functions; the courts control disclosure but will usually order the parties to provide “standard disclosure”. A party is required to disclose a document which is “directly relevant” to his claim. This means that the party with control of a document must disclose that document if: (1) he intends to rely on it; (2) it tends to adversely affect that party’s case; or (3) it tends to support another party’s case. However, the rule known as the “rule in Peruvian Guano” does not apply. As in England and Wales, there is an obligation to produce a list of documents. The signatory must certify that he accepts responsibility for identifying any individuals who might be aware of any documents, and to list the individuals from whom directly relevant documents have been sought. However: 1. beyond identifying those individuals from whom documents have been sought, there is no express duty to conduct a search, as there is in England; and 2. the standard form list of documents contains none of the questions to be found on the English form in relation to electronic data. An order may also be made for “speciﬁ c disclosure”. This is an order which requires a party to do one or more of the following things: 1. disclose documents or classes of documents speciﬁ ed in the order; 2. carry out a search for documents to the extent stated in the order; and/or

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3. disclose any document located as a result of that search. The position in relation to disclosure before proceedings have started is more complex. Subject to any argument that sections 7 or 11 of the Eastern Caribbean Supreme Court (Virgin Islands) Act, Cap 80 import jurisdiction from England, the BVI has no statutory provision which confers jurisdiction upon the court to order pre-action disclosure. However, the rule in Norwich Pharmacal v. Commissioners of Customs & Excise [1974] AC 133 is alive and well. It was relied upon extensively by JSC BTA Bank in its quest to recover the fruits of the fraud said to have been perpetrated by its former chairman, Mukhtar Ablyazov. In JSC BTA Bank v. Fidelity Corporate Services & others [2011] 2 JBVIC 2101, the Court of Appeal reversed a judgment of the Commercial Court judge which doubted whether Registered Agents had the necessary degree of participation to found jurisdiction to obtain relief against them. However, the BVI court will not permit a party to apply for a Norwich Pharmacal order simply to strengthen its own case, and will be less inclined to grant such relief if the applicant already knows of the location of assets, or the identity of a requisite party. The court will be especially slow to make such an order if the effect of it would be to pre-empt the disclosure that is likely to be given in the ordinary course under the CPR. These principles were espoused in Morgan & Morgan Trust Corporation Limited v. Fiona Trust & Holding Corporation [2006] ECSC J0403-5 and TSJ Engineering Consulting Limited v. (1) Al-Rushaid Petroleum Investment Company (2) Al-Rushaid Parker Drilling Limited [2010] ECSC J0727-3. Bannister J previously emphasised that it is not open for litigants in foreign proceedings to seek to obtain information from BVI entities about their assets which ought to be sought in the foreign jurisdiction where the main proceedings are under way (Bascuñan and others v Elsaca and others BVIHC2015/0128 applying Osetinskaya v Usilett Properties Inc BVIHC (Com) 2013/0037). The receivers appointed at the behest of JSC BTA Bank by the English Commercial Court over certain of the assets of Mukhtar Ablyazov, established before the Court of Appeal in Jeremy Outen et al v Mukhtar Ablyazov [2011] ECSC J1110-1 in November 2011 that it was within the arsenal of the court, when recognising a foreign receivership order, to order a wide class of third parties to provide such unspeciﬁ ed information or documentation to the receivers as they might reasonably request. CPR 28.14 provides that a person ordered to provide disclosure who claims a right to withhold inspection of documents, must make that claim within the list of documents. Into this category fall documents which are privileged from production. English common law, in relation to the entitlement to maintain a claim for privilege, is followed. Privilege attaches principally to those documents that have been prepared for the purpose of seeking or providing legal advice, and those documents prepared in contemplation of litigation (see The Canada Trust Company v. Royal Trust Corporation of Canada [1998] JBVIC 0801). Documents which were properly marked “without prejudice” or “without prejudice save as to costs” will generally also be exempted from the obligation to produce copies of them. This is a matter of public policy designed to protect genuine negotiations from being admissible in court.

Costs CPR 64.6(1) provides that the general rule is that the court must order the unsuccessful party to pay the costs of the successful party. Provisions similar to Rule 44.2 of the English civil procedure rules appear in CPR 64.6(3) to (6) – permitting the court to make a percentage award and to have regard to the parties’ conduct during the course of the proceedings. The

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court has a wide discretion in relation to the application of these principles, which will not be lightly interfered with on appeal. The position is much the same with interlocutory applications. Where the interlocutory application is a “procedural application” of a type falling in CPR 65.11(3), the rules provide that the court “must” order the applicant to pay the costs of the respondent, “unless there are special circumstances”. The specifi ed applications are: (a) applications to amend a statement of case; (b) an application for an extension of time; (c) an application for relief from sanctions; and (d) an application which could have been made at a case management conference (“CMC”). Similarities with the English model end at the point of quantifi cation. CPR 65.2 provides that: “if the Court has a discretion as to the amount of costs to be allowed to a party, the sum allowed is to be (a) the amount which the court deems to be reasonable were the work to be carried out by a legal practitioner of reasonable competence; and (b) which appears to the Court to be fair both to the person paying and the person receiving such costs.” The fairness criterion is an obvious departure from the English model. Leon J in Olive Group Capital Limited v. Gavin Mark Mayhew BVIHC (Com) 2015/115 provided an analysis of how the general principles for assessment of costs are to be applied. The CPR provides for no fewer than fi ve general categories of cost: 1. fi xed costs (CPR 65.4); 2. prescribed costs (CPR 65.5); 3. assessed costs on “procedural” applications (CPR 65.11); 4. assessed costs (CPR 65.12); and 5. costs in the Court of Appeal (CPR 65.13) (as amended by the ECSC Civil Procedure (Amendment) Rules 2011 (“the Amendment Rules”)). This leaves aside budgeted costs (CPR 65.8), which operate a little like a “costs cap” in England. Prescribed costs Except in relation to claims within the Commercial Division, the starting point is that where the fi xed costs rules do not apply (they apply only to claims for a sum of money in which judgment has been entered in default), the prescribed costs rules apply. CPR 65.5 speaks of it being “the general rule” that those costs should be calculated in accordance with the appendices against the appropriate value. Where the claim is not for a sum of money, the value by default is deemed to be US$50,000, which produces a maximum costs recovery of US$7,500 under the Amendment Rules. It would formerly have been US$14,000. The court is then invested with a discretion to determine the value of the claim. Such an application should usually be made at the CMC (see CPR 65.6(1)), but it seems that the court will be prepared to entertain such an application even after the conclusion of the proceedings, when the claim for costs comes to be assessed: Asiacorp v Green Salt [2006] 5 JBVIC 3102. Prescribed costs in the Eastern Caribbean operate to cap the costs which may be recovered inter partes to a proportion of the value of the claim (if awarded to the defendant), or to the sum recovered (if awarded to the claimant). By way of example: • A claim worth US$50,000 will produce a costs recovery of US$7,500, assuming it concludes at trial, and only US$3,375 if it settles when the defence is served.

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• A US$1m claim will produce a costs recovery of US$70,000, assuming it concludes at trial. The position in the commercial division It can readily be seen that the application of the prescribed costs rules is apt to result in signifi cant under-recovery in relation to the question of costs. On 15 May 2009, new rules and practice directions governing procedure in the Commercial Division were gazetted, which abolished the application of CPR 65.4 to 65.11 (and in particular, the prescribed costs rules) to litigation in the Commercial Division. The Court of Appeal confi rmed in Westford Special Situations Fund v. Barefi eld Nominees BVICVAP 2010/014 that these changes also have the effect of altering the rules to the quantifi cation of costs in appeals from the Commercial Division. Instead, a simple mechanism to assess those costs was adopted. This development was widely welcomed: it had been a familiar refrain of the courts, in the BVI in particular, that: “the question of costs in big commercial cases in this Territory is sometimes more protracted and litigious as the cases themselves [sic]. The present application to assess costs is one such example. It took two days to be argued, whereas the application for an anti-suit injunction took one day” (Finecroft v. Lamane Trading Corp [2006] 8 JBVIC 3101). A similar complaint was made in Michael Wilson & Partners v. Tigerkhan [2008] ECSC J0620, where Charles J observed: “Some critics feel that the present costs rules are grossly inadequate for the British Virgin Islands and that large, complex, multi-jurisdictional commercial matters were not suffi ciently considered when the rules were drafted. Others consider the costs regime particularly prescribed a windfall. For my part, there appears to be one or two diffi culties with the Rules...” Until the changes brought into force by the new Commercial Practice Direction, the courts in the BVI had been at the forefront of seeking to construe the rules in a manner which met the justice of cases such as these. For instance, in Asiacorp, Charles J was prepared to work backwards and to fi x the value of the claim by reference to the level of costs which she considered to be fair and reasonable. The submission that she should do so was met with an excitable response from the respondent: it is “preposterous and makes a mockery of the court”, but it was plainly the only way in which substantial justice could be done to the receiving party. In Tigerkhan, Charles J was again persuaded to meet the justice of the case by holding that if she were wrong in her view that CPR 65.12 applied, she would, in any event, have disapplied the cap. Interestingly, in this context, she held that there was nothing in CPR 65.11 which required the court to limit the costs to between 10% and 100% of the prescribed costs. In an appropriate case, there could be no objection to costs of, say, 200% and 300% being awarded.

Litigation funding The BVI follows the English common law position in relation to the maintenance of litigation. Except to the extent that it has arguably been disapplied by the rules in relation to prescribed costs, the indemnity principle applies to litigation in the BVI. A litigant will, therefore, be able to recover from his opponent only to the extent that he was contractually liable to his solicitor. However, since the introduction of the Legal Professional Act (LPA) 2015, the ability of a successful litigant to recover foreign lawyers’ fees which have been incurred in

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litigation was successfully challenged in Garkusha v. Yegiazaryan and Ors (BVIHCMAP 2015/0010). The LPA came into force on 11 November 2015. It included restrictions on the practice of BVI law to a strict practising certiﬁ cate regime. However, in the recent case of John Shrimpton & Anor v. Dominic Scriven & Ors, BVIHCMAP 2016/0031 the Court of Appeal considered the changes made to the costs regime by the LPA and found that section 18(3) of the LPA means that the costs of a foreign lawyer whose name is not on the Roll can no longer be recovered as a disbursement. The decision clariﬁ es the uncertainty that arose following the decision in Garkusha as to the position on foreign lawyers’ fees, and places the jurisdiction on the same footing for practice requirements as various other jurisdictions, such as Hong Kong, Cayman, and Bermuda. Statutory developments in England in relation to conditional fee and contingency agreements do not apply within the context of contentious business in the BVI, and as such the common law rules against maintenance currently prevent lawyers practising in the BVI from entering into such agreements. However, certain funding arrangements relating to non-contentious business are permissible under section 44 of the LPA. Insurers can and do indemnify their insured in relation to litigation costs, but there is a very limited market for after-the-event litigation products.

Interim relief Section 24 of the Eastern Caribbean Supreme Court (Virgin Islands) Act, Cap 80 provides that: “an injunction may be granted or a receiver appointed by an interlocutory order of the High Court or a judge thereof, in all cases in which it appears to the Court or judge to be just or convenient that the order should be made, and any such order may be made either unconditionally or upon such terms and conditions as the Court or judge directs.” CPR Part 17 provides that amongst the interim remedies that the court can grant are interim declarations, interim injunctions, orders directing a party to fi le and prepare accounts, and orders to deliver up goods. In practice, it is the power at CPR 17.1(j) to make a freezing order which is encountered most frequently. There also exists a power to make search orders. These wide powers are qualifi ed by the common law rules which have developed in England. In relation to litigation proceedings before the Courts of the BVI, relief may be obtained where: 1. the applicant has a good, arguable case on the merits, meaning “one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success” (see Ninemia Maritime Corporation v. Trave Shiffahrgesellschaft GmBH [1983] 2 Lloyd’s Rep 600); 2. the applicant can establish, with solid evidence, a real risk that the judgment or award may otherwise go unsatisfi ed; 3. the respondent has some assets, even if it cannot be proved that those assets are within the jurisdiction of the court: see Gee on Injunctions at 12-042; or 4. it is just and convenient to make the order. The court will always expect the applicant to provide an undertaking in damages, and it may require that the undertaking be fortifi ed with the provision of some form of security.

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A nuance particular to litigation offshore is that the courts of its various jurisdictions have taken different approaches to the application of the rule in The Siskina [1979] AC 20. The Siskina appeared to confi ne the availability of injunctive relief to cases where substantive proceedings could be tried and fi nally determined within the jurisdiction. In England, the effect of the decision has been whittled away – fi rst by legislation (see section 25 Civil Jurisdiction & Judgments Act 1982, subsequently extended by Order in Council to proceedings in other jurisdictions: the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997, SI 1997 No 302); and secondly, by case law. In Channel Tunnel Group v. Balfour Beatty Construction [1993] AC 334, the House of Lords was prepared to accept that the court did have jurisdiction to grant interlocutory relief in substantive proceedings brought in England, even if those proceedings had to be stayed to facilitate arbitral proceedings abroad. In Mercedes Benz v. Leiduck [1996] AC 284, the Privy Council held that the Hong Kong Court had no jurisdiction to grant a freezing injunction against a foreign defendant in aid of foreign proceedings, but left open the question as to whether or not such relief might be available where the defendant fell within the territorial jurisdiction of the court. More recently, the House of Lords clarifi ed in Fourie v. Le Roux [2007] UKHL 1 what was meant by “jurisdiction” in this context. Unfortunately, the courts of the offshore world have taken divergent approaches to these developments. The Courts of Guernsey and Jersey refused to follow The Siskina (see Solvalub v. Match Investments [1998] ILPr 419). Despite initial success at fi rst instance, that trend has not been adopted in the Bahamas (Grupo Torres SA v. Mees Pierson (Bahamas) Ltd and others (1998) 2 O FLR 16), nor in Belize (Securities & Exchange Commission v. Banner Fund International 1996 54 WIR 123). Draft legislation has been circulated which would bring the position in the BVI more in line with that now prevailing in England, but there is no sign that it will be enacted soon. The position in the BVI had appeared to be that The Siskina was alive and well (see Alfa Telecom Turkey v. Telisonera [2009] ECSC J0928-1 and Sibir Energy Plc v. Gregory Trading SA [2005] 12 JBVIC 2001). Presumably for similar reasons, in Pacifi c International Sport Clubs Limited v. Comerco Commercial Limited [2005] ECSC J1223-1, Olivetti J observed: “without deciding the point, as it does not fall for determination, I also understand that the law governing Norwich Pharmacal orders is such that it does not permit an order to be made requiring anyone to disclose information for use in foreign proceedings (a different regime covers this) but in aid of suit in this jurisdiction”. However, in Black Swan Investment v. Harvest View [2010] 3 JBVIC 2301, the opportunity came before the Commercial Division judge to consider the issue afresh. Echoing the approach of the Jersey court in Solvalub, Bannister J decided in Black Swan that it would be “highly detrimental” to the interests of important offshore fi nancial centres such as the BVI not to have within its armoury the jurisdiction to grant injunctive relief in aid of foreign proceedings where appropriate. The judge held that it was open to him to resolve the question left open by the Privy Council in Mercedes Benz and to “fi ll it in this jurisdiction by respectfully adopting the [dissenting] reasoning of Lord Nicholls in Mercedes Benz”. The position of defendants not subject to the territorial jurisdiction of the BVI court did not directly arise on the facts. Black Swan was settled before an appeal in that case reached the Court of Appeal. However, in Yukos CIS Investments v. Yukos Hydrocarbons [2011] ECSC J0926-3, the Commercial Court judge refused to grant injunctive relief, on a number of grounds. The majority of the Court of Appeal upheld this refusal. Materially, he took the view that the Black Swan

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jurisdiction did not engage. Black Swan, he explained, “rests upon the willingness of the Court, in a case where the defendant to foreign proceedings had assets within its jurisdiction, to act in aid of the claimant’s prospective entitlement to a money judgment, if successful in the foreign proceedings. It depends upon the assumption that the foreign money judgment will be enforceable by registration or otherwise, in the court within whose jurisdiction the assets are situated. It is this last feature which founds the jurisdiction.” In Yukos, the position was different. Although a claim had been made in the alternative for a money judgment, upon which little or no reliance had been placed during the course of argument, Bannister J held that there was never likely to be any enforcement activity at all: “if Yukos CIS succeed in the Dutch proceedings, they will not be coming to this jurisdiction to register their judgment because there will be nothing to register. Wincanton will have become indirectly entitled to the shares in the defendants by virtue of its entitlement to the shares in FPH [one of the Dutch vehicles to which the BVI subsidiaries were transferred] and there will be neither need nor reason for it to trouble this court to assist it to obtain redress. For this reason alone, it seems to me that the Black Swan principle has no application to the present case.” In the Court of Appeal, the appellant argued that the judge had confi ned the Black Swan jurisdiction too narrowly, whilst the respondent argued that Black Swan was wrongly decided. The court decided that: 1. the BVI court plainly has territorial jurisdiction over the defendants, each of whom were BVI companies (this much was common ground); 2. the judge was wrong (per Kawaley, Redhead and Gordon JA) to the extent that he held that he had no jurisdictional (or subject matter) competence to grant interim relief in support of a foreign cause of action which was not designed to obtain a money judgment; 3. however, it did not follow from the preliminary fi nding that jurisdictional competence exists that it was right to grant interim relief in support of an anticipated foreign non- money judgment (Redhead JA dissenting); 4. Bannister J was right (Redhead JA dissenting) to go on to hold that there was an insuffi cient factual nexus between the appellant’s asserted rights of ownership over the shares of the Dutch parent and the asserted right to freeze and/or appoint a receiver over the assets of the BVI subsidiaries. The appellants claimed merely a right to indirect control of the respondents; the foreign cause of action did not give rise to potential BVI proceedings to enforce such a judgment; and 5. Bannister J was therefore right in substance to hold (Redhead JA dissenting) that the Black Swan decision was inapplicable. Indeed, since Black Swan relied for its validity upon the proposition of Lord Nicholls that injunctions were granted in aid of prospective judgments, not causes of action, a contrary fi nding would have been perverse. The decisions in the cases of Black Swan and Yukos were explored and followed in the case of Gold Seal Holdings Limited and others v. Paladin Limited and others [2014] Bda LR 81. Whilst this case was heard in the Supreme Court of Bermuda the decision is of interest, as it related to a company that was resident in the BVI. The presiding judge (Kawaley CJ) summarised in his judgment the issues of jurisdiction (referring in particular to the principles set out in the case of Mercedes Benz AG v. Leiduck) and interlocutory relief (paying particular attention to the decisions in Black Swan and Yukos). Further guidance was recently given in 2016 in the cases of Bascuñan v. Elsaca BVIHC 2015/0128 and PT Ventures SGPA SA v. Tokeyna Management Limited BVIHC (Com) 2015/0134.

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In relation to interlocutory relief, the judge followed the principles set out above and assessed whether the applicant had a good arguable case, could demonstrate a risk that he would suffer damage which only an interim injunction could adequately prevent, and/or demonstrate that justice and convenience favoured granting the injunctive relief. The judge ultimately refused to grant interim relief and held that the second defendant’s imminent claim in the BVI did not disclose a good and arguable case and (perhaps more importantly) that the most appropriate forum in which to seek both interim and ﬁ nal relief in connection with a dispute over who should control a BVI company is the BVI Court. The judgment highlights not only the importance of properly preparing evidence to support each claim but is also a good guideline when considering in which jurisdiction to bring a claim and/or apply for interlocutory relief.

Enforcement of judgments Enforcement of local judgments The court has a wide armoury of powers which enable it to enforce local judgments. Writs of possession or execution are available, which enable the bailiff to be instructed to enforce against land, or against goods, as the case may be. Attachments of debts or charging orders are also available, as are oral examinations, which permit the debtor to be examined in relation to their assets. In addition, the judgment summons procedure remains in wide use. However, the reality of international commercial practice is that it is very rare to see BVIBCs which are either controlled or have assets within the jurisdiction. Even where assets exist within the jurisdiction, they will commonly be limited to shareholdings in other BVIBCs. In such cases, a local judgment will enable the judgment creditor to take advantage of the provisions of Part 48 of the Eastern Caribbean Supreme Court Civil Procedure Rules (“CPR”). This provides the court with the power to grant charging orders (and associated stop notices). However, it is more common to see creditors making an application to appoint a liquidator or receiver over a defaulting BVIBC debtor in the alternative. It is open to a creditor to apply for appointment of a liquidator over a defaulting debtor company where the debt is not the subject of a bona fi de dispute on substantial grounds (Sparkasse Bregenz Bank v. Associated Capital Corporation [2003] ECSC JO618-5). In any case where a judgment (local or foreign) has fi rst been obtained, this is usually easy to establish. It must, however, be borne in mind that to proceed down this route, the debtor company must not have the benefi t of a counterclaim which would extinguish its own liability or reduce it to below the statutory minimum of US$2,000 (Rule 149 of the Insolvency Rules, 2005). Enforcement of foreign judgments Attempts to enforce foreign judgments and to convert them into judgments of the BVI Court have been relatively uncommon but are increasing. Where it is desired to do so, perhaps in order to obtain a charging order, foreign judgments may be enforced in the BVI at common law, or in one of the limited instances provided for by statute. The statutory machinery is to be found in: 1. the Foreign Judgments (Reciprocal Enforcement) Act (Cap 27) 1964; and 2. the Reciprocal Enforcement of Judgments Act (Cap 65) 1922. The Foreign Judgments (Reciprocal Enforcement) Act (Cap 27) 1964 Section 3 of the Foreign Judgments (Reciprocal Enforcement) Act (Cap 27) 1964 provides that the Governor in Council may nominate the High Courts of jurisdictions in which he is

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satisﬁ ed that “substantial reciprocity of treatment will be assured as respects the enforcement in that foreign country of judgments given in the High Court”. To those jurisdictions, the intention was that an application for registration of the foreign judgment might be made under section 4. Certain jurisdictions have purportedly been designated, but some doubt exists as to whether or not the designation exercise was carried out effectively. The Reciprocal Enforcement of Judgments Act (Cap 65) 1922 No such doubts exist in relation to the earlier Reciprocal Enforcement of Judgments Act (Cap 65) 1922. However, as originally enacted, it applied only to judgments given in the High Court of England and Wales, Northern Ireland and the Court of Session in Scotland. It has since been extended to additional jurisdictions, but they are relatively few in number (currently the Bahamas, Barbados, Belize, Bermuda, Nigeria, Trinidad and Tobago, Guyana, St Lucia, St Vincent, Grenada, Jamaica and New South Wales Australia). Section 3(1) provides that if an applicant, within 12 months of the date of the judgment, brings an application for the registration of the judgment, the court will make an order directing registration where it is just and convenient for the judgment to be enforced in the BVI. Section 3(2) of the Act excludes judgments from the system of registration where: they were obtained by fraud (section 3(2)(d)); an appeal is pending or the time for appealing has not expired (section 3(2)(e)); or it would be contrary to public policy to enforce the award. The BVI court would generally look to English decisions as to the types of conduct which may affront public policy; as a matter of policy, the courts of the BVI will not enforce, directly or indirectly, foreign tax claims. In JSC BTA Bank v. Mukhtar Ablyazov (2014), the Court of Appeal held that it was not open to a defendant to use the test of just and convenient in section 3(1) to challenge the underlying processes of the English Court where none of the excluding provisions set out section 3(2) had been met. In that case, the defendant wished to challenge the validity of the English judgment on the basis that he had ﬁ led an appeal with the European Court of Human Rights (“ECHR”). The court rejected the defendant’s argument that his appeal to the ECHR represented an appeal of the English judgment and, in noting that none of the exceptions in section 3(2) had been met, held that the judge had been correct to refuse to consider the defendant’s case pursuant to a separate consideration of section 3(1). Section 3(2)(a) of the Act excludes from the system of registration judgments obtained where the original court lacked jurisdiction, or where: 1. in the case of a judgment debtor present within that jurisdiction, he was not served with the proceedings (section 3(2)(c)); or 2. in the case of a judgment debtor not ordinarily resident or carrying on business within the jurisdiction of the home court, he did not submit to the jurisdiction of the court. This takes a narrow view of jurisdiction. Many common law jurisdictions will assert jurisdiction over parties not present within the jurisdiction on the discretionary grounds that they are “necessary and proper” parties to ongoing litigation within that jurisdiction. However, in the BVI this does not apply and judgments obtained in the circumstances described above will be excluded from the system of registration. Where the Act does apply, it has the undoubted advantage of simplicity. All that is required before a judgment may be registered and enforced as if it were a judgment of the BVI court, is an application under Part 72 of the CPR. The application may be made without notice, but must be supported by evidence. The application must contain certain prescribed information and must exhibit: 1. a duly authenticated copy of the judgment; and

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2. details of any interest which has become due under the law of the country in which judgment has been entered. The simplicity of the without notice application is to be contrasted with the common law route, which is to sue on the judgment itself. The result is much the same, but it can take longer. Enforcement at common law At common law, the courts in the BVI will treat any fi nal and conclusive monetary judgment as being a cause of action in itself under the doctrine of obligation by action, irrespective of the jurisdiction in which the judgment was obtained. There is no requirement of reciprocity. The judgment creditor must: 1. prove the judgment; and 2. show that it is a fi nal and conclusive monetary judgment for a specifi ed sum. If those matters are established, a retrial of the issues in the action will not be necessary. The creditor may instead apply for summary judgment under CPR Part 15. Since the judgment creditor is proceeding by way of a fresh action, he will only be able to proceed in the BVI if he is able to serve the proceedings upon the judgment debtor by a means permitted by CPR Parts 5 and 7. It will still be possible to defeat an application for summary judgment, or indeed an action founded upon a foreign judgment, even one which is conclusive and made in respect of a specifi c sum, if: 1. the foreign court did not have jurisdiction in the matter (i.e. the judgment debtor either did not submit to the jurisdiction, or was resident or carrying on business within the jurisdiction and was not duly served with the process); 2. the foreign judgment includes penalties, taxes, fi nes or similar fi scal or revenue obligations; 3. the judgment was obtained by fraud; 4. recognition or enforcement of the judgment in the BVI would be contrary to public policy; or 5. the foreign proceedings were conducted in a manner which infringes the rules of natural justice. The position is more complex in relation to foreign judgments which are not for a specifi ed sum of money. In those circumstances, the common law doctrine will not strictly engage, but the creditor may instead seek to avoid a re-trial of the issues by relying upon the equitable principle of estoppel, in essence by arguing that it would be an abuse of the process of the court: 1. to re-litigate matters previously decided in a court of competent jurisdiction. Even where the judgment of the foreign court cannot be enforced at common law, it may nevertheless be possible to argue that the losing party should not re-litigate those issues that were decided by the foreign judgment; and 2. to litigate matters in subsequent proceedings which ought to have been advanced in the original proceedings. As a rule, the courts will expect a party to advance all of his case at the same time, so as to prevent the other party being vexed twice by the same matter (see the rule in Henderson v. Henderson 1843-60 All ER Rep 378). Enforcement of arbitral awards On 23 January 2014, the BVI passed the Arbitration Act 2013, which came into force on 1 October 2014. The 2013 Act repealed the previous legislation, the Arbitration Ordinance

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1976. The BVI is a dependent territory of the United Kingdom, which is a party to the New York Convention, and the BVI acceded to the New York Convention on 25 May 2014. The 2013 Act introduces the UNCITRAL Model Law on Arbitration (as amended on 7 July 2006) to the territory with some minor exceptions. As the New York Convention had not previously been extended to the territory, BVI arbitral awards prior to 25 May 2014 had been largely unenforceable outside of the jurisdiction. In the past, the BVI has rarely been the seat of arbitration hearings, and the 2013 Act has sought to address this by the establishment of the BVI International Arbitration Centre (or the BVI IAC). The 2013 Act is likely to have only a lesser impact on the enforceability of foreign arbitration awards from New York Convention states, as many of them were already capable of enforcement pursuant to the 1976 Ordinance. One important change is that the deﬁ nition of a Convention State is now wide enough to include the United Kingdom, which will permit enforcement of awards from, for example, the London Court of International Arbitration which had previously been excluded from the former legislation. The 2013 Act also includes provision for the enforcement of arbitral awards from Non-Convention States, which may be refused where it is just to do so.

Cross-border litigation This is largely dealt with above. The BVI Court does recognise orders and judgments from other jurisdictions and regularly supports foreign proceedings by granting injunctive relief in support of freezing orders and asset tracing claims.

International arbitration As set out above, the Arbitration Ordinance (Cap 6), 1976 was repealed and replaced by the Arbitration Act 2013, which came into force in October 2014. Due to the infancy of the Act there have been few authorities that illustrate how the courts will approach the new provisions. Perhaps one to note is Jinpeng Group Limited v. Peak Hotels and Resorts Limited BVIHCMAP 2014/0025 and 2015/0003 in which the Court of Appeal considered whether to stay a winding-up petition in favour of arbitration. In that case the court decided that where a debt was not disputed on genuine and substantial grounds but fell under the terms of an arbitration clause, the court has a wide discretion as to whether to stay or dismiss the originating application to allow for arbitration or to proceed. The court held that the petitioner did not have to prove that exceptional circumstances existed in order for the court to exercise its discretion to make a winding-up order differing in approach from the English courts set out in Salford Estates (No 2) Ltd v. Altomart Ltd [2014] EWCA Civ 1575. In Sonera Holding B.V. v. Cukurova Holding S.A. (BVIHC (Com) No. 119 of 2011), Bannister J did consider how the Act has affected the jurisdiction of the court when dealing with cases that have an arbitral element. In the case in question, Sonera had previously obtained a Convention award against Cukurova and Cukurova had failed to pay as ordered. Sonera applied to the BVI court to enforce the award and duly obtained judgment. Cukurova applied to set aside the judgment on the principal ground that in making the award of damages, the First Tribunal had exceeded its jurisdiction. This argument was rejected by the BVI court and the Court of Appeal and Privy Council followed suit. Cukurova then sought to attack the decision of the First Tribunal by commencing further arbitral proceedings, and Sonera applied to the BVI court for an anti-arbitration injunction in an attempt to prevent Cukurova from undermining previous decisions.

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When considering the case, Bannister J noted that Section 3(2) of the Act conﬁ rmed that the court shall not interfere in the arbitration of a dispute, save as provided expressly in the Act. In his judgment, Bannister J gives full consideration to the provisions of the Act, noting that the general provisions (Sections 7–9 and 11–16) apply to domestic arbitrations only. He therefore found that these provisions are incapable of having extra-territorial effect. In short, Bannister J found that section 10 of the Act has no application in relation to an arbitration with a foreign seat, and decided that the overriding nature of the prohibition contained in Section 3(2)(b) of the Act prevented him from interfering with the arbitration process at all, and he therefore dismissed the application. The case does give some indication as to the approach of the court. However, the appointment of a former arbitrator as the new commercial judge may lead to differing judgments in the future. At present, it is, in practice, virtually unheard of to encounter an arbitration clause within commercial contracts which provides for the BVI to be the seat of any arbitration. It is more common to encounter arbitration clauses which provide for a foreign seat of arbitration. In such an event, the foreign arbitral award may then subsequently be enforced or recognised within the BVI, in accordance with the principles and rules set out in the sections above. However, the BVI has recently established an Arbitration Centre with a view to attracting more arbitral work to the territory. Therefore, there may be more developments on this point in the coming months.

Mediation and ADR The courts of the Eastern Caribbean have long encouraged mediation and other forms of alternative dispute resolution. By Rule 27.7 of the CPR the court may adjourn a case management conference to enable settlement discussions, or a form of ADR procedure to continue. A process of court-connected mediation was instituted by Practice Direction 1 of 2003 which created, in each ECSC territory, a national mediation committee. The Practice Direction confers upon the court jurisdiction to refer a dispute to mediation, and provides that the parties “will not be allowed to opt out of the referral order to mediation, except by order of the Master or Judge and upon adducing good and substantial reasons”. The BVI now has a growing number of qualiﬁ ed mediators. However, their services are infrequently (if ever) used in international commercial litigation.

Regulatory investigations There is little in the way of regulatory controls of consumer affairs in the BVI. This is because the large majority of companies incorporated in the BVI do not operate within the territory. However, all companies incorporated in the BVI are accountable to the BVI Financial Services Commission and the Commission. The Commission is responsible for issuing administrative penalties for non-compliance with business legislation (largely relating to payment of annual fees) and has the ability to strike companies from the Register for any default. The Commission may also conduct investigations into money laundering and has extensive powers when it comes to seeking information from Registered Agents. Whilst the court will assist the FSC where needed, the Commission is largely autonomous and operates with little interference from the courts.

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Scott Cruickshank Tel: +1 284 494 6864 / Email: [email protected] Scott is the Managing Partner and Head of Litigation of the BVI offi ce. He has considerable experience in areas such as shareholder disputes, insolvency, fraud and asset-tracing, trust litigation, and corporate and commercial disputes generally. Prior to relocating to the BVI in 2008, Scott was a barrister at the Scottish Bar where he built up a sizeable and successful practice as a corporate and commercial litigator. Scott routinely works with large city law fi rms, fi nancial institutions and corporate and commercial clients based throughout the world with respect to large multi-jurisdictional disputes and transactions. He has considerable courtroom experience matched with an acute commercial acumen. Chambers Global has variously described Scott as being “very thorough and professional, and provides fantastic client care” (2013); that he has “extensive experience in insolvency and trust litigation” (2014); that he is “always on the ball, very thorough, very personable and very easy to work with” (2015); and that he is an “experienced practitioner who is well regarded, with sources highlighting his combination of detailed legal knowledge and good commercial judgment” (2016). Scott is a Fellow of INSOL International, being the fi rst BVI practitioner to have successfully completed the INSOL Global Insolvency Practice Course.

Matthew Freeman Tel: +1 284 494 6864 / Email: [email protected] Matthew is an Associate in the Litigation Department of the BVI offi ce. He has considerable experience of corporate and commercial litigation including insolvency, shareholder disputes, trust litigation, fraud and asset tracing. Matthew also has a broad experience of ADR procedures including mediation and arbitration. He qualifi ed as a solicitor in England and Wales in 2007 (now non-practising), having completed a training contract with a reputable regional fi rm. In 2013 he moved to a niche practice and continued to advise corporate clients, partnerships and high-net-worth individuals, and partnerships in relation to a wide range of corporate and commercial disputes. He took up partnership in October 2014 before joining Lennox Paton in April 2015.

Lennox Paton 4th Floor, Wickhams Cay, Road Town, Tortola, British Virgin Islands Tel: +1 284 494 6864 / Fax: +1 284 494 6839 / URL: www.lennoxpaton.com

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Robert W. Staley, Jonathan G. Bell & Jessica M. Starck Bennett Jones LLP

Structure and effi ciency of process The Canadian court system is comprised of: (i) provincial and territorial courts; (ii) the Federal Courts; and (iii) the Supreme Court of Canada, which is the highest court in the nation. Federal courts have specifi ed jurisdiction to resolve disputes in certain federally regulated areas such as immigration and intellectual property. Within the provinces and territories, superior courts are courts of inherent jurisdiction and have broad jurisdiction to hear most matters. The provincial and territorial courts are structured in a hierarchy, with trial courts being subordinate to the appellate courts. Each province and territory has enacted a distinct set of procedural rules governing practice within its courts. The Federal Courts also operate according to distinct rules of procedure. Despite these distinct procedural regimes, there exist many commonalities between the procedural rules across provinces. Effi ciency of process, for example, is prioritised throughout Canada. The Supreme Court of Canada has recently called for a “culture shift” towards greater proportionality in dispute resolution. Although the principal goal remains to ensure a fair process that results in a just adjudication of disputes, the Supreme Court has emphasised the importance of tailoring procedures to the needs of the particular case in order to ensure effi ciency.1 One approach that can be used to foster effi ciency is summary judgment procedures, which allows for a claim to be disposed of without a full trial. When faced with a motion for summary judgment, a judge must determine if there is a genuine issue requiring a trial, after considering affi davit evidence, out-of-court examination transcripts and, in some cases, oral testimony.

Integrity of process Judicial independence is a cornerstone of the Canadian judicial system.2 In order to ensure that judges can make impartial decisions, the judiciary is separate and independent from the other two branches of government – the executive and legislature. Although judges are appointed and paid by the government, various mechanisms have been put in place to ensure judicial independence. Judges have security of tenure, which allows them to remain on the bench until the age of 75 (age 70 in some provinces and territories), and can only be removed from offi ce after an independent investigation determines that they are unfi t or have engaged in misconduct. Judges are also guaranteed suffi cient compensation, which can only be altered by an independent compensation commission. There are several institutions, such as the Canadian Judicial Council, which act as a buffer between the judiciary and the government. These institutions regulate areas such as discipline, pay and benefi ts, and continuing education for judges.

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It is important in Canadian law that judges both act and are perceived to act impartially. For this reason, once appointed, judges at all levels of the court are expected to disengage from public debate regarding their decisions, and to refrain from expressing their opinion on major political or social issues. The federal government appoints judges to the Federal Courts, the superior courts of the provinces and territories, and the Supreme Court of Canada. Provincial and territorial governments appoint judges to the provincial and territorial-level courts. In 2016, Canada implemented a more transparent system for appointing Supreme Court justices.3 Under this system, an advisory board will release the assessment criteria, questionnaire, and answers provided by the ﬁ nal nominee to the public. The Canadian government has also recently announced an effort to make federal judicial appointments more representative of Canada’s diverse population.4

Privilege and disclosure In Canadian civil litigation, all relevant and material evidence relating to the issues before a court must be disclosed to all parties. There are, however, a number of exceptions to this rule. These exceptions arise from the recognition that the public interest in preserving and encouraging particular confi dential relationships justifi es a departure from the general rule that all relevant and material evidence be disclosed. Such communications are therefore allowed to remain privileged and be exempt from disclosure. Legal privilege is one of the most well-recognised privileges. By successfully invoking legal privilege, a person is entitled to resist the disclosure of information or the production of documents to which an opposing litigant would otherwise be entitled.5 Canadian law generally recognises two categories of legal privilege: solicitor-client privilege; and litigation privilege. Solicitor-client privilege The protection that is afforded to confi dential communications between a lawyer and client is referred to as “solicitor-client privilege” in Canada. Solicitor-client privilege applies to both oral and documentary communications fl owing between the lawyer and client in connection with the provision of legal advice. The communication must be intended to be made in confi dence, in the course of seeking or providing legal advice, and must be grounded in the professional’s expertise in law.6 Solicitor-client privilege belongs to the client and therefore can only be waived by the client. Litigation privilege Litigation privilege protects any documents or communications created for the dominant purpose of preparing for existing or anticipated litigation.7 Unlike solicitor-client privilege, litigation privilege arises and operates even in the absence of a solicitor-client relationship and applies to all litigants, whether or not they are represented by counsel. The Supreme Court of Canada recently released two decisions on privilege, both of which further demonstrate the court’s recognition of the fundamental role that both solicitor-client and litigation privilege play in ensuring access to justice.8

Costs In Canada, cost awards are within the discretion of the court.9 Costs typically follow the outcome of the proceeding, allowing the successful party to be paid a portion of his or her costs by the unsuccessful party.10 However, courts may depart from this general rule in cases where there has been oppressive and vexatious conduct of proceedings.11 The

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Supreme Court of Canada has explained that costs are awarded in this manner in order to increase the fairness and efﬁ ciency of the justice system. Costs serve as a disincentive to vexatious litigants and also make the justice system more accessible to litigants who seek to vindicate a legally sound position.12 When assessing the quantum of costs to be awarded, the court’s overall objective is to establish an amount that is fair and reasonable in the particular circumstances of the step in the proceeding, rather than simply awarding the actual amount of costs incurred by the successful party.13 In the majority of cases, the successful litigant receives a costs award on a partial indemnity scale, which amounts to approximately 40% of their total legal expenses. In exceptional cases involving reprehensible conduct, costs may be awarded on a substantial indemnity scale (also referred to as “solicitor-client costs”), which comes closer to 70–80% indemniﬁ cation. A lawyer who engages in grossly improper conduct may also be ordered to personally pay some of the costs in extraordinary cases. Many provinces and territories in Canada encourage settlement by attaching costs consequences to a party’s pre-trial rejection of a settlement offer that ends up being equally or more favourable than the result ultimately achieved.14 Canadian courts also have the power to order plaintiffs to provide security for defendants’ legal costs. A defendant will generally bring a motion for an order for security for costs where it fears that the plaintiff will not be able to fund an adverse costs award. In considering such a motion, courts take into account a variety of factors, including where the plaintiff resides, whether the parties are engaged in parallel proceedings in other forums, whether the action itself is frivolous, and whether the plaintiff has the resources to pay costs. If granted, the plaintiff is required to pay an amount into court before any costs award has even been made. In the context of a class action, jurisdictions across Canada have adopted two distinct approaches to costs: (1) no costs (British Columbia, Manitoba, Newfoundland and the Federal Court); and (2) standard costs (Ontario, Alberta, New Brunswick, Saskatchewan, and Nova Scotia). In no-costs jurisdictions, barring exceptional circumstances, costs are not awarded at any stage in the class proceeding. This approach is designed to promote access to justice by ensuring that a representative plaintiff is not discouraged from bringing a class action for fear of a potential costs award if they are unsuccessful. In contrast, in standard costs jurisdictions, courts generally award costs as they would in any other type of proceeding.

Litigation funding Common law jurisdictions have historically been opposed to third parties interfering with lawsuits in which they have no legitimate interest. Intermeddling in a dispute in which a third-party has no interest without justifi cation or excuse is a legal impropriety known as “maintenance” and, if carried out with a view to sharing in the profi ts of the action, will amount to “champerty”. Recent case law suggests that Canada may be moving away from the traditional common law stance with respect to third-party litigation funding. In Berg v Canadian Hockey League, Justice Perell of the Ontario Superior Court explained that as long as third-party funding agreements are fair and reasonable from the client’s perspective and do not interfere with the lawyer-client relationship or the administration of justice, they are permissible and justifi ed as a means to afford plaintiffs access to justice.15 The Manitoba Court of Appeal has also recently weighed in on the issue, confi rming the necessity of fi nding an improper motive when determining that an arrangement amounts to champerty or maintenance.16

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Interim relief There are two types of pre-trial injunctions available in Canada: interim injunctions and interlocutory injunctions. An interim injunction can be obtained on an ex parte basis and may be granted on the same day in urgent cases. This type of injunction is generally only granted for brief periods of time, lasting until an application for an interlocutory injunction is made. The interlocutory injunction serves to preserve the status quo or enjoin certain conduct until a ﬁ nal determination of the parties’ rights is rendered. A pre-trial injunction will only be granted if a three-pronged test is satisﬁ ed. First, there must be a serious question to be tried. Second, the court must be convinced that the applicant will suffer irreparable harm if the injunction is not granted. Third, the balance of convenience must favour the applicant’s request for injunctive relief.17

Enforcement of judgments and awards Canadian courts have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments.18 The Supreme Court of Canada has stated that legitimate foreign judicial orders “should be respected and enforced, not sidelined and ignored”.19 Enforcement of foreign judgments is regulated at the provincial level. Judgments from the United Kingdom, for example, are recognised in certain provinces through a bilateral convention between Canada and the United Kingdom. If no such statutory recognition of judgments exists, the common law may serve as an alternative method for enforcing a foreign judgment. The foreign judgment must be fi nal and dispositive in order to be enforced in Canada. The judgment must have originated from a court that had jurisdiction under the principles of private international law as applied by Canadian courts, and be for a defi nite and ascertainable sum of money. If it is not a monetary judgment, its terms must be suffi ciently clear and limited in scope. A foreign court will be found to have correctly assumed jurisdiction if there exists a real and substantial connection between the foreign judgment and the events, persons and circumstances that gave rise to that judgment. If the foreign judgment meets all of these criteria, it may nevertheless be denied enforcement if it: (a) is based on a foreign penal, revenue, or public law; (b) was obtained by fraud; (c) is contrary to natural justice; or (d) violates public policy.20 In Quebec, Articles 3155 and following of the Civil Code21 govern the substantive rules applicable to the recognition and enforcement of foreign judgments. Articles 507 and 508 of the Code of Civil Procedure govern the procedural aspects related to enforcement.22 Technically, the enforcement of a judgment from one Canadian province in another province is considered to be the enforcement of a “foreign” judgment.23 In practice though, Canadian courts will generally scrutinise judgments issued in another Canadian province or territory with less rigour than when scrutinising judgments from another country. Canadian courts generally enforce foreign arbitral awards pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the UNCITRAL Model Law on International Commercial Arbitration 1985 (Model Law). A party must fi le the award, along with evidence of the arbitration agreement on which it was founded. The Supreme Court of Canada has confi rmed that Canadian limitations statutes apply to the enforcement of a foreign arbitral award in Canada.24

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Cross-border litigation Canadian courts will assume jurisdiction over a claim where the following two conditions are met: 1. the court determines, as a matter of law, that it has jurisdiction. In other words, the court has jurisdiction simpliciter and, therefore, can hear the action; and 2. if jurisdiction simpliciter is established, the court must then decide, as a matter of discretion, whether jurisdiction should nonetheless be declined because another forum is more convenient. In making this determination, the court must decide whether there is a real and substantial connection between the parties or subject matter and the province where the action has been commenced. The Canadian common law has traditionally recognised three pillars of jurisdiction simpliciter for actions in personam brought before a provincial superior court: • Presence-based or personal jurisdiction Under Canadian conﬂ ict of law rules, the forum court has independent jurisdiction to hear actions brought against a defendant that is resident or domiciled in the territorial jurisdiction of the forum court, regardless of the subject matter of the action or where the cause of action arose.25 The same rule applies with respect to jurisdiction over corporate defendants carrying on a business in the province.26 • Consent-based jurisdiction This type of jurisdiction arises where the defendant has agreed (expressly or impliedly) to be bound by the jurisdiction of the forum court. • Assumed jurisdiction The jurisdiction of Canadian superior courts in litigation against a foreign defendant was revisited by the Supreme Court of Canada in Van Breda v Village Resorts Ltd.27 In this case and its companion decisions, the Supreme Court held that to establish jurisdiction simpliciter over a foreign defendant, there must be an objectively “real and substantial connection” between the subject matter of the litigation and Ontario, as the proposed forum. The Van Breda analysis starts with a non-exhaustive list of presumptive connecting factors, each of which will, prima facie, establish the necessary connection and entitle a Canadian court to assume jurisdiction over the dispute. In the context of tort claims, the Supreme Court held that any of the following factors could establish the necessary presumptive connection to the province: (a) the defendant is domiciled or resident in the province; (b) the defendant carries on business in the province; (c) the tort or wrong was committed in the province; or (d) a contract connected with the dispute was made in the province.28 However, the list of presumptive connecting factors is not closed or exhaustive, and a court may consider other new factors.29 Once the plaintiff has established the existence of a presumptive connecting factor linking the dispute to the province, the court will have jurisdiction to hear the dispute unless the challenging party can successfully rebut the presumption on the facts of the case.30 A presumptive connecting factor may be rebutted where the challenging party can demonstrate that, on the facts, the connecting factor does not point to any real relationship between the subject matter of the litigation and the province.31

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Once jurisdiction simpliciter is established, the litigation will proceed in that province unless the defendant can establish that it is not the most appropriate forum for the dispute, such that the court should exercise its discretion to decline jurisdiction.32 The burden is on the defendant to demonstrate that fairness to the parties, and the effi cient resolution of the claims, make the other forum clearly more appropriate.33 Obtaining evidence from a non-party Canadian resident When a litigant seeks to obtain evidence from a non-party Canadian resident for use in a proceeding outside of Canada, they must do so by way of letters rogatory. In determining whether to give effect to such a request, a Canadian court will consider whether: (1) the evidence sought is relevant; (2) the evidence sought is necessary for trial and will be adduced at trial, if admissible; (3) the evidence is not otherwise obtainable; (4) the order sought is not contrary to public policy; (5) the documents sought are identifi ed with reasonable specifi city; and (6) the order sought is not unduly burdensome.34

International arbitration Each Canadian province and territory (other than Quebec) has separate legislation for domestic arbitration and international commercial arbitration. In Quebec, both domestic and international commercial arbitrations are regulated by the Civil Code of Quebec and the Code of Civil Procedure.35 Federally, international commercial arbitration is governed by the Commercial Arbitration Act36 (CAA). The CAA applies to matters where one of the parties is Her Majesty in right of Canada, a departmental corporation, a Crown corporation, or if maritime or admiralty matters are at issue. Although international commercial arbitration legislation is similar across Canadian jurisdictions, there are certain differences that may create unforeseen risks for inter- jurisdictional entities. In reaction to these jurisdictional inconsistencies, there has been a recent push by the Uniform Law Conference of Canada to synchronise provincial, territorial and federal legislation.37 A new statutory regime governing international commercial arbitration came into effect in Ontario in March 2017. The International Commercial Arbitration Act, 201738 (ICAA) clariﬁ es and harmonises Ontario’s statutory framework for international commercial arbitration and adopts principles underlying the New York Convention. The ICAA also provides clarity with respect to limitations periods applicable to enforcement of arbitral orders. For international arbitration, an award cannot be appealed on its merits to a court. A court may, however, set aside the award under Article 34 the Model Law.39

Mediation and ADR Canada offers prospective litigants a wide variety of alternative dispute resolution forums. Some examples of these alternatives, each falling under the category of alternative dispute resolution, include negotiation, mediation, arbitration (and hybrid procedures like Med- Arb), and expert determination. Mediation Mediation has become increasingly common in Canada in recent years. Not only is mediation encouraged by the legal profession and the judiciary; in some cases, mediation is actually required by statute.

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In Ontario, the proliferation of mediation is at least in part related to the enactment of the Commercial Mediation Act, 201040 (CMA). The CMA ensures that parties settling a commercial dispute through mediation will be able to register their settlement agreement with the court, thus strengthening its enforceability. Parties may also seek out mediation because of the high degree of confi dentiality that surrounds the process. The Supreme Court of Canada has confi rmed that parties can elect to abide by a higher degree of confi dentiality in the context of mediation than is generally afforded under the common law.41 This can be achieved if the parties clearly stipulate in their mediation contract that they intend to override the exception to the common law settlement privilege which allows a party to disclose protected communications in order to prove the existence or scope of a settlement.42 Arbitration Arbitration of domestic commercial disputes is becoming increasingly popular in Canada. As described above, every province and territory has its own separate arbitration legislation. There are many arbitral institutions present in Canada, including: the ADR Chambers; the ADR Institute of Canada; the Canadian Arbitration Association; the Canadian Commercial Arbitration Centre; the International Centre for Dispute Resolution; and the International Chamber of Commerce.43 If an agreement to arbitrate a certain matter is in place, a party can apply to the court for an order staying the proceedings in favour of arbitration. Courts must stay the proceedings, provided that the arbitration agreement is not void, inoperative, or incapable of being performed. For domestic arbitrations, there are limited rights of appeal, usually only on questions of law. Appeal rights vary by province and territory. Some provinces and territories do not provide for any right of appeal, whereas others provide a right to appeal after having obtained leave.

Regulatory investigations Increasingly, legal disputes are being handled by regulatory and administrative agencies as opposed to the traditional court system. Administrative tribunals run parallel to the provincial or territorial and federal court systems. These specialised bodies are created by statute and focus on particular matters of law, including employment insurance, labour relations, human rights and workers’ compensation. These tribunals are not part of the court system; however, it is possible to challenge a tribunal’s decision to the courts through a judicial review process.

* * *

Endnotes 1. Hryniak v Mauldin, 2014 SCC 7 at para 2. 2. For a more detailed discussion of the Canadian judiciary, see Department of Justice, “The Judiciary”, (Canadian Department of Justice, 2016), online: http://www.justice. gc.ca/eng/csj-sjc/ccs-ajc/05.html#app. 3. Justin Trudeau, Prime Minister of Canada, “New process for judicial appointments to the Supreme Court of Canada” (Government of Canada, 2016), online: http://pm.gc.ca/ eng/news/2016/08/02/new-process-judicial-appointments-supreme-court-canada.

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4. Department of Justice, “Changes to the Appointments Process for Federal Judges” (Frequently Asked Questions) (Canadian Department of Justice, 2017), online: http:// www.justice.gc.ca/eng/csj-sjc/scapq-pncsq.html. 5. Blood Tribe Department of Health v Canada (Privacy Commissioner), 2008 SCC 44. 6. Robert W. Hubbard, Susan Magotiaux & Suzanne M. Duncan, The Law of Privilege in Canada (Toronto: Thomson Reuters, 2016) at 11.10. 7. Robert W. Hubbard, Susan Magotiaux & Suzanne M. Duncan, The Law of Privilege in Canada (Toronto: Thomson Reuters, 2016) at 12.20. 8. Lizotte v Aviva Insurance Company of Canada, 2016 SCC 52; Alberta (Information Privacy Commissioner) v University of Calgary, 2016 SCC 53. 9. Burgess v Davis [1936] 2 DLR 532 NSSC; See also Mark M. Orkin, The Law of Costs, 2d ed (Toronto: 2017). 10. Wesbell Networks Inc v Bell Canada, 2015 ONCA 33 at para 22. 11. 1318706 Ontario Ltd. v Niagara (Municipality) (2005), 75 OR (3d) 405 (Ont CA). 12. British Columbia (Minister of Forests) v Okanagan Indian Band, [2003] 3 SCR 371 at para 26. 13. Boucher v Public Accountants Council (Ontario), 2004 Carswell Ont 2521 at para 26. 14. See for example, Rule 49.10 of the Ontario Rules of Civil Procedure. 15. Berg v Canadian Hockey League, 2016 ONSC 4466 at para 5. 16. Bjornsson et al v Smith et al, 2016 MBCA 91 at paras 20–23. 17. RJR-MacDonald Inc. v Canada (Attorney General), [1994] 1 SCR 311 at para 48. 18. Chevron Corp v Yaiguaje, 2015 SCC 42 at para 27 [Chevron]. 19. Chevron at para 53. 20. Pro Swing Inc v ELTA Golf Inc, 2006 SCC 52 at para 31. 21. Civil Code of Québec, CQLR c CCQ-1991. 22. Code of Civil Procedure, CQLR c C-25.01. 23. Edwin G. Upenieks & Robert J. van Kessel, Enforcing Judgments and Order, 2nd ed (LexisNexis, 2016) at 111. 24. Yugraneft Corp v Rexx Management Corp, 2010 SCC 19. 25. Singh v Rajah of Faridkote, [1894] AC 670 at 683. 26. Stephen G.A. Pitel, Nicholas S. Rafferty, Conﬂ ict of Laws (Toronto: Irwin Law Inc, 2010) at 59. 27. Club Resorts Ltd. v Van Breda, 2012 SCC 17 [Van Breda]. 28. Van Breda at para 90. 29. Van Breda at paras 91–92. 30. Van Breda at para 94. 31. Van Breda at para 95. 32. Van Breda at para 102. 33. 2249659 Ontario Ltd v Sparkasse Siegen, 2013 ONCA 354 at paras 53, 59; Van Breda at para 104.

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34. Friction Division Products Inc v EI Du Pont de Nemours & Co (No. 2) (1986), 56 OR (2d) 722 at para 25. 35. Civil Code, arts 2638–2643; Code of Civil Procedure, arts 620–654. 36. Commercial Arbitration Act, RSC 1985, c17. 37. For a detailed discussion of the differences between provinces see James H. Carter, The International Arbitration Review 4th edition, (London: Law Business Research Ltd. 2013) at 115-130. 38. International Commercial Arbitration Act, SO 2017, c2, Schedule 5. 39. Which states that an arbitral award may be set aside only if: (a) the party was legally incapable; (b) the party was not given proper notice of the appointment of the arbitrator; (c) the party was not given proper notice of the proceeding; (d) the party was denied the opportunity to present its case; or (e) the tribunal’s decision went beyond the scope of what the parties agreed was arbitrable. 40. Commercial Mediation Act, SO 2010, c16, Schedule 3. 41. Bombardier Inc v Union Carbide Canada Inc, 2014 SCC 35 [Bombardier]. 42. Bombardier at para 67. 43. For a full list, see Department of Justice, “Dispute Prevention and Resolution” (Canadian Department of Justice, 2015), online: http://www.justice.gc.ca/eng/abt- apd/dprs-sprd/index.html.

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Robert W. Staley, Partner Tel: +1 416 777 4857 / Email: [email protected] Robert Staley is Chair of the Shareholder Activism and Critical Situations Practice Group. His practice focuses on complex securities litigation, securities regulation and enforcement, shareholder activism and securities class actions. Rob regularly advises Boards of Directors, Audit Committees and Special Committees in connection with internal and regulatory investigations and in managing litigious transactions. Rob is recognised by Lexpert, Chambers & Partners, The Legal 500, Benchmark and many more as a leading lawyer in Dispute Resolution. In 2014, 2015 and 2017, Benchmark Canada conferred on Rob Benchmark’s award as Canada’s Securities Litigator of the Year. Peer-review publications have recognised Rob as “a brilliant lawyer – he’s a real strategist, has the ability to see the big picture, and does a superb job… in court”, for “his skilled handling of complex cases”, as “absolutely ﬁ rst rate at examining and cross-examining witnesses”, for his “excellent courtroom presence”, his ability to provide “practical and concise advice”, and as “a masterful strategic thinker”.

Jonathan G. Bell, Partner Tel: +1 416 777 6511 / Email: [email protected] Jonathan Bell’s general litigation practice focuses on complex corporate and commercial disputes, securities litigation and class actions. Jon has motion, application, trial and appeal experience before all courts in Ontario, as well as a number of administrative and regulatory boards and tribunals. He has experience in matters pertaining to securities regulatory and enforcement matters, internal investigations, shareholder and partnership disputes, directors’ and ofﬁ cers’ liability, professional negligence, product liability, domestic and international arbitration, oppression proceedings and class proceedings, among others. Jon has extensive experience in managing the unique e-discovery and record management challenges of complicated litigation. He has presented to peers at professional conferences as well as to a number of industry and professional organisations on how corporate litigants can best address the new challenges of the e-discovery age.

Jessica M. Starck, Associate Tel: +1 416 777 5514 / Email: [email protected] Jessica Starck’s litigation practice is focused on corporate and commercial disputes, securities litigation and fraud matters. Jessica joined Bennett Jones after summering and articling with the ﬁ rm. She is a member of the Advocates’ Society, the Canadian American Bar Association, the New York State Bar Association and the Ontario and Canadian Bar Associations.

Bennett Jones LLP 3400 One First Canadian Place, P.O. Box 130, Toronto ON, M5X 1A4, Canada Tel: +1 416 777 6128 / Fax: +1 416 863 1716 / URL: www.bennettjones.com

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Ian Huskisson, Anna Peccarino & Neil McLarnon Travers Thorp Alberga

Effi ciency/integrity The Cayman Islands are a British Overseas Territory. The legal system is based on the English common law, as amended by domestic statute, with the Privy Council in London as the highest court of appeal. The legal structures, concepts, and approach are instantly recognisable to any English, US or other common law adviser. This backbone of legal similarity and political stability has proved crucial to the growth of the Islands. Over the last 20 to 30 years, the Cayman Islands have developed specifi c legislation to facilitate a wide range of international fi nancial transactions. In addition, the Cayman Islands have a broad and deep pool of accountants, bankers, lawyers and other service providers in order to offer service levels similar to those found in the leading onshore centres. Over 40 of the top 50 banks globally hold licences in the Cayman Islands. With approximately 11,000 registered investment funds, Cayman Islands fund vehicles are routinely used by institutional and independent asset managers. Cayman vehicles are considered, by a very wide margin, to be the market leader for offshore hedge funds. In terms of insurance, the Cayman Islands are one of the most attractive jurisdictions for captive vehicles, and continue to be the leading jurisdiction for healthcare captives. The administration of justice in the Cayman Islands is carried out on three levels: Summary Court, Grand Court and the Court of Appeal. In 2009, in response to the needs of the fi nancial services industry, the Financial Services Division of the Grand Court was established (the FSD). The FSD is modelled on the English commercial court and has highly experienced judges presiding over complex fi nancial services disputes. Appeals from the Grand Court lie to the Cayman Islands Court of Appeal, which sits regularly throughout the year. Appeals are heard by three judges, including Lord Justices of Appeal from the English Court of Appeal. In appropriate cases, further appeal may lie to the Judicial Committee of the Privy Council in London. Judgments of the Privy Council are persuasive in many jurisdictions. By way of example, the Privy Council recently made new law extending the tort of malicious prosecution to civil as well as criminal cases. This was following an appeal from the Cayman Islands (Crawford Adjusters and others v Sagicor General Insurance (Cayman) Limited [2013] UKPC 17).

Enforcement of judgments/awards In principle, foreign judgments and arbitral awards can be enforced in the Cayman Islands courts. At the time of writing (with the exception of Australian judgments), there is no system for registration and automatic enforcement of foreign judgments. However, it is

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intended that legislation will soon be passed extending the current registration system to most Commonwealth countries. Once the new legislation is passed, judgments from other countries (most notably the United States) will continue to be enforced by court under the common law system, as if they were based on a contractual right. The process for enforcement therefore involves the commencement of a fresh action in the Cayman Islands courts. Judgment is usually granted on a summary basis. Once granted, the judgment can be enforced by seizure of property or other means, as with any other local judgment. There are a number of well-established formal requirements which must be satisfi ed before the court will enforce a foreign judgment or arbitral award. These are as follows: • The foreign court or tribunal was competent to hear the claim. • The judgment or award involves a positive obligation, such as an obligation to pay a debt or perform a specifi ed task. • The judgment or award is fi nal and conclusive. • The judgment or award does not involve taxes, fi nes or penalties. The requirement that the foreign court was competent to hear the claim should be assessed with reference to the principles of Cayman Islands law, rather than the law of the country making the judgment. This important distinction was illustrated in the case of Banco Mercantil Del Norte SA v Cabal Peniche [2003 CILR 343], in which the Cayman Islands court declined to summarily enforce a judgment of the Mexican courts. It was argued that the defendant in that case had submitted to the jurisdiction of the Mexican court by voluntarily appearing in those proceedings. The appearance relied on what is known as Amparo proceedings in the Mexican courts. The aim of the Amparo proceedings was to obtain an order setting aside the deemed service of the proceedings. This would be considered a submission to the jurisdiction of the Mexican courts, but under Cayman Islands law it would not. Under Cayman Islands law, purely contesting the jurisdiction of the court does not amount to a voluntary submission to the jurisdiction. Accordingly, on the facts of this case, there was real doubt that the Mexican court had jurisdiction (applying Cayman Islands law), and the Cayman Islands judge declined to grant summary judgment on the enforcement application. The judge concluded: “I am of the view that this was a purely jurisdictional hearing on the face of the record. The threshold for a summary judgment is not met in my view.” Practitioners should be aware that there are circumstances in which the Cayman Islands courts will not recognise foreign trust laws or enforce judgments that are inconsistent with Cayman Islands trust law and practice. The Trusts Law (2011 Revision) will prevent the enforcement of a foreign judgment setting aside the transfer of property into a Cayman Islands trust in certain circumstances. For example, a trust might be established to prevent a relative from inheriting property as of right (also known as forced heirship) under the relevant foreign law. The Cayman Islands courts will not recognise a judgment of a foreign court requiring the property to be returned.

Cross-border litigation A very large part of the business of the Cayman Islands courts is cross-border in nature. The judges of the Cayman Islands courts regularly interact and cooperate with judges from other jurisdictions. The Cayman Islands courts are, in principle, receptive to requests for judicial assistance from other courts, including requests for the production of documents or the

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examination/deposition of witnesses located in the Cayman Islands. The Cayman Islands courts generally adopt the approach taken in the well-known English case of Rio Rinto Zinc v Westinghouse [1978] A.C 547, where it was said: “It is our duty and our pleasure to do all we can to assist that court, just as we would expect the [foreign court] to help us in the circumstances.” A good example of successful cooperation between the Cayman Islands and other courts is the collapse of the Bank of Credit and Commerce International (“BCCI”). BCCI’s worldwide operations were put into a coordinated liquidation process in 1991. The liquidation has since resulted in substantial recoveries for creditors. Central to the success of the liquidation was a plea-bargaining agreement struck between the Cayman Islands liquidators and the United States authorities. The following extracts from one of the overseas liquidator’s reports confi rm the extent of the co-operation involved. “In November and December of 1991, under the supervision of the Grand Court of the Cayman Islands, the District Court of Luxembourg, and the High Court in England, the BCCI liquidators negotiated an historic plea and co-operation agreement with the United States. The Agreement was presented to the Grand Court of the Cayman Islands and approved in December 1991.” “In accepting this agreement, Judge Joyce Hens Green of the United States District Court for the District of Columbia stated: The Plea Agreement now before the Court refl ects, on a truly global measure, extraordinary efforts and amazing co-operation of a multitude of signatories representing myriad jurisdictions, to fully settle actions against the corporate defendants, which had operated in 69 countries around the globe, and through the plea restitution, to locate and protect all realizable assets of BCCI for the ultimate benefi t of the depositors, creditors, United States fi nancial institutions, and other victims of BCCI. The promise of the Plea Agreement is that those extraordinary efforts, that amazing co-operation, should continue.” Cross-border insolvencies have continued to generate ground-breaking decisions. The English Supreme Court decision in Rubin v Eurofi nance [2012] UKSC 46 is particularly relevant to offshore litigation. Here the English Supreme Court established that a judgment made in foreign insolvency proceedings would not be enforced against an English defendant, unless the defendant had been within the jurisdiction of the foreign court. It had previously been suggested that judgments made in insolvency proceedings in the country of an insolvent company’s incorporation or centre of main interests (including claims to set aside pre-insolvency transactions) should be enforced against defendants domiciled elsewhere, even where they had not submitted to the insolvency jurisdiction. The decision in Rubin is likely to be followed by the courts in the Cayman Islands and other offshore jurisdictions. It may lead to more claims having to be brought in offshore jurisdictions where asset holding companies are domiciled. The Rubin decision also brings the confl ict of laws position in international insolvencies more in line with applicable principles in commercial cases. An interesting variation on this theme was presented in the Cayman Islands case of Irving Picard and Bernard Madoff Investment Securities LLC (in Securities Investor Protection Act Liquidation) v Primeo Fund (In Offi cial Liquidation) [Court of Appeal, 16 April 2014]. In this case, applying Rubin, liquidating trustees appointed in the United States brought proceedings in the Cayman Islands to recover assets alleged to be due to the bankrupt Madoff

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estate. The proceedings had to be brought in the Cayman Islands because the defendants were not within the jurisdiction of the United States bankruptcy courts. However, the liquidating trustees sought to argue (amongst other things) that the Cayman Islands courts should apply the relevant United States bankruptcy laws rather than Cayman Islands law. It was argued that it was open to the Cayman Islands courts to apply foreign bankruptcy laws, based on sections of the Cayman Islands companies legislation that encourage cooperation with foreign offi ce-holders. The court found that any avoidance proceedings (e.g. proceedings to set aside suspect transactions) a foreign offi ce-holder wishes to bring in the Cayman Islands would have to be brought under the applicable Cayman Islands legislation. The strong but not as yet overwhelming trend in the Cayman Islands and other offshore cases (which are too numerous to mention here) involving Madoff and similar funds which have collapsed following the discovery of fraud is that (absent any unusual circumstances), investors who cash in prior to the collapse may keep their payments at the expense of the remaining investors. This approach is justifi ed in part on the need for commercial certainty in order for mutual funds to operate effi ciently, but contrasts sharply with that taken in the United States and other jurisdictions, where courts will generally allow clawback of payments made to investors who redeem their investments before the fraud is discovered.

Privilege and disclosure Cayman Islands law follows the traditional common law approach to both privilege and disclosure. Privilege will apply to legal advice generally and also to communications made in contemplation of litigation. During the course of litigation, all parties are under an automatic and strictly enforced obligation to disclose documents within their control that relate to the matters in issue. This includes documents that are adverse to their case and that may lead to a “train of enquiry”. Parties must also identify documents that were once but are no longer within their control, for example, if they have been lost or destroyed. One issue that must always be considered when litigating in the Cayman Islands is confi dentiality. Unlike the traditional common law approach, where disclosure obligations generally override confi dentiality, Cayman Islands law requires that the leave of the court be fi rst obtained before certain confi dential documents are disclosed. The Confi dential Information (Disclosure) Law (2016 Revision) (“CIDL”) defi nes confi dential information as information arising in or brought in to the Islands concerning any property of a principal to whom a duty of confi dence is owed. It is important to note that the CIDL is not a “secrecy law”. All that it does is require a court application to be made before making any required disclosure. In all but the most extreme of cases, expect an order to be made permitting disclosure.

Costs and funding Courts in the Cayman Islands follow the principle of “loser pays” in most situations. The winner generally has to wait until the conclusion of the case to receive payment, and only then after the amount has been assessed by the court in a process called taxation. It is possible in some circumstances to require the provision of security for costs up front, and to make a payment into court which (if not beaten at trial) should result in a costs order in favour of the defendant from the deadline for acceptance onwards. It is also possible to ask the court to require third parties who have in fact been directing litigation behind the “cloak” of the named party to pay the winner’s costs, provided they have been put on notice of their

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cost risk. Contingency fees are not recoverable in the Cayman Islands, although there have been a number of recent cases in which liquidators of companies have been permitted to enter into conditional fee arrangements with local lawyers, or contingency arrangements with lawyers overseas. In December 2015, the Law Reform Commission released a draft bill and a discussion paper for public consultation on conditional and contingency fee agreements between clients and lawyers in civil action cases which, if passed into law, will pave the way for a no-win, no-fee regime. There have been several high-proﬁ le claims in recent times against directors of Cayman Islands companies for breach of duty, amongst other things. One particular feature of Cayman Islands’ company law (which differs from English law) is the availability of widely drawn exclusions of liability for directors. Cayman Islands law follows the traditional approach of the English common law in trust cases, where trustees may exclude liability very widely. It is not uncommon for the Articles of Association of Cayman Islands companies to also provide for a company pursuing claims against its directors to indemnify the directors for their costs of the proceedings. In the case of BTU Power Management Company v Abdul Hayat (Unreported, 1 June 2009), the Cayman Islands court enforced Articles which required a company to pay a director’s defence costs up front.

Interim relief Interim relief in the form of asset-freezing and other injunctions is available in the Cayman Islands. The Cayman Islands government has recently passed a law (the Grand Court Amendment Law 2014) for the purpose of clarifying the courts’ ability to grant injunctive relief in support of proceedings in other jurisdictions. This is a welcome development and assists claimants recover assets that may have been placed offshore in order to defeat claims. The Cayman Islands courts now have the power to grant a wide variety of injunctions in support of domestic and other proceedings. These include the freezing of assets, preservation of property, disclosure of assets, documents, etc. Unlike most European jurisdictions where conventions establish the relative priority of the different jurisdictions, in the Cayman Islands it is often necessary to seek the assistance of the court to prevent unlawful “forum shopping” by granting an anti-suit injunction. Anti- suit injunctions are normally aimed at preventing a party (who is subject to the jurisdiction of the Cayman Islands courts) from pursuing litigation in another country that should be litigated in the Cayman Islands. This will commonly be where there is an exclusive jurisdiction clause, or where a claim raises issues that can only be determined by the courts of the Cayman Islands. This last issue was raised in the case of Asia Paciﬁ c Online Limited v Marcus Watson and Others (Unreported, 25 April 2012), in which the Cayman Islands court granted an “anti- anti-suit injunction” to restrain intended anti-suit injunction proceedings about to be brought in the United States. The dispute related to Chapter 11 proceedings in which it was alleged certain shares in a Cayman Islands company would be expropriated against their wishes through the Chapter 11 process. The court granted the injunction, on the basis that the US proceedings could amount to a repudiation of the constitution of a Cayman Islands company. In a similar vein, the Privy Council in London (the highest appellate court for the Cayman Islands) has recently determined that when a company is being wound up in the jurisdiction where it is incorporated, an anti-suit injunction was available to prevent a creditor or member from pursuing proceedings in another jurisdiction which are calculated to give him an unjustiﬁ able priority. A creditor (Shell) brought proceedings in the Netherlands

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against a company which was later wound up in the BVI. In those proceedings, Shell obtained an order attaching certain assets of the company. The effect of the attachments was that, if Shell succeeded in its claim in the Dutch courts, it would likely be able to satisfy its judgment debt in full, whereas other creditors who had claims in the liquidation could recover only a dividend. The purpose of the Dutch attachments was to obtain priority which Shell would not get in the liquidation. The liquidators applied for an anti-suit injunction to restrain Shell from taking steps to enforce the attachments. They lost at ﬁ rst instance but, on appeal, an injunction was granted. Shell appealed. The issue on appeal was whether Shell was, in principle, entitled to do what it had done, and, if not, whether an injunction could be issued to prevent it taking any steps to enforce the attachments. The court considered the fundamental principle applicable to all anti-suit injunctions, that the court does not purport to interfere with any foreign court, but may act personally upon a defendant by restraining him from commencing or continuing proceedings in a foreign court where the ends of justice require. On this basis, the court dismissed the appeal, upholding the injunction that had been granted (Stichting Shell Pensioenfonds v Krys and another [2014] UKPC 41).

International arbitration The principal benefi ts of arbitration, such as confi dentiality and potentially more limited discovery, are making arbitration more popular with the international business communities. Many parties selecting arbitration in the Cayman Islands for the resolution of international commercial disputes will expressly provide in their agreements for the arbitration to be governed by the rules of a particular organisation or arbitral body. A model ad hoc arbitration clause can be found in the Arbitration Law 2012. This replaced previous legislation which had been based on the English Arbitration Act of 1950. Under the new law, arbitration agreements may be in the form of either an arbitration clause in a contract, or a separate agreement. Whichever form it takes, with a couple of specifi c exceptions, an arbitration agreement must be in writing, and it must be contained in a document signed by the parties or in an exchange of letters, facsimile, telegrams, electronic or other communications which provide a written record of the agreement. Subject to certain mandatory rules, the parties may agree to adapt the arbitral process to suit their needs. In particular, the parties may agree on: the number and method of appointment of the arbitrators; their specifi c areas of expertise and qualifi cations; the language of the arbitration; whether the arbitration is to be conducted under institutional rules, and if so which arbitration boards to adopt; and whether to nominate an appointing authority to choose the members of the arbitral tribunal or to retain the power to choose the tribunal themselves. The enforcement of arbitration agreements, and of resulting arbitral awards made in countries which are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the NY Convention), is governed by the Foreign Arbitral Awards Enforcement Law, which was originally enacted in 1975 and later revised in 1977 (the FAAEL). The FAAEL incorporates the provisions of the NY Convention into Cayman Islands Law. A NY Convention Award will be enforced as if it were a judgment of the courts of the Cayman Islands, unless one of the limited circumstances for an award to be challenged under the NY Convention can be established. The Cayman Islands courts can be expected to adopt a robust approach to enforcement of NY Convention awards. In Globeop Financial Services LLC and others v Titan Capital Group and others (Unreported), 23 April 2014, the

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Chief Justice of the Cayman Islands summarily rejected allegations of impropriety and required the enforcement of a NY Convention award from the United States. In conclusion, the Cayman Islands courts are respectful of, and will readily enforce, arbitration awards from qualifying-convention and other countries. Where the parties have agreed that their disputes should be arbitrated, not litigated, then the Cayman Islands courts can be expected to enforce arbitration. One potential exception may involve winding-up proceedings.

Mediation and ADR The Cayman Islands courts embrace, but do not require, the resolution of disputes by alternative methods of dispute resolution (ADR). The advantages of ADR include conﬁ dentiality, comparatively limited discovery and disclosure requirements, reduced costs, time-saving, and the preservation of business relations. All conventional forms of ADR are available in the Cayman Islands, and practitioners are familiar with them.

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Ian Huskisson Tel: +1 345 623 2367 / Email: [email protected] Ian is a commercial litigation partner with over 17 years’ post-qualifi cation experience gained in London and the Cayman Islands. His experience covers all aspects of company law, insolvency and other fi nancial services disputes. Ian qualifi ed as a solicitor advocate when practising in London and has also acted as an expert witness on the law of insolvency. Ian was part of Global Law Experts’ Alternative Dispute Resolution Team of the Year in 2014.

Anna Peccarino Tel: +1 345 623 2374 / Email: [email protected] Anna is an experienced litigation and alternative dispute resolution partner with over 20 years’ experience gained under the relevant legal systems of London, Paris, Rome, the Cayman Islands and Jersey, Channel Islands. Anna has conducted high-proﬁ le arbitrations and mediations under the auspices of the major ADR bodies, particularly the ICC, LME, LCIA and AAA, and has experience in drafting ADR agreements in accordance with the rules and regulations of those bodies. Anna has acted in a number of high-proﬁ le matters, notably representing the Italian government, the French, British and Belgian railways and multi-million dollar listed corporations. Anna was part of Global Law Experts’ Alternative Dispute Resolution Team of the Years 2013 and 2014.

Neil McLarnon Tel: +1 345 623 2378 / Email: [email protected] As sole Counsel, Neil has represented clients at every level of the English civil law Court structure, from tribunals and county courts, through the High Court, the Court of Appeal to the UK Supreme Court. He has represented clients in ICC, LCIA, DIAC and ad hoc arbitrations. He also regularly appears before the Dubai International Financial Centre Court. As Junior Counsel, he has worked alongside Senior Counsel for hearings and trials taking place before the High Court and the Courts of the Bahamas, the British Virgin Islands, the Cayman Islands, Guernsey and Jersey, Neil’s practice areas include arbitration, banking and ﬁ nance, civil fraud, commercial law, company law, directors’ duties, funds law, injunctions, insolvency law, partnership law, private international law and trusts and estates law. Neil is ranked in Citywealth as a leading trusts barrister.

Travers Thorp Alberga 103 South Church St., Harbour Place, PO Box 472, Grand Cayman KY1-1106, Cayman Islands Tel: +1 345 949 0699 / Fax: +1 345 949 8171 / URL: www.traversthorpalberga.com

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Cui Qiang & Li Qishi Commerce & Finance Law Offices

Effi ciency of process The judicial system in the People’s Republic of China1 (the “PRC”) is now embracing “golden time” in terms of both effi ciency and integrity. The current court system of the PRC is usually summarised as “Four Levels and Two Instances”. “Four Levels” refers to the existing four-layer courts: (i) the Basic-Level People’s Court; (ii) the Intermediate People’s Court (the “IPC”); (iii) the High People’s Court (the “HPC”); and (iv) the Supreme People’s Court (the “SPC”). “Two Instances” means that normally for each case, the litigants are entitled to challenge the judgments rendered by the fi rst-instance courts by appealing to higher-level courts (the second- instance courts) only once, subject to re-trial under exceptional circumstances. Regarding the time limit for judgment-making, different limitations apply to the fi rst and second instance respectively: three months for the former; and six months for the latter, subject to extensions occasionally approved by competent authorities.2 It should be noted that periods for certain procedures, such as those of the judicial appraisal and the public announcement, are not added into the time limit. Another exception is that the three- or six-month limit does not apply to foreign-related cases,3 which involve foreign-related elements.4 As the caseload at all levels of Chinese courts has kept increasing during the past decade, the aforementioned limitations are normally modifi ed by extension(s).

Integrity of process Under a legal standard, a court in China should adjudicate cases independently, based solely on the facts and in accordance with the relevant laws, without being subject to any intervention from any administrative authorities, entities or individuals. In recent years, the SPC has set up or approved the establishment of several cross-region courts and SPC circuit courts, making a bold and innovative move towards a more delocalised, decentralised, and just judicial system. Another improvement for the current judicial system is transparency. In contrast to previous practices, the SPC, now leading another round of judicial reform in China, requires all Chinese courts (including the SPC itself) to publish their judgments and rulings on the internet, subject to few exceptions.5 Although stare decisis is not an established judicial principle in China, prior judgments and rulings, especially those made by the SPC or High People’s Courts, are persuasive in subsequent cases. Analysis of recent judicial data has proved that transparency is to some extent beneﬁ cial for judicial certainty and consistency.

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Privilege and disclosure The PRC law touches little upon privilege, be it the attorney-client privilege or work product privilege, whilst Chinese practising lawyers do bear a statutory duty of confi dentiality and fi delity to their clients.6 In practice, when the parties have agreed that all the information disclosed or proposals in the course of negotiation are privileged and shall not be used in other proceedings, such agreement is likely to be upheld by courts or arbitral tribunals.7 For evidence in civil cases, the courts normally do not take the initiative to conduct the collection or investigation. On the contrary, the parties in dispute shall bear the burden of providing evidence and the adverse consequences when failing to do so. Exceptions are made for issues concerning public interest or similar elements for which courts would investigate on their own. Unlike the US or other common law jurisdictions where disclosure or discovery rules are adopted, there is no mandatory obligation for the disclosure of documents or information imposed on parties in the legal proceedings under the PRC law. However, procedural arrangements of similar nature do exist and operate. For instance, when one party is able to establish that certain evidence is under the control or custody of the other party, whilst the other party refuses to submit such evidence without justifi ed excuses, adverse inferences would be rendered against that party.

Costs Under the PRC law, normally a party in a civil action may have to cover three types of fee or cost: (i) the fi ling fee; (ii) the application fee; and (iii) other cost or expense.8 The fi ling fee is paid to courts for the commencement of a trial, be it the fi rst-instance, second-instance, or retrial. While the application fee is usually for the sake of a specifi c procedure, such as the application for recognising or enforcing a foreign arbitral award, other cost or expense can include reimbursement for the witness and expert, and the attorney’s fees. Fees paid to the courts are generally fi xed at a certain amount, except for those in disputes concerning monetary compensation or property, which shall be calculated in consideration of the claim amount case by case. The doctrine of “Costs Follow the Event” is generally acknowledged in the judicial practice of the PRC, which means a party who is substantially successful in a case is entitled to costs. It is the same for arbitration practice in the PRC, where the arbitral tribunal may have broader discretion on the amount allocated between the parties when the case is not so black and white. A long-standing controversial issue for costs is whether the losing party should bear the burden of the attorney’s fee of the winning party. In other words, should the loser pay all? In 2016, the SPC issued an announcement,9 in which a mechanism similar to “costs on an indemnity basis” is mentioned for the fi rst time, which provides for a legal ground for courts to order the losing side to compensate reasonable costs, including the attorney’s fee incurred by the winning side. On December 8, 2016, the Beijing Intellectual Property Court (the “Beijing Court”), an intermediate court, granted a judgment upholding the plaintiff’s claim on its attorney’s fee which was billed on an hourly basis, amounting to RMB 1,000,000 in total.10 This judgment is widely regarded as the fi rst judgment of its kind in China to recognise the hourly-basis attorney’s fee as reasonable cost in favour of the winning party.

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Litigation funding Under the PRC law, the re is no doctrine of Champerty and Maintenance or similar ones, which means that the current legal framework does not constitute an obstacle for litigation funding. However, litigation funding is not a dynamic industry in China, while the contingency fee arrangement can be commonly found in civil cases. Whether litigation funding could move into the mainstream is still up for further testing of the market.

Interim relief There are three categories of interim relief or measures under the PRC law: (i) preservation of certain property; (ii) preservation of certain evidence; and (iii) order for speciﬁ c performance.11 In practice, the forms for interim relief by courts may vary on a case-by-case basis. In practice, in order to maintain the status quo of relevant properties or ensure that the judgment (or arbitral award) can eventually be enforced, the court may, upon the application of one party, grant orders for preservation of certain property or conducts against the other party. Absent such application, the court may, when necessary, order the adoption of preservation measures voluntarily. Normally, the court may order the applicant to provide certain security for the granting of interim measures so that when the preservation was wrongfully applied, the other party may obtain compensation for any losses incurred from the preservation. The security which the applicant has to provide, could be of various types, from providing certain property to submitting bond-related documents backed by insurance companies. Apart from the interim measures within the proceedings, a party may pursue interim relief early on at the pre-litigation stage. A court would grant its order within 48 hours upon its acceptance of such application. When the measure is ordered, the applicant shall ﬁ le its case within 30 days, or otherwise the measure would be lifted.12 For arbitration seated in Mainland China, arbitral tribunals have no power or capacity under the PRC law to grant interim measures. A tribunal receiving application for interim measures from parties would forward such application through the arbitration commission and eventually to the competent court. It should be noted that the CIETAC Arbitration Rules 2015 has adopted the emergency arbitrator mechanism, under which the emergency arbitrator may grant emergency relief in accordance with the applicable law or the agreement of the parties.

Enforcement of judgments For the enforcement of judgments, Chinese courts hold a relatively positive standing. In recent times, the SPC has invested tremendous efforts in the enforcement regime, in a resolute attempt to remove the difﬁ culty in enforcement. Regarding the enforcement of foreign judgments before Chinese courts, the PRC law provides for two approaches: (i) invoking the international treaty concluded or participated by the PRC and the state where the foreign judgments are made; or (ii) conducting in accordance with the principle of reciprocity.13 For the recognition and enforcement of foreign judgments, there are no treaties as powerful as that for foreign arbitral awards, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”). A noteworthy update is a ruling by the Nanjing Intermediate People’s Court (the “Nanjing Court”), which opens a window for the application of another approach in the recognition

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and enforcement of foreign judgments: the principle of reciprocity. 14 On December 9, 2016, the Nanjing Court ruled to recognise a Singaporean judgment on the ground of reciprocity for a prior judgment made by a court in Jiangsu Province, where Nanjing is the capital city. This ruling was then selected and praised by the SPC as a Guiding Case which would have quasi-precedent effect for all Chinese courts to follow. Additionally, another update concerning the enforcement of judgments is a SPC-involved statement. On June 9, 2017, the SPC issued the Joint Statement of the Second Sino-ASEAN15 Judge Forum (Nanjing), announcing that for states within the region (China and the ASEAN), which have not entered into treaties with the PRC for the recognition and enforcement of judgments before, the reciprocity relationship is presumed to be established between such states and China except where prior judgments in the nations have denied reciprocity. This statement, although not as formal as legislation or judicial interpretation under the PRC legal regime, is deﬁ nitely a green light for a more pro-enforcement environment in days to come.

Cross-border litigation The proceedings in other jurisdictions might obtain support viz judicial assistance from the PRC in two aspects: (i) service of legal documents; and (ii) taking of evidence. For these two items, there are multiple options available for the parties and courts to take under the PRC law. China is a contracting state to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Service Convention”), the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (the “Hague Evidence Convention”), and a series of relevant bilateral treaties. The regimes established by the conventions and treaties could be utilised among convention and treaty states. In practice, the service of legal documents within the territory of China pursuant to the Hague Service Convention would take four to six months on average, while the taking of evidence within the territory of China under the Hague Evidence Convention normally takes six to 12 months. Apart from the convention regime, diplomatic channels are widely regarded as a choice for the service of legal documents, especially where no conventions or treaties are available. On matters regarding evidence, a diplomatic ofﬁ cer or consular agent is legally permitted to collect evidence from its own citizens by certain methods within the territory of China.16 Currently, injunctive or provisional measures rendered by courts in other jurisdictions may not be upheld or enforced before Chinese courts. Given that China is promoting its “One Belt, One Road” Initiative (the “OBOR Initiative”), chances are that the scope of judicial assistance may be extended appropriately.

International arbitration Notwithstanding that the Arbitration Law of the PRC stayed unchanged for more than 20 years, of which certain provisions and mechanisms are more conservatively inclined, if not outdated, China, also a contracting state to the New York Convention, is moving fast towards an arbitration-friendly jurisdiction. Currently, there are approximately 250 arbitration institutions in China, among which the CIETAC,17 BAC,18 SHIAC,19 and SCIA20 are frequently regarded as ﬁ rst-tier institutions in terms of case-management quality and international reputation. In the same vein, numerous international arbitration institutions, such as the HKIAC,21 ICC,22 and SIAC23 chose to open their representative ofﬁ ces in Shanghai Free Trade Zone (the “SHFTZ”) to better communicate with Chinese users and further prepare for more substantial moves once the

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restrictions on the nationality of arbitration institutions for arbitration seated in China are loosened or fi nally lifted. For now, the SHFTZ is the centre of highlights for arbitration innovations in China. On December 30, 2016, the SPC issued an opinion for the promotion of judicial safeguards for the SHFTZ24 by taking an exceptionally fl exible and liberal position on arbitration by parties located within the SHFTZ. Firstly, the SPC appeared to modify its previous stance on denying the validity of agreements to arbitrate overseas between domestic parties for the lack of foreign-related element.25 Instead, the SPC opinion states that agreements for off-shore arbitration entered into between SHFTZ-registered Wholly Foreign Owned Enterprises (the “WFOEs”), which are deemed as domestic entities under the PRC law, may not be held invalid solely on the ground of lack of foreign-related elements. Secondly, the prohibition on ad hoc arbitration under certain conditions is loosened. Due to the legal restriction under the PRC law, inter alia, Article 16 of the Arbitration Law, that a valid arbitration clause must contain the designation of an arbitration institution, ad hoc arbitration has long been a “taboo” in Chinese arbitration community. However, the SPC opinion says the agreement for ad hoc arbitration between SHFTZ-registered enterprises could be held valid and the courts should report the agreements they regard as invalid to higher courts for further review. Therefore, the prior-reporting system designed for the judicial review of recognition and enforcement of foreign-related arbitration agreements and arbitral awards has been extended to ad hoc arbitration agreements. When appropriate, the SHFTZ innovations could be followed by other regions of China, or even nationwide. Regarding arbitration case law, two recent cases are worth noting. The fi rst case, Siemens v. Golden Landmark,26 mainly addressed the interpretation of foreign-related elements. In the case, the Shanghai 1st Intermediate People’s Court (the “Shanghai Court”) took a relatively liberal approach to the foreign-related element under the PRC law, which interestingly echoed the SPC opinion dated December 30, 2016. In addition, the Shanghai Court emphasised the importance of estoppel, which bars one party from making assertions that are contradictory to its prior position. The other notable case Haopu v. Wicor,27 deals with the refusal of enforcement of an ICC arbitral award on the ground of public policy exception. In this case, the Taizhou Intermediate People’s Court (the “Taizhou Court”) found that the arbitration clause for the Hong Kong-seated arbitration had been ruled invalid by another Chinese court prior to the making of the award by the tribunal, so the Taizhou Court held it would be contrary to the public policy under the Arrangements of the SPC on the Reciprocal Enforcement of Arbitration Awards by Mainland China and the Hong Kong SAR, which largely adopts the legal regime of the New York Convention, if the arbitral award was enforced. This case appears to provide an implication that the timing of the judicial review on the validity of a given arbitration clause might be decisive for whether the public policy exception could be established. In addition to commercial arbitration, investment arbitration equally draws a lot of attention these years. On December 1, 2016, the SCIA updated its arbitration rules to include the administration of investment arbitration. This is the fi rst case of arbitration institutions in Mainland China exploring investment arbitration. On March 9, 2017, in an ICSID arbitration where the South Korean investor initiated a suit against the PRC Government, the tribunal issued an award dismissing all of the investor’s time-barred claims.28 On May 31, 2017, another ICSID tribunal rendered a decision on jurisdiction in a case between a Chinese company and the Government of Yemen,29 concluding that the tribunal does have jurisdiction to hear claims in relation to the Chinese company’s allegations of expropriation. The case will touch on substantive issues at later stages. Recently on June 21, 2017, ICSID registered

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another arbitration case where a German investor claimed for the protection under the Sino- Germany BIT 2003 against the Chinese Government.30 The above-cited developments on investment arbitration appear to indicate that the ﬂ oodgate for China participating in investment arbitration is open.

Mediation and ADR Mediation is an enchanting method of ADR in China, entertaining a long history of practice and support lent by Confucianism and preferential policies. A unique feature for mediation in China is that mediation is frequently borrowed or inserted in the litigation (judicial mediation) and arbitration proceedings (arb-med-arb), while the outcome of the judicial mediation and arb-med-arb proceeding, if the mediation is successful, would be a mediation statement. Unlike a contract, the mediation statement has the same effect as a fi nal judgment or arbitral award. Another form of ADR is negotiation, a common option utilised by Chinese parties. In fact, large numbers of high-profi le cases in China are settled by negotiation, notwithstanding the settlement agreements per se are not directly enforceable before the Chinese courts. Given there is no one-size-fi ts-all rule for ADR in China, parties, especially foreign parties, should be familiar with the Chinese culture and align themselves with the best local practice to secure favourable results for their case.

Regulatory investigations Under the PRC law, the administrative authorities, such as, the AIC,31 MOFCOM,32 EPB,33 and CSRC,34 etc., are empowered to conduct investigations and impose penalties under certain circumstances. The Administrative Penalty Law (amended in 2014) provides for the basic legal framework, followed by multifaceted laws, regulations, or implementation rules targeting speciﬁ c industries or process. It should be noted that the regulatory investigation process is tightly regulated and legally reserved in the PRC. Normally, there would be a preliminary notice of penalties for the parties’ knowledge and preparation, and then a hearing for the parties and their agents to present defence prior to the granting of a formal penalty, if any. The administrative authorities would initiate investigation and evidence collection to ﬁ gure out what happened in a case, while parties are under statutory duties to cooperate with the investigation. Parties dealing with administrative authorities should be aware that the rights of defence and statement are duly protected by the Administrative Penalty Law and more importantly, their exercise of such rights would not cause any detrimental effects to them in the outcome of their case. Since administrative transparency is a trend in the PRC, access to administrative penalties is open to the public. In addition, the parties are legally entitled to seek recourse to administrative reconsideration and administrative litigation when their rights or interest, either procedural or substantive, are violated by the authorities.

* * *

Endnotes 1. For the purpose of this chapter, China refers to and has the same meaning with the People’s Republic of China, exclusive of Hong Kong SAR, Macao SAR, and Taiwan Region, AKA Mainland China.

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2. Article 149, 176 of the Civil Procedure Law (2012). 3. Article 270 of the Civil Procedure Law (2012). 4. Article 522 of Fa Shi (2015) No.5 of the SPC. 5. Fa Shi (2016) No. 19 of the SPC. 6. Article 38 of the Law on Lawyers of the PRC. 7. See Article 67 of Fa Shi (2001) No.33 of the SPC. 8. Order No.481 of the State Council of the PRC. 9. Fa Fa (2016) No.21 of the SPC. 10. The case number for the ﬁ rst instance is (2015) Jing Zhi Min Chu Zi No.441, while that for the second instance remains unknown. 11. Article 100 of the Civil Procedure Law (2012). 12. Article 101 of the Civil Procedure Law (2012). 13. Article 282 of the Civil Procedure Law (2012). 14. (2016) Su 01 Xie Wai Ren No.3. 15. ASEAN, short for the Association of Southeast Asian Nations, is a regional intergovernmental organisation comprising, as of now, ten Southeast Asian states, i.e. Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam. 16. Second limb of Article 277 of the Civil Procedure Law (2012). 17. China International Economic and Trader Arbitration Commission. 18. Beijing Arbitration Commission / Beijing International Arbitration Centre. 19. Shanghai International Economic and Trade Arbitration Commission / Shanghai International Arbitration Centre. 20. South China International Economic and Trade Arbitration Commission / Shenzhen Court of International Arbitration. 21. Hong Kong International Arbitration Centre. 22. International Chamber of Commerce International Court of Arbitration. 23. Singapore International Arbitration Centre. 24. Fa Fa (2016) No. 34 of the SPC. 25. (2013) Er Zhong Min Te Zi No.10670. 26. (2013) Hu Yi Zhong Min Ren (Wai Zhong) Zi No.2. 27. (2015) Tai Zhong Shang Zhong Shen Zi No.00004. 28. Ansung Housing Co., Ltd. v. People’s Republic of China, ICSID Case No. ARB/14/25. 29. Beijing Urban Construction Group Co. Ltd. v. Republic of Yemen, ICSID Case No. ARB/14/30. 30. Hela Schwarz GmbH v. People’s Republic of China, ICSID Case No. ARB/17/19. 31. The Administration for Industry & Commerce. 32. The Ministry of Commerce. 33. The Environmental Protection Bureau. 34. China Securities Regulatory Commission.

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Cui Qiang Tel: +8610 139 1145 7439 / Email: [email protected] As an experienced arbitration and litigation attorney, Cui Qiang has dealt with a large quantity of cases involving equity investment, real estate, construction and infrastructure, international trade, transport and logistics, intellectual property, antitrust as well as non-performing loans disposal. He has successfully represented many international investment institutions, multinational companies and large-scale domestic corporations for more than 400 cases relating to dispute resolution and arbitration before the Chinese courts as well as arbitral tribunals of China International Economic and Trade Arbitration Commission (CIETAC), the Beijing Arbitration Commission (BAC), the Hong Kong International Arbitration Center (HKIAC) and Shanghai International Arbitration Center (SHIAC). With a profoundly deep understanding of law, Mr. Cui has accumulated extended experience as an arbitral agent or litigator, and helped clients secure favourable results in most (over 95%) of the cases he has handled. In 2017, Mr. Cui was nominated as Rising Star by Asian Legal Business. Recently, he was selected as the youngest Panel Arbitrator of China Maritime Arbitration Commission (CMAC), one of the major maritime arbitration institutions in the world. Recent examples of work include: • Acted for a private equity fund in a case before CIETAC claiming for the repurchase of shares and expected loss of profi t due to the fundamental breach of a share subscription agreement by the original shareholder. • Acted for a large real estate company, headquartered and listed in Singapore, in an arbitration case before CIETAC, against one of the largest state-owned real estate companies in PRC, concerning the ownership transfer of a promising commercial complex (amount in dispute more than RMB 240m), and succeeded in defending claims of breach and the purported termination of the agreement on the ground of mutual misunderstanding on the facts. • Acted for Yingli Energy (China) Co., Ltd. and its holding company as defendants in defending a claim brought by the plaintiff SiC Processing GmbH, incorporated in Germany, for the breach of a 20-year processing and procurement agreement of silicon wafer-cutting fl uids – successfully defended the case, with the court dismissing the vast majority of the claim. Li Qishi Tel: +8610 138 1187 5733 / Email: [email protected] Li Qishi has a broad commercial practice, focusing mainly on contentious and non-contentious work in the area of international trade, equity and joint venture, banking and fi nance, insolvency and restructuring. Li Qishi frequently appears in PRC courts at all levels and arbitrates in PRC, she also has considerable experience in international arbitration. Li Qishi has been involved in a number of complex and high-profi le international commercial disputes. Li Qishi has been trained in London, and is frequently engaged by international law fi rms or enterprises to advise on matters under Chinese law, or to give legal opinions for overseas arbitral tribunals or courts. As a senior associate, Li Qishi is recommended as a “user-friendly and cooperative” lawyer to deal with. Commerce & Finance Law Offi ces F/6 NCI Tower, A12 Jianguomenwai Avenue Chaoyang District, Beijing 100022, P. R. China T el: +8610 6569 3399 / Fax: +8610 6569 3838 / URL: www.tongshang.com

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Sarah Rizk & Ashraf Ali Mena Associates in association with Amereller Legal Consultants

Introduction The Egyptian court system is modelled after the French system of dual justice, comprising courts of general jurisdiction and administrative courts. The courts of general jurisdiction are three-layered. The district courts (al-Maḥākim al- Juz’iyya) and primary courts (al-Maḥākim al-‘Ibtida’iyya or al-Maḥākim al-Kuliyya) act as courts of fi rst instance. Their jurisdiction is primarily based on the amount in dispute. The courts of appeal (Maḥākim al-‘Isti’nāf) form the second instance of litigation. The highest court in the hierarchy of civil and commercial litigation is the Court of Cassation (Maḥkamat al-Naqd), which is not a trial court and principally reviews questions of law. In 2008, specialised economic courts were established in the context of court system reforms to ensure the effi cient resolution of disputes in commercial matters. Economic courts have exclusive jurisdiction over civil disputes arising out of the application of 13 laws, including the laws regulating the capital market, investment, fi nancial leases, unfair competition and anti-trust, companies, transfer of technology, commercial agency, intellectual property, insolvency and the banking system. They further have exclusive jurisdiction over criminal proceedings in respect of certain crimes following the fi elds of economic activity, including insurance, fi nancial leases, capital markets, investment, intellectual property, telecommunications, unfair competition and antitrust, consumer protection and electronic signature. Economic courts do not constitute a separate court system, but form part of the courts of general jurisdiction. Administrative courts form an independent court system, organised under the Council of State (Majlis al-Dawla). They have jurisdiction over various matters including matters relating to the decisions made by government or public entities, matters arising under certain types of public works and concession contracts, disciplinary actions involving government employees and damage claims for unlawful government actions. Administrative law is essentially judge-made law and consists of legal rules developed by the administrative courts.

Effi ciency of process The procedure before Egyptian courts is principally governed by the Egyptian Civil and Commercial Procedure Act promulgated by Law No. 13 of 1968 (“ECCP”). Court proceedings in Egypt commence with the fi ling of the statement of claim with the competent court. The statement of claim must include certain information required by the ECCP, including: (i) the contact details of the parties; (ii) the date of fi ling the statement of claim; (iii) the court that the claim is fi led with; and (iv) the facts of the case, the claimant’s

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claims and supporting evidence. For the statement of claim to be registered with the court, it must be submitted together with: (i) the fi ling fee; (ii) copies for all defendants and two copies for the clerk’s offi ce; (iii) the original documents relied on or copies thereof; and (iv) a memorandum explaining the claim or an undertaking that the statement of claim includes a full explanation of the claim. The statement of claim is subsequently served upon the defendant(s) through a court bailiff. The court bailiff serves a formal notice notifying the defendant of the claim, the time and date of the hearing, together with a copy of the statement of claim. The service of process must be completed within a maximum period of 30 days, provided that the hearing is not scheduled at an earlier date. The statement of defence and supporting evidence must, in principle, be submitted at least three days before the hearing. Written pleadings and documents are to be submitted by each party in hard copies and are fi led in the court’s records. The opposing party may obtain copies thereof, which are handed out by the clerk’s offi ce. There is no possibility to fi le pleadings and documents electronically. In some cases before the fi rst instance courts, the proceedings are based on documents only. In most cases, however, the proceedings involve brief oral arguments in addition to the submission of written pleadings and documentary evidence. When hearings are held, they are mostly public. However, in exceptional cases requiring privacy (for example, due to national security concerns or trade secrets), the court may decide to hold hearings in camera. Egyptian judges have a purely adjudicative function. They are not empowered to offer mediation or foster settlement. Further, being a civil law system, Egyptian law does not provide for the use of juries in civil or criminal matters. The judge establishes the facts of the case, based on the assessment of the parties’ documentary and testimonial evidence, and applies the law to the established facts. In practice, Egyptian judges can be relatively proactive in establishing the facts. For example, judges may, and often do, appoint experts (from a roster of experts registered with the Ministry of Justice) to opine on certain issues in dispute or conduct site visits when needed. The Egyptian judicial system suffers from effi ciency problems that are mostly due to insuffi cient resources and ineffi cient administration coupled with a high caseload. In addition, a major reason for delays is the requirement to notify documents, judicial summons and decisions through court bailiffs. Another cause for delays is the frequent use of experts by the courts to examine and deliver opinions on various issues, including the calculation of damages. As the experts appointed by the court are not bound by time limits, the required reports may be delivered with delay. As a result, the time frame of a civil case may be as long as two to fi ve years, excluding any enforcement procedure. A criminal case, on the other hand, may be decided within a few months, or take one year or more.

Integrity of process According to the Egyptian Constitution of 2014 (“Constitution”), the judiciary is an independent power. Article 184 of the Constitution states that: “[t]he judiciary is independent. It is vested in the courts of justice of different types and degrees, which issue their judgments in accordance with the law. Its powers are deﬁ ned by law. Interference in judicial affairs or in proceedings is a crime to which no statute of limitations may be applied.”

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To ensure the independence of the judiciary, the Constitution provides for a number of guarantees, including that judges may not be removed from ofﬁ ce. This means that judges may not be dismissed, moved to another court or placed in early retirement for reasons not provided for in the law and without following certain procedure. Further, an independent Supreme Judicial Council was established to handle the administrative affairs of the judiciary, the appointment and promotion of judges for the courts of general jurisdiction, and disciplinary matters (handled by the Judicial Inspection Department). The Supreme Judicial Council is chaired by the President of the Court of Cassation and its membership is determined by the law. Egyptian law requires impartiality of the judiciary. In this regard, the ECCP provides for certain cases where a judge is deemed to be unﬁ t to decide a dispute, even if his recusal is not requested by any of the parties. These cases apply where a judge: (i) is related to one of the parties up to the fourth degree; (ii) is in a pending dispute with one of the parties or their spouses (or if the judge’s spouse is in any such dispute); (iii) acts for or is the guardian of a party, or is related to the guardian of a party, or is related to a member of the board of directors or manager of a party who has a personal interest in the case; (iv) has an interest in the case (or if his spouse or relatives or other persons associated with him have any such interest); (v) has opined on the case, represented a party or written on the case, even if this was before he acted as judge; or (vi) has previously heard the case as judge, expert or arbitrator or submitted a testimony therein. In these cases, any act taken or decision rendered by the judge is deemed null and void, even if by agreement of the parties. Similarly, the ECCP permits parties to request the recusal of judges in certain cases, including where the judge or his spouse are parties to a similar case or where a dispute has arisen between them and one of the parties after the case commenced. Further, parties may request the recusal of a judge if one of the parties is employed by the judge, if the judge has shared a residence with one of the parties, or received a gift from them prior to or during the case. Finally, a judge may be recused if he has a hostile or affectionate relationship with one of the parties that is likely to prevent him from being neutral in deciding the matter.

Privilege and disclosure Egyptian law does not allow discovery; there is no requirement for a party to provide (upon request or otherwise) evidence which may support the counterparty’s case. This derives from the general privilege against self-incrimination in civil law proceedings. As to disclosure, a party to a dispute is, as a general rule, not compelled to disclose documents to the counterparty or to the court. However, under the Egyptian Evidence Act promulgated by Law No. 25 of 1968 (“Evidence Act”), the court may, upon the request of a party, require the other party to produce relevant documents if certain requirements are fulfi lled. In particular, the court may require the production of a document: (i) if the law permits requiring the relevant party to produce the document; (ii) if the document is common between the parties, which is the case especially if the document was concluded in the interest of both parties, or if it evidences their mutual rights and obligations; or (iii) if the counterparty has relied on the document at any stage of the proceedings. In practice, the scope of document production before Egyptian courts is normally limited to specifi c documents or narrowly defi ned categories of documents. The Evidence Act provides a list of privileged communications which may not be disclosed to third parties, including: • Information obtained by state employees or public servants acquired during performance

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of their duties. Such information may not be disclosed even after termination of their employment or fulﬁ lment of their duties, unless the privilege is waived by the public entity upon the request of the court or a party. • Information obtained by lawyers, medical professionals, agents or others, acquired by reason of their profession. Such information may not be disclosed even after termination of the professional relationship, unless it was intended for committing a felony or misdemeanour. • Information obtained by spouses during the marital relationship. Such information may not be disclosed even after termination of the marital relationship, unless either of the spouses ﬁ les a lawsuit or is prosecuted for committing a felony or misdemeanour against the other.

Costs The rule under the ECCP is that the losing party carries all litigation costs, including court fees and the cost of legal representation of the successful party. In practice, however, the losing party is normally not required to carry all costs of the successful party, but only the court fees, the fees and expenses of any experts appointed, and nominal legal representation costs. These costs are, however, not paid to the counterparty but deposited with the Ministry of Justice. If both the claimant and defendant lost partially in the case, the court has total discretion to decide which of the parties shall bear the costs or in what proportion they shall be borne by the parties. Notwithstanding the rule that the losing party carries all litigation costs, some exceptions apply. For example, the losing party is not required to pay the litigation costs if it is receiving legal aid. A further exception is the case where the successful party committed an error during the proceedings which justifi es that this party bear all costs by way of compensation. In addition, there are cases where the losing party is not required to pay the full costs of the successful party, such as where that party has caused unnecessary costs or failed to disclose certain documents that are material to the outcome of the case. Court fees in Egypt are determined based on the amount in dispute and the court hearing the case. In 2009, an amendment to the Court Fees in Civil Matters Act promulgated by Law No. 90 of 1944 raised the court fees to prevent frivolous cases. According to this amendment, court fees are: 2% of the amount in dispute up to EGP 250; 3% of the amount in dispute exceeding EGP 250 up to EGP 2,000; 4% of the amount in dispute exceeding EGP 2,000 up to EGP 4,000; and 5% of the amount in dispute exceeding EGP 5,000. Court fees and litigation costs are fi xed in the fi nal decision rendered by the court.

Litigation funding As per the Legal Profession Act promulgated by Law No. 17 of 1983 (“Legal Profession Act”), lawyers have wide discretion to determine their fees. Accordingly, fee structures in Egypt are ﬂ exible, and lawyers can charge their clients on the basis of hourly rates or agree on a contingency fee for handling cases. While contingency fees are not explicitly regulated, the Legal Profession Act places a limit for percentage-based fees at 20%. In Egypt, litigation is normally funded directly by the parties, as third-party funding is not common. Insurance for litigation costs is similarly rare.

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Interim relief Interim relief can be obtained in Egypt mainly through summary proceedings. They are of temporary nature, which means that the relief granted is only effective until the ﬁ nal decision is rendered and has no effect on the underlying right of the requested relief. The requirements for granting interim relief as developed by Egyptian courts are as follows: • the underlying right of the requested relief likely exists, which is the case if there is a legal rule protecting this right and if the facts of the case support the conclusion that this right exists; and • the matter is of an urgent nature, so that there is danger of irremediable harm to the underlying rights if the requested relief is not granted. In terms of the types of relief available, interim relief can be in the form of orders to maintain the status quo, protective seizure of assets in the possession of a party or third parties, appointment of a legal guardian, injunctive relief or restraining orders.

Enforcement of judgments and arbitral awards Egypt is a party to a number of bilateral and multilateral treaties on judicial cooperation in civil and commercial matters, including the Convention of the Arab League on the Enforcement of Judgments and Arbitral Awards (“Arab League Convention”) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“New York Convention”). Foreign judgments can be enforced in Egypt under the ECCP. In terms of procedure, an enforcement order or exequatur must be obtained from the competent court. In principle, the courts will not review the merits of the decision de novo when deciding on the issuance of an enforcement order. The courts will only examine whether the requirements for enforcing foreign judgments in the ECCP are fulfi lled. These requirements are as follows: • The reciprocal treatment of judgments rendered by Egyptian courts. Absent reciprocity, the court will tend to review the merits of the case as if it had original jurisdiction over the dispute, and will grant exequatur if it is satisfi ed that the foreign court has ruled in the same or similar manner. • Egyptian courts do not have jurisdiction over the dispute, while the jurisdiction of the foreign court is established according to the lex fori. • Due process was observed in the international court proceedings. Egyptian courts will essentially verify that the parties to the dispute were duly notifi ed and properly represented in the proceedings, i.e. that they had a full and fair opportunity to litigate the issue in the international proceedings. • The parties were properly notifi ed and represented in the case. • The foreign judgment is fi nal and has res judicata effect in accordance with the lex fori. • The foreign judgment does not confl ict with a previous judgment rendered by an Egyptian court in the same dispute, and is not contrary to public order or public morals as understood by Egyptian law. Foreign arbitration awards can be enforced in Egypt under the New York Convention, which applies to the enforcement of awards rendered in signatory states, or under the Arab League Convention, which applies to the enforcement of arbitral awards rendered in member states of the Arab League. In addition, Egypt has concluded a number of

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bilateral treaties on judicial cooperation in civil and commercial matters, which enable the enforcement of arbitration awards rendered in the signatory states. According to a recent decision of the Egyptian Court of Cassation, foreign arbitration awards rendered in the signatory states of the New York Convention are to be enforced pursuant to the Egyptian Act on Arbitration in Civil and Commercial Matters promulgated by Law No. 27 of 1994 (“Arbitration Act”). Pursuant to the Arbitration Act, the enforcement of awards is subject to the following requirements: • the deadline to bring an annulment action, namely 90 days from the notifi cation of the award to the losing party, has expired; • the award does not contradict any previous decision rendered by the Egyptian courts in the same matter; • the award does not violate public policy in Egypt; and • the award was properly notifi ed to the losing party. If these requirements are fulfi lled, an order or execution will be issued. It is, however, within the discretion of the judge reviewing the petition to decline to issue an order of execution, even if the requirements are fulfi lled, if a reason for annulment is discernible on the face of the award. The order of execution can be appealed in all cases. By applying the New York Convention, which is in force in Egypt, an arbitral award cannot be enforced in Egypt if it has been set aside by the courts at the seat of the arbitration.

Cross-border litigation Egyptian courts have mandatory jurisdiction over claims against Egyptian citizens (with the exception of claims related to real property abroad) and non-Egyptians residing in Egypt, claims related to property located in Egypt, claims related to obligations created or to be performed in Egypt, bankruptcy proceedings registered in Egypt and interim measures to be enforced in Egypt. Forum selection clauses are, in principle, recognised under Egyptian law. As regards claims within the jurisdiction of Egyptian courts, the parties may agree to refer any disputes related thereto to foreign courts. For such agreements to be valid and enforceable, it is required that: (i) the dispute has an international dimension; (ii) Egyptian sovereignty and public order are not affected; (iii) the dispute has some nexus to the selected forum; and (iv) the agreement is recognised by the lex fori. Choice of law provisions are normally recognised and enforced by Egyptian courts, provided that they are valid. In practice, an important restriction applies in the case of disputes under technology transfer contracts, as the application of Egyptian law is mandatory. Further, rules of public order and public morals in Egyptian law cannot be derogated from by agreement of the parties. In commercial law, public order provisions include those related to the protection of local agents, maximum interest and worker protection.

International arbitration Arbitration proceedings seated in Egypt are governed by the Arbitration Act. Apart from domestic arbitrations, the Arbitration Act further governs arbitration proceedings not seated in Egypt, where the parties have agreed to conduct the arbitration according to its provisions. The Arbitration Act is based on the UNCITRAL Model Law on International Commercial Arbitration of 1985 (“UNCITRAL Model Law”). The Arbitration Act departs from the

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UNCITRAL Model Law in some respects, such as the stipulation that the arbitral tribunal may only grant interim relief if it is expressly empowered by the parties to do so, and that an award may be annulled if the arbitrators failed to apply the law agreed on by the parties to govern the merits the dispute. The Cairo Regional Centre for International Commercial Arbitration (“CRCICA”), established in 1979, is the main arbitration institution in Egypt. CRCICA adopted the UNCITRAL Arbitration Rules with minor modiﬁ cations. The present CRCICA Arbitration Rules, which entered into force in 2011, are based on the new UNCITRAL Arbitration Rules as revised in 2010. CRCICA administers institutional arbitrations and provides assistance in ad hoc arbitral proceedings upon the request of the parties. While there are no special courts for arbitration in Egypt, the Arbitration Act provides that the Cairo Court of Appeal shall have jurisdiction over certain arbitration matters, including matters arising in the context of institutional arbitrations located in or outside Egypt, and arbitrations seated outside Egypt where the parties have agreed to conduct the arbitration according to the Arbitration Act. According to the Arbitration Act, parties can apply to the competent court to issue interim relief either before or during the arbitration. An arbitral tribunal may also order interim relief, if the parties agree to empower the tribunal to do so. The selection of arbitration rules providing for the power of the arbitral tribunal to order interim relief incorporates such an agreement. A court seized with a case ﬁ led in violation of an arbitration agreement is required to dismiss the claim as inadmissible if so requested by a party. The plea for inadmissibility must be raised before the party submits any request or defence in the court proceedings. When an arbitration agreement is in place, bringing an action before court does not prevent the other party from commencing or continuing an arbitration, and does not preclude the rendering of an award. Arbitration awards cannot be appealed or challenged on the merits in Egypt. The Arbitration Act expressly excludes the means of recourse provided for in the ECCP. According to the Arbitration Act, an action to annul an arbitration award may be brought before court within 90 days from notifying the award to the losing party. An award may be annulled on limited grounds, which are provided for in the Arbitration Act on an exclusive basis. The court may also, at its own initiative, annul an arbitration award that is contrary to Egyptian public policy.

Mediation and alternative dispute resolution Mediation is the most common method of alternative dispute resolution (“ADR”) in Egypt. There is, however, no formal statutory regulation of mediation. Therefore, mediation remains a matter of contractual agreement between the parties. CRCICA has rules in place for mediation, which were last revised in 2013. Further, a Mediation and ADR Centre was established as a branch of CRCICA to administer mediation and other ADR processes such as conciliation, technical expertise, mini trials and claim review boards. In some cases, Egyptian law compels mediation before pursuing certain civil claims before court. For example, before ﬁ ling a civil, commercial or administrative claim against a public entity, a claimant is required to refer the dispute to a designated mediation committee established by the Ministry of Justice. This does not apply to certain types of disputes, including disputes with the Ministry of Defence or the Ministry of Military Production, and disputes related to property rights.

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Sarah Rizk Tel: +20 2 3762 6201 / Email: [email protected] Sarah Rizk is Counsel at Amereller Legal Consultants, based in Cairo and Munich. She received her legal education from Cairo University (LL.B.) and Harvard Law School (LL.M.), and is admitted to practice in Egypt and the State of New York. Ms. Rizk’s practice is mainly focused on arbitration. She acted as counsel in numerous arbitrations under the ICC, LCIA, UNCITRAL, DIAC, CRCICA and other rules across the Middle East and abroad. Ms. Rizk’s experience as counsel encompasses a wide range of areas including construction, energy, media, share and asset purchases, technology transfer, agency and supply. In addition, Ms. Rizk regularly advises clients on diverse matters under Egyptian and Middle Eastern law, including dispute resolution agreements, litigation and enforcement proceedings. Her working languages are Arabic, German and English.

Ashraf Ali Tel: +20 2 376 20 157 / Email: [email protected] Ashraf Ali is Local Partner and Head of Litigation Affairs at Mena Associates in association with Amereller Legal Consultants, based in Cairo. Mr. Ali is admitted as an attorney before the Egyptian Court of Cassation and Supreme Constitutional Court. His practice focuses on litigation, mainly in the areas of civil law, criminal law, commercial law, capital markets and banking law. Mr. Ali has over 25 years of experience representing businesses in a wide variety of legal disputes and transactions in all phases of civil and commercial litigation, including trial and appellate practice before the Court of Cassation and High Administrative Court. He represented both plaintiffs and defendants in a broad range of corporate/business disputes, as well as in litigation involving claims of breach of contract, fraud, breach of ﬁ duciary duty, business torts and unfair competition claims, labour disputes, commercial agency, shareholder and partnership disputes and dissolutions, real estate litigation, theft of trade secrets, professional malpractice, defamation, copyright, trademark, and rights of privacy and publicity.

Mena Associates in association with Amereller Legal Consultants GIC Tower, 21 Soliman Abaza, Muhandiseen, Giza, Cairo, Egypt Tel: +20 2 3762 6201/3 / Fax: +20 2 3762 6202 / URL: www.amereller.com

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Michael Madden & Justin McClelland Winston & Strawn London LLP

General In previous editions of this Insight we have referred to wide-reaching procedural reforms following a review of the English Civil Justice System by Lord Justice Jackson in 2013 (the “Jackson Report”). Whilst many of the recommendations made by Jackson LJ related to the costs and funding of litigation, the Jackson Report also recommended a number of measures to enhance the courts’ approach to case management. The aim was for judges to become more proactive in ensuring that cases are progressed efficiently and at a cost proportionate to the issues in dispute. The Jackson Report also emphasised the need to make best use of appropriate technologies to foster better case discipline. The culture introduced by these reforms, in particular the emphasis on proactive case management and improving effi ciency to manage the costs of litigation proportionate to the sums in dispute, continue to be prominent themes of further recently proposed reforms to the Civil Justice System. In July 2016, Lord Justice Briggs published his fi nal report following a review of the structure of the Civil Courts in England & Wales. This report made a series of recommendations, including: 1. the development of an on-line court for all money claims up to £25,000; 2. an increased use of court lawyers and offi cials to relieve judges of certain case management duties; 3. the transfer out of London of more work and the encouragement of more cases to be dealt with by specialist or local courts and tribunals; 4. a unifi cation of enforcement proceedings across civil courts; and 5. a new procedural code for transfer between the High Court and County Courts. The Civil Courts Structure Review by Lord Justice Briggs (the “Briggs Review”) also introduced procedures aimed at reducing the backlog of cases waiting to be heard in the Court of Appeal. It did so by (i) signifi cantly limiting the number of applications for permission to appeal that could be dealt with by way of an oral hearing; (ii) enabling more appeals to be heard by two judges (as opposed to three); (iii) providing judges with greater judicial assistance; and (iv) introducing rules limiting the documentation that could be introduced on an appeal. Controlling litigation costs continues to be an important focus of the English courts; 2016 saw a combination of further implementation and refi nement of cost management structures such as the amendment to cost budgeting rules, an area which now seems to be a subject of constant review.

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Implementation of new specialist court Schemes In last year’s Insight we reported on the creation of the “Shorter Trial Scheme” (the “Scheme”). The Scheme provides a blueprint for progressing appropriate “business” cases to trial much quicker and at signifi cantly reduced cost. Cases in this scheme are allocated to a judge who will ensure that the case proceeds to trial and judgment within a year. Interim applications are dealt with on paper, disclosure is limited to what is proportionate, and oral evidence is kept to a minimum. Trials are restricted to a maximum of four days and costs assessed summarily at the end of the trial. In 2016, the fi rst cases concerning the availability of the Scheme and the attitude of the courts to it were reported. In the case of Family Mosaic Home Ownership Limited v. Peer Real Estate Limited [2016] the court had to consider an application by a defendant to transfer a pending case (i.e. issued outside of the Scheme) into the Shorter Trials Scheme, and whether the case concerned was appropriate for the Scheme. The judge indicated that, in deciding whether to transfer a case, the court would have regard (without prejudice to the generality of the Overriding Objective (being the guiding principle of English civil litigation to deal with cases justly and at proportionate cost)) to (i) the suitability of the case to be part of the Scheme; and (ii) the wishes of the parties. The judge was very clear that an existing case could be transferred into the Scheme as the intention behind the legislation was that the Scheme should be suffi ciently fl exible to allow cases to be transferred in and out of the Scheme as appropriate. The judge indicated that the Scheme will not normally be suitable for: 1. cases including an allegation of fraud or dishonesty; 2. cases which are likely to require expensive disclosure and/or reliance upon extensive witness or expert evidence; 3. cases involving multiple issues and multiple parties; 4. cases in the Intellectual Property Enterprise Court; and 5. public procurement cases. In this case, the key issue was whether a dispute between a social housing registered society and a landowner concerning the terms upon which the society had purchased land was a “business” dispute and therefore fell within the ambit of the Scheme. The judge had no hesitation in concluding that the dispute fell within the ambit of the Scheme. This outcome refl ects the approach of other judges who were very keen in 2016 to encourage the use of the Scheme as a means of providing a level playing fi eld between parties. Last year, we also reported on the launch of the “Financial List”, the object of which was to ensure that cases which would benefi t from being heard by judges with particular experience or expertise in the fi nancial markets, or (ii) raised issues of general importance to the fi nancial markets, are dealt with by such judges. To be included within the fi nancial list: (i) the claim must be for more than £50 million and relate to banking or fi nancial transactions; (ii) it should require particular expertise in fi nancial markets; or (iii) it should raise issues of general importance to fi nancial markets. The term, “fi nancial markets”, has been defi ned broadly to include fi xed income markets, equity markets, derivatives markets, loan markets, foreign currency markets and commodities markets. In the case of Property Alliance Group Limited v. Royal Bank of Scotland plc [2016], the High Court provided guidance on the criteria to be considered where an application to transfer an existing case into the Financial List is contested.

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In this case, the defendant bank had applied to transfer to the Financial List proceedings which concerned claims that the defendant bank had mis-sold four interest rate swaps, acted improperly in relation to fi xing LIBOR, and breached a customer agreement by transferring its banking relationship to another legal entity within the bank. The claim was for approximately £29 million. In considering the matter, the judge referred to the Court Guide to the Financial List which stated that the defi ned subject matter (of cases referable to the Financial List) is drawn widely. It requires that the claim be equivalent to or more than £50 million. The court stated, however, that no single criterion was necessarily determinative of the issue. Even where the fi nancing requirement was met, the Financial List may not be suitable for straightforward claims which require no fi nancial market expertise. In addition, so far as the second and third criteria are concerned, these could involve cases which relate to the defi ned subject matter but have a value lower than £50 million. If the case required fi nancial market expertise or raised issues of general market importance, the judge confi rmed that it could be suitable for the Financial List. The judge also had particular regard to the fact that the case concerned matters of market signifi cance, and that the case could be assigned to a new Financial List judge without causing disruption to the current proceedings, and concluded that this was an appropriate case to refer to the Financial List. It is quite clear from this decision that, having created the Financial List, the courts will be keen to see it used to its full potential in appropriate cases. Maintaining respect for the judiciary The UK’s decision in the referendum in June 2016 to leave the European Union has provided a fresh impetus to ensure that the UK remains the jurisdiction of choice for international business litigation. The cornerstone of such impetus is to preserve the renown, calibre and independence of the judiciary and to strengthen judicial diversity. In his Annual Report of 2016 the Lord Chief Justice (Head of the Judiciary and the President of the Courts of England and Wales) emphasised the importance of recruiting and maintaining judges of the appropriate calibre who are accepted as such within society. He also emphasised the importance of ensuring that society understands the fundamental role of the judiciary as part of the British constitution and appreciates the contribution made by the justice system to the cohesion and prosperity of UK society and principles. The role of the judiciary in the UK constitution It is likely that these comments were made as a reaction to statements made in certain newspapers in response to the High Court judgment in the case of R (on the application of Miller and Another) v. Secretary of State for Exiting the European Union. This case concerned one of the most signifi cant constitutional issues to come before the UK courts in over 100 years. The Applicant sought a judicial review of the Prime Minister’s decision, without the approval of Parliament, to exercise the right under Article 50 of the Treaty on European Union which would have triggered the process whereby the UK would leave the European Union. Following the referendum decision in June 2016 when the UK voted to leave the EU, the new Prime Minister expressed an intention to commence the formal process without further Parliamentary debate or consideration. Counsel for the Government argued that the referendum itself gave the government the authority to proceed. The contrary argument relied on by the Applicant was based on the constitutional principle that only Parliament has the authority to amend or revoke legislation made by Parliament. As the country had experienced over 40 years of legislation by or with the authority of Parliament governing the

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UK’s relationship with the EU, only Parliament could undo this, which would be the ultimate effect of triggering Article 50. Judicial review proceedings such as this are heard fi rst by the Divisional Court of the High Court and ordinarily by one judge. An appeal from the High Court would usually proceed to the Court of Appeal and then to the Supreme Court. However, there is a procedure known as “leapfrogging” whereby, if the High Court considers a case of appropriate national importance, it can certify that an appeal of the High Court decision should go directly to the Supreme Court. In this case, everyone expected that the High Court decision would be subject to the leapfrog procedure. As a result, instead of just having one judge decide the High Court case, three of the country’s most senior judges were given that task and, in a truly exceptional situation, the Lord Chief Justice, the Master of the Rolls (the second most important judge in the England and the Presiding Judge of the Civil Division of the Court of Appeal) and another Court of Appeal Judge sat as judges of the High Court to hear the fi rst instance case. In their carefully crafted and well-reasoned judgment, the High Court panel found against the Government and upheld the constitutional convention of Parliamentary sovereignty. Constitutional lawyers and many commentators praised the judges for maintaining their independence, and for the clarity of the judgment. The role performed by the judges demonstrated the practical operation of the balance of powers within the UK constitution between the Executive, Legislature and Judiciary. However, this did not stop a backlash from certain populist newspapers who, immediately following the judgment, described the judges as “Enemies of the People” and criticised them for acting against the will of the people. The Lord Chancellor’s mild rebuke to the newspapers in a statement made a few days later (emphasising the independence of the judiciary as “the foundation upon which our rule of law is built”, adding that “our judiciary is rightly respected around the world for its independence and impartiality”) was criticised as a belated and inadequate rebuke, failing to recognise the duty of judges to “do right to all manner of people after the laws and usages ‘of the Realm’ without fear or favour, affection or ill will.” The Lord Chancellor operates a dual role in the UK’s constitution as the person responsible for the effi cient functioning and independence of the courts and (as a member of the Government) the Secretary of State for Justice. The tension created by those two (in this case apparently confl icting) roles was obvious in the perceived failure by the Lord Chancellor to issue a sterner rebuke to the newspapers concerned. Many commentators have expressed their support for the Lord Chief Justice in his attempts to repair the damage apparently done by the populist press to the reputation of the judiciary and to the respect that it is entitled to, and had undoubtedly earned in this case, in grappling in good faith with a diffi cult constitutional issue. The case was subsequently appealed to the Supreme Court, which for the fi rst time ever sat with the entire panel of 12 Supreme Court Justices and which by a signifi cant majority upheld the decision of the High Court. This time, the press reaction was fortunately more guarded. Hopefully, it had paid attention to the words of the Lord Chief Justice and recognised the need to respect the judges in the honest performance of their role. The “Leapfrog” The “leapfrog” procedure was also used in another constitutional case in 2016. This time, the case concerned the role in English jurisprudence of the Judicial Committee of the Privy Council (“JCPC”). The JCPC is the highest Court of Appeal for a number of Commonwealth countries as well as for the UK’s Overseas Territories, Crown Dependencies and Military Sovereign Base areas. It also hears, very occasionally, appeals from a number of ancient

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and ecclesiastical courts which few in the UK know exist. These include the Church Commissioners, the Arches Court of Canterbury, the Chancery Court of York and the Court of Admiralty of the Cinque Ports. The Commonwealth countries that still have the JCPC as their ultimate court include: Antigua and Barbuda; the Bahamas; St Lucia; Trinidad and Tobago; and Mauritius. The origins of the JCPC originate from just after the Norman conquest of England in 1066 when it was the most senior court in the UK. However, during the period of the Long Parliament (1640 to 1660), the domestic role of the JCPC was abolished as the Privy Council as a whole (which comprised both executive and judicial functions) was seen as too closely aligned to the King and not suffi ciently independent to operate as a court of fi nal appeal. However, the international role of the JCPC was preserved. The role of JCPC decisions in English precedent hierarchy had been considered to be persuasive although not binding on English law. In the case of Willers v. Joyce [2016], the claimant commenced proceedings claiming that the defendant was liable in the tort of malicious prosecution for having caused claims to be brought against the claimant alleging breach of contractual and judicial duties, which were eventually discontinued prior to trial and which the claimant said had been pursued solely out of malice and without any legal or factual foundation. The claimant’s claim was, however, struck out by the High Court because the judge considered herself to be bound by a House of Lords (i.e. the predecessor of the Supreme Court) decision in Gregory v. Portsmouth City Council [2000] which held that the tort of malicious prosecution did not extend to include civil proceedings. The judge had been referred to the Privy Council case (Crawford Adjustors v. Sagicor General Insurance [2013]) (which was signifi cantly more recent than the Gregory case) in which the Privy Council held (on an appeal from the Cayman Islands) that the tort of malicious prosecution of civil proceedings is actionable in English law. The judge recognised the persuasive nature of the JCPC case but considered that she had a duty to evaluate the extent to which such a case would be adopted should it come before the Supreme Court. As she considered this to be an on-balance decision, she considered herself bound to follow the House of Lords decision. Recognising the important constitutional issue which this created, being the role in English jurisprudence of JCPC decisions, the judge granted permission for the appeal to “leapfrog” directly to the Supreme Court. On the point of law, the Supreme Court by a fi ve-to-four majority decided that malicious prosecution of civil proceedings is actionable under English law. In a second judgment, the Supreme Court decided unanimously that, although the ordinary rule was that decisions of the JCPC are not binding, the JCPC could, in an appropriate case, direct that a decision it made as to English law was to be binding on the English courts, and that it could overrule a previous decision to the contrary by the Supreme Court, the House of Lords or the Court of Appeal. The rationale for this decision appears to have been the fact that the President of the JCPC is also the President of the Supreme Court, and the panels of the JCPC normally consist of Supreme Court Justices. Applications for relief from sanctions In previous Insights we have identifi ed the English courts’ recent fi xation on compliance with procedural rules and the attitude taken by the courts to procedural failings; in particular, the extent to which relief should be given from sanctions applicable to such non- compliance. The case of Mitchell v News Group Newspapers Limited [2013] sent tremors of concern through English litigation lawyers (and their insurers) when the Court of Appeal indicated that it would take a comparatively tough approach, in future, to delays and non-

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compliance with court orders. The Court of Appeal held that relief against sanctions for non-compliance with court orders would only be given if the breach was a trivial one and where there was a good reason for it. In deciding whether to grant relief against sanctions, the court would have regard to the needs and interests of all court users and not just the facts affecting each individual case. In response to the Mitchell decision, a fl urry of satellite litigation was launched as “innocent” parties sought to take advantage of procedural breaches by their opponents. As a result, the Court of Appeal in Denton v. T H White [2014] felt obliged to clarify the test for the circumstances in which the court would grant relief against sanctions for non-compliance. It suggested that a three-stage test ought to be adopted. ‘Stage one’ involved identifying and assessing the seriousness of the non-compliance and, if the breach was a serious or signifi cant one, relief would be less likely to be given. At ‘stage two’ the court would ask itself why the breach occurred and whether there was a reasonable excuse to explain it. Finally, irrespective of the conclusions reached from stages one and two, the court should still go on to consider all the circumstances of the case in order to deal with the application justly. The court gave the following guidance: “... the more serious or signifi cant the breach, the less likely it is that relief would be granted unless there is good reason for it; … where there is good reason for a serious or signifi cant breach, relief is likely to be granted; … where the breach is not serious or signifi cant relief is also likely to be granted. However all the circumstances of the application must still be considered.” Since the Denton decision, there have been signifi cantly fewer reported cases concerning non-compliance with procedural orders. To that extent, the Court of Appeal has, in the main, succeeded in avoiding the plethora of satellite litigation that was the immediate response to Mitchell. Notwithstanding the modifi ed test issued following Denton, it is clear that the courts are prepared to adopt a tough approach to non-compliance and that they have been keen for this to be seen as a cultural shift in English litigation. In BPP Holdings v. Revenue And Customs [2016], the Court of Appeal had to consider confl icting Upper Tribunal decisions on “whether the stricter approach to compliance with rules and directions made under the Civil Procedure Rules applies to cases in the tax tribunals.” The Court of Appeal restored the order of the First-tier Tax Tribunal which debarred HMRC from further involvement in the proceedings for failing to comply with an order requiring it properly to particularise its case. This decision addresses the question of the extent to which it is appropriate for tax tribunals (and potentially other tribunals) to consider the guidelines in Mitchell and Denton when dealing with non-compliance. The Court of Appeal found that there was nothing in the wording of the Overriding Objective in the relevant tax tribunal rules which was inconsistent with the general policy described in Mitchell and Denton. It made it clear that the orders, rules and practice directions of tribunals should be complied with in the same manner as those of the court. The Senior President of Tribunals, sitting as a member of the Court of Appeal, said: “I am of the fi rm view that the stricter approach is the right approach”. Some commentators continue to refer to a perceived inconsistent approach to non- compliance adopted by different judges and different courts. This is notwithstanding a series of judicial training programmes aimed at attaining a degree of consistency. The reality of the situation is that each case requires a subjective consideration by the judges concerned

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of the particular facts of the case. This is an inevitable recipe for uncertainty. Whilst some may consider uncertainty an unfortunate consequence, others see it as a deterrent to those who might otherwise “give it a go”, and either fl out a deadline or unfairly seek to take an advantage from another’s failure to comply with a court order. This uncertainty can be illustrated by two recent Court of Appeal decisions. In The Prudential Assurance Company Limited v. Commissioners for Her Majesty’s Revenue and Customs [2016], Lewison LJ criticised the lax pleading practice and slow conduct of litigation adopted by the parties. He placed particular weight on the importance of the pleadings accurately disclosing all the issues that either party would seek to argue: “It is for the parties (subject to the control of the court) to defi ne the issues on which the court is invited to adjudicate. This function is the purpose of statements of case. The setting out of a party’s case in a statement of case enables the other party to know what points are in issue, what documents to disclose, what evidence to call and how to prepare for trial. It is inimical to a fair hearing that a party should be exposed to issues and arguments of which he has had no fair warning. If a party wishes to raise a new point, he should do so by amending a statement of case….. Although in days gone by the court would routinely allow late amendments to statements of case, in more recent time attitudes have changed. It is now the case that the court requires strong justifi cation for a late amendment. This is not only in the interest of the opposing party but also consonant with the interests of other litigants in other cases before the court and the court’s duty to allocate a proportionate share of the court’s resources to any particular case…. The court is then faced with a discretionary case management decision, to be exercised in accordance with the overriding objective….. it soon became clear that the lack of pleadings meant that the parties disagreed about what was the scope of the trial; what were the issues that the judge had to decide; whether points had or had not been raised; whether or not they could be raised on appeal; and even what the judge had decided. This is no way to conduct litigation involving millions of pounds. We were told that this unacceptably cavalier approach to pleadings was a common feature of this kind of litigation. It must stop.” An apparently different approach to late amendment was taken by the Court of Appeal in McTear and another v. Engelhard and another [2016]. This case involved an amendment application made in the trial window itself. The trial judge had taken “a very dim view” of the defendants having “waited until the trial to apply to re-amend the defence to plead new matters”. The trial judge had also been highly critical of the defendants’ approach to the litigation and court orders. However, the Court of Appeal took a different view to the Judge. Vos LJ stated: “The arguments addressed by the parties to this aspect of the appeal concerned the substantive merits of the third judgment, including the Judge’s treatment of the alleged set-off. I would only say two things about set off; fi rst, it is generally a matter of law, albeit a notoriously diffi cult one; and secondly that I was somewhat surprised by the view that set off had not already been pleaded when the amended defence alleged that, as a necessary consequence of the Credit, the cash balance in the amount of the Sum was ‘extinguished’.” These comments seem to suggest that where an amendment only involves a point of law and one which a highly experienced lawyer thought should have been pleaded all along and which his opponent should have anticipated, the fact that it had not been pleaded until the

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eleventh hour was not to be treated as a serious procedural fault. Two further Court of Appeal cases give additional guidance on the fact that the court will have regard to deciding whether to grant relief against sanctions. In British Gas v. Oak Cash and Carry [2016], the defendant had failed to comply with an order to fi le its pre-trial checklist and listing questionnaire. As a result, the court ordered that unless the documents were fi led by 19 February 2014 its defence would be automatically struck out. The trainee solicitor who was given the task of fi ling the documents did so the day before the deadline expired. Unfortunately, the wrong documents were fi led. The correct documents were fi led two days later (i.e. on 21 February). The defence had automatically been struck out but the defendant did not apply for relief against sanctions for a further month. The Court of Appeal, led by Jackson LJ, refused to grant relief against sanctions and held that the judgment obtained by the claimant following the automatic strike-out of the defence should stand. Applying the three-stage test in Denton, the court held: 1. In assessing the seriousness or signifi cance of a breach, the court must ignore historic breaches and look only at the particular breach in respect of which relief is sought. However, where there is a breach of an “unless order”, it is necessary to look at the underlying breach which resulted in the unless order being made. 2. The defendant’s solicitor’s personal problems which had led to the oversight could not be relied upon, as these had been long-standing and should have been accommodated by the fi rm concerned. 3. Finally, the court had regard to all the circumstances of the case and in this regard, the fact that the defendant’s solicitors had not applied until a month after the breach for relief, bearing in mind the trial date was imminent, weighed heavily on the court’s mind. In Gentry v. Miller [2016], the defendant insurance company (for some unknown reason) decided not to engage in litigation commenced by the claimant, which it considered was a fraudulent claim. The claimant obtained judgment in default, and only then did the defendant seek to participate in the litigation and seek to have the judgment set aside. Although the court acknowledged that the insurers believed that the claim was fraudulent, it did not justify a departure from the general rules such that the judgment would not be set aside. Vos LJ stated: “In my judgment, Mitchell and Denton represented a turning point in the need for litigation to be undertaken effi ciently and at a proportionate cost and for the rules and orders of the court to be obeyed. Professional litigants are particularly qualifi ed to respect this change and must do so. Allegations of fraud may in some cases excuse an insurer from taking steps to protect itself, but here this insurer missed every opportunity to do so…… the insurer must in these circumstances face the consequences of its own actions.” Whilst many have expressed concern about the apparent inconsistency between Court of Appeal decisions, it is important to bear in mind that the court is trying to reconcile a number of competing issues in terms of access to justice and the effi cient management of the court system. In doing so it must bear in mind the guidance given by the Court of Appeal in Denton to consider all the circumstances of the case to achieve a just result. If there are little or no practical consequences to allowing a late amendment or late evidence or if the justice of the case so strongly requires it, the court will not allow a blind adherence to rules to prevent this. Technology The courts’ desire to embrace technology was refl ected in the landmark decision of the High Court in Pyrrho Investments Limited v. MWB Property Limited [2016]. In that case the

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court approved, for the fi rst time, the use of predictive coding to facilitate the review by the parties of documentary evidence. Predictive coding, which is also known as “technology, or computer, assisted review”, is a process whereby an initial trawl of the documentary evidence is undertaken by software which analyses and scores documents for relevance. Optimum results are achieved if the parties agree a protocol in advance which is used to identify a representative sample of potentially relevant documents. In this case over three million documents had been identifi ed as potentially relevant, such that this was an obvious case where an alternative approach to a full manual review of the documents was appropriate. In giving his judgment, Master Matthews noted that there was not a great deal by way of guidance, and nothing by way of authority, on the use of predictive coding software as part of the disclosure process. Having found no provisions of the Civil Procedure Rules preventing the use of such process, the Master identifi ed the following factors in favour of approving the use of such technology in the present case: 1. experience in other jurisdictions, while so far limited, has been that predictive coding software can be useful in appropriate cases; 2. there is no evidence to show that the use of predictive coding software leads to less accurate disclosure being given than say a manual review, and indeed there is some evidence to the contrary; 3. there will be greater consistency in using the computer to apply the approach of a senior lawyer towards the initial sample (as refi ned) to the whole document set, than in using dozens, perhaps hundreds of lower-grade fee earners, each seeking independently to apply the relevant criteria in relation to individual documents; 4. the number of electronic documents which must be considered for relevance and possible disclosure in the case; 5. the cost of manually searching such documents as compared with the cost of using predictive coding; 6. the value of the claims made in the litigation; 7. the ability within the trial process to consider other disclosure methods if, for any reason, the predictive coding software route turns out to be unsatisfactory; and 8. the agreement of the parties concerned to the use of the software and how to use it. Case management and disclosure The Pyrrho decision was considered and approved by the Companies Court Registrar in the case of Brown v. BCA Trading Limited [2016]. In that case, the petitioner was applying for an order that the company’s affairs had been conducted in a manner unfairly prejudicial to its interest and was seeking remedies valued at more than £20 million. At a case management conference the court was asked to consider whether the companies could adopt predictive coding as a means for providing disclosure, which would cost approximately half the cost of the traditional key word approach. The court was cognisant of the fact that the obligation of disclosure would fall heavily on the company as opposed to the petitioner who held comparatively few relevant documents. In its judgment the court endorsed predictive coding in clear and unequivocal terms. The court noted that the statements of case in the proceedings were cast on a wide basis such that the ambit of disclosure was equally extensive, and noted that: “…..experience shows that issues will narrow signifi cantly by the time the trial is reached. This can mean that what may have appeared to be necessary disclosure based upon the statements of case at this stage, will turn out to have been

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unnecessary and indeed, to a large degree, irrelevant to the way the case will be held at trial. It can mean that costs will have been incurred which need not have been incurred both during disclosure and when complying with subsequent directions concerning evidence.” Whilst not dictating to the parties exactly how it should adopt the exercise, the court strongly encouraged the parties to engage in a collaborative process of identifying and reducing issues before embarking on disclosure, and to have a clear view of what is actually needed by way of disclosure before searching for and reviewing documents, and thereafter to make the best use of technology where case management considerations justify this, in accordance with the Overriding Objective. The extent of the court’s case management powers, particularly in the context of disclosure, was also the subject of the High Court decision in Vilca & 21 others v. Exstrata Limited & Another [2016]. The claimants in this case were complaining about the treatment suffered by protestors against the defendants’ copper mining operations in Peru, arguing that the defendants incited or participated in the police violence and as a result bore a degree of responsibility for the injuries suffered by the protestors. The allegations were fi rmly denied by the defendants. The issue of disclosure had already been considered by the courts on two occasions and the present application arose out of complaints made by the claimants that the defendants had unreasonably limited the ambit of disclosure. In the earlier hearing, the judge had said: “However, whatever the legal or factual merits of the case advanced for the claimants, its nature is tolerably clear and the kind of document that is potentially relevant to it is also tolerably clear. The defendants would be ill advised to give the appearance of being reluctant to be co-operative in the process of making these documents available….” In the present hearing the judge noted that certain positive decisions had been taken by the defendants and their lawyers not to disclose documents which, the judge considered, should have been disclosed. In light of the apparent failings in the defendants’ disclosure exercise, the claimants sought an order that the defendants’ disclosure should be reviewed by another fi rm of solicitors or by independent counsel. Whilst the judge recognised that it was open to him to make such an order, he concluded that it would be a most unusual order to make (imposing as it would a cost burden on the client whose solicitors’ conduct was a subject of the review) and it would require strong grounds for it to be ordered. The judge considered that what was, in reality, one (albeit signifi cant) decision to limit disclosure was not suffi cient to justify such an order in this case. Instead of making an order requiring independent disclosure, the judge required the defendants’ law fi rm to deliver to him a plan for achieving the level of disclosure that the judge considered appropriate. It remains to be seen whether the judge’s proactive engagement with the parties to identify the extent of disclosure will be followed.

Injunctions The English courts have had to consider a number of cases relating to freezing orders and the evidence required in support of the claim that there is a risk that the defendants will dissipate their assets. In the case of Dinglis Properties v. Dinglis Management [2016], the court held that where there was no evidence of a risk of dissipation and where there was limited evidence that the assets themselves could physically be dissipated, it would discharge a freezing injunction that had previously been obtained without notice against the defendant.

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In Cyprus Popular Bank v. Vgenopoulous [2016], the English High Court considered whether a foreign freezing order could be enforced in England and Wales before the debtor’s time for appealing the order had passed. The claimant had obtained a world-wide freezing order in Cyprus against the defendant and registered it as a judgment in the English court pursuant to EC Regulation 44/2001. The question was whether the freezing order became immediately enforceable against a third party bank in England or whether it only became enforceable if no appeal was brought against the registration within the relevant two-month period or following the determination of any appeal. The High Court concluded that the freezing order did not become fully enforceable until after the defendant’s appeal against registration had been determined. In particular, the court had regard to Article 47(3) of the EC Regulation 44/2001 which provides that: “During the time specifi ed for an appeal ….. against the declaration of enforceability and until any such appeal has been determined, no measures of enforcement may be taken other than protected measures against the property of the party against whom enforcement is sought.” In the case of National Banks Trust v. Yurov [2016], the defendant applied to discharge a freezing order granted against it on the basis that there had been a failure by the claimant to provide full and frank disclosure when it applied for the order on a without-notice basis. The judge identifi ed three material non-disclosures by the claimant and then considered the factors which should be taken into account in determining whether such disclosures were suffi cient to deny the claimant its right to the freezing injunction. These factors were: 1. the importance of the facts not disclosed to the judge’s decision to grant the freezing order; 2. the need to ensure compliance with the duty of full and frank disclosure, and whether or not failure to disclose was “culpable”. A failure would be innocent if the fact in question was not known to the claimant, or its relevance not perceived at the time of the without-notice application; and 3. the injustice to the claimant if the order was discharged. The judge concluded in this case that the non-disclosure was not suffi cient to justify the discharge of the freezing order. Privilege and the “without prejudice” rule A recurring issue in the past few years has been the extent to which clients can rely on legal advice privilege, the most common form of legal professional privilege in English law under which a client’s communications with its legal adviser are protected from disclosure in judicial, regulatory or administrative proceedings. Since the controversial 2003 decision of the Court of Appeal in Three Rivers District Council v. Governor & Company of the Bank of England (No.5), the circumstances in which legal advice privilege can apply to a communication have been signifi cantly narrower, in large part due to the view that the court took of the scope of the client. Under English law, legal advice privilege protects communications between a legal adviser and its client the purpose of which is to receive or give legal advice (in both a litigation and non-contentious context). Litigation privilege (which is only available if a dispute is reasonably contemplated and if the communication is for the dominant purpose of litigation) has a wider scope and applies to communications between (i) a client or its legal adviser, and (ii) a third party.

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The applicability of legal advice privilege can be unclear where the client is a corporate entity. In such cases, it can be open to debate which individuals within the organisation are the ‘client’ for the purposes of giving and receiving advice. Since the decision of the Court of Appeal in Three Rivers No.5, the position under English law has been that, for the purposes of legal advice privilege, the ‘client’ is the narrow group of individuals within the corporate entity who are expressly charged with instructing legal advisers and seeking advice. This can cause particular diffi culties for corporate entities that carry out information- gathering exercises (such as internal reviews) before litigation is in reasonable contemplation (and therefore prevents legal privilege applying). 2016 saw two key cases in which the boundaries of legal advice privilege were challenged. In Astex Therapeutics Limited v Astrazeneca AB1, the High Court considered, as part of an application by the claimant for specifi c disclosure, the extent to which notes of interviews of a client’s employees by its in-house counsel or external legal adviser could be covered by legal advice privilege or litigation privilege. The dispute arose from a Collaboration Agreement relating to the parties’ efforts to develop treatments for Alzheimer’s disease, under which the defendant was required to make certain payments to the claimant in respect of drugs nominated as “Candidate Drugs”. The defendant developed two such drugs but, following an internal review in which the defendant’s in-house counsel and external legal advisers interviewed current and former scientists, it subsequently notifi ed the claimant that it no longer considered either of the above drugs to be within the scope of the Collaboration Agreement. A dispute subsequently arose, in which the claimant sought disclosure of the documents produced as part of the defendant’s review, which was resisted on the basis that the relevant documents were “by their nature privileged from production”. In response to the claimant’s subsequent application for specifi c disclosure, the defendant argued that (i) certain of the communications were covered by legal advice privilege, whilst (ii) others fell within the scope of litigation privilege. The defendant claimed that as its legal advisers had been involved in the information- gathering exercise, the case could be distinguished from Three Rivers No.5. However, the judge made it clear that the involvement of legal advisers would not necessarily clothe a document with legal advice privilege, and held that the interview notes could not be subject to legal advice privilege because the latter did not “cover an information gathering exercise of the type which will normally be conducted in relation to litigation but undertaken before a dispute is in reasonable contemplation”. When considering whether litigation privilege would apply to any of the interview notes, the judge held that there was insuffi cient evidence to establish whether a dispute was in reasonable contemplation, noting that “a party cannot simply self-certify that this part of the test is satisfi ed. Unless the position is so obvious… some evidence may be needed to assist the court in making a determination.” He also referred to a remark he made in relation to an earlier application that “to my mind it is plainly insuffi cient… to state in bald terms that information and/or documents are privileged without condescending to give any explanation about the type of privilege which is relied upon and how it is said to arise.” The judge, therefore, held that further evidence about how and when litigation privilege was said to have arisen would be required in the circumstances. Soon after the decision in Astex Therapeutics, the High Court again considered, as part of a dispute between a bank and its shareholders, In Re RBS Rights Issue Litigation [2016]

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(the Rights Issue Litigation), whether notes of interviews conducted by the bank’s lawyers with current and former employees of the bank were either subject to legal professional privilege or protected by US Federal law under which the notes were privileged. The documents in question comprised transcripts, notes and other records of interviews conducted by the bank’s solicitors as part of internal investigations carried out for the purpose of enabling the bank to seek and receive legal advice. The shareholders had sought specifi c disclosure and inspection of the documents. The bank resisted the shareholders’ application on four key grounds. First, the bank sought to distinguish Three Rivers No.5 by reference to the fact that the documents in question in that latter case were not communications with legal advisers (either in-house or external). As such, the bank argued that the decision in Three Rivers No.5 did not deal with situations in which the relevant communication was made directly to a legal adviser by an employee of the client who had been authorised to do so. The judge rejected this. The second limb of the bank’s case was that, in order to qualify for protection, the communication must be from someone who had been authorised to seek or receive legal advice from the client’s legal adviser, with such communication being made at the adviser’s request for the purpose of enabling the client to seek or receive legal advice. The bank noted that the fact that its employees had such authority distinguished its case from Astex Therapeutics, in which it was not argued that the employees interviewed were authorised to give instructions to legal advisers. While the judge had sympathy with the second limb of the bank’s case, describing it as “the fundamental and most powerful part” of its case, he ultimately rejected it. In his view, the fact that the notes recorded direct communications with the bank’s legal advisers was not suffi cient to clothe them in legal advice privilege, and the individuals interviewed were “providers of information as employees and not clients”. The third limb of the bank’s case was that, notwithstanding the above, the notes constituted “lawyers’ working papers”, a category of documents which it is generally accepted are protected by legal advice privilege to the extent that they reveal the trend of advice given by a legal adviser. The bank argued that the notes were not transcripts of the interviews but instead were documents that were created to “assist in providing legal advice”, and which “evidence[d] the impressions of the lawyer with a view to advising the client” and “reveal[ed] the lawyer’s train of enquiry”. The judge, working from a starting point that the interviews themselves were not privileged communications (for the reasons stated in relation to the fi rst two limbs), held that the burden was on the bank to demonstrate that the notes contained “some attribute…which distinguishes them from verbatim transcripts or reveals from an evident process of selection the trend of legal advice being given”. He accepted that notes of an interview are likely to refl ect the “interests, lines of enquiry and perception of the relative importance of the points covered” of the person making the note and, therefore, that they may refl ect the note- maker’s mental impressions. However, the judge held that the evidence submitted by the bank in support of its case for privilege did not demonstrate, even in general terms, the legal analysis on which the bank had justifi ed its claim for privilege. Further, he noted that the bank had not provided any evidence that the notes contained material that would reveal the trend of the legal adviser’s advice. Finally, he indicated that there is a difference between a document refl ecting a “train of inquiry” and that revealing the trend of advice given. Therefore, in light of what he

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considered to be the insuffi ciency of the evidence submitted by the banks, the judge rejected the argument that the notes constituted lawyers’ working papers. The fourth and fi nal limb of the bank’s case was that United Stated federal law (under which the notes would have been privileged) should govern issues of privilege, as the US was the jurisdiction which had the closest connection to the instructions in relation to which the documents in question were created. The bank argued that, in light of the modern conception of privilege as being a fundamental human right rather than an aspect of the law of evidence, the traditional rule that the law of the forum should govern issues of privilege was rendered obsolete. However, again, the court rejected this submission. It concluded that the recognition of privilege as a fundamental right did not justify the departure from the established rule that the law of the forum governs issues relating to privilege. The “without prejudice” rule in English law has developed over many years to provide parties with a “Potteresque” cloak of invisibility under which they can conduct settlement negotiations, confi dent that nothing they say in the context of those negotiations can be used against them should a settlement not be achieved and the case proceed to trial. In 2016 the English court considered, on a number of occasions, the scope of the without-prejudice rule. In two decisions, R (on the application of Wildbur) v. Ministry of Defence [2016] and Ravenscroft v. Canal and River Trust [2016], the court refused to allow parties to rely on correspondence or extracts of correspondence which were properly regarded as without prejudice. The court emphasised the overriding importance of encouraging parties to settle litigation and providing a safe environment for them to do so. In Suh v. Mace (UK) Limited [2016], the parties held a meeting to discuss the case generally. The meeting was not expressed to be without prejudice. However, during the discussions, one party made certain admissions which the other sought to rely on at the trial on the basis that the meeting was not without prejudice. Whilst the trial judge allowed the admissions into evidence, the Court of Appeal took the opposite view and said that it was wrong to adopt a formulaic approach here and require a party to specify that a certain part of a meeting is without prejudice to ensure that the admissions remain privileged. Instead the court should adopt a purposive approach: “the only sensible purpose for such a meeting must have been to seek some kind of solution to the litigation… that is what settlement is, and what both parties must objectively be regarded as having genuinely been seeking. There is no justifi cation for salami slicing the interviews into parts that were open and parts that were without prejudice.” This approach is different from the previously accepted position that if parties wished to engage in settlement discussions in the context of a wider meeting, they should state that the relevant part of the meeting was “without prejudice”. In future it will be up to the party seeking to rely on admissions made in a meeting to prove that they were made in circumstances where it was intended that they could be relied upon. Whilst it will still be sensible for a party to make clear that a meeting is intended to be covered by without- prejudice privilege, this decision does provide a safety net in circumstances where this is not stated, but where the purpose of the meeting is to seek to resolve the litigation. A limitation to this rule has been developed whereby correspondence marked “without prejudice save as to costs” can be referred to once the substantive issues have been resolved, and at a time when the court is considering who should bear the costs of the litigation and whether one party has behaved unreasonably in the conduct of the litigation. Part 36 Offers (see later) are conducted under the “without prejudice save as to costs” procedure.

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The without-prejudice rule will also not be allowed by the court to act as a cover for perjury, blackmail or other unambiguous impropriety. This approach was reinforced by the court in the case of Unilever Plc v. Procter & Gamble [2001]. In Ferster v. Ferster [2016], the court of Appeal had to consider the scope of the “unambiguous impropriety” exception. This case concerned an acrimonious dispute between three brothers concerning the running and ownership of an online gaming business. One of the claims in the proceedings was that two of the brothers were using the proceedings merely to extort an infl ated price out of the third for their shares in the business. A mediation took place which failed to resolve matters but settlement correspondence continued through the mediator afterwards. In the course of that correspondence the two brothers indicated that they had become aware of certain impropriety in the proceedings by the other brother and threatened that, unless the other brother agreed to pay a price for their shares £2 million in excess of what they had previously claimed, they would bring criminal and committal proceedings against him and his life partner. The judge and the Court of Appeal allowed this correspondence to be included in the evidence notwithstanding its without-prejudice “label”, as it supported the other brother’s contentions as to the motive behind his brothers’ proceedings and went beyond what was appropriate in settlement negotiations. In particular, the court held that the following factors were relevant: 1. the threats of criminal action went beyond what was reasonable in pursuit of civil proceedings; 2. the threats extended to the brother’s life partner who was not a party to the proceedings; 3. the purpose of the threats was to obtain a fi nancial advantage; and 4. the settlement offer did not connect the alleged wrongdoing to the increased demand. Instead the demand was connected to threats of criminal proceedings against the brother and his family. Privilege may be lost if a party decides to waive privilege. Waiver may be express or implied, it can be limited to a severable part of a document or communication, or it can be more widespread. Parties seeking to waive privilege on part of a document or a series of correspondence are advised to obtain the agreement of the other parties to the litigation as to the precise of extent of the waiver, so as to avoid unwittingly disclosing privileged communications. In Commodities Research Unit International v. King and Wood Mallesons [2016], the court held that the claimant in a professional negligence action had waived privilege to all advice that it had received from the defendants in relation to the settlement of earlier litigation when it sought to rely on certain limited advice concerning the settlement. Perhaps more surprisingly, the court also held that the claimant had waived privilege on communications with its current solicitors because it had referred to that correspondence in a schedule to a witness statement which had been served to support the claimant’s claim for management time dealing with the underlying action. Although surprising on fi rst consideration, the rationale is logical, as it is not possible to assess the amount of time spent on matters without knowing what those matters concerned.

Costs and funding The Civil Procedure Rules under CPR 3.12(1) require that all claims below £10 million should be cost-managed by the court. In Signia Wealth Ltd v Marlborough Trust Company Ltd and another [2016], the claimant had not speciﬁ ed that it had a monetary value in excess of £10 million so as to take the case out of the costs management regime. On the basis of the test in CPR 3.15(2) the judge held that the nature of the claim and the way it was being

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conducted (signiﬁ cant allegations and ill-feeling on both sides), and the amount of costs, meant it was eminently suitable for costs control by the court. In Agents Mutual v Gascoigne Halman [2016], the costs-management regime was adopted for the ﬁ rst time in proceedings in the Competition Appeals Tribunal. It was held that even if parties had agreed to dispense with budgeting, that did not preclude the CAT from making such costs management orders as it deemed appropriate.

Settlement Most disputes before the English courts are concluded by way of a settlement agreement between the parties and the courts have generally shown a reluctance to interfere with the terms of such settlement. The court will only set aside a settlement agreement on one or more of the usual grounds justifying interference with a contract, including fraud, mistake, misrepresentation and incapacity. Last year, we reported that the Court of Appeal refused to set aside the settlement agreement in Hayward v Zurich Insurance Company Plc (“Zurich”) [2015] even where new evidence of fraud had emerged, because it considered the defendant Zurich had some knowledge of the fraud at the time of the settlement. However, the Supreme Court in Hayward v Zurich [2016] overturned the Court of Appeal decision and set aside the settlement agreement. Mr Hayward suffered an accident at work and issued proceedings against his employers. His employers’ defence was conducted by its insurers, Zurich. Liability was admitted subject to a 20% deduction for contributory negligence. The issue for consideration was quantum, Zurich contending that Mr Hayward had exaggerated the consequences of his injury for fi nancial gain. However, the trial on quantum never occurred as the parties reached a settlement. A few years later, Mr Hayward’s neighbours provided Zurich with new evidence showing that Mr Hayward’s injury claim was dishonest and that, from their observation of his conduct and activities, they believed that he had recovered in full from his injury at least a year before the settlement. As a result, Zurich commenced fresh proceedings for an order that the settlement agreement be set aside. While the court at fi rst instance granted this, the Court of Appeal overturned this decision (as we reported in last year’s Insight) on the basis that Zurich had been on notice that Mr Hayward’s claim was exaggerated at the time of the settlement and should be held to the terms of the settlement agreement, even where new and more compelling evidence of the same fraud emerged later. On appeal, the Supreme Court had to determine two questions. First, in order to show the requisite infl uence by or reliance on the fraudulent misrepresentation which was the basis for setting aside a settlement, was Zurich: (a) required to prove that it was induced into the settlement because it believed that Mr Hayward’s assertions were true; or, (b) was it suffi cient to establish that the fact of the misrepresentations was a “material cause” of Zurich entering into the settlement? In his leading judgment, Lord Clarke reviewed the relevant authorities and concluded that none of these contained any reference to a principle that belief in the representation was required before a settlement could be set aside. He said that an insurer may settle on the basis that the judge might believe the misrepresentations and that the insurer’s “qualifi ed belief or disbelief does not rule out inducement”. Accordingly, his answer to (a) was “no”, and to (b) was “yes”. The second question before the Supreme Court was whether there were any circumstances in which suspicion that a claim was fraudulent would preclude unravelling a settlement when

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fraud is subsequently established. Lord Clarke found that it was diffi cult to envisage any such circumstances. The policy arguments of fi nality and the encouragement of settlement which had partly informed the Court of Appeal’s decision to uphold the settlement agreement were not suffi cient in the Supreme Court. Lord Clarke said that “I am not persuaded that the importance of encouraging settlement, which I entirely agree is considerable, is suffi cient to allow Mr Hayward to retain monies which he only obtained by fraud.” The Supreme Court’s decision provides a clear message to claimants that fraud will not be tolerated, even if uncovered after a settlement agreement has been concluded. Settlement of litigation is encouraged by the courts in a number of ways. The two most signifi cant are: (i) the emphasis by the courts in encouraging parties to litigation to engage in mediation or other forms of alternative dispute resolution with the threat of costs sanctions against any party who unreasonably refuses to engage in such ADR; and (ii) the procedure encapsulated in Part 36 of the Civil Procedure Rules enabling parties to make offers to settle which, if refused by the other party who fails to beat the offer at trial, can result once again in signifi cant adverse cost consequences. In Khanty – Mansiysk Recoveries Ltd v. Forsters LLP [2016], the claimant had taken an assignment of a claim in negligence and damages for £70 million against the defendant. The defendant argued that the claim was caught by an earlier settlement agreement between them and the assignor of the claim. The release clause in the settlement agreement stated that the agreement was: “… in full and fi nal settlement of all or any Claims which the parties have, or could have had against each other (whether in existence at some time in the future, and whether or not in contemplation of the Parties …)”. Claim was defi ned as: “… any claim, potential claim … whether known or unknown, suspected or unsuspected … however and wherever arising … whether or not such claims are within the contemplation of the Parties at the time of this Agreement arising out of or in connection with the Action of the invoice …” The court agreed with the defendants and held that the true construction of the settlement agreement in the context of the relevant background included the claim. This was because the wording of the clause was very wide. In particular, the words “in connection with” were suffi cient to encompass the claim against the defendants. The court reached this conclusion notwithstanding that, at the time of the settlement agreement, no allegation of negligence had been made against the defendants. The decision highlights the possible consequences of drafting wide release clauses, as they may have the effect of settling claims which, although unknown, are not objectively impossible at the time the settlement agreement is concluded. The basic theme of Part 36 is quite simple. It: (i) enables either a claimant or a defendant to offer to settle the litigation on terms; (ii) specifi es a deadline by which the offer can be accepted; and (iii) identifi es the costs and other consequences of a failure to accept the offer. However, the provisions of Part 36, and the Practice Direction which accompanies it, are detailed and have been the subject of a number of cases in the past year. The Part 36 Offer must state the period of time available for acceptance of the offer (the “Relevant Period”). If a party accepts a Part 36 Offer within the Relevant Period, the claimant will be entitled to its costs of the proceedings up to the date on which the Notice of Acceptance was served on the offeror. However, if the offer is accepted after the expiry

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of the Relevant Period and the parties do not agree liability for costs, the court must make an order as to costs. Ordinarily, the court will order that the claimant should be awarded the costs of the proceedings up to the end of the Relevant Period, and that the offeree must pay the offeror’s costs from then until the date of acceptance. In the case of Sutherland v. Khan [2016], the court had to consider whether a claimant was entitled to its costs on the standard basis or the indemnity basis (the latter basis being more favourable to the payee) for for the period between the expiry of the Relevant Period and the acceptance by the defendant of the offer. In this case the judge noted that the defendant had waited until just before the trial to accept the claimant’s offer and concluded that merely to award standard costs would not provide an incentive to the defendant to accept an offer promptly. In this case the judge awarded indemnity costs. The case of ABC v. Barts Health NHS Trust [2016] also concerned the late acceptance of a Part 36 offer. In this case the judge held that a claimant who waited eight months after the expiry of the relevant period before accepting a Part 36 offer should pay the defendant’s costs for the eight-month period on an indemnity basis. The case of Sugar Hut Group Limited and Others v. AJ Insurance Service [2016] is a rare example of the Court of Appeal overturning a cost order obtained by a claimant relying on a Part 36 offer. In this case the claimant had failed to beat the defendant’s Part 36 offer. However, the High Court still had regard to the offer due to the proximity of the sum offered and the eventual sums awarded. The Court of Appeal, however, quashed that decision and, with a fresh exercise of its discretion, ruled that a Part 36 offer was irrelevant in circumstances where the sum offered did not beat the eventual award. The Court of Appeal made clear that there was no longer any place within the provisions of Part 36 for a “near miss” rule. In Purrunsing v. A’Court & Co [2016] the claimant had made a Part 36 offer to settle the claim for £516,000 inclusive of interest. The offer was dated 20 May 2015. Following the trial the claimant recovered £470,000 together with interest to 14 April 2016 of £48,983.01, which totalled £518,983.01. The claimant submitted that since it had recovered a sum in excess of what had been offered, it was entitled to recover enhanced costs for the period from the expiry of the Relevant Period of the Part 36 offer. The court made short shrift of the claimant’s argument, recognising that it did not compare like-with-like and that the proper approach was to eliminate the effect of interest after the end of the Relevant Period from the offer and the judgment sum before comparing them. The court’s supervision of regulatory investigations In last year’s Insight, we commented on the increase in the number of global regulatory investigations. While the headline-grabbing regulatory decisions in respect of the LIBOR and foreign exchange investigations were not as prominent in 2016, there is no sign of a slowing-down in regulatory enforcement activity more generally. That activity has also been accompanied by a continuation of the trend of challenges in court to the actions of regulatory bodies. We reported last year on a challenge to the Financial Conduct Authority by a trader (R (on the application of Julien Grout) v. The FCA [2015]) in which the trader sought to overturn the decision by the FCA to terminate an investigation into his conduct. The court rejected that novel challenge, noting that considerable discretion is vested in investigators and prosecutors regarding the conduct of investigations. In a similar challenge in 2016, (R (on the application of Soma Oil & Gas Ltd) v. Director of Serious Fraud Ofﬁ ce [2016]) Soma sought Judicial Review of the Serious Fraud Ofﬁ ce (SFO) given its delays in an

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investigation which had been commenced into Soma’s activities in Somalia. Briefl y, on 25 June 2015 the SFO commenced an investigation into Soma and whether it had committed bribery and corruption offences in relation to its activities in Somalia. In response to the urgency of the allegations, Soma had conducted an internal investigation which concluded that there was no evidence of wrong-doing. It therefore vigorously denied the allegations and cooperated fully with the SFO in its investigation, seeking exoneration. However, Soma believed that the SFO was taking too long to reach a conclusion to its investigation (which risked adverse commercial consequences) and therefore sought by way of Judicial Review confi rmation from the court that: 1. the SFO’s failure to conclude its investigation of the fi rst of two sets of allegations was “irrational”; 2. the SFO’s refusal to provide confi rmation that no further action would be taken in respect of that fi rst set of allegations was irrational under Article 8 of the European Convention on Human Rights; and 3. the SFO’s refusal to provide information in relation to a second set of allegations was contrary to common law and EU Directive 2012/13/EU on the rights of an accused or suspected person. The High Court, considering the application, refused to grant the requested relief to Soma. The court noted that challenges to the decisions of prosecutors could only be advanced on very narrow grounds and would only succeed in “highly exceptional cases”. Exhibiting a wariness to become involved in prosecutorial decision-making, they noted that there were “good and sound constitutional reason[s] that decisions to prosecute are entrusted under our constitution to the prosecuting authorities”. While acknowledging that the decisions of prosecutors were ultimately susceptible to review by the courts, the court considered that the behaviour of the SFO in this case had not reached the very high hurdle for the courts to interfere. The decision of the SFO was some way from irrational. It is of note that the application for Judicial Review had had the effect of prompting the SFO to send a letter (the day prior to the hearing of the application) to Soma giving it some comfort that no action would be taken against it in respect of the fi rst set of allegations. However, the court was at pains to emphasise that the sending of such a letter was not to be taken as setting a precedent for the SFO in future cases. The court did acknowledge, though, that the provision of the letter was clearly triggered by the seeking of Judicial Review, such that the order for costs against Soma was reduced to refl ect that. In the last 18 months the SFO has embarked upon a sustained attack on what it perceives as unmeritorious claims to legal professional privilege (“LPP”) by organisations under investigation. A prominent example has been a long-running investigation by the SFO into Barclays plc which was reported in the media to involve extensive discussions between the bank and the SFO regarding access to LPP material. However, it was the SFO’s (and not the suspect organisation’s) handling of LPP material which featured in court with a challenge by a Mr McKenzie (R (on the application of Colin McKenzie v. SFO [2016])). The case concerned material which had been seized from Mr McKenzie following his arrest at Heathrow Airport on 20 June 2015, that data comprising electronic material stored on several devices. Having started to review some of the material, the SFO notifi ed Mr McKenzie’s solicitors that it considered that one of the electronic devices could contain material subject to LPP. As such, in accordance with SFO policy and procedures, they sought from Mr McKenzie’s solicitors a list of search terms to enable

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potential LPP material to be identifi ed by an electronic search so that it could be “isolated for review by independent counsel”. The request for such search terms triggered a challenge (by way of Judicial Review) of the SFO’s procedures regarding the sifting-out of LPP material. In essence, Mr McKenzie argued that the SFO should not have any access to the potentially LPP material at all, as they should eliminate the possibility of inadvertently viewing LPP material. The court acknowledged that there was an obligation on the SFO “to devise and operate a system to isolate potential LPP material from bulk material lawfully in its possession, which can reasonably be expected to ensure that such material will not be read by members of the investigative team before it has been reviewed by an independent lawyer to establish whether privilege exists”. However, such an obligation did not require that the policy and procedures would exclude all real risk of the investigative team being exposed to LPP material; it was suffi cient that the procedures would make it “very unlikely that they will do so”. We would expect the SFO’s stance on testing claims to LPP will continue for the foreseeable future. The review in last year’s chapter considered the emergence of deferred prosecution agreements (“DPAs”), the fi rst of which was entered into on 30 November 2015 with the approval of the High Court. That fi rst DPA (involving Standard Bank plc) was followed in 2016 by a second DPA between XYZ Limited and the Serious Fraud Offi ce (Serious Fraud Offi ce v. XYZ Ltd [2016]. As with all DPAs, they require court approval and this was no exception. The name of the company entering into the DPA was anonymised given that the SFO envisages that there will be future cases against individuals from XYZ Limited and the SFO did not wish to prejudice their prosecution. As with the fi rst DPA, the subject matter of the case was bribery and corruption. A notable feature of the XYZ Limited DPA was the involvement of the parent company of XYZ Limited (ABC Limited, again anonymised) which was involved in making a payment to XYZ Limited in order to meet the fi nancial penalty imposed upon it under the DPA. This was the case notwithstanding, as Mr Justice Leveson noted, “ABC being entirely ignorant of what had been happening at XYZ and its conduct when it had intimation of the facts has been beyond reproach”. The judge stopped short of seeking to establish liability of a parent company for the acts of its subsidiary (the facts of this case would not have allowed for that in any event) but he did note that, “any evidence that a parent company has set up a subsidiary as a vehicle through which corrupt payment may be made so that the company can be abandoned in the event that the payment comes to light is likely to lead to prosecution under s.7(1) of the Bribery Act 2010”. Unfortunately, the judge did not take the opportunity to provide further guidance of what could constitute “adequate procedure” under the Bribery Act s.7 offence, so we must wait for future cases to provide this assistance for organisations. The use of DPAs by the SFO appears likely to continue for the foreseeable future, offering for the SFO the certainty of punishment being meted out and, for the defendant organisation, the ability to settle a matter on more favourable terms and with a reduced timetable.

Cross-border issues There is a reason why lawyers include various “Boiler Plate“ clauses into contracts, especially contracts between parties from different jurisdictions. One such clause is the governing law

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clause. In the modern business world it is not uncommon for a party from one jurisdiction to enter into a contract with a party from another jurisdiction which could involve the purchase of goods based in a third jurisdiction and their delivery to a fourth. It the parties do not agree in advance the law that governs that contract when a dispute arises, they could argue between the choice of four potential jurisdictions and there is a ready-made cocktail for dispute. Article 4 (1)(a) of the Rome I Regulation states that in the absence of an agreement, a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence. However, Article 4 (3) provides that where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in Article 4(1), the law of that other country shall apply. In Molton Street Capital LLP v. Shooters Hill Capital Partners LLP [2016], the court had to consider whether the contract for sale of bonds to an English buyer negotiated by an English broker was subject to New York law, as the seller was habitually resident in New York. The judge had little hesitation in concluding that New York law applied. He held that Rome I made very clear that the starting position was to consider the location of the seller, and only if all the circumstances of the case justiﬁ ed, should the court depart from this and have regard to other factors. In this case, the other factors did not clearly outweigh the starting position such that Article 4(1) applied. The court’s supervision of international arbitration Fundamental to a valid arbitration agreement is that it must represent a binding commitment by both parties to submit a dispute to arbitration. In the case of Anzen Limited v. Hermes One Limited [2016] the JCPC (on appeal from the Eastern Caribbean Supreme Court – British Virgin Islands) had to consider whether a clause in a shareholders’ agreement which provided that “any party may submit the dispute to binding arbitration” constituted a binding obligation to arbitrate. In this case the JCPC identiﬁ ed three possible interpretations of the arbitration clause: 1. Analysis (I) – if either party wishes to pursue the dispute it must do so through binding arbitration; 2. Analysis (II) – the words are purely permissive, leaving it open to one party to commence litigation, but giving the other party the option of submitting the dispute to binding arbitration by commencing arbitration proceedings; or 3. Analysis (III) – either party may submit a dispute to litigation, but the other party has the option of submitting the dispute to arbitration, by making an unequivocal request to that effect and/or by applying for a corresponding stay. The JCPC rejected analysis (I) as the use of the word “may” was clearly permissive. If the draftsman wished to make arbitration mandatory, he/she would have used words such as “shall” or “should”. As a result, the clause was not a binding agreement to arbitrate disputes. Instead, it allowed either party to commence court proceedings, albeit affording the other party an option to submit the dispute to arbitration and once exercised, a binding arbitration agreement was created. The trickier question for the JCPC related to precisely how the option should be exercised. In particular, the JCPC had regard to the case of ADS UST-Kamenogorsk Hydropower Plant LLP v. UST-Kamenogorsk Hydropower Plant JSC [2013] in which the Supreme Court had made clear that a party does not have to commence arbitration proceedings in order to obtain a stay of litigation commenced in breach of an arbitration agreement. That is, a binding

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arbitration is as much an agreement not to submit disputes to the courts as it is a positive agreement to submit them to arbitration. Accordingly, the JCPC preferred analysis (III) to the effect that, the option of submitting the dispute to arbitration in this case is exercisable by making an “unequivocal request to that effect” and/or by applying for a stay. In Pencil Hill Limited v. US Citta di Palermo Spa [2016], the High Court had to consider two confl icting issues of public policy, namely that in support of enforcing foreign arbitral awards under the 1958 New York Convention, and that against enforcing penal awards of damages which are contrary to English law public policy. In this case, Pencil Hill had sold the fi nancial rights to a footballer to the defendants for €10 million, payable in two instalments. The contract provided that if Palermo failed to pay any instalment, a penalty equal to double the sum outstanding would become due. In the Swiss arbitration the tribunal held in favour of Pencil Hill but had refused to award the full penalty claimed, as it offended Article 163.3 of the Swiss Code of Obligations as being disproportionate and unfair. As a result only 25% of the penalty claimed was awarded by the tribunal. When Pencil Hill sought to enforce the award in the English courts, Palermo argued that the penal award was suffi ciently “injurious” to justify the court refusing to enforce it as a matter of English public policy. The judge was referred to Cavendish Square Holdings BV v Makdessi [2015] which dealt with the circumstances in which the rule against penalties is to be applied. In that case the Supreme Court stated: “The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre-estimate of loss. These are not natural opposites or mutually exclusive categories… the true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter.” In weighing up all the circumstances, in particular the fact that the penal award had already been reduced to a level which was seen as not disproportionate and unfair, and the strong leaning towards the enforcement of foreign arbitral awards, the judge was satisfi ed that the important public policy against enforcement of penal awards was not suffi cient to permit him to refuse the enforcement of the arbitral award. The judge was also alert to the fact that the contract was governed by Swiss private law and that under Swiss law, the Swiss court had already reduced what it considered to be an excessive penalty into a non-excessive payment. The importance of this decision is that it refl ects the strong judicial approach in the UK to the enforcement of international arbitration awards under the New York Convention. Third party funding has become increasingly common in international arbitration, particularly in investor state arbitrations. In an ICC arbitration brought before a sole arbitrator in London, Essar Oilfi eld Services Limited (“Essar”) was found liable to pay damages to Norscot Rig Management PVT Limited (“Norscot”) for breach of an operations management agreement. In addition, the arbitrator found that Essar was liable to pay Norscot US$4 million in costs which included US$1.94 million in Norscot’s third party funding liability. In Essar v. Norscot [2016], Essar sought to challenge the arbitrator’s award of US$1.94 million on the basis that the tribunal had exceeded its powers under the Arbitration Act 1996. In considering the facts of the case, the court had regard to the arbitrator’s fi ndings on Essar’s conduct in the arbitration. It was clear to the arbitrator that Essar had set out to cripple Norscot fi nancially, which had been the direct cause of Norscot having no alternative but to enter into the litigation funding agreement. The arbitrator also found that “it was blindingly

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obvious to [Essar] that the claimant….. would fi nd it diffi cult if not impossible to pursue its claims by relying on its own resources. The respondent probably hoped that its fi nancial imbalance would force the claimant to abandon its claim.” Section 59 of the Arbitration Act empowers the arbitrator to make an award allocating the costs of the arbitration as between the parties, determining the recoverable costs on such basis as it thinks fi t, and costs include “the legal and other costs of the parties”. The Commercial Court agreed with Norscot that the cost of litigation funding fell within “other costs”, both under the ICC Rules and under Section 59 of the Arbitration Act 1996. Accordingly, for the time being, a successful claimant can recover the costs of a funding agreement in arbitration even though such costs are not recoverable in High Court litigation. In the case of W Limited v. M Sdn Bhd [2016], the Commercial Court had to consider a challenge against the independence of an arbitrator on the grounds of alleged confl ict of interest. The claim was in effect one of serious irregularity for apparent bias. In this case the arbitrator’s law fi rm, unknown to the arbitrator, commenced acting for an affi liate of a party to the arbitration. The claimant relied on paragraph 1.4 of the Non-Waivable Red List of the IBA Guidelines, which includes a situation where “the arbitrator or his/her fi rm regularly advises the party or an affi liate of the party and the arbitrator or the fi rm derives fi nancial income therefrom”. Applying the IBA Guidelines, the arbitrator would have had a non-waivable confl ict of interest. However, under English law the test of apparent bias is whether “a fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”. In this case the court had regard to the fact that the arbitrator was effectively a sole practitioner, only using the secretarial facilities of his fi rm. The arbitrator was clearly committed to transparency and the court held that he would have made a disclosure had he been alerted to the situation (which he had not). The court therefore concluded “without hesitation” that on the basis of English law, a fair-minded and informed observer would not have considered that there was a real possibility that the tribunal was biased or lacked independence and impartiality. The court then considered to what extent it was bound by the IBA Guidelines, and saw them as “of assistance” but not binding on the English courts. Whilst the IBA Guidelines will continue to be applied by international arbitration lawyers, the judgment does serve to warn against a mechanical application of the IBA traffi c light system without the application of careful consideration of the specifi c circumstances of the case.

Acknowledgment Michael and Justin would like to thank litigation and arbitration associates at Winston and Strawn London LLP, Daniel Meagher; Bibi Sarraf Yazdi; Anuj Moudgil and Suzanne Labi for their invaluable assistance in compiling this chapter.

* * *

Endnote 1. [2016] EWHC 2759 (Ch)

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Michael Madden Tel: +44 20 7011 8763 / Email: [email protected] Michael Madden is a partner who leads the fi rm’s commercial litigation presence in London. Mr. Madden advises clients on commercial real estate disputes involving joint ventures, fi nance, and landlord and tenant disputes. His wide-ranging disputes practice includes international and domestic contracts, fi nance transactions, real estate, tax, defamation, professional negligence, and insolvency issues. He has extensive experience as the lead partner in disputes involving corporate acquisitions, divestitures, and joint ventures in various industries. Mr. Madden is a member of the Law Society, a fellow of the Chartered Institute of Arbitrators, and an accredited Mediator. He holds an LL.B. Hons from the University of London (London School of Economics).

Justin McClelland Tel: +44 20 7011 8736 / Email: [email protected] Justin McClelland is a solicitor advocate in the fi rm’s London offi ce who focuses his practice on cross-jurisdictional disputes and contentious regulatory matters. Mr. McClelland has advised and represented clients across a number of sectors, including fi nancial services, transport, construction, pharmaceuticals and energy. His broad experience includes: contentious regulatory investigations; high-value litigation; high-value tax litigation; sensitive corporate investigations; fraud and related advisory matters; and the creation and implementation of compliance procedures.

Winston & Strawn London LLP CityPoint, 1 Ropemaker Street, London EC2Y 9AW, United Kingdom Tel: +44 20 7011 8700 / Fax: +44 207 011 8800 / URL: www.winston.com

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Markus Kokko & Niki J. Welling Borenius Attorneys Ltd

Effi ciency of process In Finland, disputes are primarily resolved in state courts. Arbitration is common in business-to-business disputes, although it remains the dispute resolution mechanism of choice for large businesses. Businesses that are involved in cross-border trade also usually opt for arbitration as a dispute resolution mechanism, due inter alia to the international enforceability of the award. Other alternative dispute resolution methods such as mediation are not very common, although mediation has won ground in academic discussion, and even among practising lawyers. There are three instances of state courts: the District Courts; the Courts of Appeal; and the Supreme Court. Only a limited number of cases reach the Supreme Court, as a case usually has to be valuable as a precedent in order to qualify for leave to appeal before the Supreme Court. There are also some specialist courts which handle business-related disputes, such as the Market Court (e.g. IPR and Public Procurement), the Insurance Court and the Labour Court (applicability of collective bargaining agreements). The Average Adjuster, an offi cial appointed by the Ministry of Trade and Industry, issues rulings on maritime insurance cases in the event of an average. Finland also has a parallel court system for administrative disputes which consists of the Administrative Courts as a fi rst instance, and the Supreme Administrative Court as the second and last. The Administrative Courts resolve issues concerning, e.g., taxation, land use and customs, as well as competition law issues such as public enforcement of cartel prohibition and merger control. Court proceedings are not burdened by common law concepts such as juries or pre-trial discovery proceedings. Legal codifi cation is abundant, as it is the norm for civil law legal systems and is fairly understandable to laymen. Legal precedent is also quite easily retrievable and so does not burden the parties’ legal costs unreasonably, as might be the case in some common law jurisdictions. Prolonged hearings due to deliberation on procedural issues are also quite uncommon, as deliberate obstruction by advocacy is quite rare. Most submissions and almost all correspondence with the courts can be fi led electronically, but if there are copious amounts of evidence, the courts will likely request the fi ling party to provide hard-copies on the material. A business dispute takes on average a year in the District Court and another year in the Court of Appeal, although averages vary locally, and one should not be surprised if a dispute takes up to three years to resolve in a state court. Arbitration proceedings usually take roughly a year from the formal initiation of arbitration. There is an ongoing debate on the effi ciency of state court proceedings; however, at the

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moment no signifi cant reforms are contemplated to address the issues of expediency and cost. That being said, the Ministry of Justice continuously examines various means by which the procedure in the courts can be streamlined and expedited. If court proceedings take an exceptionally long time to conclude, a party may seek compensation from the state. With respect to time spent on proceedings, Finland is, compared to other European jurisdictions, not ineffi cient but can hardly be considered effi cient either. Judges and courts have nevertheless taken a special interest in expediency and judges have, in recent years, been noticeably more proactive in facilitating the examination of cases in order to minimise the total amount of time spent on the proceedings. In civil cases, courts will inquire into the parties’ willingness to engage in judge-led mediation and, if both parties agree, a judge will mediate between the parties with the objective of reaching a settlement.

Integrity of process Judges are impartial and their independence is reasonably protected by law. Judges are not formally bound by precedent or doctrine, only by law. In practice, judges will nevertheless apply precedent, established doctrine and other sources of law as well, unless there are grounds for deviating from them based on the facts of the case. The concept of natural justice is not accepted by the Finnish legal system, although courts have a certain tendency to strive for fair and equitable outcomes. The legal conclusions reached by the courts are therefore predictable as a general rule, and uncertainty is usually based on the parties’ abilities or inabilities to present evidence in support of their claims. The state court system is generally considered to have integrity, and is considered fair and impartial with regard to foreign parties as well. Corruption and bribery are relatively unheard of with regard to judges in the Finnish court system. State courts do lack business and industry experience; to that extent, they might not always be aware of the impact of special circumstances in the case at hand. The adjudication has, nevertheless, generally been considered fair and on a par with fact by practising lawyers and academics alike. Practising attorneys often recommend arbitration as a dispute-resolution mechanism for business-to-business, high-value and complex disputes involving industry- speciﬁ c circumstances, due to the possibility of arbitrator selection by either of the parties or the appointing institute, in addition to the other advantages of arbitration.

Privilege and disclosure Finland is considered a civil law country and does not have extensive discovery or disclosure proceedings concerning evidence in civil law disputes. The court may nevertheless order a party to present a document or another piece of evidence which may be relevant as evidence in the dispute when petitioned by a party. Refusal may be sanctioned with a fi ne, and the court may also order an executive offi cer (bailiff) to execute the order. A party to an arbitration may, if the arbitral tribunal considers it appropriate, petition a court to order the production of documents for the purpose of the arbitration, in which case the court will apply the Code of Judicial Procedure on the matter. The main rule is that a party must be able to present its own evidence in support of its claims. The Code of Judicial Procedure is based on the notion that the requested evidence must be specifi ed and relevant as evidence in the case. Usually, the requirement of specifi city is quite strictly interpreted. A petition concerning a narrow category of documents may nevertheless be successful, as courts have been somewhat more fl exible during the last decade. However, as a rule of thumb, it may be stated that the petition and the subsequent

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order to produce should be specifi c enough for an executive offi cer to be able to enforce the order by executing it himself. The court may order a third party to produce the evidence as well. Adverse inferences may be drawn by the court and by arbitral tribunals alike if a party refuses to produce the requested evidence (drawing adverse inferences is naturally beset by its own set of problems concerning the conclusions one might be able to draw). The rules on privilege in the production of documents are for the most part similar to the exemptions of giving testimony in the main hearing. Some information and documentation (such as business and trade secrets) are protected by law and can therefore not be the subject to an order. A public offi cial, physician, pharmacist or midwife, or the assistant of such a person, an attorney or counsel, a court-appointed mediator or auxiliary mediator, or priest, may not present a document if it can be assumed that the document contains something on which he or she may not be heard as a witness. In addition, a witness may refuse to give a statement which would reveal a business or professional secret, unless very important reasons require that the witness be heard on the subject matter. Similarly, a party may refuse to provide a document containing this kind of information. The court will examine the grounds for refusal prior to deciding on the issue. Partial production of a document may also be ordered. There is an exception to the confi dentiality obligation and right of an attorney. An attorney might be ordered to testify and produce documents if he has not acted for the client in court proceedings (i.e. only acted in an advisory role). In-house counsel are considered regular employees of a company and as such, do not enjoy any special confi dentiality rights or obligations. Settlement negotiations are protected by customary confi dentiality agreements to the fact. Finnish law does not provide any special protection in this respect. An attorney is nevertheless not allowed to invoke a settlement offer in court, due to the Ethical Rules of the Finnish Bar Association (unless the offering party invokes it fi rst or allows it). Electronic production of documents has not surfaced as a real problem, due to a restrictive view on document production in general. At the moment, no steps are being taken to prepare for possible problems concerning electronic production that might surface in the future.

Costs and litigation funding Costs consist of attorneys’ fees, witness fees and other miscellaneous costs. The courts charge a nominal amount for initiating proceedings. The basic principle in the Code of Judicial Procedure is that the loser pays the reasonable and necessary costs of the winning party. What is considered reasonable is evaluated in casu. In business-to-business disputes, most of the costs are usually retrievable. The evaluation of whether legal costs have been reasonable is accentuated in proceedings involving private individuals, and the evaluation usually takes into account the complexity and value of the case at hand. The costs shall be claimed alongside the substantial claims of the case, and the courts will decide on the allocation of costs in their judgments. When the judgment is ﬁ nal, the costs may be retrieved while enforcing the actual judgment. Attorneys usually work based on hourly rates, and the costs are usually invoiced regularly. Conditional fees are not prohibited per se, but they are quite rare, as they are somewhat

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difﬁ cult to reconcile with the system and traditions in place. Fee caps are very rare in litigation assignment, but are sometimes employed in the appeals stage of court proceedings as costs are signiﬁ cantly easier to predict at this stage. Cost issues in arbitration follow the same principles, although arbitration tribunals tend to be somewhat more tolerant of the amount of legal costs claimed. Third-party funding is possible, and the most common way in which this is realised is by way of insurance. Other third-party funding is quite uncommon, although not unheard of, and has been used in landmark cases which concern entire industries or cases with multiple claimants.

Interim relief The courts may grant interim relief based on the Code of Judicial Procedure. Usually, the party petitioning for interim relief must post security for the potential damage an injunction may cause the other party. The court may order the seizure of property if the petitioner establishes its receivable to be likely, and there is a danger that the other party hides or otherwise acts in a manner that endangers the receivable. If the petitioner establishes likelihood of him having some other enforceable right, and there is a danger that the other party, by doing or neglecting to do something, endangers or otherwise diminishes the right from being realised, the court may: (i) under the threat of a fi ne, order the other party to refrain from doing something; (ii) under the threat of a fi ne, order the other party to do something; (iii) entitle the petitioner to do something or have something done; (iv) order the property of the other party to be set into the custody of an agent (trustee); or (v) order any other measure which is necessary to safeguard the right which needs to be protected. The order must be proportional to the right which is to be safeguarded, and may not cause unreasonable harm to the other party. The system for interim relief is quite fl exible in that it recognises different kinds of rights and the need to protect them, and has, for instance, successfully been employed to prevent strikes by labour unions. Proceedings for interim relief are usually quite fast and effective and are handled as priority cases if so requested by the applicant. After the ruling on the interim relief, the order must be enforced by an Executive Offi cer, which will require security for possible damage that the order can cause. One can expect the application and enforcement of an urgent interim relief to take approximately three to fi ve days. It should be noted that a plaintiff applying for interim relief in Finland faces the risk of liability for damages if the interim relief is later found to be groundless and to have caused the subject of the order damage. The claim for damages shall be pursued in regular court proceedings.

Enforcement of judgments A domestic judgment is enforced by the local executive ofﬁ cers. Enforcement may be initiated even though there is a pending appeals process ongoing. A judgment will also include a decision on legal costs, if costs have been claimed by either party. If an applicant requests enforcement before a ﬁ nal judgment from the Court of Appeals, it must post security for the eventuality that an appeals court changes the judgment. Foreign court judgments cannot be enforced without an international convention or a national provision forming the basis of the enforcement action. Enforcement procedures vary depending on the international rules applicable.

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For example, if a judgment has been rendered by a court in a Member State of the European Union, the recognition and enforcement is performed in accordance with the rules set out in Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). In addition, there are conventions allowing for the enforcement of judgments within specifi c fi elds depending on the subject matter, such as the Luxembourg Convention on Recognition and Enforcement of Decisions concerning Custody of Children and on Restoration of Custody of Children. The enforcement of arbitral awards is decided on by the state courts. As a rule, the state court will apply the in favorem pro validitate rule on its deliberation, and the threshold for setting the award aside is quite high. However, as most arbitral proceedings take place in Helsinki, other District Courts might not be as familiar with arbitral law, in which case it is recommended to seat the arbitration in Helsinki. Finland has ratifi ed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and foreign arbitral awards are therefore enforceable in Finland. An arbitral award can be set aside by the court on the basis of either invalidity or nullity. The award is considered invalid if: (i) the case was inarbitrable; (ii) the award contradicts the foundations of the judicial system (ordre public); (iii) the award is so unclear and incoherent it cannot serve as a basis for enforcement; or (iv) the award has not been signed by the arbitrators (majority suffi ces, but an explanation must be provided for why the minority has not signed the award). The award is considered null if: (i) the arbitrators have exceeded their powers; (ii) the arbitrators have been appointed in the wrong manner; (iii) an arbitrator has been incompetent due to bias; or (iv) the arbitral tribunal has not afforded a party a suffi cient opportunity to present its case. Enforcement of a foreign arbitral award can be denied by the court if: (i) the arbitration agreement has been invalid (due to certain grounds); (ii) a party has not been informed of the proceedings or has otherwise been inhibited or unable to present its case; (iii) the arbitral tribunal has exceeded its powers; (iv) the composition of the arbitral tribunal or the arbitration itself has signifi cantly deviated from the arbitration agreement; or (v) the arbitral award has not yet become binding in the country in which it was given, or if it has been set aside in that country. The arbitral award may not be enforced to the extent that the arbitral award contradicts the foundations of the Finnish legal system (ordre public). The party enforcing the award or the judgment always bears the risk for the other party’s insolvency. If the execution is unsuccessful due to lack of assets, the party enforcing the award will have to pay its own legal costs, in addition to not being able to retrieve the claimed amount.

Cross-border litigation As Finland is a Member State of the European Union, Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters is applied in Finland, and may be considered one of the main instruments for international procedural law. In addition to this regulation, Finland is obviously also bound by other applicable regulations such as EC No 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters. With regard to notices and evidence, Finland applies the Hague convention(s), although common law discovery or disclosure proceedings are not permissible. Enforcement of a foreign judgment must always be based on a convention or national provision.

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International arbitration Arbitration is governed by the Finnish Arbitration Act of 1992. The enactment was largely “inspired” by the UNCITRAL Model Law in place at the time. Only minor amendments have been made since its enactment. The main institutional body in arbitration is the Arbitration Institute of the Finland Chamber of Commerce. The Arbitration Rules of the Institute were recently updated to better conform to international best practice. The key objective of the reform was to address issues such as expediency and cost effi ciency, multi-party administration, arbitrator-ordered interim relief and increased confi dentiality. The Institute has a good reputation internationally, and both domestic and international disputes are regularly arbitrated under the auspices of its Rules. The Board of Directors also now includes highly recognised international practitioners, whose expertise benefi ts the institution. The judiciary’s attitude towards arbitration is quite positive, and attorneys also tend to recommend arbitration in business-to-business disputes due to the advantages afforded by arbitration. The fact that state courts often lack knowledge of industry realities, despite otherwise being quite competent, also plays a role in attorneys’ positive attitude towards arbitration. Finland is party to, and has ratifi ed, the New York convention on the Recognition and Enforcement of Foreign Arbitral Awards. As a general rule, if a civil law case may be settled outside of court, the case is arbitrable. The exception is that consumers are not bound by arbitration agreements concluded before the dispute has arisen. Arbitration is not applicable to non-discretionary (indispositive) matters. The arbitral award may not be appealed, although it can be set aside based on the set of grounds elaborated above. Although it has not been stated expressis verbis in the Arbitration Act, arbitrators are generally considered to have the power to estimate damages when a party is unable to bear its burden of proof to the full extent. Guidance on the powers of the arbitrators may, to this extent, be found in the Code of Judicial Procedure. Arbitration proceedings are supported by the state courts if necessary. Although the majority of proceedings are institutional, some proceedings are ad hoc, and therefore might need court assistance to a greater extent, although even in these cases, court assistance is quite uncommon. A party may petition a state court to appoint one or more arbitrators to the tribunal. Correspondingly, a court may relieve an arbitrator when requested to do so by the parties. A court may also enforce the production of evidence (including witness testimony) if considered necessary by the arbitral tribunal. Notwithstanding the lis pendens rule applicable to the relationship between the arbitration proceedings and court proceedings, a state court may grant interim relief when petitioned to do so by a party. The Code of Judicial Procedure is applicable to the application for interim relief. Mediation is not very common in business-to-business disputes, although it has at least garnered some academic enthusiasm by practitioners. The Act on Conciliation in Civil Disputes in General Courts governs some civil law disputes.

Mediation and ADR State court judges are obligated to inquire into the parties’ willingness to settle cases and a case may also be referred to judge-led mediation proceedings if both parties agree to it. Judge-led mediation has garnered some success in low-value disputes, but has yet to become a major method of dispute resolution.

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Mediation has not evolved into a noteworthy method of dispute resolution in Finland. Some industries such as the construction industry have developed dispute-resolution mechanisms similar to mediation, but these are rarely agreed on in advance and usually deal with low- value disputes and single issues at once. The advantages of mediation have been recognised among practising jurists and academics alike. Training is also offered by inter alia the Finnish Bar Association. The University of Helsinki has also founded a Conﬂ ict Management Institute aiming to research and develop alternative dispute resolution methods. Mediation and ADR has nevertheless not succeeded in making a breakthrough in Finland. Parties usually try to resolve their disputes amicably before retaining counsel. Due to the cooperative business climate in Finland, parties often succeed in their efforts and disputes subsequently are not referred to outside counsel until negotiations have deadlocked. State courts and arbitration still lead the ﬁ eld when parties are unwilling to settle on their own, and the popularity of arbitration has increased in recent years − as indicated by the statistics of the main arbitration institute in Finland, the Arbitration Institute of the Central Chamber of Commerce.

Regulatory investigations In Finland, regulations are often supported by criminal statutes and many criminal offences only require negligence (as opposed to intent) from the offender. These kinds of criminal statutes may be found in regulations covering inter alia the fi nancial sector, work safety, tax and environmental issues. In recent years, authorities have concentrated especially on environmental cases and transfer pricing (tax), while investigations into the fi nancial sector and other sectors have evened out to a steady stream of relatively standard cases. The authorities are usually quite cooperative in their environmental supervision and the objective has been to minimise the impact of industry on the environment. Environmental permits are issued once the authorities are satisfi ed that all reasonable efforts are made to minimise the impact on the environment. The number of environmental prosecutions has nevertheless grown during recent years and this development has culminated in the largest environmental criminal case in Finnish history, concerning a nickel mine in northern Finland. In that case, it was evident that cooperation between the industry, the supervising authorities, non-governmental organisations and the courts in charge had presented a challenge to everyone involved. Governmental bodies have by law been afforded rather broad powers of discretion with regard to their supervision of industry sectors, and they are in principle supported by the courts. It is therefore advisable to retain external counsel in the early stages of business operations in order to ensure that all regulations are taken into account and that business operations continuously monitor their regulatory obligations. External counsels have also proven themselves very useful when confl icts between businesses and regulatory bodies have surfaced. It is recommended that regular compliance reviews are performed of the business operations covered by extensive regulations in order to minimise the effects of any regulatory violations.

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Markus Kokko Tel: +358 20 713 3482 / Email: [email protected] Markus regularly advises major domestic and international clients on dispute resolution and corporate crime cases. Markus has in-depth experience of domestic and international corporate and commercial disputes and he has acted as lead counsel in numerous extensive cases. His fi eld of experience encompasses cases related to a wide variety of business sectors, such as the chemicals industry, fi nancial markets, international trade, retail and wholesale, mining, services and consultancy. Markus also has an exceptional track record in handling a broad range of litigation and arbitration cases, including ad hoc proceedings as well as proceedings governed by ICC Rules, SCC Rules and the Arbitration Rules of the Finland Chamber of Commerce. In addition, Markus frequently advises companies and executives in relation to complex corporate crime cases and criminal investigations regarding, inter alia, insider trading, environmental violations, corruption, imports and exports and tax. Markus’ effi cient and client-oriented approach has earned him an excellent reputation which has been recognised by rankings in Chambers Global, Chambers Europe, The Legal 500 and Best Lawyers. Furthermore, Markus also serves as an arbitrator and he has written many articles on litigation and arbitration. Markus heads the fi rm’s Litigation & Arbitration and Corporate Crime teams.

Niki J. Welling Tel: +358 20 713 3483 / Email: [email protected] Niki is specialised in questions related to dispute resolution. In addition to both domestic and international litigation and arbitration, Niki also advises clients on general corporate and commercial law as well as employment law. Niki frequently represents clients in both arbitration and court proceedings relating to e.g. sale of goods, construction and real estate, joint venture projects, corporate conﬂ icts and insolvency. Niki has also gained experience in corporate crime-related work and Administrative Court proceedings.

Borenius Attorneys Ltd Eteläesplanadi 2, FI-00130 Helsinki, Finland Tel: +358 20 713 33 / Fax: +358 20 713 3499 / URL: www.borenius.com

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Olivier Laude, Victor Champey & Olivier Guillaud Laude Esquier Champey

Effi ciency of process French legal and judiciary system Unlike the American and English legal systems, the French legal system belongs to the civil law tradition. It is another peculiarity of French law that it is divided into two major branches: private law and public law. Although this structure may trigger uncertainty about the respective powers of the administrative courts and the courts overseeing private law matters, the boundaries of each judicial branch are now quite stable: only around 30 cases are brought annually before the Confl icts Tribunal, the court that arbitrates confl icts of jurisdiction between courts handling private or public law matters. This chapter mainly focuses on private law. It should be emphasised that public law and administrative courts govern questions involving administrative bodies (e.g. State, local authorities, administrative agencies) and their relationships with private individuals. The scope of such legal branch and judicial structure is therefore quite wide, in a country where administrative organs’ actions infuse many aspects of private and economic life. Accordingly, most claims for damages involving a public authority must be brought before an administrative court. The local Courts of fi rst instance, the administrative Courts of appeal and the Conseil d’Etat form the three-tier system of administrative courts.1 By contrast, private law encompasses pure commercial and civil matters, i.e. all matters that are not ruled by public law. The civil court system is structured as a three-tier pyramid. The Courts of fi rst instance, which together form the fi rst tier, comprise four major2 kinds of courts: • The Superior courts (Tribunaux de grande instance): such courts have jurisdiction over any private dispute, provided that: (i) the disputed amount is in excess of €10,000; and (ii) the law has not expressly conferred jurisdiction to another court. Such courts have exclusive jurisdiction over several matters (whatever the disputed amount), such as intellectual property, real estate or family law. In 2016, there were 164 Superior courts. • The Courts of common pleas (Tribunaux d’instance): such courts have jurisdiction over any private dispute, provided that: (i) the disputed amount is lower than €10,000; and (ii) the law has not expressly conferred jurisdiction to another court. Such courts have exclusive jurisdiction over several matters (whatever the disputed amount), such as tenant disputes. In 2016, there were 307 Lower civil courts. As from July 1st, 2017, such courts are entitled to hear cases formerly brought before the lay judges (who had jurisdiction over matters where the disputed amount was lower than €4,000).

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• The Commercial courts (Tribunaux de commerce): such courts have exclusive jurisdiction over commercial matters, including insolvency proceedings. They are run by non-professional judges elected from members of the commercial community. In 2016, there were 136 Commercial courts. • The Labour courts (Conseils de prud’hommes): such courts have exclusive jurisdiction over employment disputes. They are run by an equal number of non-professional judges elected among employers and employees by their peers. In 2016, there were 210 Labour courts. The second tier comprises the Courts of appeal, that hear appeals fi led against all decisions rendered by the civil Courts of fi rst instance (depending on their geographical jurisdiction). Any fi rst instance decision can be appealed, except judgments for less than €4,000, for which an appeal can only be made on points of law directly to the Court of Cassation. In 2016, there were 36 Courts of appeal. The third tier of the civil court system is the Court of cassation. Like the Conseil d’Etat in the system of administrative courts, this Court exercises fi nal control over judgments issued by the Courts of appeal. The Court of Cassation is divided into four sections (civil section, commercial and fi nancial section, employment section and criminal section). It should be highlighted that the Court of cassation does not hear arguments on the facts, but rather only focuses on points of law. Should the Court of cassation quash a decision issued by a Court of appeal, the case would generally be sent back, for a rehearing of both fact and law, to a Court of appeal other than the one which issued the quashed decision. Civil courts also hear cases dealing with certain aspects of tax law, as well as criminal law. French proceedings enable victims of criminal offences to be awarded civil damages. Under such circumstances, the criminal courts rule on the civil liability of the defendant. This procedural route is favourable to the victim, considering the duty and extended powers of the public prosecutor in collecting and presenting proofs to the court. 2016 started with a major reform of French contract law. Indeed, ordinance No. 2016-131 dated February 10, 2016, has introduced several notable changes, among which:3 • the mandatory performance of promises to enter contracts (new Civil code, Art. 1124); • a proper regime for hardship has been introduced (new Civil code, Art. 1195);4 and • a party may unilaterally terminate a contract (new Civil code, Art. 1226).5 It is worth mentioning that a class action mechanism was introduced in the French legal system in 2014. Such mechanism was then limited to the protection of consumers, and provisions were gathered in the Consumer Code. In 2015, the scope of class action was then expanded to public health. Since the law No. 2016-1547 dated November 18, 2016 (the so- called law “modernising Justice for the 21st Century”), class actions proceedings now apply to three new areas: discrimination practices, environment and digital personal data. Class actions may only be exercised by recognised associations which have been duly registered for at least fi ve years, and whose statutory purpose involves the defence of interests which have been infringed. If the class action proceedings aim at stopping a misconduct, the courts must establish the existence of such a misconduct and order the defendant, if necessary under penalty, to put an end to it. If the class action proceedings rather seek compensation for damages, the procedure consists of three stages: the judge shall rule on the responsibility of the defendant; defi ne the group of individuals likely to benefi t from the class action outcome; and set the deadlines by which any victim can join the group to benefi t from the judgment on liability.

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The alternative dispute resolution (ADR) procedures are run either as a complement or as an alternative to the jurisdiction of national courts and the procedures applicable before them (see below). Case management As far as practical monitoring of cases by national courts is concerned, the time required for a case to be handled is often diffi cult to predict, but is rarely faster than one year. Appeal proceedings before both the Court of appeal and the Court of cassation often require 18 months. Case management is the duty of the courts, and parties have no direct infl uence on it – although they may apply for time extension to fi le briefs or evidences. A judge in charge of overseeing the proceedings and the procedural timetable is designated only before the Superior courts and the Courts of appeal – in particular, such judges are absent from proceedings held before Commercial courts and Labour courts. The use of electronic communications has been encouraged over the past years to facilitate the management of cases handled by courts: this trend led to the adoption of the Decree dated May 6, 2017, pursuant to which any procedural document shall be sent to courts through an electronic interface. If not, judges must declare it inadmissible. A similar obligation has been introduced in administrative proceedings since a Decree dated November 2, 2016.

Integrity of process Under French law, judicial trials held before all domestic courts are submitted to the rules of due process. The most relevant source is the European Convention on Human Rights (ECHR), which was incorporated into French law in 1974, hence its direct effect on domestic proceedings. Article 6 of the ECHR provides for fundamental requirements, as the neutrality of courts, the reasonable duration of proceeding and the public nature of hearings. Under criminal law, core rules include the presumption of innocence, the right to legal assistance, the right to effectively prepare one’s defence and, more generally, the right to a fair trial. The European Court of Human Rights also speciﬁ es the applicable standards as regards fundamental requirements of the due process of law. French law also ensures the compliance of exceptional proceedings and ADR mechanisms with due process. In this respect, ex parte proceedings may be held only under circumstances justifying the absence of an adversarial debate, and the arbitral tribunal shall have the duty to ensure that the parties are treated equally and to uphold the principle of due process.6

Privilege and disclosure As a core principle, all correspondence between French lawyers, and between clients and their lawyers, are strictly privileged. Nevertheless, privilege is not attached to correspondence with or between in-house lawyers. Lawyers are entitled to waive the privilege of their correspondence by specifying that a document is “offi cial” or “not confi dential”. As regards correspondence between French lawyers and their foreign counterparts, no general rule is applicable – playing the role of a general guideline, the European Code of Conduct is deprived of legal force. The rules on privilege applying to correspondence between French and non-French lawyers must therefore be analysed on an ad hoc basis. Should no statutory privilege be applicable, setting up a contractual framework may safeguard confi dentiality of exchanges, although there is no certainty such contractual arrangement would suffi ciently protect the client’s interests.

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Parties at trial have to prove the facts they rely on to support their case, and judgments are solely based on evidence produced during the proceedings. Facts may be produced either spontaneously, or under the supervision of the court. Parties are free to disclose facts or not, in order to best support their case. Under French law, no duty of disclosure or discovery is applicable. Nevertheless, a judge can order or facilitate the production of evidence, via two distinct mechanisms: • before a trial has commenced, and provided the outcome of a future trial depends on evidence at stake, a party may be allowed by a judicial order to seek evidence within his future opponent’s (material or electronic) premises; and • if a party relies on an evidence that is not under his or her control, the judge can order the other party or a third party to provide such evidence. The failure to cooperate is punished by the payment of a ﬁ ne determined by the judge, except if a lawful impediment is admitted.7 Materials related to pending civil proceedings are not public. Access to documents and information is only granted to parties and their counsels. Despite the fact that judicial decisions are public (as a general rule), no open, systematic archive system is made available to the public. Nevertheless, copies of judgments are available at court ofﬁ ces.

Litigation funding Since the law No. 2015-990 dated August 6, 2015, fees arrangements are mandatory (as a leading principle). Fees must be fi xed, at least partially: contingency fees, if a lawyer and his or her client agree on their existence, cannot represent 100% of legal fees. Disputes over fees are brought before the head of the local Bar, whose decision can be appealed within one month. In general, the losing party bears all the dépens,8 which correspond to costs incurred during the proceedings (e.g. court’s fees, translation fees, expert’s fees – and except attorney’s fees). The losing party can also be ordered to pay a portion of the frais irrépétibles, which mostly consist of attorney’s fees9 – considering the rather low amounts awarded on this ground, most lawyers’ fees remain irrecoverable. A mechanism of State legal assistance exists. It is granted depending on the level of resources of the applicant. Beyond economic criterion, only French residents (or non-residents if such an option is envisaged by an international treaty) can benefi t from it. Commercial companies cannot benefi t from legal aid. If granted, the head of the local Bar appoints a counsel to the aided party. The Counsel would then receive a fi xed fee from the State, and court fees and costs related to the enforcement of judgments will be borne by legal aid. Third-party funding is not prohibited per se by the professional lawyers’ rules. However, its development is moderated by anti-laundering regulations, which require lawyers to control the identity of their clients and the nature of operations that require their expertise (any suspicion shall be deferred to the head of the local Bar, who may decide to transfer the case to the competent government body). As a fi nal note, it should be highlighted that the practice of ordering security for costs is not common in France.

Interim relief French law offers a variety of interim reliefs, which follow from different proceedings and address diverse situations.

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Parties may ask a judicial authorisation to gather and/or protect proofs before a trial starts.10 The request shall be submitted before the court that would have jurisdiction over the proceedings rules on the merits of the case, and the seeking party must demonstrate that documentary evidence at stake could determine the outcome of a future trial, and is at risk of disappearance. This pre-trial mechanism is particularly powerful, as the proceedings can be held ex parte, and the scope and nature of data covered by the judicial order can be quite wide (notwithstanding the fact that they shall be suffi ciently identifi ed). Moreover, summary proceedings enable parties to obtain protective court orders. Such orders, which are immediately enforceable,11 are always inter partes and do not terminate the dispute as regards the merits of the case.12 Parties can use this procedural route: • when seeking urgent measures that do not encounter any serious challenge or which the existence of the dispute justifi es;13 • to avoid an imminent damage or to abate a manifestly illegal damage (even where confronted with a serious challenge from the other party);14 or • to obtain an interim payment from a party, provided the ground of such payment is not seriously challenged.15 French law also provides for the following conservatory measures, that can be awarded ex parte: • Protective attachments (saisies conservatoires): the requesting party shall: (i) produce the legal ground enabling the attachments (such ground must show a prima facie case on the merits); and (ii) specify the amount of the requested security, and demonstrate that disappearance of the defendant’s assets is likely to occur. The claimant shall initiate proceedings related to the claim at stake within three months counted from the date of the order, falling which the order will lapse (anyone affected by an attachment can challenge it). • Judicial mortgages (sûretés judiciaires): courts have the power to direct the provisional registration of a charge over properties, shares or stocks, or business owned by the defendant (attachments of earnings can also be contemplated).

Enforcement of judgments A prevailing party shall retrieve an original of the judgment from the court, and serve it (via a bailiff) to the losing party within six months in case of default judgment, or 30 years in case of adversarial proceedings. Other mandatory delays exist and shall be assessed on a case-by-case basis. As regards enforcement within the European Union (EU), the regulation No. 1215/2012 dated December 12, 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, is applicable to proceedings initiated after January 10, 2015 (as opposed to judicial decisions issued after the same date). This regulation allows the direct enforcement of a judgment issued by a domestic court of one Member State in another Member State. The prevailing party shall obtain from the court that originally issued the judgment a certiﬁ cate stating that said judgment is enforceable in the Member State where it has been issued. From then on, only a few grounds allow the losing party to challenge the enforcement of said judgment – e.g. the violation of public policy or due process. As regards enforcement of judgments issued in a non-EU Member State and in the absence of a bilateral enforcement treaty, the Superior court shall evaluate whether: (i) the foreign

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court had jurisdiction over the case under French rules of jurisdiction; (ii) the judgment was obtained by fraud; and (iii) the requested enforcement would breach French international public policy. The enforcement procedure is initiated by a summons and is adversarial. Since the law No. 2016-1691 dated December 9, 2016, measures relating to assets belonging to a foreign State can only be enforced by virtue of a prior judicial authorisation and only under the following cumulative conditions: • the considered State expressly agrees to the enforcement of such a measure; • the considered State assigned assets at stake to the satisfaction of the measure subject of the proceedings; and • the assets at stake (i) are speciﬁ cally used for non-public purposes by the considered State, and (ii) are linked to the State entity involved in the considered judicial or arbitral proceedings. In any case, provisional or enforcement measures may not be applied to assets assigned to diplomatic missions.

International arbitration General framework of French law on arbitration As signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (that came into force in France on September 24, 1959), France has developed an arbitration-friendly regime that was clarifi ed on January 13, 2011, when a Decree implemented new rules in support of arbitration. Today, French arbitration law is mostly contained in Book IV16 of the Code of Civil Procedure (“CCP”), although several principles can be found in the French Civil Code.17 The fact that the seat of ICC is based in France also contributes to the development of international arbitration practice in France. French law makes a fundamental distinction between domestic and international arbitration. This distinction pervades the entire legal framework for arbitration in France, and allows international arbitration to be governed by more fl exible and permissive principles than those applying to domestic arbitration. The relevant criterion for the distinction between domestic and international arbitration is economic, and is based on the nature of the underlying transaction, as provided for in Article 1504 CCP:18 an arbitration is to be considered “international” if the dispute involves the fl ow of goods, services or currency over international borders, “irrespective of parties’ nationality, law applicable on procedure or merits, or seat of arbitral tribunal”. An award that results from international arbitration will be treated as an international award even if rendered in France. Arbitration agreement The CCP expressly provides that “an arbitration agreement shall not be subject to any requirements as to its form”,19 and the courts also recognise that an arbitration agreement can be incorporated by reference to another document – even if the latter was not signed by a party – if that party’s consent can be proved by other means.20 Case law considers that the existence and effectiveness of the arbitration agreement is assessed in accordance with the common intention of the parties. Since there is no requirement of formal consent to an arbitration agreement in French law, an arbitration agreement may bind non-signatories in some circumstances. Third parties

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can be bound by an arbitration clause in circumstances where they have participated in the negotiation, performance or termination of an agreement containing an arbitration clause.21 French case law also admits that when the arbitration agreement is transmitted, for example in case of claim or contract assignment, third parties can be bound by an arbitration clause.22 In application of the principle of compétence-compétence, if the dispute is submitted to a court before the constitution of the arbitral tribunal, the court will refer the parties to arbitration unless it fi nds that the arbitration agreement is manifestly void and not applicable. In contrast, if the dispute is submitted to a court after the constitution of the arbitration tribunal, such court will always decline jurisdiction.23 While only professional parties were traditionally entitled to agree on arbitration clauses under French law, the law modernising the Justice for the 21st Century (dated November 18, 2016) has reversed such principle by amending article 2061 of the Civil code: non-professional parties can now enter into arbitration agreements. Nevertheless, the performance of an arbitration clause cannot be imposed on a non-professional party (who therefore benefi ts from the option to bring its case either before the arbitral tribunal designated by the clause, or a State judge). Arbitral proceedings An arbitration clause may designate the arbitrator(s), or provide a specifi c appointment procedure, either directly or by reference to arbitral or procedural rules.24 French law on international arbitration provides general procedural rules applicable in the absence of a specifi c agreement of the parties. The Tribunal can also defi ne applicable procedure if it is needed.25 In the absence of a choice of law clause, arbitrators may, for instance, determine the applicable law directly, without following a confl ict of law approach. In all cases, the arbitrator shall take trade usages into account.26 Broadly speaking, parties and the arbitral tribunal enjoy wide freedom to organise the arbitration proceedings, the only true limits being due process and respect of the principles of French international public policy. It is worth highlighting that the principle of confi dentiality of arbitral proceedings is expressly recognised in domestic arbitration27 but not in international arbitration.28 In the latter case, the parties are advised to agree on confi dentiality at the outset of the arbitral proceedings. The grounds for challenging arbitrators have been identifi ed by the courts and are not identifi ed in the CCP. A challenge will be successful if the challenging party can show that an arbitrator lacks the qualities expected from any judge (including independence and impartiality), or does not possess the qualities or skills required by the parties in their arbitration agreement. Where there is no unanimous consent of parties to remove an arbitrator,29 the issue shall be resolved by the person responsible for administering the arbitration or, where there is no such person, by the judge acting in support of arbitration. Arbitrators’ failure to comply with their duty of disclosure30 could lead to the setting aside of the award.31 The 2011 Decree has enhanced the powers of the arbitral tribunal. In particular: • The tribunal can “take all necessary steps concerning evidentiary and procedural matters including summoning “any person” (witness cannot be sworn in). If a party is in possession of an item of evidence, the arbitral tribunal may enjoin that party to produce it, determine the manner in which it is to be produced and, if necessary, attach penalties to such injunction.”32

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• The arbitral tribunal may order upon the parties any conservatory or provisional measures that it deems appropriate, set conditions for such measures and, if necessary, attach penalties to such order.33 However, only courts may order conservatory attachments and judicial security. Supporting role of domestic courts Domestic courts may only interfere with arbitral proceedings under exceptional circumstances, when the circumstances so require. In particular, the judge acting in support of the arbitration (the juge d’appui)34 is entitled to rule on requests relating to: (i) any dispute relating to the constitution of the tribunal;35 (ii) challenges, incapacity or resignation of arbitrators;36 or (iii) extension of statutory or contractual time limit of arbitral proceedings.37 Domestic courts may also intervene in other circumstances: • when a party seeks a provisional measure before the constitution of the arbitral tribunal – domestic courts have jurisdiction despite the existence of an arbitration agreement;38 • they may order conservatory attachments and judicial security – an arbitral tribunal being deprived of such powers;39 and • upon request of the arbitral tribunal, the President of the Tribunal de grande instance, that has territorial jurisdiction may summon a third party to provide a copy or to produce any ofﬁ cial or private deed that a party to the arbitral proceedings intends to rely on.40 Lastly, domestic courts play a procedural role as regards (i) actions to enforce arbitral awards, and (ii) actions to set aside arbitral awards. Arbitral awards Although arbitrators must act diligently and in good faith in the conduct of the proceedings (Article 1464(3) CCP), there are no provisions regarding time limits for the making of an international award (as opposed to an extendable six-month period applicable to domestic arbitration41). An arbitral award may only be enforced by virtue of an enforcement order (Exequatur) issued by the Tribunal de grande instance of the place where the award was rendered in France or by the Tribunal de grande instance of Paris if the award was rendered abroad.42 Exequatur proceedings are not adversarial. While parties may agree on their ability to lodge an appeal against a domestic arbitration award,43 an international arbitration award cannot be subject to appeal proceedings.44 Nevertheless, different recourses are open to the parties against an international award depending on whether it was rendered in France or abroad: • International awards rendered in France may be challenged: (i) either by an action to set aside the award within one month of service of the award,45 if parties have not waived this right46 (the limited grounds being listed in Article 1520 CCP); or (ii) by way of an appeal against the order ruling on the exequatur proceedings47 (such an appeal is possible only if enforcement of the award is denied48 – if enforcement is granted, no appeal is practicable, unless parties have waived their right to set aside the award.49 In any case, the courts will never review the merits of the award or set it aside for wrong application of the law (Article 1520 CCP for international arbitration), and an appeal against the Exequatur does not stay enforcement proceedings.50 • The only recourse against international awards issued abroad is a challenge against the order granting their recognition,51 under applicable grounds set forth at Article 1520.

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ADR ADR52 has been increasingly promoted in recent years as a cost-effective way to settle disputes. Apart from arbitration, the CCP envisions several mechanisms of ADR, among them mediation, conciliation, and participatory procedure (procédure participative). Despite the fact that they refer to the same mechanism (settling an agreement with the assistance of a third person) and can either be extra-judicial or judicial,53 mediation and conciliation have specifi c features: • Mediation is conducted by an extra-judicial mediator, who is not required to demonstrate any academic or curricular experience in mediation, as long as he or she is qualifi ed to understand the nature and object of the dispute. • By contrast, conciliation is conducted by a judicial conciliator. Conciliators are unpaid offi cers of the courts, who must have had at least three years of legal experience. • If the parties reach an agreement through a mediation or conciliation process, they can request the court to homologate it. Such agreement would benefi t from the same legal force as a judgment – and may be enforced in all Member States of the EU under specifi c conditions. As a general trend, ADR mechanisms tend to gain a mandatory force as regards procedural rules: • The Code of Civil Procedure imposes a compulsory conciliation or mediation for specifi c litigation (notably in family and labour law). • Pursuant to Articles 56 and 58 of the Code of Civil Procedure, as amended by the Decree No. 2015-282 dated March 11, 2015, the claimant has to mention in the summons which action she or he has taken to try to amicably resolve the dispute at stake prior to initiating court proceedings. • The law modernising Justice for the 21st Century (dated November 18, 2016) now imposes on the claimant a duty to fi rst seek reconciliation with the support of a judicial conciliator before bringing a judge to the trial, whereupon a trial is initiated by registry to the court offi ces and not by summons. Henceforth, all disputes of a value less than €4,000, applying to a Court of common pleas, will fi rst demand an attempt at conciliation. The request would otherwise be automatically rejected. • The law modernising Justice for the 21st Century has also widened the scope of the participatory procedure (a negotiation mechanism implemented by both parties’ lawyers) by allowing it even after a court is seized. It should also be noted that ICC Mediation Rules came into force in 2014, which deal with the running of the mediation process (either before or after the outset of a dispute).

Regulatory investigation With the development of international sanctions taken against global corporations on the grounds of the US Ofﬁ ce of Foreign Assets Control (OFAC)54 or Foreign Corrupt Practices Act (FCPA),55 compliance and business ethics have become increasing ﬁ elds of legal development. Beyond regulatory constraints deriving from foreign norms, corporations operating in France need to develop an increasing focus on internal regulations. The law No. 2016-1691 (the so-called “loi Sapin 2”) was passed on December 9, 2016 and seeks to align French practice with international anti-bribery legal framework. Notably, this law has further regulated the sanctions against:

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• Unfair trade practices:56 courts may order civil penalties sanctioning abusive commercial practice up to €5 million (vs. €2 million before). Alternatively, such penalty may reach up to three times the amount of unfair gains or, in proportion to unfair benefi ts gained from the breach, 5% of the turnover excluding French taxes. Any judgment that sanctions an unfair trade practice shall now be published (such penalty was previously only an option). • Market abuses: the Financial Markets Authority (AMF) can now sanction market abuses with fi nes capped at €100 million, or ten times the benefi t gained from the breach if it can be determined; alternatively the monetary penalty may reach up to 15% of the total annual turnover in the event of a failure to comply with several European Regulations. Any order issued by the AMF shall now be published if the market abuse relates to a breach of the obligation to declare the crossing of a threshold, the publishing of the total number of voting rights and shares in a company, or the publishing of compulsory semi- annual and annual fi nancial reports.

* * *

Endnotes 1. Quasi-judicial bodies have authority over matters relating to speciﬁ c ﬁ elds of law, such as the Autorité de la Concurrence or the Autorité des Marchés Financiers, as regards competition law and securities law respectively. 2. Several specialised courts have subject-matter jurisdiction within the judicial order of private law – such as the farm leases tribunal, the pensions tribunal, or the social security commission (among others). 3. For an in-depth review of the reform, see Pr. B. MERCADAL, Réforme du droit des contrats, Editions Francis Lefebvre, May 2016. 4. Such innovation within the Civil code results from case law. 5. Such innovation within the Civil code results from case law. 6. Article 1510 CCP. 7. Articles 138-142 CCP. 8. Article 696 CCP. 9. Article 700 CCP. 10. Article 145 CCP. 11. Article 489 CCP. 12. Article 488 CCP. 13. Articles 808 & 872 CCP. 14. Articles 809 & 873 CCP. 15. Articles 809 & 873 CCP. 16. Articles 1442 et seq. CCP. 17. Especially in Articles 2059, 2060 and 2061, which deal with arbitration agreements. 18. “An arbitration is international when international trade interests are at stake” (Article 1504 CCP). 19. “An arbitration agreement shall not be subject to any requirements as to its form” (Article 1507 CCP).

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20. Court of cassation, October 11, 1989, Bomar Oil NV. 21. Decision in the Dow Chemicals arbitration – ICC Case No. 4131. 22. This doctrine, that has been validated by case law, has now been codifi ed in the new version of article 2061 of the Civil code. 23. An arbitration agreement does not prevent parties from seeking support from domestic courts in support of arbitration, when such option is applicable (see below). 24. “An arbitration agreement may designate the arbitrator(s) or provide for the procedure for their appointment, directly or by reference to arbitration rules or to procedural rules” (Article 1508 CCP). 25. “An arbitration agreement may defi ne the procedure to be followed in the arbitral proceedings, directly or by reference to arbitration rules or to procedural rules. Unless the arbitration agreement provides otherwise, the arbitral tribunal shall defi ne the procedure as required, either directly or by reference to arbitration rules or to procedural rules” (Article 1509 CCP). 26. “The arbitral tribunal shall decide the dispute in accordance with the rules of law chosen by the parties or, where no such choice has been made, in accordance with the rules of law it considers appropriate. In either case, the arbitral tribunal shall take trade usages into account” (Article 1511 CCP). 27. “Subject to legal requirements and unless the parties decide otherwise, arbitral proceedings are subject to the principle of confi dentiality” (Article 1464(4) CCP). 28. “Unless the parties have agreed otherwise, and subject to the provisions of the present Title, the following Articles shall apply to international arbitration: (3) 1462, 1463 (paragraph 2), 1464 (paragraph 3), 1465 through 1470 and 1472 regarding arbitral proceedings” (Article 1506 CCP). 29. “An arbitrator may only be removed with the unanimous consent of the parties” (Article 1458 CCP). 30. “Before accepting a mandate, an arbitrator shall disclose any circumstance that may affect his or her independence or impartiality. He or she also shall disclose promptly any such circumstance that may arise after accepting the mandate” (Article 1456(2) CCP). 31. E.g Civ. 1, October 20, 2010, n°09-68.997 and 09-68.131 ; Paris, September 9, 2010, n°09/16182. 32. “If a party is in possession of an item of evidence, the arbitral tribunal may enjoin that party to produce it, determine the manner in which it is to be produced and, if necessary, attach penalties to such injunction” (Article 1467(3) CCP). 33. “The arbitral tribunal may order upon the parties any conservatory or provisional measures that it deems appropriate, set conditions for such measures and, if necessary, attach penalties to such order. However, only courts may order conservatory attachments and judicial security. The arbitral tribunal has the power to amend or add to any provisional or conservatory measure that it has granted” (Article 1468 CCP). 34. The juge d’appui, i.e. the President of the Superior court (Article 1459 CCP as regards domestic arbitration; Article 1505 CCP as regards international arbitration). 35. “If the parties have not agreed on the procedure for appointing the arbitrator(s): (1) Where there is to be a sole arbitrator and if the parties fail to agree on the arbitrator, he or she shall be appointed by the person responsible for administering the arbitration or, where there is no such person, by the judge acting in support of the arbitration;

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(2) Where there are to be three arbitrators, each party shall appoint an arbitrator and the two arbitrators so appointed shall appoint a third arbitrator. If a party fails to appoint an arbitrator within one month following receipt of a request to that effect by the other party, or if the two arbitrators fail to agree on the third arbitrator within one month of having accepted their mandate, the person responsible for administering the arbitration or, where there is no such person, the judge acting in support of the arbitration, shall appoint the third arbitrator”. “If there are more than two parties to the dispute and they fail to agree on the procedure for constituting the arbitral tribunal, the person responsible for administering the arbitration or, where there is no such person, the judge acting in support of the arbitration, shall appoint the arbitrator(s)”. “Any other dispute relating to the constitution of an arbitral tribunal shall be resolved, if the parties cannot agree, by the person responsible for administering the arbitration or, where there is no such person, by the judge acting in support of the arbitration” (Articles 1452–1454 CCP). 36. “The constitution of an arbitral tribunal shall be complete upon the arbitrators’ acceptance of their mandate. As of that date, the tribunal is seized of the dispute. Before accepting a mandate, an arbitrator shall disclose any circumstance that may affect his or her independence or impartiality. He or she also shall disclose promptly any such circumstance that may arise after accepting the mandate. If the parties cannot agree on the removal of an arbitrator, the issue shall be resolved by the person responsible for administering the arbitration or, where there is no such person, by the judge acting in support of the arbitration to whom application must be made within one month following the disclosure or the discovery of the fact at issue”. “Arbitrators shall carry out their mandate until it is completed, unless they are legally incapacitated or there is a legitimate reason for them to refuse to act or to resign. If there is disagreement as to the materiality of the reason invoked, the matter shall be resolved by the person responsible for administering the arbitration or, 5 where there is no such person, by the judge acting in support of the arbitration to whom application must be made within one month following such incapacity, refusal to act or resignation” (Articles 1456 and 1457 CCP). 37. “If the arbitration agreement does not specify a time limit, the arbitral tribunal’s mandate is limited to a six-month period from its referral. The statutory or contractual time limit may be extended by agreement between the parties or, where there is no such agreement, by the judge acting in support of the arbitration” (Article 1463 CCP). 38. “If there is a legitimate reason to preserve or to establish, before any legal process, the evidence of the facts upon which the resolution of the dispute depends, legally permissible preparatory inquiries may be ordered at the request of any interested party, by way of a petition or by way of a summary procedure.” (Article 145 CCP). 39. “The arbitral tribunal may order upon the parties any conservatory or provisional measures that it deems appropriate, set conditions for such measures and, if necessary, attach penalties to such order. However, only courts may order conservatory attachments and judicial security. The arbitral tribunal has the power to amend or add to any provisional or conservatory measure that it has granted” (Article 1468 CCP). 40. “If one of the parties to arbitral proceedings intends to rely on an ofﬁ cial or private deed to which it was not a party, or on evidence held by a third party, it may, upon leave of the

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arbitral tribunal, have that third party summoned before the President of the Tribunal de grande instance for the purpose of obtaining a copy thereof or the production of the deed or item of evidence. Articles 42 through 48 shall determine which Tribunal de grande instance has territorial jurisdiction in this regard. Application shall be made, heard and decided as for expedited proceedings. If the president considers the application well-founded, he or she shall order that the relevant original, copy or extract of the deed or item of evidence be issued or produced, under such conditions and guarantees as he or she determines, and, if necessary, attach penalties to such order. Such order is not readily enforceable. It may be appealed within fi fteen days following service of the order” (Article 1469 CCP). 41. “If the arbitration agreement does not specify a time limit, the arbitral tribunal’s mandate is limited to a six-month period from its referral. The statutory or contractual time limit may be extended by agreement between the parties or, where there is no such agreement, by the judge acting in support of the arbitration.” (Article 1463 CCP). 42. “The existence of an arbitral award shall be proven by producing the original award, together with the arbitration agreement, or duly authenticated copies of such documents. If such documents are in a language other than French, the party applying for recognition or enforcement shall produce a translation. The applicant may be requested to provide a translation by a translator whose name appears on a list of court experts or a translator accredited by the administrative or judicial authorities of another Member State of the European Union, a Contracting Party to the European Economic Area Agreement or the Swiss Confederation.” “An arbitral award may only be enforced by virtue of an enforcement order issued by the Tribunal de grande instance of the place where the award was made or by the Tribunal de grande instance of Paris if the award was made abroad. Exequatur proceedings shall not be adversarial. Application for exequatur shall be fi led by the most diligent party with the Court Registrar, together with the original award and arbitration agreement, or duly authenticated copies of such documents” (Articles 1515 and 1516 CCP). 43. “The award shall not be subject to appeal unless otherwise agreed by the parties” (Article 1489 CCP). 44. “The only means of recourse against an award made in France in an international arbitration is an action to set aside” (Article 1518 CCP). 45. “An action to set aside shall be brought before the Court of Appeal of the place where the award was made. Such recourse can be had as soon as the award is rendered. If no application is made within one month following notifi cation of the award, recourse shall no longer be admissible. The award shall be notifi ed by service, unless otherwise agreed by the parties.” “An award may only be set aside where: (1) the arbitral tribunal wrongly upheld or declined jurisdiction; or (2) the arbitral tribunal was not properly constituted; or (3) the arbitral tribunal ruled without complying with the mandate conferred upon it; or (4) due process was violated; or (5) recognition or enforcement of the award is contrary to international public policy” (Articles 1518–1520 CCP). 46. “By way of a specifi c agreement the parties may, at any time, expressly waive their right to bring an action to set aside. Where such right has been waived, the parties nonetheless retain their right to appeal an enforcement order on one of the grounds

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set forth in Article 1520. Such appeal shall be brought within one month following notifi cation of the award bearing the enforcement order. The award bearing the enforcement order shall be notifi ed by service, unless otherwise agreed by the parties” (Article 1522 CCP). 47. “An order denying recognition or enforcement of an international arbitral award made in France may be appealed. The appeal shall be brought within one month following service of the order. If the order is appealed, and if one of the parties so requests, the Court of Appeal shall rule on an action to set aside unless the parties have waived the right to bring such action or the time limit to bring such action has expired” (Article 1523 CCP). 48. Article 1523 CCP 49. “No recourse may be had against an order granting enforcement of an award, except as provided in Article 1522, paragraph 2. However, an action to set aside an award shall be deemed to constitute recourse against the order of the judge having ruled on enforcement or shall bring an end to said judge’s jurisdiction, as regards the parts of the award which are challenged” (Article 1524 CCP). 50. “Neither an action to set aside an award nor an appeal against an enforcement order shall suspend enforcement of an award. However, the fi rst president ruling in expedited proceedings or, once the matter is referred to him or her, the judge assigned to the matter, may stay or set conditions for enforcement of an award where enforcement could severely prejudice the rights of one of the parties” (Article 1526 CCP). 51. “An order granting or denying recognition or enforcement of an arbitral award made abroad may be appealed. The appeal shall be brought within one month following service of the order. However, the parties may agree on other means of notifi cation when an appeal is brought against an award bearing an enforcement order. The Court of Appeal may only deny recognition or enforcement of an arbitral award on the grounds listed in Article 1520” (Article 1525 CCP). 52. As regards arbitration, see above. 53. Mediation or conciliation can occur during a judicial proceeding, on the initiative of the judge or the parties. Judicial and extra-judicial mediation and conciliation obey the same rules for the appointment of the third person – but in judicial conciliation, the judge is not obliged to appoint a conciliator, since she or he could conduct the process. However, the third person must inform the court of any diffi culty encountered. Moreover, the judge can still grant interim reliefs and bring an end to the amicable process if its success is jeopardised. 54. E.g. the banks BNP (US$ 8.9 billion) or Crédit Agricole (US$ 787 million) in 2014– 2015. 55. E.g. total (US$ 398 million) or Alstom (US$ 772 million) in 2013–2014. 56. It can be emphasised that the ordinance No. 2017-303 dated March 9, 2017 reinforces parties’ ability to seek civil compensation of anti-competition practices, parallel to proceedings led by French and European competition authorities. These procedural innovations particularly touch upon the computation of the fi ve-years’ time limitation to initiate proceedings, the common liability of co-authors and the evidential regime of considered infringements (e.g. irrefutable presumption of infringements in case of sanctions awarded by competition authorities, potential fi nes to force the communication of relevant data, courts’ ability to seek support from competition authorities).

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Olivier Laude Tel: +33 1 75 44 47 00 / Email: [email protected] A founding partner at Laude Esquier Champey, Olivier Laude has a wide litigation expertise which spans business litigation, media and IP, white collar crime, insolvency and international arbitration. While advising several key players in the Internet, IT sector and press groups, Mr. Laude is also involved in major white collar crime cases, as well as international arbitration cases. “Clients praise his original approach in handling their cases and describe him as ‘very reactive and sharp’.” (Chambers & Partners Europe). He graduated from HEC Business School and holds a Bachelor degree in philosophy. He studied law at the University of Paris I where he received a DEA degree in business law and at the Criminology Institute of the University of Paris II Panthéon-Assas. A French native speaker, Mr. Laude speaks fl uent English and Spanish. Victor Champey Tel: +33 1 75 44 47 00 / Email: [email protected] Victor Champey is a founding partner at Laude Esquier Champey with “‘excellent technical skills’ and an excellent business sense’” (Legal 500 Paris (2011/2012)). Thanks to his strong expertise in general business law and his extensive experience of procedural tools, he represents all kind of clients’ interests, whether plaintiffs or defendants, at all stages of disputes. Regularly involved in breach of contract matters and disputes between shareholders (transfer, liability guarantees), Mr. Champey is also a real estate litigation attorney (construction, commercial leasing), and handles complex inheritance matters involving corporate issues (approval clauses, joint ownership, corporate governance). He has also developed specifi c skills in the fi eld of Internet litigation (identifi cation of Internet users, libel, liability of webhosts). Mr. Champey holds an LL.M. from Cornell University, a DEA degree in business law from the University of Paris X Nanterre and a Master’s degree in history from the University of Paris IV La Sorbonne. He speaks fl uent French and English. Olivier Guillaud Tel: +33 1 75 44 47 00 / Email: [email protected] Olivier Guillaud focuses his practice on contentious and non-contentious matters in all aspects of commercial and corporate law as well as white collar crimes. He has developed legal skills in multi-jurisdictional litigation, arbitration and restructuring, with a focus on breach of contract matters, attachment proceedings and disputes between shareholders. Prior to joining Laude Esquier Champey, Mr. Guillaud worked in the litigation & arbitration departments of prominent French and American law fi rms in Paris. He joined the Paris bar with an international business background gained through several years’ experience in France, Switzerland and the Netherlands. A former student of the Ecole Normale Supérieure de Lettres et Sciences Humaines, Olivier Guillaud is a graduate of Sciences Po Paris, ESSEC business school and the University of Paris II Panthéon-Assas. He speaks fl uent French and English. Laude Esquier Champey 4, rue Quentin Bauchart, 75008 Paris – France Tel: +33 1 75 44 47 00 / Fax: +33 1 75 44 47 01 / URL: www.lecspartners.com

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Meike von Levetzow Noerr LLP

Effi ciency of process The high effi ciency of the German court system in general, and in particular with respect to civil procedure, is acknowledged internationally. This effi ciency is evidenced by the average duration of civil proceedings in Germany. Civil proceedings in regional courts at the level of fi rst instance take on average 8.2 months. If the judgment is appealed before the higher regional court, the proceedings take on average 25.2 months from the beginning of the fi rst instance. Proceedings can take longer in larger and more complex cases. However, less than 20% of cases in the fi rst instance take more than a year. The reasons for this effi ciency are manifold. German civil courts do not investigate the facts of a case. It is the duty of the parties to present the facts, including potential evidence, to the court at the earliest possible point in time, i.e. already in the statement of claim and in the statement of defence. Since each party is obliged to present the facts which substantiate their claim or defence, this principle functions as an accelerator for proceedings. Also, judges are legally obliged to expedite the procedure as much as possible. A speedy procedure is guaranteed by the German constitution. If a judge does not expedite the proceedings suffi ciently, legal remedies, including damages, are provided by the German Courts Constitution Act. However, in German civil procedure, such claims play a very limited role due to the widespread effi ciency of civil proceedings. The court has several means to expedite the procedure. It sets deadlines for submitting pleadings. If the parties do not abide by them, this can under certain circumstances lead to the exclusion of further statement of facts. The court further informs the parties about its preliminary view on the legal issues in question and about the facts it deems decisive for the dispute, at the latest in the fi rst oral hearing. This leads to a certain streamlining of the proceedings since it enables the parties to address the relevant points in their subsequent submissions. With regard to factual issues, the judge will fi rst assess whether the claimant has stated the facts corroborating his legal claim in suffi cient detail. If the defendant has contested a factual statement of the claimant, the judge will only hold an evidentiary hearing if he or she deems the fact legally relevant and if the claimant has offered concrete evidence. In the same way, if the defendant has stated facts that substantiate a defence against the claim, the court will hear evidence if the claimant has contested such facts, if the court deems the fact legally relevant and if the defendant has offered appropriate evidence. If the defendant fails to participate in the proceedings or does not appear at the hearing, the other party can apply for a preliminary default judgment (Versäumnisurteil). Such default judgment can be awarded if the claim is well-founded at face value. It is immediately enforceable, i.e. the claimant does not have to pay any security as he would in the case

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of a regular judgment which has not become res judicata yet. The claimant is, however, obliged to compensate any damage caused by the enforcement of the judgment if it is reversed later on. Another way to obtain a quick court decision is the payment order procedure (Mahnverfahren). This procedure is intended for cases in which the claimant does not expect the debtor to contest the claim, but still wants to obtain a judgment, for example, in order to suspend the limitation period. It has advantages with regard to timing and costs since it is conducted electronically and since the court fees amount to a sixth of the fees for regular court proceedings. The procedure is limited to payment claims and comprises two stages. In both stages the defendant may object to the claim within two weeks. An objection leads to regular litigation proceedings in court. If the defendant does not object to the claim, the court will grant an enforceable award equal to a judgment in every way. Within the European Union, in cross-border situations, the claimant can also obtain a European payment order according to Regulation (EC) No. 1896/2006 of 12 December 2006. The claimant has to apply for such European payment order in a country whose courts are competent under the rules of the Regulation and general EU law. In Germany, the application has to be fi led with the district court of Wedding using the compulsory form. The effi ciency of proceedings is further supported by numerous special competences in German law, leading to highly specialised and qualifi ed divisions and chambers that are capable of handling also very complex matters in an effi cient manner. Examples are the special jurisdiction for cases involving antitrust issues or intellectual property matters, where specialised courts have been chosen for several geographical areas in order to guarantee the required competence and experience of the judges. With regard to cross- border disputes, it should be mentioned that certain courts offer special civil chambers which can conduct hearings in English. In a more general sense, commercial disputes are usually decided by the commercial division of a Regional Court (Kammer für Handelssachen); the case is then handled by one professional judge and two lay judges who are usually experienced business persons. A further increase in effi ciency is to be expected with the introduction of electronic case fi les in German courts. Under the E-Justice Act, all German civil courts are obliged to use electronic case fi ling by 1 January 2018. By 1 January 2022, professional parties to the proceedings such as attorneys and public agencies are also required to fi le their statements via the electronic case fi ling system. The ultimate aim is to achieve a paperless court. Time-consuming service of documents between the parties and the court will be replaced by real-time transmission through electronic mail. Court fi les will also be available online to all parties and the court at all times.

Integrity of process The independence and impartiality of the judiciary are fully guaranteed under German law since all judges enjoy functional and personal independence and are appointed for life. The judiciary is bound only by law and justice. A judge can be disqualifi ed by law from exercising judicial offi ce in cases involving himself or close relatives. Furthermore, a judge can be recused by either party if sound reasons justify a lack of confi dence in his impartiality. A judge who, in conducting or deciding a legal matter, perverts the course of justice for the benefi t or to the detriment of a party, is liable to imprisonment of between one and fi ve years.

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Privilege and disclosure Attorney-client privilege is guaranteed under German law. As so-called professional bearers of secrets (Berufsgeheimnisträger), attorneys have the right to refuse testimony in court with regard to any information confi ded to them by their clients. They can refuse to answer specifi c questions or to testify at all. Privilege extends to oral and written communication. A waiver by the client is possible. A breach of the attorney-client privilege is punishable by criminal law. The attorney will also be disbarred. There is no general principle of disclosure in the German law of civil procedure. The disclosure of documents is only possible to a very limited extent. The judge can order a party to disclose a specifi ed document in its possession if the requesting party bears the burden of proof. In practice, the relevant procedural provisions are used very sparingly by the courts. New developments have been sparked by European legislation with respect to cartel damages claims. Directive 2014/104/EU (“Cartel Damages Directive”) grants the claimant the right to obtain the disclosure of certain relevant evidence even without the necessity to specify individual items of evidence. In order to ensure the enforcement of cartel damages claims, the European legislator deems such right appropriate, since cartel damages cases are characterised by an information asymmetry between the cartel participants and the purchasers of their product. The same rules apply for requests of the defendant with regard to a potential passing-on of losses to their customers. The Directive was transposed into national law in Germany by way of the 9th amendment of the German Act Against Restraints of Competition, effective as of 9 June 2017. The next months will show how the new provisions on disclosure are implemented by the courts.

Costs Under German civil procedural law, the losing party has to bear the costs of the legal dispute. Costs are strictly regulated under German law. In civil proceedings, the court fees and the minimum lawyers’ fees are statutorily fi xed by the German Court Fees Act and the German Lawyers’ Fees Act, depending on the amount in dispute. The increase of the fees is regressive, i.e. the fees increase less and less as the amount in dispute increases. As an example, in the case of a payment claim of €1,000, the court fees amount to €159 and the lawyers’ fees for the fi ling of the claim to a minimum of €147. If the claim amounts to €1,000,000, the court fees amount to €16,008; the lawyer’s fees for the fi ling of the claim to a minimum of €7,314, and if a hearing takes place, to another €6,730. The maximum amount in dispute is €30m. For an attorney who represents several parties, the maximum amount in dispute is limited to €100m. If both parties partially win and lose, they have to bear the costs proportionately. The obligation of the losing party to reimburse the other party’s legal fees is limited to the attorney fees fi xed by the German Lawyers’ Fees Act based on the amount in dispute. This is true even if the prevailing party has agreed with their counsel to pay on the basis of hourly rates. Larger law fi rms usually invoice their services based on hourly rates. The German Lawyers’ Fees Act, however, obliges German lawyers to charge at least the fees fi xed therein. Since under German law a lawyer is not only a representative of the party but also an independent body in the administration of justice (unabhängiges Organ der Rechtspfl ege), he or she is not permitted to compete on the basis of price. For the same reason, contingency fee arrangements are only allowed under German law if a client would otherwise be unable to pursue his claim due to lack of funding. An instrument for the claimant to reduce the costs of a lawsuit can be to join forces with other claimants who want to assert similar claims against the same defendant. Whereas a

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class action as such does not exist in Germany, claimants can combine their claims against the same defendant in one action, or assign their claims to one of the claimants or to a third party who fi les one single action for all claims. The assignment of claims to one party is common practice, for example, in cartel damages claims where several purchasers have claims against one or several cartel participants. In a landmark judgment of 17 December 2013, the Regional Court of Düsseldorf (case No. 37 O 200/09) established clear legal limits to such an approach. This decision was confi rmed by the judgment of 18 February 2015 of the Cartel Senate of the Higher Regional Court of Düsseldorf (case No. VI U (Kart) 3/14) that dismissed the claimant’s appeal. Although an action with regard to several assigned claims is not prohibited in general under German law, according to these decisions certain requirements have to be observed: fi rstly, a company that professionally provides the service of debt collection in Germany in general has to be registered under the German Legal Services Act. Secondly, the company has to prove that it has adequate fi nancial funds to bear the costs of the opposing party and potential third parties in the event that it loses the action. These requirements must be met at the time the claim is assigned.

Litigation funding In Germany, litigation funding is available in several forms. Firstly, there is publicly funded legal aid under the German Code of Civil Procedure for parties that are unable to bear the costs of litigation. This funding is not limited to natural persons but includes legal persons if they are established and registered in the European Economic Area (EEA). Even the funding of cross-border litigation is possible under the conditions set in European Directive (EC) 2008/8. However, since this option requires the inability to cover the costs, most corporate parties will not beneﬁ t from public funding. Secondly, there is litigation funding on a commercial basis. The terms vary from company to company. In general, they operate on proﬁ t participation, i.e. receive a percentage of any awarded sum. The percentage varies according to the risk assessment. It usually starts at around 7.5%. The minimum litigation value ranges between €50,000 and €100,000. In case of failure, the funder has to bear the costs as agreed. Usually this includes the court fees, the legal fees of both sides, and the expenses for witnesses and experts. Apart from this option it is notable that legal expense insurance is widely common in Germany, both with private individuals and with companies; thus, fees are reasonable. The legal expense insurance covers court fees and the legal fees of the opposing side, yet not the fees of the losing party.

Interim relief If a matter is too pressing to await the outcome of the main proceedings, a claimant can, if applied for, be granted interim relief. Interim relief is designed to ensure the enforcement of a decision in the main proceedings, and not to anticipate the judgment. Therefore the legal requirements are as follows: on the one hand, the claimant has to establish a predominant degree of probability that the claim is well-founded to the satisfaction of the court. This does not amount to proving the claimant’s case, but he or she has to present the supporting facts and substantiate them, e.g. by sworn afﬁ davits. On the other hand, the claimant also has to give reasons for the urgency of his claim, e.g. why a verdict in the main proceedings would come too late to be successfully enforced. However, the court in general cannot grant relief that forestalls the outcome of the main proceedings. The claimant can request a decision ex parte, i.e. without hearing the defendant, if the surprise factor is vital for the

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success of the interim measure. Based on these provisions, interim relief can be obtained in some cases on the same day, depending on the urgency and the complexity of the matter. The resulting court decision can be enforced immediately, yet only within one month of its issue. It is worthy of mention that the claimant is strictly liable for any damages caused by the enforcement of such a court order if he or she does not prevail in the main proceedings. If the defendant objects to the court order, the judge will give his verdict, usually after a hearing. The non-prevailing party may appeal against this judgment.

Enforcement of judgments Enforcement in Germany is mainly effected by bailiffs and by the courts. German enforcement law provides, for example, for the possibility of sending a bailiff to the defendant to seize money and valuables and for the possibility of attaching claims of the defendant against third parties (e.g. bank accounts) by way of court order. The enforcement of a German claim against a German party requires knowledge about given assets or claims. Established agencies and private investigators can provide information on enforcement possibilities. A fi nal judgment by a foreign court will, in principle, be recognised and enforced by the courts of Germany. Within the European Union a judgment given in a Member State is usually enforceable in the other Member States without any declaration of enforceability being required. In this regard, as of January 2015, Council Regulation (EU) No. 1215/2012 (Brussels I Regulation – recast) replaces the former Brussels I Regulation (No. 44/2001). The enforcement of a judgment can only be refused under very limited conditions, for example, if such recognition is manifestly contrary to ordre public in the Member State concerned. Even these strict limitations are irrelevant if the claimant obtains a European payment order according to Regulation No. 1896/2006. Through these provisions, enforcement within the European Union is relatively easy. With regard to non-European nations, a wide variety of recognition and enforcement treaties are in place. Most of these require additional procedure. Where no treaty exists, an exequatur procedure is necessary under German law. The judgment will be enforced if an action for judicial enforcement is brought to have the judgment declared enforceable by the competent German court. The judgment of enforcement will be of the same force and effect as a material judgment by a German court. The German court will only examine whether the foreign judgment is legally effective and fi nal, whether there is any impediment to recognition, or whether there are any defences which have arisen after the date on which the foreign judgment became legally effective and fi nal. In general, recognition of a foreign judgment will only be denied if: the foreign court lacked jurisdiction; the defendant that was absent from the hearing was not served duly; the judgment is incompatible with a judgment delivered in Germany; the judgment contradicts the ordre public; or if reciprocity (in regard to enforcement) is not guaranteed. The cost of enforcement differs depending on the kind of enforcement. As an example, the court fees for an attachment order of the court seizing claims of the defendant against a third party amount to €20 independently of the amount in dispute. The fees for a bailiff sent to the defendant to seize valuables amount to €26 if the seizure takes less than three hours. Law fi rms often bill on an hourly basis if involved, for example, with regard to the search for assets. There is a minimum fee under the German Lawyers’ Fees Act, depending on the amount in dispute. For example, in the case of a payment claim of €1,000, the lawyers’ fees for the enforcement of the claim amount to a minimum of €34; for a claim of €1,000,000, to €1,706.

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Cross-border litigation Foreign claims can be served upon German residents pursuant to the Hague Service Convention. Despite existing differences between German civil procedure and other nations’ rules (e.g. U.S. civil procedure), German courts apply a very service-friendly approach. For example, German courts will not refuse service on the grounds that U.S. civil procedure is different to German civil procedure, that claims are raised through class actions or that the claimant seeks punitive damages. Only in extreme situations will German courts refuse the service of foreign statements of claims upon German residents. Within the European Union (with the exception of Denmark) the Council Regulation (EC) No. 1393/2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters enables a simplifi ed service from one member state to another. In particular, in cartel damages cases based on cross-border cartels, the question of the competent court has become relevant. The European Court of Justice ruled on 21 May 2015 (case No. C-352/13), in a nutshell, that Art. 6 (1) of the Brussels I Regulation is generally applicable if a claimant fi les an action against several cartel participants from different European Member States. In the underlying case, the company in question was acting for several purchasers who had assigned their claims to it. It had fi led these claims against all cartel participants with the Regional Court of Dortmund. Art. 6 (1) of the Brussels I Regulation requires a close connection between the asserted claims. According to the decision of the European Court of Justice, this close connection is given in the case of a binding decision of the Commission fi nding that there was a single infringement of EU law and that each participant is liable for the loss resulting from his infringement. Jurisdiction of the court seized could not be based on Art. 5 (3) of the Regulation since there was no single place where the cartel was concluded and since the damage occurred individually for each buyer and assignor at the place of its registered offi ce. In cases of cross-border litigation it often becomes necessary to hear a witness who is located abroad. While the witness is not obliged to appear in a German court, the German court has several options to obtain his or her testimony. The court can: (i) ask the witness to give his testimony in a video conference; (ii) ask the competent authorities of the other state to hear the witness; (iii) under certain circumstances, ask the witness to appear in court in Germany; or (iv) ask the witness to answer in writing to the evidentiary questions. For proceedings within the European Union (except Denmark), Council Regulation (EC) No. 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters (“Evidence Regulation”) provides for the possibility that the foreign court can directly transmit its request for the taking of evidence to the requested German court. It provides a deadline for the reaction of the German court of 90 days. The foreign court also has the possibility to obtain the permission of the requested court to conduct the taking of evidence in Germany itself.

International arbitration German law allows for arbitral tribunals to replace courts in civil matters, granting them the same power and authority as state courts. German arbitration law in Book 10 of the German Code of Civil Procedure is mainly based on the UNCITRAL Model Law. It is applicable to all arbitral proceedings having their place of arbitration in Germany. German arbitration law is generally acknowledged as arbitration-friendly. State courts are only allowed to interfere with arbitral proceedings subject to certain strict exceptions, for example, if minimal procedural standards are violated. Apart from such exceptions, state courts are barred from

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interfering with arbitration proceedings. If the defendant invokes an arbitration agreement (Schiedseinrede), the court has to dismiss the state court proceedings as inadmissible. Signiﬁ cantly, on 7 June 2016, the Federal Supreme Court of Germany (Bundesgerichtshof) delivered a landmark judgment in that respect, rejecting speedskating champion Claudia Pechstein’s claim for damages against the International Skating Union (ISU) as inadmissible based on an arbitration agreement in favour of the Court of Arbitration for Sport (CAS). In its ruling, the Court found that the CAS is a genuine arbitral tribunal in the sense of German law, thus further strengthening the favourable view of German courts towards arbitral proceedings. This arbitration-friendly legal environment is also demonstrated by the state’s role during the different phases of arbitration proceedings: the state courts support the arbitral tribunal in its constitution if necessary, grant the opportunity for interim measures, and offer their arsenal of enforcement methods. Judicial supervision of the arbitration process is generally assigned to the Higher Regional Courts (Oberlandesgerichte), in order to limit the reviewability of their decisions and thus expedite the proceedings. The arbitration-friendliness of the law is twofold; on the one hand it guarantees the freedom of arbitration from state interference, on the other hand it ensures the effectiveness of arbitration. The role of the state courts is, therefore, supportive and supervisory. However, German courts cannot assist the parties in enforcing broad disclosure as such orders would be inadmissible under the German rules governing civil procedure. Even though this might be disadvantageous for a party seeking to factually substantiate its claim, it can also be an advantage for parties that are interested in maintaining certain trade or commercial secrets and, thus, do not want to be subject to broad disclosure. German arbitration law offers the parties the freedom to determine the number of arbitrators, the appointment procedure as well as the rules of the arbitration procedure themselves. They are also free in their choice of the language of the proceedings, which makes Germany attractive as a place for arbitration for foreign companies. The place of arbitration is also subject to party autonomy and not necessarily identical with the place where the proceedings are held geographically. According to the principle of consent, the arbitration agreement is only binding between the parties to it, and third parties can only be incorporated in its scope under very strict and special conditions. Both ad hoc arbitration and institutional arbitration exist under German law, as well as hybrid forms of both. Ad hoc arbitration is used in corporate disputes, in particular. Where arbitration clauses only contain the bare minimum, German arbitration law provides a fall- back regime to ensure certain procedural standards. In institutional arbitration the parties can refer to an arbitration institution to provide the legal framework. The best-known German arbitration organisation in Germany is the German Institution of Arbitration, the DIS (Deutsche Institution für Schiedsgerichtsbarkeit e.V.). The DIS provides well- established provisions regarding arbitration proceedings, a set of fast-track rules, as well as a list of arbitrators. The DIS Arbitration Rules are also used where the parties to an arbitration in Germany have an international background. They are currently under revision. The modernised DIS Arbitration Rules are planned to be launched by the end of 2017. Furthermore, since 15 September 2009, the DIS has offered Supplementary Rules for Corporate Law Disputes. They are designed speciﬁ cally for the determination of disputes relating to resolutions of limited liability companies (GmbH), although they are also suitable for various other types of disputes. Even though the number of arbitration cases has constantly risen in recent years (in 2016 the DIS saw an increase, with 172 newly initiated arbitration proceedings compared to 140

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in the previous year), percentage-wise they only form a rather small amount of the decided cases. At national level it is assumed that arbitration cases only amount to less than 1% of all general legal proceedings. This can be best explained by the effi cient German judicial system. However, also at national level the number of arbitration cases increases with the amount in dispute and the complexity of the case. Still, in international cases the percentage of arbitration cases is signifi cantly higher. One of the reasons for this is that Germany – among 155 other signatory states – is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Thus, a foreign arbitral award can be enforced in Germany and a German arbitral award can be enforced in other signatory states. In order to profi t from the arbitration-friendly German laws, the parties need to agree on arbitration as the dispute resolution mechanism. The arbitration agreement is a separate agreement that exists independently from the validity of the main contract, whether it is incorporated in the contract or separated from it. In favour of arbitration, German courts have applied a broad interpretation of arbitration clauses. There are no strict formal requirements with regard to the arbitration agreement. German arbitration law only provides that the arbitration agreement must be contained either in a document signed by the parties or in an exchange of letters, faxes, telegrams or other means of telecommunication which provide a record of the agreement. Nonetheless, parties should keep a record of the agreement, as disputes in the vast majority of the cases – especially when it comes to the issue of the validity of the arbitration agreement – depend on the wording of the agreement.

Mediation and ADR In light of the amount of time and fi nancial resources that can bound by legal proceedings, the demand for alternative dispute resolution mechanisms has steadily increased in recent years. Consequently, and rather similar to arbitration, mediation has become more professional and institutionalised. The DIS provides rules for case administration with regard to mediation and other alternative dispute resolution mechanisms such as expert determination (Schiedsgutachten) and conciliation (Schlichtung). The quality of the mediation process in Germany is further ensured by the fact that the professional title “certifi ed mediator” may only be used by persons who have completed specifi c training. Especially for parties who are interested in continuing their business relationship, mediation offers a favourable option for alternative dispute resolution and its objective is not to decide a legal dispute, but to fi nd an amicable settlement between the parties. On the other hand, this also means that the agreed solution only results in contractual obligations and is not legally binding. This can lead to court or arbitration proceedings if one party does not fulfi l its contractual obligation. In order to prevent such follow-on disputes, German law provides for a possibility to make the agreement enforceable via notarisation by a German notary public or a German court, or by means of a lawyers’ settlement. With regard to international cases, it should be noted that no framework comparable to the New York Convention for the enforcement of arbitral awards is in place for the international enforcement of a mediation settlement. In July 2012, the German legislator implemented EU Directive (EC) 2008/52 and adopted the Act to Promote Mediation and Other Methods of Out-of-Court Dispute Resolution (“Mediation Act”), which contains basic principles for mediation, its procedural rules, the standard duties of the mediator, and rules on the promotion and evaluation of mediation. Due to its implementation into German national law, the Mediation Act applies to international as well as national cases. While the focus of the Mediation Act is obviously aimed at

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mediation, it is nonetheless applicable to other methods, such as adjudication, conciliation or ombudsmen. In addition, the German Code of Civil Procedure gives the parties the chance to enter into mediation proceedings even after court proceedings have already started. If the parties agree to participate in mediation, the statute of limitation is suspended, thereby guaranteeing the parties the necessary time to fi nd an amicable solution. The Mediation Act guarantees the advantage of confi dentiality as it imposes strict confi dentiality obligations on the mediator and on those involved in the administration of the case. These persons also have the right to refuse to testify in civil court proceedings. Furthermore, the DIS provides its own set of Mediation Rules.

Regulatory investigations Numerous regulatory agencies in Germany supervise the implementation of legislation in specifi c areas. A special focus is to ensure functioning markets in areas with tendencies to monopolisation. The Federal Network Agency (Bundesnetzagentur) supervises the market access to gas, electricity, telecommunication, postal and railway services. Its tasks include the supervision of competition on these markets, compliance with technical standards and all applicable laws such as consumer protection laws. The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) supervises the banking, fi nance and insurance sector. The Federal Cartel Offi ce (Bundeskartellamt) generally enforces the prohibition of cartels and abuse of market dominance in Germany. These authorities may prohibit business conducts that constrain competition, set conditions for the conduct of companies, or impose regulatory fi nes. In such administrative proceedings, the involved parties are heard and may be subject to a dawn-raid. Legal representation is not legally required in these cases but recommendable with regard to the impeding consequences, the specialised knowledge required, the regularly high amount of documents to be scrutinised and personnel to be interviewed in such investigations.

Acknowledgment The author thanks Angelika Milger, research assistant at Noerr LLP, for her assistance with this chapter.

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Meike von Levetzow Tel: +49 30 2094-2344 / Email: [email protected] Meike von Levetzow is a partner in the Berlin ofﬁ ce of Noerr. She has many years of experience as a litigation lawyer before numerous district and higher regional courts throughout Germany and as counsel and arbitrator in national and international arbitration proceedings. She specialises in commercial arbitration in the area of complex civil, commercial and corporate law disputes. In addition, she represents German and international companies before state courts, particularly in disputes under contractual and liability law and in anti-trust damages cases. She also advises and represents ﬁ nancial institutions in banking law. Meike studied at the Universities of Freiburg and Berlin (Humboldt), and was admitted to the German Bar in 2004. She holds the title of an Attorney Specialising in Banking and Capital Markets. She is a member of the German Institution of Arbitration (DIS) and the German-American Lawyers’ Association (DAJV). Meike speaks German, English and Spanish.

Noerr LLP Charlottenstraße 57, 10117 Berlin, Germany Tel: +49 30 2094 2344 / Fax: +49 30 2094 2094 / URL: www.noerr.com

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Stephen Chan & Richard Healy Oldham, Li & Nie

Effi ciency of process The Hong Kong legal system is based on the common law. This is refl ected in Hong Kong’s court procedures which bear signifi cant similarities with other common law jurisdictions. Civil Justice Reform With a view to promoting cost-effective litigation, reducing undue delay and abuse of process, the Hong Kong courts introduced the Civil Justice Reform (the “CJR”) in 2009. Since the CJR, the Hong Kong courts have been armed with wide jurisdictional and case-management powers to ensure that parties conduct their litigation sensibly and cost-effi ciently. In particular: 1. The court actively case-manages each proceeding through case-management conferences and the setting down of fi rm timetabling directions. In a decision on 6 June 2017 of Wong Fong Yuk (DCPI 1694/2013), the failure on the part of the plaintiff’s solicitors to comply with case-management directions resulted in the costs of the adjournment being borne by the plaintiff’s solicitors personally on an indemnity basis. 2. The introduction of “milestone dates” encourages parties to comply with important timetabling directions unless there are exceptional circumstances. This can be seen in the recent decision of Zhang Rui Hua & Anor v Wang Lan & Anor (HCAP 13/2010) on 23 March 2017, where the plaintiff’s application to adduce further evidence was rejected on the grounds that it would have the effect of delaying milestone dates already set by the court. 3. Mediation takes place earlier on in proceedings before parties become entrenched in their positions. Failure to mediate gives rise to potential adverse cost consequences. In the decision of Poon Fow Hing v Poon Kwai Ping Corinna (CACV 124/2015) on 6 March 2017, the court made specifi c directions for the parties to consider mediation as the case, being a family dispute, was one that “cries out for mediation”. 4. To further encourage settlement of proceedings, a regime of sanctioned offers and payments exists to facilitate settlement negotiations with strict cost consequences on any party that behaves unreasonably in rejecting a settlement offer. Default judgment For cases which are not likely to be contested, the default judgment procedure in Hong Kong offers a cost-effective method of bringing a claim and obtaining a court order capable of being subsequently enforced. Order 6 of the Rules of the High Court (Cap. 4A) (the “RHC”) allows a plaintiff to initiate a writ action without fi ling a full statement of claim. Instead, the writ can be indorsed with

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an indorsement of claim with a concise statement of the nature of the claim and the relief sought. It is only after a defendant acknowledges service of the writ with an intention to defend that a plaintiff must thereafter within 28 days fi le a fully particularised statement of claim setting out the action. If a defendant does not properly acknowledge service within 14 days of service of the writ, Order 13 RHC allows for fi ve different instances whereby claims for default judgment can be entered, the most common of which is a claim for a liquidated sum of monies. Technology In 2014, the High Court in Hong Kong upgraded its Technology Court facilities to support video conferencing, displays of electronic documents and support for hearings related to vulnerable witnesses. There is no current online platform in Hong Kong to upload or fi le documents to the court directly. However, fi ling of electronic documents has been the norm in the Court of Appeal and upon specifi c directions from the court. The Hong Kong judiciary website (http://www.judiciary.hk/en/index) provides a searchable database of judgments which are of signifi cance as legal precedents between 1946 to 1948 and from 1966 onwards. Judgments are generally published on the judiciary website within three working days of being handed down and received.

Integrity of process Hong Kong Basic Law The Basic Law of the Hong Kong Special Administrative Region (HKSAR) can be described as a mini-constitution preserving the common law and rules of equity which were in force in Hong Kong prior to 1 July 1997. In particular, the Bill of Rights Ordinance (Cap. 383) enacted under the Basic Law serves to protect the spirit of natural justice and its principles. Judges in Hong Kong routinely and consistently apply the principles of fairness and natural justice to the determination of cases, whether applying the requirements under the respective ordinances or through the application of common law principles. By way of illustration, in the recent case of Sun Tian Gang v Hong Kong & China Gas (Jilin) Limited (HCCT 46/2015) decided on 21 September 2016, the court set aside an arbitration award on the basis that the arbitral process and enforcement of the same violated notions of natural justice, fairness, due process and public policy. The arbitration had in fact been commenced without the plaintiff’s knowledge and proceeded in his absence during his period of incarceration. Independence and impartiality of the judiciary According to the World Economic Forum’s Global Competitiveness Report 2016–2017, Hong Kong is ranked 8th out of 138 countries. Hong Kong is the only Asian economy ranked within the top 10 on judicial independence. It is a fundamental aspect of the Hong Kong legal system that members of the judiciary are independent of the executive and legislative branches. Judges are appointed by the Chief Executive of the HKSAR on the recommendation of the Judicial Offi cers Recommendation Commission, an independent statutory body comprising local judges, persons from the legal profession and reputable persons from other sectors. The Court of Final Appeal, the highest appellate court with power of fi nal adjudication on the laws of Hong Kong, also facilitates confi dence in the independence of the Hong Kong

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judiciary by including world-renowned judges from overseas as non-permanent judges. This helps Hong Kong maintain its high degree of autonomy under the Basic Law and preserves the independence of the Hong Kong judiciary.

Privilege and disclosure Introduction In the context of civil litigation in Hong Kong, discovery refers to the stage in the proceedings whereby each party is required to disclose the existence of all relevant documents to the issues in the litigation. Discoverable documents Under the Rules of the High Court (Cap. 4A), each party is required to disclose the existence of documents which: 1. are, or have been, in his/her/its possession, custody or power; and 2. relate to a matter in question in the action. A party cannot pick and choose what documents to disclose. This means that if a document is prejudicial to a party’s case, it must still be disclosed if it is relevant to the case overall. Possession, custody or power If the document is physically in the possession of a party, then as long as it is relevant, it is discoverable. A document that a party does not physically have may still be considered to be in that party’s custody or power. For example, if a party does not have a document because it is held by an agent, then that party is considered to have access to it. Accordingly, the document is treated as being in that party’s custody or power and it is discoverable as long as it is relevant. It is also important to note that if a relevant document used to be in your possession, custody or power, it is also discoverable in the sense that the party will have to disclose its prior existence, and how it came to be lost or disposed of. Relevance A document is relevant if it relates to a matter in question in the action. That will be determined by the pleadings. The idea of relevance is construed very widely. This means that a document is relevant even if: 1. it is of marginal assistance to either party; 2. it may damage a party’s own case; or 3. it may lead to a train of enquiry which may directly/indirectly lead to a result which is relevant to the proceedings. Privilege Some documents which might be relevant can be kept from the other party if those documents are privileged. There are two broad categories of privilege in Hong Kong: legal advice privilege; and litigation privilege. A. Legal advice privilege means all communications with a party’s lawyer, including in- house lawyers, for the purpose of giving or receiving legal advice. That advice does not need to pertain to the litigation. B. Litigation privilege protects correspondence between a party, his lawyer and/or a third party, but only if the purpose of the communication was for obtaining or giving advice in relation to the litigation.

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Electronic discovery On 1 September 2014, the High Court in Hong Kong introduced a new pilot scheme for discovery and provision of electronically stored documents for commercial list cases (the “Pilot Scheme”). The Pilot Scheme applies to all claims or counterclaims which exceed HK$8m and there are at least 10,000 documents to be searched for the purposes of discovery. The Pilot Scheme and relevant protocols set out in Practice Direction SL1.2 have continued to operate to the beneﬁ t of practitioners dealing with cases involving a substantial quantity of documents (see decision dated 13 April 2017 of Zhang Hong Li & Ors v DBS Bank (Hong Kong Limited) & Ors HCCL 2/2011).

Costs Entitlement to costs Generally in proceedings in Hong Kong, costs follow the event. This means that in most cases, the loser pays the reasonable legal costs of the winner on a “party and party” basis. In some instances, the court can order costs to be paid on an “increased” or “indemnity” basis depending on the circumstances (set out further below). If the parties cannot reach agreement on the amount of costs, the receiving party will need to apply for taxation of costs. Taxation is the process whereby the court is asked to assess what reasonable amount of costs are payable. As a result of the taxation process, while a receiving party may pay 100% of his legal costs to his own solicitors, he may not necessarily recover all that he paid from the other party. Security for costs A defendant to an action or proceedings may apply for security for the defendant’s costs from the plaintiff. The most common ground is that the plaintiff is an individual or entity which is ordinarily resident outside of Hong Kong. Orders for security for costs are particularly notable for their judicial discretion (see Alviero Martini SpA v Bubble Retail Management Ltd [2013] HKEC 1734) and are often more about the quantum of the security to be ordered, rather than whether security for costs should be given at all. The courts generally adopt a “broad-brush” approach to assessing quantum in view of the circumstances and nature of each particular case. Sanctioned payments and offers Under the Rules of the High Court, parties may offer to settle the whole or a part of a claim by way of a sanctioned offer or payment. The content of a sanctioned offer is strictly prescribed by Order 22, rule 5 of the Rules of the High Court. Any deviation from the strict requirements may render the sanctioned offer or payment ineffective. There are various adverse cost consequences if a party does not accept a properly drafted sanctioned offer or payment, and subsequently either does not succeed in the action, or receives a judgment and fails to do better than the sanctioned offer or payment. In such circumstances, the court has discretion to order the party who failed to reasonably accept the sanctioned offer/payment to pay the costs of the other party, even if the other party did not succeed overall in the litigation. Overall, this encourages parties to adopt sensible positions in settlement and discourages parties who, while having a meritorious claim, persist in litigation claiming disproportionate sums of damages.

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Litigation funding in Hong Kong Historically, Hong Kong has had a complete prohibition against third party litigation funding due to antiquated English doctrines of maintenance and champerty. However, in the Court of Final Appeal decision of Siegfried Adalbert Unruh v Hans-Joerg Seeberger & Anor [2007] 10 HKCFAR (“Unruh”), the court considered that there were various exceptions to prohibition against maintenance and champerty, namely: 1. the “common interest” category whereby persons with a legitimate interest in the outcome of the litigation are justifi ed in supporting the litigation; 2. cases involving “access to justice” considerations; and 3. a miscellaneous category of practices accepted as lawful, such as sale and assignment by a trustee in bankruptcy of an action commenced in the bankruptcy to a purchaser for value. While these comments were largely obiter, the case of Re Cyberworks Audio Video Technology Ltd [2010] 2 HKLRD 1137 (“Cyberworks”) confi rmed that the “access to justice” considerations were applicable in circumstances where insolvent companies with legitimate claims against third parties could obtain litigation funding from third parties in exchange for a split of the proceeds of litigation. As such, the court sanctioned the liquidators in entering into a deed of assignment with the third-party litigation funder. Third party funding for arbitration On 28 December 2016, the Hong Kong Government introduced the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 (the “Bill”) to clarify that third party funding of arbitration and mediation is not prohibited by the common law doctrines of maintenance and champerty. The Bill was passed on 14 June 2017. The provisions permitting third party funding in arbitration will come into effect later in 2017. This will include a Third Party Funding for Arbitration Code of Practice which will need to be issued and fi nalised by an authorised body appointed under the Arbitration Ordinance (Cap. 609).

Interim relief Introduction Hong Kong courts have a wide variety of powers to grant interim relief to litigants, particularly where one party seeks to preserve the status quo and prevent the other party from dissipating evidence and assets. Injunctive relief An interim injunction is a provisional measure designed to protect an applicant’s rights from irreparable harm pending litigation and to prevent the defendant from dissipating its assets. Under Section 21L of the High Court Ordinance (Cap. 4), the court may grant an interim injunction in cases where it is “just and convenient” to do so. The Mareva injunction is a common type of injunction whereby a plaintiff seeks to freeze the defendant’s assets (e.g. bank accounts) pending ﬁ nal determination of the proceedings. Generally, an applicant for a Mareva injunction will need to show: 1. a good arguable case on substantive claims against the defendant; 2. the defendant has assets within Hong Kong; 3. the balance of convenience is in favour of the grant; and

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4. there is a real risk of dissipation of the assets which, if dissipated, would render the plaintiff’s judgment nugatory. The plaintiff will generally need to provide an undertaking as to damages, which means that if the plaintiff is unsuccessful in his claim, and the freezing order causes the defendant to suffer loss, then the applicant will be liable to pay for those damages. Urgent injunctions (such as the Mareva injunction) are generally made on an ex parte basis, which means that the plaintiff need not notify the defendant prior to making the application. As only one party will be present at the hearing, the plaintiff will be under an obligation to give full and frank disclosure to the court about all material matters in the case, even those which are detrimental to the plaintiff’s case.

Enforcement of judgments and awards Foreign Judgments (Reciprocal Enforcement) Ordinance In Hong Kong, if a foreign judgment falls within the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (the “Ordinance”) and originates from one of the designated countries set out in the Ordinance, then the process for recognition of that foreign judgment must be in accordance with the Ordinance. Broadly, for a foreign judgment to be recognised under the Ordinance: 1. the judgment must be from a superior court, one that has unlimited jurisdiction in civil and criminal matters; 2. the application must be made within six years of the date of the original judgment; 3. the judgment must not have been wholly satisfi ed; 4. if the judgment has been satisfi ed in part as at the date of registration, the judgment shall be registered only in respect of the balance remaining payable; 5. the judgment must be enforceable by execution in the country of the original court; 6. the judgment is fi nal and conclusive as between the parties; and 7. the judgment is for a sum of money. Common law process If the foreign judgment falls outside the scope of the Ordinance, the common law process can be used. A judgment creditor can apply for a Hong Kong judgment without a review of the merits of the foreign judgment if that foreign judgment is: • fi nal and conclusive upon the merits of the claim in the foreign jurisdiction; • a claim for a fi xed sum; and • the judgment debtor has assets in Hong Kong. In a recent decision on 3 June 2016, the Hong Kong Court of First Instance confi rmed in Motorola Solutions Credit Company LLC v Kemal Uzan & Ors (HCA 2232/2013) that where a judgment debtor has no assets in Hong Kong, there is no basis for a judgment creditor to bring proceedings to enforce a foreign judgment in Hong Kong. The Hong Kong courts will not permit an action to be brought in a vacuum. Enforcement of registered judgments The basic pre-requisite for enforcing a judgment in Hong Kong is to either have a registered foreign judgment, or a local Hong Kong judgment. The procedure for enforcement will vary depending on the type of enforcement desired.

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For example, an enforcement via garnishee proceedings can be achieved by issuing an ex parte summons supported by an afﬁ davit. The afﬁ davit must show the identity of the garnishee (e.g. a bank) in Hong Kong and in what way the garnishee is indebted to the judgment debtor.

Cross-border litigation Introduction Prior to the Civil Justice Reform (“CJR”) in April 2009, a foreign plaintiff could not obtain interim relief in Hong Kong unless the applicant could establish that the Hong Kong courts had some jurisdiction over the matter to grant substantive relief (Mercedes Benz AG v Leiduck [1996] 1 AC 284). The rationale was that any interim relief sought in Hong Kong must be dependent upon there being a pre-existing cause of action in Hong Kong. Interim relief in aid of foreign proceedings After the CJR and the introduction of Section 21M of the High Court Ordinance, it is no longer necessary in Hong Kong for a foreign plaintiff to have a substantive claim in Hong Kong before the foreign plaintiff can obtain interim relief. Section 21M provides that the court may appoint a receiver or grant interim relief in relation to proceedings which: 1. have been or are to be commenced in a place outside Hong Kong; and 2. are capable of giving rise to a judgment which may be enforced in Hong Kong under any ordinance or common law or through the Foreign Judgments (Reciprocal Enforcement) Ordinance. Pre-action discovery – Norwich Pharmacal Orders Under Section 41 of the High Court Ordinance (“HCO”), there is also scope for a foreign plaintiff to seek pre-action discovery in Hong Kong against third parties for the purpose of obtaining information which may lead to litigation in either Hong Kong or abroad. This is useful in situations where, for example, an innocent party is aware that his funds have been transferred into a particular bank account in Hong Kong. However, the innocent party may only know of the bank account number and not the name of the bank account holder. Perhaps the innocent party also does not know whether the money still remains in the bank account or has been transferred on to other bank accounts. In order for the innocent party to formulate his claim, he may apply for pre-action discovery against the bank for information. This is commonly referred to as a Norwich Pharmacal application. The rationale behind Norwich Pharmacal applications is that the law imposes a duty upon a person who, through no fault of their own, gets caught up in the wrongdoings of others. In those circumstances, the person becomes obliged to assist the wronged party by providing full information and disclosing the identity of the wrongdoers. The identity of these potential defendants can then be made the subject of discovery by the court.

International arbitration Introduction Prior to the enactment of the Arbitration Ordinance (Cap. 609) (the “Arbitration Ordinance”) on 1 June 2011, arbitrations were separated into two types: domestic and international. Various rules existed depending on the type of arbitration. For example, only domestic arbitrations could be brought before the Hong Kong courts for determination

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on a substantive issue of law. International arbitrations could only be appealed in Hong Kong in very exceptional circumstances. After 1 June 2011, with the introduction of the Arbitration Ordinance adopting the UNCITRAL Model Law, both domestic and international arbitrations are now subject to the same set of rules. General approach of the courts of Hong Kong The Hong Kong courts have generally adopted a pro-arbitration approach by ensuring minimal intervention in arbitral proceedings. In KB v S & Ors [2015] HKCFI 1787, the court recognised that its primary aim was to facilitate the arbitral process and to assist in the enforcement of arbitral awards. Enforcement of arbitral award The Arbitration Ordinance provides that any award made in any country (including Hong Kong) may be enforced in Hong Kong as though it were a judgment from the Hong Kong Court of First Instance, provided that leave is obtained. The party seeking leave to enforce must produce: 1. an authenticated original award; 2. the original arbitration agreement; and 3. if the award is not in either Chinese or English, a duly translated copy of the same. The Hong Kong courts have powers to refuse to grant leave to enforce an arbitral award under the Arbitration Ordinance if: A. A party to the arbitration agreement was under some incapacity. B. The arbitration agreement was not valid, either under the law to which parties subjected it or under the law of the country where it was made. C. The dispute related to matters not contemplated within the terms of arbitration or is beyond the scope of terms of arbitration. D. The arbitral procedure was contrary to what parties agreed or the law where arbitration took place. E. The award is not yet binding on parties or has been set aside or suspended by a competent authority. It should be noted that the Arbitration Ordinance draws a subtle distinction between those awards made in a territory that is party to the New York Convention (a “Convention Award”) and those that are not (a “Non-Convention Award”). For Convention Awards, the enforcement can only be refused on one of the grounds of refusal set out above. The courts in Hong Kong do not have residual discretion to refuse. For Non-Convention Awards, the courts in Hong Kong retain residual discretion to refuse leave to enforce for any reason they see ﬁ t.

Mediation After the Civil Justice Reform, mediation has become an integral keystone to Hong Kong litigation. While not only actively encouraging parties to mediate at an early stage in proceedings, adverse consequences in costs have been prescribed against those parties who unreasonably refuse to mediate. Mediation is a conﬁ dential and private process. The entire process is without prejudice, meaning that any information exchanged between the parties during the

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course of mediation cannot later be used as evidence in the substantive proceedings. The general approach to mediation in Hong Kong is as follows: 1. The parties will send their “position papers” to the mediator. These position papers may be exchanged with the other party if agreed. 2. At mediation, each party will generally provide their opening statements, their views, intentions and possibly their desired outcome. 3. The mediator will then facilitate discussions of options. The conduct of the mediation will depend upon each individual mediator. 4. If mediation is successful, the parties will usually enter into a settlement agreement. In order to facilitate mediation, the courts in Hong Kong have wide powers to stay proceedings for a period of time to allow the parties to explore mediation. Either party may apply for a stay, and in some instances, the court may order a stay of its own motion. Mediate First pledge 2017 The Hong Kong Department of Justice has actively promoted mediation by way of “Mediate First” pledge events since 2014. The “Mediate First” pledge is a commitment by signatories of the pledge to use mediation ﬁ rst to try and resolve disputes before resorting to other means of dispute resolution. As of 2017, more than 360 companies and organisations in Hong Kong have signed the pledge.

Regulatory investigations Money lenders With very low interest rates in Hong Kong, the money lending business has fl ourished in recent years. Those carrying on business in Hong Kong as a money lender are governed by the Money Lenders Ordinance (Cap. 163). On 1 December 2016, additional licensing conditions were imposed upon money lenders. Further restrictions on advertising were imposed which require that lenders must: • show their money lender’s licence number on any advertisements; and • there must be a risk warning statement included in any audio advertisement. Competition Ordinance The Competition Ordinance (Cap. 619) came into effect in Hong Kong in December 2015. On 28 March 2017, the Competition Tribunal handed down its fi rst written decision in the case of Competition Commission v Nutanix Hong Kong Limited & Ors (CTEA 1/2017). The Nutanix case involves proceedings brought against fi ve information technology companies over an allegation of bid-rigging in a tender to provide information technology services. The Competition Commission seeks remedies including pecuniary penalties and a declaration of contravention of the Competition Ordinance. While the decision in Nutanix is not a substantive one, it nonetheless sets a precedent for the treatment of confi dential information in originating documents fi led in the specialist court.

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Stephen Chan Tel: +852 3526 7807 / Email: [email protected] Stephen is a litigation partner at Oldham, Li & Nie. He regularly acts for multi-national corporations in Hong Kong-based commercial litigation and international arbitration matters, and has extensive experience in Mareva (freezing) injunctions, tracing and recovery of funds. He also advises on contentious employment and intellectual property disputes. Stephen is admitted to practise law in both Hong Kong and New Zealand, and is an experienced advocate, having appeared in various Courts and Tribunals in both Hong Kong and New Zealand. Stephen is a current member of the Hong Kong Law Society Arbitration Committee.

Richard Healy Tel: +852 2868 0696 / Email: [email protected] Richard is head of the OLN Dispute Resolution Group and is responsible for matters involving civil and commercial litigation, dispute resolution, and corporate and commercial matters generally. Richard has acted in connection with shareholders/director’s disputes, intellectual property infringement and general commercial litigation. In recent years such matters have included a number of insolvency and regulatory matters, matters involving the misselling of ﬁ nancial products and other professional negligence claims, contested probate matters, arbitration and expert determination relating to rent reviews.

Oldham, Li & Nie 5th Floor, St. George's Building, 2 Ice House Street, Central – Hong Kong Tel: +852 2868 0696 / Fax: +852 2810 6796 • 2845 6671 / URL: www.oln-law.com

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Péter Gárdos, Erika Tomori & András Nagy Gárdos Füredi Mosonyi Tomori Law Office

Effi ciency of process Effi ciency in numbers If one looks at the numbers, the effi ciency of the courts in Hungary has improved signifi cantly over the last few years. At the level of district courts, over 80% of civil matters are decided within one year, and in less than 3% of cases does the dispute take over three years to close. Regional courts are also very quick. Although there are differences between the courts, on average over 70% of fi rst-instance matters, and over 90% of second-instance matters, are closed within one year. Courts of appeal typically decide on the case within one year. However, there are signifi cant differences between the different courts of appeal, e.g. in case of a regional court of appeal, second-instance judgments in civil matters are delivered usually within six months, whereas in case of the Municipality Court of Appeal, a decision may take two years. Decisions by the Supreme Court rarely take more than a year. Rules ensuring effectiveness of the procedure Some reasons for the effi ciency of the process: • Litigation may be avoided by payment order procedure, which is a simplifi ed non-judicial civil proceeding falling within the competence of the notary public. According to Act L of 2009 on payment order procedures, an overdue pecuniary claim not exceeding HUF 1,000,000 can only be recovered by way of payment order, if the defendant has a home address or habitual residence in Hungary and the claim does not originate from an employment relationship. If the claim exceeds HUF 1,000,000, but does not exceed HUF 400,000,000, the party may choose between going to court or initiating a payment order procedure. The notary public issues the order within 15 days following receipt of the application (or within three working days if the application was submitted electronically). The defendant is entitled to submit a statement of opposition within 15 days following notifi cation. If no statement of opposition is fi led in due time, the payment order shall have the same effect as a fi nal judgment. In case such statement is fi led in due time, the payment order procedure shall be brought before the court in respect of the part contested by the defendant. • The judges are legally obliged to deliver the judgments within reasonable time. Such right is enshrined in the Fundamental Law. If this obligation is breached, the parties may claim damages. • Although Act CXXX of 2016 on the Code of Civil Procedure (hereinafter: Civil Procedure Act) does not contain deadlines for the procedure, the judge may set deadlines. If the parties do not abide by them, e.g. fi nes may be imposed on the parties, and the statement of the party may be excluded.

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• The Civil Procedure Act introduces a divided procedure structure, which may also help to expedite procedures. Under this structure, the fi rst part (entry section) of the procedure defi nes the framework of the legal dispute, while the second part (hearing section) is limited to taking of evidence and deciding on the merits. • The Civil Procedure Act limits the right of the parties to amend the claim and the counterclaim. During the entry section of the procedure, the pleadings may be amended without any restrictions. However, in the hearing section of the fi rst instance proceedings, the claimant may amend the pleadings only if the reason for the amendment is a fact learned by the claimant after the end of the entry section or a measure made by the court after the end of the entry section. • If the defendant fails to submit a statement of defence in writing and does not submit a defence of set-off, or if such claim is rejected by the court, the court ex offi cio obliges the defendant in accordance with the claimant’s pleading, unless the litigation has to be terminated due to formal reasons. • It is possible to collect evidence before the opening or during the course of the hearing (preliminary taking of evidence) if there is reasonable cause to suggest that the taking of evidence could not be performed successfully at a later stage. Preliminary taking of evidence shall be performed according to the general rules of taking of evidence. • The court may impose fi nes amounting to HUF 1,000,000. Late performance or omission of a procedural action or statement may entail that the court would decide the case without taking the action or statement into consideration. The court may order the bearing of certain procedural costs regardless of the outcome of the dispute. In case any participant of the procedure disobeys a court order, the court may order them e.g. to reimburse cost, to pay a fi ne, but the court also has the power to have the participant brought before the court by the police, and to reduce the fees otherwise due.

Integrity of process and judges Hungary has a civil law legal system. The new Civil Procedure Act was adopted in 2016; it will enter into effect on 1 January 2018. This analysis is based on the new Act. Three types of courts have jurisdiction in fi rst instance cases: • regional courts (“törvényszék”) are the general courts of fi rst instance; • administrative and labour courts (“közigazgatási és munkaügyi bíróság”) have jurisdiction in labour law cases and in appeals against resolutions of administrative bodies; and • district courts (“járásbíróság”) have jurisdiction in cases where the amount in dispute does not exceed HUF 30,000,000, and in certain cases listed in the Civil Procedure Act irrespective of the value of the litigation. Different types of court may proceed on appeals: • regional courts also have jurisdiction on appeals against the decisions of the district courts and the administrative and labour courts; while • the courts of appeal (“ítélőtábla”) have jurisdiction on appeals against the decision of regional courts. • The Supreme Court (“Kúria”) has jurisdiction in legal review (“felülvizsgálat”) cases. The jurisdiction of same-level courts is divided geographically. Appeal against the ruling of the fi rst instance court may be submitted within 15 days after

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the ruling of the court of fi rst instance has been served. Ruling in the second-instance procedure is delivered without a formal hearing, unless the parties request the hearing or the court fi nds that a hearing is necessary. In certain cases, legal review of the fi nal judgment by the Supreme Court is available. The general deadline for the submission of the request for legal review is 60 days after the fi nal ruling is served. As a general rule, the Supreme Court delivers its ruling without a hearing. In accordance with the Fundamental Law, which provides the basic principles of judicial power, the Supreme Court acts not only in legal review cases, but also guarantees the uniform application of law. Its uniformity decisions are binding for other courts. The Fundamental Law further provides that the basic rules on courts shall be adopted by the Parliament with a qualifi ed majority. The integrity of the system is also supported by the Fundamental Law, which provides that judges are appointed by the president of Hungary, and judges are independent.

Privilege and disclosure Legal privilege and disclosure as it is understood in common law, does not exist in Hungarian law. There are some provisions, however, in the Civil Procedure Act, which enables the party to obtain documents from the other party. Generally the party shall submit the evidence which supports its factual claims. If the party is unable to present a document that would support its claim because it is in the possession of the other party, the party may request the court to order the other party to present that document. Where a document is held by a person who is not involved in the action, such person may be ordered to present the document in the course of inspection by the court. At the parties’ request, the court shall obtain any document from another authority or organisation, if such document cannot be released directly to the party. If the document contains any confi dential information, the court shall require an exemption under the obligation of confi dentiality. Any part of a document that contains confi dential information shall be inadmissible as evidence if the original classifi er refuses to allow the party’s access thereto.

Costs and litigation funding The most relevant are the following types of costs of litigation: • Duty is payable by the claimant at the time of the submission of the claim. The general amount of the duty is defi ned by Act XCIII of 1990 on duties; it is 6% of the amount in dispute, but the duty cannot exceed HUF 1,500,000 in fi rst instance cases. The duty payable for appeals is 8% with a maximum of HUF 2,500,000, whereas the duty payable for legal review by the Supreme Court is 10% with a maximum of HUF 3,500,000. • Costs in connection with the taking of evidence. These costs are advanced by the interested parties. The most signifi cant of these are the costs of expert evidence. In case of private experts, the party and the expert agree on the price, whereas in case of court experts, the price is calculated in accordance with decree 3/1986 (II. 21) of the Minister of Justice, and the court only appoints the expert if the costs are advanced by the interested party. • Costs of attorneys, advanced by the parties.

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The parties advance their costs upon their occurrence. The court will decide on the bearing of all costs and duties in its ﬁ nal ruling. Generally, the expenses of the successful party shall be covered by the losing party. A decree (32/2003 (VIII. 22) of the Minister of Justice) determines the amount of the costs of an attorney that can be awarded (e.g. if the amount in dispute is HUF 10 million, HUF 500,000 will be awarded) or the parties may claim costs based on their agreement with their attorneys; however, the court may reduce the requested costs. The Act on attorneys provides that the mandate fee is subject to free negotiations, and the Act expressly acknowledges contingency fees. Security for legal costs is available for the defendant if the plaintiff’s domicile is not within the EU or the EEA. Hungarian law also opens the door to both complete and partial exemption from costs and expenses. The exemption is generally dependent on the income and ﬁ nancial situation of the given party. There are no rules in Hungarian law on costs budgeting and litigation funding.

Interim relief The Civil Procedure Act provides that interim relief may be sought in order to prevent the occurrence of damage, preserve the status quo giving rise to the dispute or protect the rights of the party. A request for interim relief may be submitted together with the claim or before the statement of the claim. Submitting the request before the statement of claim is possible only if further delay would jeopardise the aim of the provisional measure. When deciding on the request for interim relief, the court measures the detriment caused by the interim relief to the other party and the detriment caused by rejecting the request. The other party may react in writing on the request for interim relief, and the court also has the power to hold a hearing about the request. The decision of the court is delivered in expedited procedure. Appeal is available against this decision; however, the decision is provisionally enforceable immediately. In certain cases, the court may order the interim relief if the party requesting the interim relief provides security covering the potential damages caused by it.

Enforcement of judgments Judgments of Hungarian courts are enforced in accordance with the rules of Act LIII of 1994 on judicial enforcement (hereinafter: Judicial Enforcement Act). In EU-related affairs, primarily Regulation (EU) No 1215/2012 determines recognition and enforceability. Under this Regulation, in general, a judgment delivered in a Member State shall be recognised in the other Member States without any special recognition procedure, and under no circumstances may such judgment be reviewed as to its substance in the addressed Member State. Similarly, a judgment enforceable in the Member State where it was delivered shall be enforceable in the other Member States without any declaration of enforceability being required. Similar rules exist in relation to judgments delivered in Switzerland, Norway and Iceland in accordance with the Lugano Convention. In cases where the Regulation is not applicable, the provisions of Act XXVIII of 2017 on Private International Law (hereinafter: Private International Law Act) and of the

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Judicial Enforcement Act apply. Based on these, a foreign judgment may be recognised and enforced if it meets certain requirements (e.g. jurisdiction of the foreign court is considered legitimate, the judgment is construed as ﬁ nal and binding by the law of the state of origin, the grounds for denial shall not apply). No special recognition procedure is necessary. Nevertheless, the recognition is not automatic; the fulﬁ lment of the requirements is usually examined by the competent court. Awards may be enforced in accordance with a statutory provision on the enforcement of such awards, international treaties or reciprocity.

Cross-border litigation Regulatory structure Rules on cross-border litigation are regulated in both domestic and international norms. International regulation consists of international agreements, directly applicable EU law and reciprocity. Regarding domestic regulation, both the Civil Procedure Act and the Private International Law Act contain relevant provisions. Directly applicable EU law Regulation (EC) No 1393/2007 of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents) and Council Regulation (EC) No 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters apply directly in Hungary. Under the EU regulation, in civil or commercial matters, the courts of the Member States (with the exception of Denmark) may take evidence both directly and indirectly. EU Member States are required to designate a central authority to transmit the documents needed to be served and to receive such documents from other Member States. Each Member State is entitled to serve judicial documents through its diplomatic or consular agents or by postal services. The central authority designated in Hungary for the taking of evidence and the service of documents is the Ministry of Justice, whereas the receiving and transmitting agencies are the courts. International agreements Hungary also signed the Hague Conventions regulating the taking of evidence and the service of documents regarding civil and commercial matters. Under the Hague Conventions, similarly to the EU regulation on the service of documents, the courts of the Contracting States are not entitled to enter into direct contact with each other. The Contracting States are required to designate a central authority to receive the letter of request coming from a judicial authority of another Contracting State, and to transmit it to the competent authority. Also, similarly to the EU regulation, under the Hague Conventions, a diplomatic ofﬁ cer or consular agent of a Contracting State may take the evidence for the court of the state which she/he represents, if the competent authority designated by the state in which she/he exercises her/his functions has given its permission for such activity. Domestic law Under domestic law, in the absence of any international regulation, the request for legal assistance may be complied with if so agreed by the Minister in charge of the judicial system and the Minister of Foreign Affairs and, if necessary, the Minister competent according to the subject of the matter. Legal assistance shall be refused if compliance with the request would be contrary to Hungarian public policy.

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International arbitration The most important legal sources of international arbitration in Hungary are: Law-Decree no. 8 of 1964 implementing the European Convention on International Commercial Arbitration, Geneva, 1961 (hereinafter: Geneva Convention); Law-Decree no. 25 of 1962 implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958 (hereinafter: New York Convention); and Act LX of 2017 on Arbitration (hereinafter: Arbitration Act). Both the Geneva Convention and the New York Convention were adopted under the auspices of the United Nations. Geneva Convention The Geneva Convention applies to arbitration agreements concluded for the purpose of settling disputes arising from international trade between physical or legal persons having, when concluding the agreement, their habitual place of residence or their seat in different Contracting States, and also to arbitral procedures and awards based on such agreements. The parties to an arbitration agreement may apply to either a permanent arbitral institution or to an ad hoc arbitral procedure. In the latter case, the parties are free to appoint arbitrators, determine the place of arbitration and lay down the procedure to be followed by the arbitrators. New York Convention The New York Convention applies to the recognition and enforcement of arbitral awards (adopted by either ad hoc or permanent arbitral bodies) made in the territory of a state other than the state where the recognition and enforcement of such awards are sought. It also applies to arbitral awards not considered as domestic awards in the state where their recognition and enforcement are sought. The Contracting States are required to recognise such arbitral awards as binding and enforce them without imposing substantially more onerous conditions than imposed in case of recognition or enforcement of domestic arbitral awards. Recognition and enforcement of an arbitration award may only be refused for reasons listed in the New York Convention. However, Hungary made a reservation that it will only recognise and enforce awards made in countries that are signatories to the New York Convention relating to a dispute arising from an activity that qualifi es as business activity. Decree 12/1962 (X. 31.) of the Minister of Justice provides that a copy of the original award qualifi es as duly certifi ed in accordance with Art. IV of the New York Convention, if it is an offi cial copy done by the permanent court of arbitration, a notarised copy of the original award of an ad hoc court of arbitration, and if it is a notarised copy of the arbitration agreement. Arbitration Act Certain provisions of the Arbitration Act also apply to international arbitration unless an international treaty regulates otherwise. An arbitral procedure is deemed to be international under the Arbitration Act if the places of business of the parties are in different states at the time of the conclusion of the arbitration agreement. In case the parties have their places of business in the same state, the international element may also be based on: (i) the place of the arbitral institution determined in the agreement; (ii) the place of the performance of either the substantial or the disputed part of the obligations deriving from the relationship of the parties; or (iii) the explicit agreement of the parties.

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Mediation and ADR Settlement of disputes out of court Mediation and ADR are acknowledged in Hungary. The most important rules are found in: • Arbitration Act, and Rules of Procedure of the given permanent court of arbitration, which enters into force in 2018; • Act CLV of 1997 on consumer protection (arbitration boards); • Act CXXXIX of 2013 on the National Bank of Hungary (Financial Arbitration Board); and • Act LV of 2002 on mediation. The law tries to encourage the parties to settle their disputes out of court. The court may attempt at any time during the procedure to support the parties to settle their dispute. The conclusion of a settlement is encouraged by a reduced duty on proceedings. If the parties settle their dispute at the fi rst court hearing, the plaintiff or the defendant submitting a counterclaim is entitled to reclaim the 90%; if settlement is reached at a later stage, the parties are entitled to reclaim 50% of the duty advanced by them. Arbitration tribunals Disputes may be settled by way of arbitration if at least one of the parties is professionally engaged in business activities and the legal dispute arises out of or in connection with this activity; furthermore, the parties may dispose freely of the subject-matter of the proceedings; and arbitration was stipulated in an arbitration agreement. Decisions of the arbitration tribunals have the same effect as that of a binding court decision, and their enforcement shall be governed by the regulations on judicial enforcement. The parties may choose the permanent arbitration tribunals, e.g. the Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry, Budapest or they can choose ad hoc arbitration. Interim measures in arbitration As for arbitration tribunals, local courts may impose provisional measures upon request of either party. The court may order protective measures in a case pending before an arbitration tribunal. If the presentation of evidence before the arbitration tribunal is likely to entail considerable diffi culties or unreasonable extra costs, upon the request of the arbitration tribunal the local court shall provide legal assistance in the form of conducting the procedure for the presentation of evidence, and by the application of the coercive means necessary in the procedure for the presentation of evidence, if conducted by the arbitration tribunal. However, such powers are seldom exercised. Available remedies Decisions of an arbitration tribunal may not be appealed; however, the national courts may annul the award delivered by an arbitration tribunal for the reasons listed in the Arbitration Act, e.g. the award is in confl ict with the rules of Hungarian public policy. Arbitration boards The following arbitration boards are set by law in Hungary: • The Financial Arbitration Board is an alternative dispute resolution forum operated by the Hungarian National Bank. The board is available for the amicable resolution of fi nancial consumer disputes between consumers and fi nancial service providers.

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• There are independent arbitration boards attached to the competent county (or Budapest) chamber of industry and commerce, which provide a forum to reach an out- of-court settlement of a dispute between the consumer and the trader/service provider. Available remedies The available remedies against the decisions of the Financial Arbitration Board depend on the value of the matter and whether the fi nancial service provider submitted to the proceeding of the Financial Arbitration Board. The panel of the Financial Arbitration Board can adopt a binding resolution on the merits of the case if the fi nancial service provider has undertaken to be bound by the decision of the Financial Arbitration Board, or if the claim does not exceed HUF 1,000,000. In other cases the panel may make a recommendation on the merits of the case. The decision or recommendation of the panel is adopted without prejudice to the consumer’s right to have his claim enforced in court. The party may fi le an objection against the binding resolution of the panel, in which case the dispute will be decided by court. The annulment of the decision may be requested from the court in certain cases. Mediation The parties may choose whether they wish to use the court’s mediation process or they may opt for a mediator outside of the court. Court mediation is a non-judicial procedure, conducted by judges and court offi cials with special qualifi cations. In case of undertaking mediation outside courts, an independent third party (mediator) is involved in order to solve the dispute of the parties. The goal of the procedure is to reach a written agreement. The database of mediators is kept by the Ministry of Justice. In certain cases, the court may order compulsory mediation for the parties as well, and simultaneously suspend the civil procedure, whereas in other cases the court may inform the parties about the availability of mediation. If the parties reach an agreement in the mediation proceedings, it may be submitted to the court for approval as a settlement. Exceptions According to the general rule, arbitration is available to the parties. However, neither arbitration nor mediation may take place in the following procedures, e.g: libel proceedings; administrative proceedings; guardianship proceedings; proceedings on the termination of parental responsibility; enforcement proceedings; procedures establishing paternity or ancestry; and constitutional appeals. Further statutory regulations may restrict the arbitrability of certain types of disputes.

Regulatory investigations The Fundamental Law provides that Hungary protects the rights of consumers. Such protection is provided by several acts and authorities, e.g.: • The Hungarian Competition Authority has the right to start litigation in case of infringements which concern a large group of individuals. • Hungary implemented the Directive on Unfair Commercial Practices (Directive 2005/29/EC), which regulates unfair commercial practices, including unfair advertising, which directly harm consumers’ economic interests and thereby indirectly harm the economic interests of legitimate competitors. The Hungarian Competition Authority, the Hungarian National Bank and the Consumer Protection Authority have competence in unfair commercial practices.

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• The Hungarian National Bank has competences in case of ﬁ nancial consumer protection matters involving institutions supervised by the Hungarian National Bank. It has authority to examine complaints of consumers; it can also conduct investigations. The Hungarian National Bank also has the right to start litigation in case of infringements of the rights of consumers.

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Péter Gárdos Tel: +36 1 327 7560 / Email: [email protected] Péter Gárdos earned his law degree at the Faculty of Law and Political Sciences of Eötvös Loránd University, where he later earned a Ph.D. and an LL.M. as well. He joined Gárdos Füredi Mosonyi Tomori in 2008, and he became a partner in the fi rm in 2014. He regularly advises fi nancial institutions on transactional matters. He has signifi cant litigation practice with a special focus on litigation relating to banking activities. Between 2003 and 2010 he participated in the preparation of the new Hungarian Civil Code. He is the co-editor and co-author of the commentary to the new Civil Code published by Complex Wolters Kluwer. He regularly publishes articles, primarily in the fi eld of contract law. He is the author of a book on the law of assignment, and the editor of a book on fi duciary securities. He teaches law of contract and law of securities at graduate and LL.M. courses. Erika Tomori Tel: +36 1 327 7560 / Email: [email protected] Erika Tomori earned her law degree at at the Faculty of Law and Political Sciences of Eötvös Loránd University in 1986, where she later attended a course in Banking Law. Her primary practice areas are banking law, securities law and corporate law. Her professional experience includes the representation of fi nancial and investment institutions in establishment and licensing, litigation, legal counselling and the representation of companies involved in issuance of securities. She gives lectures in securities and fi nancial law at various universities and at the International Training Centre for Bankers. She is the author of various books on securities law. As an acknowledgment of her academic achievement she was awarded the title of honorary professor by Eötvös Loránd University in 2004 and by the Corvinus University in 2006. At the Pázmány Péter Catholic University she is responsible for the banking and capital market LL.M. course. András Nagy Tel: +36 1 327 7560 / Email: [email protected] András Nagy earned his law degree at the Faculty of Law and Political Sciences of Eötvös Loránd University in 1991. He started his career as an associate of the Financial Business Law Association. Since its establishment in 1992, he has worked for Gárdos Füredi Mosonyi Tomori Law Offi ce; from 1995 he has been a partner. His primary practice areas are business law and general civil law and civil procedural law. His professional experience includes advising clients on acquisitions of majority or minority stakes in Hungarian companies and helping foreign and Hungarian investors in the establishment and capital restructuring of companies. He drafts general terms and contracts for banks and fi nancial intermediaries. He has gained experience in fi nancing of large infrastructural investments, and represents clients in commercial disputes at state courts and courts of arbitration as well. He has represented several Hungarian commercial banks in litigations relating to foreign currency-denominated loans. Gárdos Füredi Mosonyi Tomori Law Offi ce 1056 Budapest, Váci u. 81, Hungary Tel: +36 1 327 7560 / Fax: +36 1 327 7561 / URL: www.gfmt.hu

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Ananya Kumar & Kunal Chaturvedi J. Sagar Associates

Introduction India follows a common law system, which is inherited from its history of British colonial occupation. Unlike the United Kingdom, however, India has codifi ed the common law principles in various statutes. The basic statutes governing civil and criminal law and practice in India are the Indian Penal Code, 1860 (“IPC”), the Indian Evidence Act, 1872 (“Evidence Act”), the Code of Criminal Procedure, 1973 (“CRPC”) and the Code of Civil Procedure, 1908 (“CPC”). However, it is the Constitution of India which is recognised as the highest law of the country. Under the Constitution, the Supreme Court of India is the highest judicial forum and fi nal court of appeal in the country. Apart from having been vested with wide-ranging powers, and being the highest court of appeal, the Supreme Court, in its role as the protector and enforcer of the Constitution, also exercises limited original jurisdiction to adjudicate substantial questions of law. At the next level are High Courts, which exercise territorial jurisdiction in respect of the respective state(s) where they have been set up. Each High Court commands superintendence over the subordinate courts within its jurisdiction, but is bound by decisions of the Supreme Court of India. High Courts are also constitutional courts. Being constitutional courts, both the Supreme Court and the High Courts also exercise extraordinary writ jurisdiction for protection and enforcement of constitutional and legal rights. Below the High Courts is a hierarchy of subordinate courts such as civil courts, family courts, criminal courts and various other district courts. In addition, several Tribunals have been established in India to adjudicate specifi c classes of disputes such as company matters, taxation, telecom, electricity and consumer protection, to name a few. The intent behind the establishment of these specialised tribunals was to set up fora, manned by a combination of judicial members and subject matter experts, which provide a mechanism for effi cacious and streamlined redressal of disputes. Unlike decisions of the Supreme Court, the decisions rendered by High Courts and Tribunals do not have any precedential value across the country and are limited to their respective territorial and/or subject matter jurisdictions. However, such decisions nonetheless have a persuasive value and refl ect consensus on questions requiring determination.

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Integrity of the process The Indian Constitution is built on the fundamental separation of powers between the legislature, the judiciary and the executive. A system of checks and balances has been embedded in the fabric of the Indian Constitution and the judiciary holds the mantle as the guardian of the Constitution. The multitude of masses in India place unﬂ inching faith in the judicial process and the dogmatic axiom that – not only must justice be done, but seen to be done – holds sway in India to a large extent. In 2010, the Supreme Court emphasised that “substantive due process” is a “guarantee” under the Constitution. Additionally, Indian courts follow the principles of natural justice and fair hearing, as mandated under the Constitution.

Effi ciency of process India is reeling from a high pendency of cases clogging the judicial system, and as such approaching judicial fora is often a time-consuming option. The World Bank, however, has recognised that “[a]lthough India’s courts are notoriously ineffi cient, they at least comprise a functioning independent judiciary”, where “the rule of law… generally prevails” (http:// web.worldbank.org). As of 2016, it was reported that there were approximately 28 million cases pending before district courts across the country. In the same period, the numbers for High Courts and Supreme Courts were four million and 59,000 respectively. Such a high pendency of cases is due largely to a shortfall in manpower, including judges, and infrastructure. However, this issue has been recognised in the ‘Indian Judiciary Annual Report 2015–2016’ and ‘Subordinate Courts of India: A Report on Access to Justice 2016’, and steps to address these shortfalls have been suggested. In parallel, there have been certain legislative reforms, such as the enactment of ‘The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015’ (“CC Act”), and the amendments made to arbitration law through the Arbitration & Conciliation (Amendment) Act, 2016 (“Arbitration Amendment Act”). These measures are aimed at expediting court processes in respect of commercial disputes, and updating the law relating to arbitration. Additionally, one of the goals of the NITI (National Institution for Transforming India) Aayog, which was constituted by the Union Cabinet to replace the Planning Commission, is the strengthening of arbitration processes in India. To increase effi ciency of process, initiatives have also been undertaken to simplify court procedures through the availability of different procedural mechanisms, mainly through the use of technology. Use of technology in court processes is being encouraged as a means to ensure transparency by obviating human interference and encouraging effi ciency. While computerisation and digitisation of the administration of justice in India has been undertaken under several schemes and projects since the 1990s, recently, in furtherance of the “National Policy and Action Plan for Implementation of Information and Communication Technology in the Indian Judiciary – 2005” formulated by the e-Committee of the Supreme Court of India, High Courts and district/subordinate courts across India are implementing the ‘eCourts Integrated Mission Mode Project’. This project is one of the national e-Governance projects being implemented in India. The eCourts project was created with the objective of providing services to all key stakeholders through ICT enablement and enhancing judicial functioning. Under the project, a National Judicial Data Grid has been

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established to monitor pendency in courts of fi rst instance and to act as a case information repository. The initiative is a bold step in furtherance of ensuring effi cient disposal of the vast pendency of cases. More recently, the Supreme Court of India has taken initiatives to encourage e-fi ling of pleadings, facilitating case management and providing litigants with case-related information. Online processes have also been proposed to operate as an online gateway for payment of court fee and process fee, thereby largely reducing transaction costs and increasing effi ciency. Other features offered under such system include an online court fee calculator in order to streamline fi ling processes for both advocates as well as the registry attached to the Supreme Court. In addition to use of technology as a means of facilitating the administration of court processes, there have been instances where courts in India have permitted modern technology to disrupt established practices. Recently, there is a notable trend by High Courts and other judicial fora to permit the use of instant messaging services for effecting service of court summons. Receipt of the instant message, informing the recipient party of the summons, has been deemed to constitute due service as per procedural laws. This is a welcome step towards integrating technological advancements in expediting court-driven litigation.

Privilege and disclosure Privilege The Evidence Act accords protection to professional and confi dential communications exchanged by parties with their legal advisors. Sections 126–129 of the Evidence Act set out the scope of privilege attached to professional communications in an attorney-client setting. Attorneys are restricted from disclosing any communications exchanged with the client and stating the contents or conditions of documents in their possession, in the course of and for the former’s employment with the client. However, certain exceptional grounds have also been provided for, where the privilege stands denied. Examples of these are acts in furtherance of an illegal purpose, and facts that have come to the knowledge of the attorney showing that either crime or fraud has been committed since the commencement of the attorney’s employment. Privilege is also extended to the interpreters, clerks and servants of the attorney. However, there is a grey area under Indian law on whether privilege, as provided for under the Evidence Act, extends to in-house counsel working with corporations. The Evidence Act also provides that no-one shall be compelled to disclose to the court any confi dential communication which has taken place between him and his legal professional advisor, unless he offers himself as a witness. Disclosure Indian law requires that each party to the dispute is required to disclose those documents that they refer to and rely upon in the proceedings. Parties can ask for discovery and inspection of documents and also put specifi c questions to the other party in the form of interrogatories. Documents which pertain to party’s own case, confi dential communications between a client and his legal adviser, and public offi ce records relating to affairs of the state, are treated as privileged, if their production would be injurious to the public interest. The court has the power to direct production and disclosure of documents, to direct a party to provide further and better particulars of an allegation made in its pleading, and to answer interrogatories. However, roving and fi shing enquiries are not permitted.

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Evidence may be documentary (digital records and email communications are also admissible), or oral, through witness testimony. Oral evidence through witness testimony must be direct and hearsay evidence is inadmissible, except where the person concerned is dead, cannot be found, is incapable of deposing or cannot be produced without inordinate cost or delay. Recently, though, under the CC Act, disclosure requirements have been made more stringent in respect of ‘commercial’ matters. In such matters, a party is required to disclose all documents in relation to the dispute, whether being relied upon by the party or not, along with its plaint. The intent behind such a provision in the statute is to minimise vexatious litigation and to prevent delays on account of documents being introduced at a belated stage of the proceedings.

Costs Sections 35 and 35-A of the CPC cap costs that can be awarded in favour of a successful party to INR 3,000/-. While the A&C Act did not provide for a ceiling on costs, arbitral tribunals were ordinarily guided in this regard by the provisions of the CPC. However, as pointed out in the 246th Law Commission Report (“246th Report”), a ceiling of this nature bore no relation to the actual expenses incurred by a party in litigation. An attempt has been made under the CC Act to remedy this position. The CC Act has amended various provisions of the CPC, insofar as they apply to commercial matters, which includes Sections 35 and 35-A. These changes are based on the 253rd Law Commission Report (“253rd Report”), which in turn referred to and relied upon the 246th Report. The CC Act seeks to provide a remedy to the bona fi de litigant by incorporating a ‘cost to follow the event’ regime under Section 2 of its Schedule. This Section provides a replacement provision for Section 35 of the CPC. Section 35-A (2), where the cap of INR 3,000/- fi nds place, has been specifi cally omitted by the CC Act. Once again, akin to Section 31-A, the conduct of parties has been made a relevant factor while deciding on the issue of costs, and courts are empowered to impose costs even against the successful party for portions of the claim/defence which are found to be frivolous.

Litigation funding The Supreme Court, in a judgment rendered as far back as 1955, had held that the common law doctrines of maintenance and champerty were not strictly applicable in India. Additionally there is no statute that proscribes litigation funding, or otherwise deals with the issue. Proceeding on the principle that everything that is not prohibited by law, is permitted, there does not appear to be any bar on litigation funding in India. However, this is a grey area, untested by courts in recent times, on which clariﬁ cation is needed. This is particularly so given the increase, globally, in the popularity of litigation funding.

Interim orders The (Indian) Speciﬁ c Relief Act, 1963 (“Speciﬁ c Relief Act”) and the CPC provide for grant of interim measures of protection. Courts in India have ordinarily been liberal in grant of interim relief to protect the rights of litigants, and to prevent a pending litigation from becoming infructuous. For the grant of interim relief, the party seeking the relief must show: (i) the existence

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of a prima facie case; (ii) that irreparable injury, which is not ordinarily compensable in money terms, will be caused to it if the relief is not granted; and (iii) that the balance of convenience lies in the grant of the relief sought. Grant of interim relief under the Speciﬁ c Relief Act is discretionary, as with all equitable remedies, and the availability of this remedy depends on whether it is appropriate in the circumstances of the case. The CPC also provides for the grant of injunctions. Such injunctions may be of an ad- interim, temporary nature, for the protection of the property in dispute, or the rights of the party, pending the disposal of the proceedings. In certain circumstances, such relief can be granted ex-parte, subject to the existence of circumstances warranting grant of such ex- parte injunction/order on an urgent basis. Interim orders that are passed can be both directive and restraining in nature. Orders may also be passed for attachment of property/furnishing of security before disposal of the proceedings, as well as for performance of negative covenants of contracts. Injunctions may also be of a mandatory nature, compelling the non-applicant to perform requisite acts. In case of attachment orders, however, there are strict conditions that are required to be met before a court exercises jurisdiction. The power to pass interim orders is also available with most of the specialised tribunals that have been set up.

Enforcement of judgments/awards In India, enforcement of foreign judgments is governed by the CPC. Section 44-A of the CPC provides that decrees passed by superior courts of any reciprocating territory may be executed in India as if they had been passed by an Indian court. The test for conclusiveness of a foreign judgment or decree is laid down in Section 13 of the CPC which states that a foreign judgment shall be conclusive unless: • it has not been pronounced by a court of competent jurisdiction; • it has not been given on the merits of the case; • it appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable; • the proceedings in which the judgment was obtained are opposed to natural justice; • it has been obtained by fraud; or • it sustains a claim founded on a breach of any law in force in India. Reciprocating territories, as referred to in Section 44-A of the CPC, are those territories which have been notifi ed as such by the Government of India. At present there are a limited number of foreign territories that have been notifi ed under Section 44-A, with most of these being countries forming part of the Commonwealth. Reciprocating territories notifi ed by India for the purpose of Section 44A of the CPC are: Aden; Federation of Malay; Fiji Islands; Hong Kong; Papua New Guinea; Singapore; Trinidad and Tobago; United Kingdom; Bangladesh; Western Samoa; New Zealand; and Cook Islands. In cases relating to decrees passed by foreign courts that have not been notifi ed as reciprocating territories or decrees that have not been passed by superior courts of a reciprocating territory, the decree is not directly executable in India. In such cases, a fresh suit will have to be fi led in India on the basis of such a decree or judgment, which may

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be construed as a cause of action for the said suit. In these proceedings, the decree of the foreign court is treated as another piece of evidence against the defendant.

Cross-border litigation Keeping pace with the liberalisation of the Indian economy in the 1990s, the Supreme Court recognised the growing number of contracts entered into between Indian and foreign parties, and held that in contracts which involved a foreign party, it was open to the parties to choose any governing law and confer jurisdiction on a court of their choice. Even today, Indian courts respect contractual clauses conferring jurisdiction on foreign courts and, though they have the power to entertain suits if the cause of action arises wholly or in part within the limits of their jurisdiction, they will ordinarily not override the parties’ choice of forum. In a similar vein, it is rare, though not unheard of, for Indian courts to grant anti-suit or anti- arbitration injunctions in respect of foreign proceedings. A recent judgment of the Supreme Court also held that the word “decree” in Section 13 of the CPC would include within its scope “orders” of a foreign court, going on to say that even in cases of interlocutory orders passed by foreign courts, Indian courts must give due weight to such orders unless they fall under any exception of Section 13 of CPC. India is also a party to the Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters, as well as to the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Under both these conventions, the Law Ministry has been designated as the Central Authority.

Mediation and ADR Section 89 of the CPC grants recognition to alternate dispute resolution (“ADR”) processes in civil matters. This provision was introduced to aid and assist in the settlement of disputes without having to follow the procedural mandate of the court-driven process. Courts have, therefore, been given the power to refer pending disputes to ADR mechanisms, albeit with consent of the parties. Arbitration, conciliation, mediation and Lok Adalats (an ADR mechanism set up under the Legal Services Authority Act, 1987) are recognised as ADR mechanisms under Section 89 of the CPC. These resolution processes are, in turn, regulated by different bodies of rules and/or legislation. Several courts have also set up mediation centres attached to the court complexes, specifying locally applicable rules and procedures. Resolution of disputes through ADR mechanisms is encouraged in disputes that have been fi led before the courts but have been settled through any of the aforesaid processes. An example of such encouragement is refund of the court fees if the dispute, after being fi led before a court, is settled through an ADR mechanism prescribed under Section 89. Mediation and conciliation processes have also been formally recognised in Indian company law. Section 442 of the (Indian) Companies Act, 2013 mandates the Government of India to maintain a panel of experts called the ‘Mediation and Conciliation Panel’, consisting of experts being qualifi ed for mediation between the parties during the pendency of any proceedings before either the Government of India or the adjudicatory tribunals established under the (Indian) Companies Act, 2013. The government has recently constituted the Panel and notifi ed rules for its functioning.

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International arbitration Arbitration in India is governed by the provisions of the [Indian] Arbitration & Conciliation Act, 1996 (“A&C Act”). Part I of the A&C Act applies to all arbitrations, whether domestic or international, that are seated in India. Part II of the Act applies to foreign-seated arbitrations, and deals with enforcement of foreign awards. The A&C Act is based on the UNCITRAL Model Law. Arbitration is being heralded in India as the preferred alternate to court-driven processes, particularly in view of the large number of pending cases before courts. This is refl ected in the Arbitration Amendment Act, which has brought in its wake several pro-arbitration initiatives to favour settlement of disputes through arbitral processes in India. The Arbitration Amendment Act also attempts to further reduce court intervention in the arbitral process. Under the Arbitration Amendment Act, certain principles, which were hitherto uncodifi ed, have been given statutory recognition. Extra-territorial application Between 2002 and 2012, there was ambiguity on the applicability of Part-I of the A&C Act to foreign-seated arbitrations. However, after the Arbitration Amendment Act, this position has been clarifi ed. Subsequent to its amendment, Section 2(2) of the A&C Act provides that certain provisions of Part-I will be applicable even to foreign-seated arbitrations, unless specifi cally excluded by agreement between the parties. These provisions relate to interim measures of protection by the court, and court assistance in taking evidence, as well as the appellate provisions relating thereto. The amendment to Section 2(2) of the A&C Act was a much-needed clarifi cation on the power of Indian courts to intervene in foreign-seated arbitrations, particularly to ensure that foreign arbitral awards are not subject to challenge in Indian courts. Independence and impartiality The Arbitration Amendment Act reinforces and strengthens the concept of ‘independence’ and ‘impartiality’ of arbitrators, by adopting and adapting the IBA Guidelines on Confl icts of Interest in International Arbitration. Schedule V (waivable confl icts) and Schedule VII (Non-waivable confl icts), which are similar to the Orange List and the Red List, respectively, have been introduced into the A&C Act. Subsequent to these amendments, the neutrality of arbitrators in India has been brought at par with international arbitrations. The importance of an independent and impartial arbitral tribunal has also been reiterated by the Supreme Court of India while dealing with the issue of appointment of arbitrators under Section 11 of the A&C Act, and the practice of appointing employees as arbitrators, particularly by Public Sector Undertakings, has fi nally been done away with by way of the amendment. Arbitration costs Based on the recommendations contained in the 246th Report, the Arbitration Amendment Act has amended Section 31(8) and inserted Section 31-A in the A&C Act, which gives the Tribunal the power to determine whether costs are payable by one party to another, and the quantum of such costs. The explanation to Section 31-A (1) reiterates the pre-amendment position that “costs” would include the fees and expenses of the arbitrators, courts and witnesses, legal fees

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and expenses, administration fees and any other expenses incurred in connection with the arbitration, court proceedings or the award. Section 31-A (2), which is an addition, thereafter stresses the “loser pays” principle. Section 31-A (3) sets out the circumstances that the tribunal/court is required to keep in mind while awarding costs, including factors such as conduct of the parties, the frivolity of the respective cases put forward by the litigants, and whether a reasonable settlement offer has been refused. Insertion of the latter two provisions is an attempt to toughen the existing costs regime and bring it in line with international practices. Interim measures In respect of arbitral proceedings, Section 9 of the A&C Act provides for interim measures that can be ordered by the court in relation to arbitral proceedings. Subsequent to the Arbitration Amendment Act, this remedy can be availed even in respect of arbitrations seated outside India, unless the parties have by agreement excluded the operation of the A&C Act. While interpreting the amended Section 9, some High Courts have held that the ‘agreement’ referred to must exclude the applicability of Section 9 in specifi c terms. The Arbitration Amendment Act has also tried to bring the power of the arbitral tribunal to grant interim relief on a par with that of courts, by amending Section 17 of the A&C Act. While the legislative intent of this amendment appears to be to reduce court intervention in matters related to arbitration, a recent decision of the Bombay High Court has held that even under the amended Section 17, the powers of the arbitrator to grant interim relief are not as wide as those of civil courts. Nevertheless, the amendments to the A&C Act have gone a long way, both in clarifying the position of courts granting interim relief vis-à-vis foreign-seated arbitral proceedings, and in respect of making the arbitral process less subject to intrusion by expanding the powers of the arbitral tribunal. While exercising jurisdiction under Section 9 and Section 17 of the A&C Act, courts and arbitral tribunals are bound by the principles enshrined in the Specifi c Relief Act and the CPC with respect to grant of interim relief. Further, if a court passes an interim order under Section 9, it is mandatory for the party who has sought for the order to initiate arbitration within 90 days (or such other time as prescribed), failing which the interim order lapses. Enforcement of awards Insofar as arbitral awards passed in foreign-seated arbitrations are concerned, India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Part II of the A&C Act, which incorporates terms of the New York Convention, contains the conditions for enforcement of foreign awards in India. Section 44 of the A&C Act, which is contained in Part II, provides that only those foreign awards which relate to commercial transactions, having been rendered pursuant to an agreement in writing for arbitration to which the New York Convention applies, can be enforced. Additionally, the said award should have been passed in one of such territories as the Central Government has notifi ed as a reciprocating territory. The list of reciprocating territories notifi ed in terms of Section 44 of the A&C Act is much larger than the list under the CPC. It includes Australia, Austria, Belgium, Botswana, Bulgaria, Central African Republic, Chile, China, Cuba, Czech Republic, Denmark, Ecuador, Egypt, Finland, France, Germany, Ghana, Greece, Hong Kong, Hungary, Italy, Japan, Kuwait, Republic of Korea, Macau, Malagasy Republic, Malaysia, Mauritius,

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Mexico, Morocco, Nigeria, The Netherlands, Norway, Philippines, Poland, Romania, San Marino, Singapore, Spain, Sweden, Switzerland, Syria, Thailand, Trinidad and Tobago, Tunisia, USSR, United Kingdom, Tanzania, and USA. Awards rendered in reciprocating territories so notifi ed by the Government of India are required to be fi led with due certifi cation and evidence before the courts of competent jurisdiction. Upon satisfaction that the said Award does not fall foul of any challenge to the Award on grounds of public policy of India, arbitrability of the subject matter, etc. the Award is treated as a decree of the court and is executed as such. Earlier, the Supreme Court had clarifi ed that the public policy grounds for refusal of enforcement of a foreign award are narrower in scope than those available when challenging a domestic award. The amended A&C Act now incorporates a restricted defi nition of ‘public policy’, both with respect to enforcement of foreign awards and challenges to domestic awards. An award is now considered to be in confl ict with ‘public policy’ only if it is: (i) induced or affected by fraud or corruption; (ii) opposed to the fundamental policy of Indian law; or (iii) opposed to the most basic notions of morality. India is also a party to the Geneva Convention on the Execution of Foreign Arbitral Awards (“Geneva Convention”). However, it has been seen that since the New York Convention is wider in its applicability, enforcement under the Geneva Convention is rare. Institutional arbitration India is also attempting to strengthen its framework of institutional arbitration. Recently, the Government of Maharashtra has collaborated in the setting up of the Mumbai Centre for International Arbitration, which has its own arbitral rules and dedicated infrastructure for holding arbitration hearings. Similarly, some years ago, the Delhi High Court had framed arbitral rules and established the Delhi International Arbitration Centre, which is located on the campus of the Delhi High Court. Taken together, the attempt is to strengthen arbitration in India. However, it is necessary, in conjunction, to strengthen the court processes supporting arbitration so that an Indian- seated arbitration is an attractive proposition for foreign and domestic parties alike.

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Ananya Kumar Tel: +91 11 4311 0629 / Email: [email protected] Ananya is a Partner in the Firm’s Dispute Resolution practice group, based out of New Delhi, and has more than 14 years of experience. His work focuses on Corporate & Commercial Litigation and Arbitration; with a speciﬁ c concentration on Construction & Engineering, Oil & Gas and Infrastructure Project contracts. In addition, he represents the interests of the Firm’s clients before the Supreme Court of India, various High Courts around the country, and in specialised tribunals, and provides legal advice on diverse issues pertaining to litigious aspects of transactions and agreements. Ananya also represents clients in arbitrations and court proceedings involving disputes arising out shareholder and joint venture agreements.

Kunal Chaturvedi Tel: +91 11 4311 0647 / Email: [email protected] Kunal is an Associate in the Firm’s Dispute Resolution practice group, based out of New Delhi. Kunal’s practice covers diverse areas spanning Corporate & Commercial Litigation & Arbitration. He has advised and represented clients in disputes arising out of corporate & contractual laws, competition laws, intellectual property rights, foreign investment laws, pharmaceutical and food safety laws, government tenders, franchisee agreements, land and real estate laws, and enforcement of security interests. He has advised and acted for companies in the realm of Administrative & Constitutional law. He has also been instrumental in advising and handling litigations and arbitrations for Companies involved in manufacturing, processing, trading & import of food products, Drugs & Pharma, Hospitality & Leisure, Private Equity Funds, Fast Moving Consumer Goods (FMCG), Private Ports and Airport Operators, amongst others.

J. Sagar Associates B-303, 3rd Floor, Ansal Plaza, Hudco Place, August Kranti Marg, New Delhi 110049, India Tel: +91 11 4311 0600 / URL: www.jsalaw.com

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Micael Montinari, Luca Salamone & Filippo Frigerio Portolano Cavallo

Effi ciency of process The Italian civil judicial system is governed by the Italian Constitution, the Code of Civil Procedure (“CCP”) and by several special laws on various matters. Thanks to recent reforms, the judicial process is managed entirely electronically. A party can lodge a claim either by fi ling a hard copy of the petition or an electronic one. Save for the statement of defence, any other parties’ submission shall occur only via the electronic system managed by the Ministry of Justice. As soon as the law clerk uploads the submission on to the proceedings folder, briefs and exhibits are immediately available for all the other parties and for the Judge. Such system, recently extended also to administrative proceedings, together with recent additional interventions of the Italian legislator, are aimed at increasing the effi ciency of the Italian legal system. Above all, the statistics of the Ministry of Justice show that people are relying more and more on ADR mechanisms. In particular, as we will see infra, assisted negotiation and mediation in some cases are mandatory, and a party cannot start judicial proceedings without fi rst having attempted to resolve the dispute extra-judicially. The fi rst result of this effort is the dramatic decrease in the average length of proceedings. The Ministry of Justice estimated that fi rst degree proceedings last for “only” 367 days on average, against an average of 487 days in 2014, and 547 days in 2013. In addition to the above, Italian procedure rules also provide for fast-track proceedings in case of credits supported by written evidence and certain in their amount. In such cases, the creditor can apply for a summary payment order (“decreto ingiuntivo”) instead of using ordinary proceedings. The relevant order is issued quickly: depending on the workload of each Court, in about a month’s time. If the application is upheld, the Court orders the debtor to pay in the context of ex parte summary proceedings, i.e. without the appearance of the defendant. The order is then served by the applicant on the debtor, who has up to 40 days to challenge the order. Further to such opposition, ordinary proceedings on the merits commence. Under certain circumstances, or if the order is not challenged, the same order can become enforceable, even if proceedings on the merits are still pending.

Integrity of process Principles and high-level rules concerning the Italian judicial system can be retrieved in the Italian Constitution.

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In particular, Article 24 Const. grants everyone the right to bring cases before a Court of law. It further states that everyone – also poor people – are entitled to be defended in all Courts. The right to a defence is inviolable. Further, Article 25 Const. enshrines the principle that no case may be removed from a Court established under the law. It further provides for the principle nullum crimen, nulla poena sine lege. Article 101 Const. grants the independence of the Judiciary: Judges are subject only to the law. Article 111 Const. sets the principle of the due process of law. It states that all parties shall be entitled to equal conditions before an impartial, third-party Judge. To guarantee the full manifestation of this principle, the Constitution states that all judicial decisions shall include their reasoning. Eventually, the same article provides that any party can appeal to the Supreme Court of Cassation – the highest Italian Court – in case of violations of law. The Italian legal system is organised in three main levels. Except for peculiar and limited cases, the petitioner can ﬁ le an ordinary litigation before the Ordinary Courts or the Justice of the Peace. The latter has exclusive competence for claims concerning movable assets whose value is lower than €5,000, or concerning vehicle circulation whose value is lower than €20,000. In all other cases, the Court is competent. Appeals can be brought against ﬁ rst-instance decision before the Court of Appeals, in case the appealed decision has been issued by an Ordinary Court, or before an Ordinary Court, to appeal a decision of the Justice of Peace. Eventually, only for violations of law and in the limited situations enlisted in Section 360 CCP, the losing party can appeal to the Supreme Court of Cassation.

Privilege and disclosure Disclosure Italian civil procedure is not based on the concept of disclosure, so compulsory disclosure mechanisms do not exist and the parties are, generally speaking, free to fi le only the documents to support their claims and arguments. Under particular circumstances, as set out under Articles 210–213 of the CCP, a party may request the Judge to order the other or a third party to disclose certain documents, provided that the documents are specifi cally identifi ed by the applicant party, and their disclosure is essential for the decision of the case. The Judge then examines the application of the party and issues an order in which it grants or rejects the application. If the order is addressed to a third party, the Judge may summon the third party, who in turn has the chance to fi le an opposition to the order and thus intervene in the proceedings. CCP provides no sanction against a party who does not comply with the order; certain legal authors have stated, however, that if the non-compliance is without a legitimate reason, the Judge may negatively consider such conduct when deciding the case. In addition, if documents are not disclosed, the applicant party may apply for the documents to be seized further to an order of the Judge (Article, 670, paragraph 2 of the CCP, “sequestro probatorio”). Moreover, the Judge, also without a specifi c request by one of the parties, may always request information or documents to the public administration which are necessary for the decision of the case. The same rules apply to arbitration proceedings.

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Privilege As said, there are no general disclosure obligations in Italian civil proceedings; so a party will not be forced to disclose documents they do not wish to produce in the proceedings, except in the case described above. There are, however, certain provisions which protect conﬁ dentiality: (i) A party may legitimately refuse disclosure if the latter implies violation of professional secrecy (which applies, inter alia, to clergy, external lawyers, doctors, accountants, etc.), civil service secrecy (i.e. in relation to civil servants with reference to facts learned during their service) and government secrecy; (ii) Article 249 of the CCP which allows lawyers (only external lawyers and not in-house counsel) to refuse to give oral witness testimonies in relation to facts they have learned by reason of their profession; and (iii) The Code of Conduct for Italian lawyers prohibits lawyers in civil proceedings to produce communications between lawyers marked as “conﬁ dential”, or communications related to settlement negotiations. The same rules apply to arbitration proceedings.

Costs As a general rule, pursuant to Section 91 CCP, the Judge shall order the losing party to pay the legal fees and expenses of the winning party. The counsels can submit to the Court a statement of their costs, but the fi nal determination is left to the sole discretion of the Judge. Using his/her discretion, the latter awards the fees on the basis of tables periodically published and updated by the Ministry of Justice with its decree. The last update is the Ministerial Decree no. 55 of 2014. The rule has two main exceptions. The legal fees and expenses can be offset – wholly or partially – in case: (a) there is no clear winning party; (b) the issue brought before the Court was new and innovative; (c) the law has recently changed; and/or (d) there is a brand new case law trend. Notably, Section 96 CCP empowers the Court to issue a separate order in case one party failed to act in good faith in the proceedings or started it with mala fi de. This is not intended to reimburse legal fees, but to sanction a party for his/her behaviour during the proceedings. Specifi c sanctions, also for breach of ethics rule, are provided for counsels. Indeed, the Judge has the power to report unethical behaviours to the competent organism of the competent bar.

Litigation funding Litigation funding and pactum de quota litis In Italy, as well as in other civil-law countries, litigation funding is not common and, according to authors, can be said to be underdeveloped, also considering there are no rules or standards on the point. The issue is currently dealt with by several Italian law magazines, who are reporting the interest of several international entities who are exploring funding litigation in Italy. In particular, it is reported that funders have shown interest in ﬁ nancing actions in relation to private enforcement in competition claims. It is also to be considered that, as in many other European countries, Italian lawyers are prohibited from applying pactum de quota litis to their clients; however, considering that,

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in litigation funding, lawyers would always be paid by funders, the rule would reasonably not be breached. Legal Expenses Insurance Legal Expenses Insurance is dealt with by Articles 173 and 174 of the Code of private insurance and is also rather underdeveloped in Italy. Statistics show that Italy had only 4% of the European premium income from Legal Expenses Insurance. Legal aid Legal aid is known as “Patrocinio a spese dello Stato” in Italy and is set out by Presidential Decree 30 May 2002, no. 115 (and following amendments), which is interpreted as implementing Article 24 of the Italian Constitution in order to ensure effective access to justice to those not able to independently obtain the services of a lawyer due to the inability to pay for them from their income. Legal aid is available in civil, administrative and criminal proceedings and the income threshold is currently set at €11,528.41 per year.

Interim relief These proceedings follow the general rules provided by CCP (Sections 669-bis to 700 CCP). The interested party shall ﬁ le a petition with the competent Judge. The latter will then issue a decree scheduling the hearing in which the parties will discuss the case. When particular reasons of urgency exist, upon the petitioner’s request, the Court has also the power, along with the same decree, to issue an ex parte measure before the ﬁ rst hearing. Then, the petitioner shall serve the decree and the petition on the defendant to allow the latter to properly prepare the defence. Unless the case presents complexities or there is any need to carry out brief preliminary activities (e.g. hearing witnesses), the decision – in the form of an “order” – can be issued immediately after the hearing. In accordance with Section 669-ter CCP, if a dispute is not subject to the Italian jurisdiction, the competent Court for the issuance of the interim measure is the one where the latter shall be concretely executed or enforced. Under the CCP, the remedies available on an interim basis are: • judicial seizure, aimed at securing goods whose ownership is being challenged; • precautionary seizure, aimed at securing assets when the alleged creditor fears that the debtor might dispose of them so that the guarantee on the credit might be lost; • reporting of new works or of potential damages to avoid damage taking place as a consequence of new work being started or of other goods placing a claimant’s property or possessions in danger; • preliminary investigation proceedings, aimed at securing evidence to be used in ordinary proceedings when there is the risk that such evidence will be lost; • in all other cases, a judge can issue any kind of measure deemed most appropriate for reasons of urgency (section 700 CCP), • when the application is likely to be successful on the merits (so-called, fumus boni iuris), and • there is danger in any delay (so-called, periculum in mora). Where a Judge issues measures pursuant to section 700 of the CCP, these will be stand- alone proceedings, i.e. they do not require the party to start proceedings on the merits. Given that, normally, there is no preliminary activity, such interim proceedings are aimed at

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repairing contingent situations, which may be of such a damaging nature, they cannot wait to be rectiﬁ ed until the end of full proceedings on the merits. The petitioner, in fact, cannot seek damages from the opposite party. (S)he may only request speciﬁ c performance to stop the damaging action(s).

Enforcement of judgments / awards Enforcement proceedings: general overview As soon as a party gets an enforcement order (“titolo esecutivo”) it is entitled to start enforcement proceedings aimed at obtaining goods/money/etc. from the other side, even without the latter’s cooperation. The enforcing party shall serve the enforcement order and the writ of enforcement (“atto di precetto”). Not sooner than 10 days from service – and provided that the debtor has not performed the payment yet – the creditor can fi le an application with the bailiff to: (i) seize the debtor’s movable assets; (ii) serve a writ of execution (“atto di pignoramento immobiliare”) to seize real estate; and/ or (iii) serve a writ of execution to third parties (“atto di pignoramento presso terzi”) that may owe money/goods to the debtor. Normally, this is the most-used modality and the recipients of the writ of execution are banks. In any case, the bailiff will create the enforcement proceedings folder, including all the originals, and (s)he will provide it to the enforcement Judge. Depending on the type of execution selected, the Judge will in any case hold the hearings, instruct the bailiff to perform activities, and order that the amounts/goods seized are assigned to the creditor. As soon as the creditor is fully satisfi ed or if the debtor does not have any additional goods that can be used to pay the creditor, the Judge will declare the enforcement proceedings closed. Enforcement of foreign judgments Foreign judgments Enforcement of judgments issued by foreign Courts is regulated by the Italian Law on Private International Law (Law no. 218 of 1995). Article 64 provides that a foreign judgment is fully recognised and enforceable in Italy provided that certain conditions exist. In particular, the judgment shall not be contrary to Italian public policy. See below for more details in relation to the concept of public policy. Pursuant to the EU Regulation no. 1215 of 2012, judgments issued by Courts of Member States of the European Union are automatically recognised without the need of a formal recognition. Considering the EU framework, Italian private international law rules only apply when a judgment of a non-EU country needs to be enforced in Italy. Additional provisions may be provided by multilateral treaties with third countries. Enforcement of awards Domestic awards In relation to domestic awards, a party seeking to enforce the award should follow the steps set out by Article 825 of the CCP. In particular, the party must fi le an application with the competent Court for the place where the arbitration was seated, attaching the original or a certifi ed copy of the award, together with the original or a certifi ed copy of the arbitration agreement.

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The Court verifi es the formal regularity of the award and issues an order which renders the award enforceable (the so-called “exequatur”). The order may be appealed to the Court of Appeal within 30 days. Foreign awards The procedure for the recognition and enforcement of foreign arbitral awards is set out by Articles 839 and 840 of the CCP. Pursuant to these provisions, the party wishing to enforce a foreign award must fi le an application with the Court of Appeal of the place where the other party is domiciled. If the other party is domiciled abroad, the Court of Appeal of Rome will be competent. The applicant must fi le the original of the award or a certifi ed copy, a certifi ed translation if the award was not rendered in Italian, and the arbitration agreement. The President of the Court of Appeal verifi es the formal regularity of the application and the attached documents and issues an order which renders the award enforceable in Italy, unless the dispute was not capable of arbitration according to Italian law or the award is in contrast with Italian public policy. Pursuant to Article 840 of the CCP, the order of the President of the Court of Appeal can be challenged to the Court of Appeal within 30 days. The Court of Appeal will refuse recognition of the award for the reasons set out in the New York Convention as well if the dispute is not capable of arbitration, or if the award is in contrast with Italian public policy. Public policy The standard applied by Courts of Appeal to refuse enforcement of foreign judgments and awards on the grounds of public policy has so far been a restrictive one, aimed at allowing the international circulation of awards. Public policy is usually interpreted as including only domestic public policy and not also international public policy. In particular, legal authors defi ne domestic public policy as the core of fundamental principles which shape the ethical and social structure of the national community in a certain period. In practice, Court precedents have included in the concept of domestic public policy: (i) the provisions and principles of the Constitution, the principles which derive from criminal law, the fundamental principles of EU law, including competition principles; and (ii) according to some authors, Courts of Appeal should also consider violations of procedural public policy, including violations of the principle of due process or the contrast of the award with a previous fi nal award or judgment between the parties. Given the nature of the elements, however, such violations are more likely to be ascertained in the challenge phase, where the other party will have the chance to allege them.

Cross-border litigation Taking of evidence abroad In relation to the taking of evidence abroad, the rules applicable depend on whether the states involved are members of the European Union or not. For members of the EU, the taking of evidence abroad is governed by EU Regulation 1206/2001, which fully applies also in Italy.

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Italy is also a party to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters – more commonly referred to as the Hague Evidence Convention – of 18 March 1970; thus, this Convention applies when an Italian Court requests the taking of evidence in a non-EU state or when a non-EU state requests the taking of evidence in Italy. When an Italian Court requests the taking of evidence to a state which is not party to any international convention, Article 204 of the CCP shall apply, according to which the Judge shall request the taking through a letter rogatory addressed to the foreign Authority and transmit the letter through diplomatic channels. In addition, Italian private international law rules (Articles 69 and 70 of Law 218/1995) set out that when a request is issued by a foreign (non-EU) state, the taking of the evidence is carried out pursuant to Italian procedure rules; however, Italian authorities may follow the instructions given by the requesting states, as long as it is compatible with Italian principles. Enforcing interim or freezing orders Italian Courts can assist EU member states in relation to interim or freezing orders as per the rules set out by the Recast Brussels Regulation (Reg. 1215/2012). In particular: • interim measures ordered by the Courts of a member state can circulate freely and be enforced in other EU countries; indeed, the Regulation includes provisional, including protective measures in the concept of “decisions”; the only measures excluded from circulation are those taken without the defendant being summoned to appear; • applications for provisional, including protective, measures may be made to the Courts of a state even if another member state has jurisdiction over the substance of the matter (Article 35). According to authors, this means that interim relief can be sought in the EU state (including Italy) in which the interim measure is to be enforced. In other words, if for instance, a party wishes to apply for a freezing order to be enforced in Italy, the Italian Courts will have jurisdiction even if another state has jurisdiction to hear the merits of the case. The interim measures issued by a Court which does not have jurisdiction on the matter cannot, however, circulate in other EU countries and are only effective in the country of issuance. Italian Courts may also assist non-EU states in relation to interim or freezing orders. Indeed, according to Article 669-ter of the CCP, Italian Courts have jurisdiction to hear applications for interim measures also if the substance of the matter falls within the jurisdiction of a foreign state, provided that the measure is to be enforced in Italy. However, Italian private international law rules do not allow recognition and enforcement of interim measures issued by a non-EU state, as they are not ﬁ nal (Article 64 of Law 218/1995).

International arbitration Arbitration is governed by Articles 806 to 840 of the CCP. Further to the arbitration reform of 2006, Italian law no longer makes a distinction between domestic and international arbitration. The only criteria which is still in place is that of the seat of the arbitration: in particular, if the arbitration is seated in Italy, Italian law (i.e. the relevant mentioned articles of the CCP) will apply. This is the case even if the arbitration has international elements in relation to the nationality of the parties or of the arbitrators, the law applicable to the case, or the language of the proceedings: thus, even if international elements are present, the arbitration will be considered a domestic, Italian arbitration, if the seat is in Italy.

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As regards judicial support or interference in relation to international arbitrations seated in Italy, it must fi rst be noted that Italian law fully applies the Kompetenz-Kompetenz principle. Indeed, only arbitral tribunals can rule on their jurisdiction and competence, and not national Courts. There are, however, certain cases in which national Courts will interfere with arbitration pending in Italy. In particular, Italian law has identifi ed the Courts which have jurisdiction over the district where arbitration proceedings are seated as the Courts which can rule over certain issues, which are listed below: • Competent national Courts are always to grant preliminary or interim relief even when arbitration proceedings are pending; however, as said, they cannot rule on the jurisdiction of the arbitral tribunal. Indeed, pursuant to Article 818 of the CCP, Italian arbitrators are prohibited from issuing seizures and any other interim or precautionary measures. The only exception to this rule is provided for by the rules on corporate arbitration, which allow arbitrators to stay the effi cacy of a resolution by a company’s general meeting. • National Courts may also be called to intervene in relation to the appointment of the arbitrators. In particular: (i) if the parties have indicated an even number of arbitrators and have not otherwise agreed, a further arbitrator is appointed by the President of the Court where the arbitration has its seat, upon an application of the claimant; (ii) if the parties have not agreed upon the number or appointment method of the arbitrators, the arbitrators are three and are appointed by the President of the Court where the arbitration has its seat; and (iii) lastly, if the claimant has served a statement of commencement of an arbitration and appointed an arbitrator, requesting the defendant to do the same, if the defendant does not proceed to do so within 20 days, the claimant may apply to the President of the Court where the arbitration has its seat to request the appointment. • Under Article 816-ter of the CCP, if a witness refuses to appear before the arbitral tribunal, the latter, if deemed opportune, may request the President of the Court where the arbitration is seated to order the appearance of the witness. • When challenges against awards are possible, they are decided upon by the Court of Appeal competent for the place where the arbitration was seated; the parties may then appeal the judgment of the Court of Appeal to the Supreme Court only on points of law in relation to the decision of the Court of Appeal. According to Article 832 of the CCP, the parties may also opt for an institutional arbitration (instead of an ad-hoc one) and thus rely on the rules set out by the relevant institution. In Italy, there are several arbitration institutions, the most prominent being the Milan Chamber of Arbitration, which is run by the Milan Chamber of Commerce and runs the largest number of institutional arbitrations in Italy.

Mediation and ADR In recent years, Italian legislators have passed several bills aimed at enhancing the use of ADR in order to settle the dispute without relying on the Court system. • Assisted negotiation – introduced by Law Decree no. 132 of 2014, passed into Law no. 162 of 2014

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Before starting a lawsuit, the claimant must invite the other side to enter into an agreement (a so-called “Convenzione di negoziazione assistita”). The latter aims to amicably settle the dispute in good faith, with the mandatory assistance of the parties’ counsels, before fi ling a claim with the Court. In general, for claims regarding damages subsequent to circulation of vehicles and for all matters not already included in the mandatory mediation, where one party demands payment of a sum not exceeding €50,000.00, the offer to conclude such an agreement is mandatory. This means that at the fi rst hearing the Judge can autonomously investigate whether the process was ever started and order the claimant to invite the other side to conclude such an agreement. The process can last from a minimum of one month to a maximum of three months. Where the parties are able to settle the dispute, the fi nal agreement, duly signed by them and by the assisting counsels, is considered an enforcement order and can be used to start enforcement proceedings. It is a breach of professional ethics for a lawyer who signed the agreement to appeal it. • Mediation – introduced by Legislative Decree no. 28 of 2010 and amended by Legislative Decree no. 69 of 2013 Similarly to the assisted negotiation, in certain cases, before fi ling a suit the claimant shall fi rst seek an amicable solution via a mediation organism. The mediation is mandatory for matters concerning, e.g., condominium, rights in rem, damages compensation for medical liability, libel committed via press or any other public means, insurance, banking and fi nancial agreements, etc. The mediation can last for maximum three months starting from the date the mediation’s claim was submitted. If an agreement is reached, duly signed by the parties and their counsels, it has the same force as an enforcement order.

Regulatory investigations In relation to consumer protection, Italian law is shaped in accordance with EU law and principles on the matter. There is no regulatory agency in charge of overseeing the matter, except for some powers of the Italian Competition Authority, as we shall see below. The topic falls within the competence of the Ministry of Economic Development (“Ministero dello Sviluppo Economico”), which include departments which deal with consumer protection, also with the advice of the National Council of Consumers and Users (“Consiglio nazionale dei consumatori e degli utenti”), which is a public body representing Italian consumer organisations. In relation to business affairs, in Italy there are different independent regulatory agencies (“autorità amministrative indipendenti”), with investigative, regulatory and sanctioning powers in the relevant areas of competence. These bodies are independent, which means that they do not report to the government or to branches of the same. These authorities have investigative powers, often also with the help of police forces, and – further to sanctioning proceedings in which the entities involved have the chance to defend themselves – can issue different types of sanctions, including monetary fi nes, injunctions, disqualifi cations, confi scations, in accordance with the powers granted to each authority. Appeals against the sanctions of Italian regulatory agencies are heard by Italian Administrative Courts or, in some cases, by ordinary Courts of Appeal (e.g. in the cases of Banca d’Italia and Consob).

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There are 11 of these agencies, the most prominent being: • “Banca d’Italia” (Bank of Italy), the Italian Central Bank, which has regulatory and sanctioning powers in relation to the banks and fi nancial intermediaries under its supervision in the fi elds of, inter alia, transparency in the ownership structures and management, corporate governance and internal control systems, compliance with rules and regulations, also from a contractual perspective. In addition, the “Unità di Informazione Finanziaria”, which is Italy’s Financial Intelligence Unit, which is a division of the Bank of Italy, is responsible for investigating money laundering and terrorist fi nancing. • “CONSOB”, the Italian fi nancial markets regulator, which has regulatory and sanctioning powers in relation to insider trading and market manipulation cases. In addition, CONSOB has regulatory powers to ensure transparency of ownership, accounting documents of listed companies, appeals for public investment (IPOs, takeover bids and equity swaps). • “Autorità garante della concorrenza e del mercato”, the Italian Competition Authority, which has powers in relation to market dominance abuses, cartels and other anti- competitive practices, mergers/takeovers and market concentration, the repression of unfair commercial practices, misleading and unlawful comparative advertising, and the application of confl ict-of-interests laws to government offi ce-holders. • “Autorità per le garanzie nelle comunicazioni”, the Italian Communications Authority, which is the regulatory and competition authority for the broadcasting, telecommunications, publishing and postal sectors. • “Garante per la protezione dei dati personali”, the Italian Data Protection Authority, which has powers in relation to the protection of fundamental rights and freedoms in connection with the processing of personal data.

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Micael Montinari Tel: +39 06 696661 / Email: [email protected] Micael focuses on litigation: he heads the dispute resolution team and his clients include retail chains, fashion houses, media/digital players. He has almost 20 years of experience in a broad range of matters, including arbitration and intellectual property disputes and all forms of commercial and corporate litigation, interim, injunctive and arbitration proceedings, proceedings before the competition and consumers authority, and other Italian agencies. Micael is Vice-Chair of the International Litigation Committee and of the Arbitration and Intellectual Property Committee of the International Law Section of the American Bar Association. He is a member of the Rome Bar Association and is admitted to represent clients before the Supreme Court of Cassation; he is also a member of the International Chamber of Commerce, International Bar Association and International Young Lawyers Association. Micael is ranked by Chambers & Partners (both Global and Europe) for Dispute Resolution, and he was a Client Choice International Awards 2017 winner for Litigation. Luca Salamone Tel: +39 06 696661 / Email: [email protected] Luca joined Portolano Cavallo in 2017, after working for fi ve years in the litigation fi eld. He assists Italian and foreign clients in civil, commercial, corporate, fi nancial and insolvency disputes. He also deals with arbitration proceedings. In addition, Luca gives advice in the fi elds of construction and services contracts, real estate lease and sale/purchase agreements, as well as in renegotiation of loans. Luca also honed experience in internal investigation activities, as well as criminal and regulatory investigations, and, in particular, those conducted against banks and fi nancial intermediaries, including in the context of regulatory proceedings commenced by Banca d’Italia, Consob and MEF, and in appeals against the relevant sanctions. He is a member of the Milan Bar Association.

Filippo Frigerio Tel: +39 06 696661 / Email: [email protected] Filippo Frigerio joined Portolano Cavallo in 2015, under the terms of an intern work agreement secured through Bocconi University, becoming later in the year, upon earning his Law degree from the Luigi Bocconi Commercial University, one of the fi rm’s attorneys-at-law. While completing his university studies, Filippo attended courses at the Law School of the University of Minnesota, Minneapolis, USA, for a period of fi ve months. Filippo lends his expertise to both Italian and foreign clients in matters of disputes and arbitration on civil and commercial matters, as well as of new technologies, digital media, and Italian and European legislation concerning the protection of personal data. Furthermore, he provides legal assistance to operators in the broad life sciences fi eld. Portolano Cavallo via Rasella 155, 00187 Rome || piazza Borromeo 12, 20123 Milan, Italy Tel: +39 06 696661 / Fax: +39 06 69666544 / URL: www.portolano.it

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Shinya Tago, Takuya Uenishi & Landry Guesdon Iwata Godo

Effi ciency of process Japan is a civil law jurisdiction and there are fundamental differences between the civil law and the common law litigation practices. In contrast with the adversarial system, the inquisitorial approach of the Japanese civil law procedural system means that the judge largely controls the process and the development of factual information, and the decision- making process proceeds through a series of oral hearings. In 1996, the former Code of Civil Procedure was replaced by a new Code of Civil Procedure (Law No. 109 of 26 June 1996 (CCP)). One of the key objectives of the reform was to speed up the course of trials. This goal was further emphasised through the enactment of the Law on the Expediting of Trials, Law No. 107 of 16 July 2003, which provides that the objective of expediting trials is to conclude the fi rst instance proceedings as swiftly as possible, within a period of two years of their commencement. First instance proceedings can last eight months on average, but complex cases can take longer to resolve. The courts typically schedule the initial hearing within 1 to 1.5 months after the plaintiff has submitted a statement of claims, and require the defendant to submit an answer about a week before the hearing. Generally speaking, the courts have succeeded in increasing the pace of the litigation process. Information technology plays a role in the CCP: telephone conferencing was made possible under Article 170-3 for parties residing in remote areas; videoconferencing was introduced for the long-distance examination of witnesses under Article 204; as was the electronic processing of claims for payment demands under Article 397. A technical adviser asked by the court to participate in proceedings who resides in a distant location can be heard by audio conferencing under Article 92-3, and an expert also living in a remote area may be heard using teleconference or videoconference services under Article 215-3. There are no general fast-track proceedings, but for monetary claims not exceeding JPY600,000, special proceedings called “petty claim actions” are available under Article 368 of the CCP. Cases must generally be concluded at the fi rst hearing, and the judge delivers a judgment immediately after the hearing. The defendant may object and request ordinary civil proceedings to be held before the court.

Integrity of process Integrity of process underpins the general acceptance of the Japanese judicial system as a safe and reliable forum for commercial dispute resolution, sometimes in stark contrast with the situation prevailing in certain Asian jurisdictions. The professionalism, effectiveness, integrity, accountability and transparency of the Japanese courts are highly rated. The operation of Japanese justice relies on the existence of a highly trained, professional and

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independent judiciary. Japanese courts have been very successful in upholding integrity and judgments impartially refl ect the evidence, the arguments and the laws. Judges do not depart from the law and do not act from personal or political motives. Japan is a society governed by the Rule of Law, and as such its judicial system provides a reliable means of resolving legal disputes. The judicial system provides parties to a dispute with a reasonable opportunity to obtain relief when justifi ed, and a reasonable opportunity to defend against unjustifi ed, spurious, or malicious claims. The Japanese system attempts to implement these ideals through Constitutional provisions guaranteeing the accused defendant in criminal cases the right to counsel, the privilege against self-incrimination, and a right to a speedy trial before an impartial tribunal (Constitution of Japan, Articles 37 and 38). The civil justice system provides the parties with a reliable means of resolving legal disputes by being reasonably quick; reasonably available (cost benefi t analysis generally does not weigh in favour of not using the system, although cost is still an issue); provides a neutral forum; and offers a procedure for resolving disputes that gives a righteous plaintiff a reasonable opportunity to be adequately compensated. Other factors, in addition to access to justice and the relative timeliness of justice delivery, include: the quality of justice delivery; the independence, impartiality and fairness of the judiciary; public trust in the judiciary; the absence of corruption; the stability and consistency of laws and regulations and their interpretation (even in the absence of doctrine of binding precedent under Japanese law, decisions of the Supreme Court are generally consistently followed by the lower courts to the extent that is equitable); as well as the relative ease of retrieving past judgments and extracting data from court records.

Privilege and disclosure Privilege There is no concept of attorney-client privilege under Japanese law. Attorneys, doctors and other professionals and experts to whom confi dential information has been disclosed may refuse to testify and give evidence (Item 2, Paragraph 1, Art. 197 of the CCP) or refuse to submit documents (Art. 220 of the CCP) regarding facts that have come to their knowledge in the course of the performance of their duties. However, Item 2, Paragraph 1, Art. 197 of the CCP shall not apply where the witness is released from his or her professional duty of secrecy under Paragraph 2 of Art. 197. The obligation lying on attorneys to keep secret information obtained in the course of their professional duties in confi dence is also stated under Article 23 of the Lawyers’ Law (Law No. 205 of 10 June 1949). Disclosure Under Japanese law, there are no disclosure obligations or extensive discovery processes, in contrast with common law jurisdictions. Documents submitted as evidence by the parties are typically collected by the parties through their own efforts. Accordingly, for instance, in a product liability case, if a manufacturer is not cooperating, critical evidence may be concealed from the plaintiff, which is both relevant and admissible in a product liability case, including, but not limited to, notice to the manufacturer of the existence of a defect in one or more of its products, causation, the existence of a defect, and the feasibility of safer alternate designs. It is nonetheless possible to petition a court to issue an order to submit documents after an action has commenced by providing valid reasons to compel the counterparty, or a third party keeping certain documents listed in Article 220 of the CCP in his possession, to submit said documents (Article 221). The person fi ling a motion must indicate (insofar as possible)

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the document, the identity of the person holding it, its signifi cance, what needs to be proven with it and the reasons why it is necessary. The obligation to produce documents has been recognised in the following situations: (i) documents a party has referred to for the purpose of presentation or assertion of proof; (ii) documents that a party submitting evidence has the right to require delivery or inspection of while in the possession of another person; (iii) documents showing legal relation which support the rights or legal position of the person fi ling a motion, or documents showing a legal relation between the person fi ling a motion and the holder of the documents; or (iv) documents that are not excluded. Excluded documents include documents exclusively prepared for use by their possessor; documents that contain confi dential technical or professional information (e.g., confi dential information held by professionals such as lawyers and doctors); and (v) public offi cials’ documents, disclosure of which would cause harm to the public (Article 220, Paragraph 4 of the CCP). If the other party fails to comply with the court order to produce a document, the court may fi nd the applicant’s allegations concerning said document to be true (Article 224, Paragraph 1). Before fi ling an action, if the future plaintiff has given advance notice of the fi ling to the future defendant, the plaintiff or recipient of the notice may, within four months of the date of the notice, make inquiries to the other party on matters necessary to substantiate his allegations or collect evidence (Article 132-2 of the CCP). In addition, the court may order the submission of documents and the commissioning of examinations when a motion is fi led by a party and it is diffi cult for that party to collect documentary evidence from the other side that would be clearly necessary to prove his case (Article 132-4). The absence of extensive discovery may to some extent inhibit litigation in Japan. The Japanese legal system has a fact-pleading requirement that obliges a plaintiff to plead facts suffi cient to be successful at the start of the case. The means for compelling the production of facts before the initiation of a lawsuit described above are relatively limited and ineffi cient and plaintiffs also have little opportunity to obtain meaningful factual discovery even after the suit has begun.

Costs The general rule is that court costs shall be borne by the losing party (court costs consist of court ﬁ ling fees, the costs associated with service of process, documentary fees (preparation and submission of documents, including petitions, briefs, copy of evidence, translation of documents), the costs incurred for the examination of evidence, accommodation and travel expenses and daily allowances paid to witnesses and interpreters and the remuneration of experts, as provided for under the Law on Costs of Civil Procedure (Law No. 40 of 1971)). Court costs do not include legal fees (attorneys’ fees) which are borne by each party respectively in the absence of an attorneys’ fees clause. Apart from the aforesaid court costs, the general rule is that litigation costs are borne by the party incurring the expense, even if the party prevails in the dispute. In the context of tort claims, the court may nonetheless award a usually small part of the prevailing party’s attorneys’ fees as part of the damages when there is a reasonable causal nexus between a tort and the fees. The allocation of court costs is ordered as part of the court’s decision. Attorneys’ fees may be freely agreed upon between attorneys and clients, and lawyers are allowed to charge part of their fees on a contingency basis under Bar Association rules. Many law ﬁ rms continue to determine their fees based on a combination of retainer fees and success fees based on the now repealed legal fee table of the Japanese Federation of Bar Associations.

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The Japan Legal Support Center, an independent public institution, provides civil legal aid services including free legal consultations and loans for attorneys’ fees for people who require the assistance of legal experts but who, for economic reasons, are unable to pay for attorneys’ fees and court costs although, in practice, this is largely irrelevant for international commercial disputes. To obtain public funding, the applicant must have ﬁ nancial resources below a certain amount, have some reasonable chance of success, and pursue aims consistent with the purposes of legal aid. Criminal matters are excluded from the scheme.

Litigation funding Third-party funding is not yet common in the Japanese litigation practice. Its lawfulness is still a moot point, although it does not appear to be prohibited ‘per se’. The assignment of claims or causes of action is generally permitted but the entrustment of a claim for litigation purposes is prohibited under the Trust Law (Law No. 108 of 2006). There is still a risk that third-party funding could be regarded as a criminal act under the Lawyers’ Law which prohibits any person who is not an attorney from engaging in legal business (including lawsuits, arbitration and conciliation) and also prohibits them from “acting as an intermediary in such matters” (i.e., referring cases to attorneys to obtain compensation for their business activities) (Article 72 of the Lawyers’ Law). Confi rmation that third party funding is lawful could be welcomed by some in Japan. In spite of what is written above on access to justice and integrity of process, litigation before the courts can be very costly. For example, the Japanese legal system’s practice (no longer a requirement) of paying a substantial part of lawyers’ fees upfront, inhibits litigation. The now defunct Bar Association courts’ fi ling fee system, which for most cases has a graduated fee that increases with the size of damages sought regardless of the actual work completed by the attorney, increases the cost of getting one’s case before the court. Legal fees are generally borne by each party respectively, as explained above. Also, under rules applicable to security for costs, the parties must pay litigation expenses in advance to cover the cost of handling the case to be incurred by a court, as well as a ‘per diem’ expense allowance and transportation costs needed for witnesses, experts and interpreters, etc. Those persons benefi ting from legal aid who would have fi nancial diffi culties to pay such costs can be exempted (Article 82, Paragraph 1 of the CCP). A party seeking interim measures may also have to pay a security deposit. There are currently no US-style class actions in Japan, but making access to justice easier and more affordable through collective/mass actions was the main thrust behind the special procedure known as the Japanese class action system. The Act on Special Provisions of Civil Procedure for Collective Recovery of Property Damage suffered by Consumers (Law No. 96 of 2013) introduced a system which provides for a two-tier opt-in procedure. During the fi rst stage, a qualifi ed consumer organisation fi les a lawsuit requesting the court to confi rm the liability of a business operator for a common obligation arising under a consumer contract on behalf of potential consumer claimants. If the action is confi rmed, the quantum of damages will be determined based on individual claims fi led by consumers having elected to opt in. However, the scope of claims under this Act is limited and only covers claims arising from consumer contracts and to certain categories of property damage: claims for performance based on contractual obligations, for unjust enrichment, breach of contract, warranty against defects, and claim for damages arising out of unlawful acts; however, damage to property other than the subject matter of the consumer contract, lost profi ts, personal injury, and pain and suffering are expressly excluded by the Act. There is also the so-called “appointed

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party” mechanism under Article 30 of the CCP, which allows certain plaintiffs (or defendants) appointed by other claimants (or defendants) to act on their behalf in pursuing (or defending) civil actions. Appointments can be made when there are enough claimants/defendants sharing a “common interest” (i.e., the main allegations or defences are common amongst them). The appointed party can pursue the case on behalf of the appointing parties and the result will be binding upon the appointing parties, including a settlement.

Interim relief The following forms of interim relief are available under the Civil Provisional Remedies Law (Law No. 91 of 22 December 1989). Where a dispute involves a monetary claim, obligees/potential plaintiffs may apply for a provisional attachment order (kari sashiosae) to ensure that any future monetary judgment will be enforced under said Law (Article 20). The effect of the attachment is to freeze the obligor’s/potential defendant’s assets to keep the defendant from disposing of his movables (most often money on bank accounts) or immovables and secure the future collection of their claims. It does not entitle the obligee to convert the seized property into money and have his obligation satisfi ed therewith. Where a dispute involves certain categories of non-monetary claims, potential plaintiffs may apply for a provisional disposition order (kari shobun) to preserve their rights with respect to the subject matter in dispute (Article 23). Unlike a provisional attachment which only concerns monetary claims, provisional disposition may take different forms due to the variety of subject matters in dispute. Provisional orders establishing a provisional legal relationship between the parties (e.g., labour relationship between an employer and a dismissed employee: the employee would fi le a motion requesting the court to issue a provisional order confi rming the employee’s status as employee pending a resolution of the dispute on the merits and receive salary without having to report to work) are available to avoid substantial detriment or imminent danger caused by disputed legal relationships. To be granted an order, the claimant has to demonstrate: (i) its substantive right to be protected; and (ii) the exercise of its right will most likely be impossible or extremely diffi cult without such provisional attachment or disposition. For provisional dispositions establishing a provisional legal relationship between certain parties, the claimant must establish the prima facie existence of a legal relationship that the other party is disputing, and the need for interim relief in order to avoid substantial detriment or imminent danger to the claimant.

Enforcement of judgments Domestic judgments A local judgment may be enforced by submitting to the execution court or to a bailiff an original of the judgment and a certiﬁ cate of enforceability issued by a court clerk of the judgment court (Articles 25 and 26 of the Civil Execution Law, Law No. 4 of 30 March 1979 (CEL)). The court or bailiff handles the enforcement of judgments. Enforcement differs for a monetary and a non-monetary judgment. Pursuant to Article 22 of the CEL, compulsory execution may be carried out based on (inter alia) the following “obligation- titles” (saimu meigi) (also covering foreign judgments discussed in the next paragraph): a ﬁ nal and binding judgment; a judgment with a declaration of provisional execution; an order of compensation of damages with a declaration of provisional execution; a demand for payment with a declaration of provisional execution; a notarial deed prepared by a notary with regard to a claim for payment of a certain amount of money or any other fungible chattel or a certain amount of securities, which contains a statement to the effect that the

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obligor will accept compulsory execution; a judgment of a foreign court for which an execution judgment has become fi nal and binding; an arbitral award for which an execution order has become fi nal and binding, etc. Compulsory execution may be commenced only when an authenticated copy or a transcript of an obligation-title or a judicial decision that is to become an obligation-title when it becomes fi nal and binding has been served upon the obligor in advance or simultaneously. Means of compulsory execution of obligation-titles include the following: • For the enforcement of a monetary claim, the CEL allows for compulsory execution and the debtor’s general properties (real properties, ships, moveable properties, claims and other property rights) can be attached and sold in a public auction sale, and the sales proceeds are then used for the satisfaction of the monetary claim (Section 2 of Chapter 2 of the CEL). • For the enforcement of an obligation to deliver real property, a request for the surrender or delivery of real estate property, etc. (i.e., real property in which a person resides) may be made under Articles 168 and 169 of the CEL and an indirect compulsory execution method is also available under Articles 173 and 172 of the CEL. • For the enforcement of an obligor’s performance obligation, execution may be made by a third-party substitute (Article 414(2) of the Civil Code and Article 171 of the CEL) or through an indirect compulsory execution method under Article 172 of the CEL (monetary sanction: the execution court orders the obligor to pay the obligee a certain amount deemed reasonable to secure performance of the obligation by reference to the period of delay or immediately if the obligor fails to perform the obligation within a reasonable period). • For the enforcement of an obligor’s obligation not to do something, a petition may be fi led with the court to remove the results of the obligor’s actions at the expense of the obligor or impose any other reasonable disposition for the future (Paragraph 3 of Article 414 of the Civil Code and Article 171 of the CEL). In addition, indirect compulsion is available under Article 172 of the CEL. No direct enforcement by specifi c performance is allowed if the nature of the obligation does not permit enforcement (Article 414(1) of the Civil Code). Foreign judgments Japan is not party to any bilateral or multilateral treaty for the recognition and enforcement of foreign judgments. In order to enforce a foreign judgment, the party enforcing the judgment of the foreign court must obtain an execution judgment from a competent court in Japan declaring such enforcement (Article 24, Paragraph 4 of the CEL). The requirements for the recognition of a foreign judgment are set forth in Article 118 of the CCP. The petitioner must establish that the judgment is fi nal. In addition, the judgment must satisfy the following requirements: (i) the jurisdiction of the foreign court which rendered the judgment in accordance with or under laws or regulations or conventions or treaties; (ii) the losing party has received proper service of summons or orders required to commence the proceedings (excluding service through notice by publication), or has appeared without being so served; (iii) the content of the judgment and the proceedings of the lawsuit are not contrary to public policy in Japan; and (iv) reciprocity exists (the courts of the relevant foreign country provide reciprocal recognition of Japanese judgments). If these requirements are satisfi ed, the foreign judgment will be effective and enforceable in Japan and the court issuing an execution judgment must not retry the whole case or review the case on its merits regardless of whether or not the foreign judicial decision was erroneous (Article 24,

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Paragraph 2 of the CEL). With respect to (iii) above, a Supreme Court judgment of 1997 denied the enforceability of punitive damages in a judgment of a state court of California as a violation of Japan’s public policy.

Cross-border litigation Jurisdiction The jurisdiction of the Japanese courts in cross-border disputes is governed by the CCP (Chapter 2, Section 1, Articles 3-2 et seq.) which lays down international jurisdiction rules applicable to litigation in the Japanese courts. Jurisdiction over a dispute primarily depends on the classifi cation of the dispute, as per the examples below: • Jurisdiction based on the defendant’s domicile (Article 3-2 of the CCP): the defendant’s domicile or residence in Japan; the principal place of business or business offi ce of the defendant’s legal entity. • Jurisdiction over an action involving a contractual obligation (Article 3-3): for an action based on a claim for performance of a contractual obligation; on a claim for damages due to non-performance of a contractual obligation; or on any other claim involving a contractual obligation: the place of performance of the obligation (Article 3-3, Item 1 of the CCP). • A tortious action: the place of the tortious act (Article 3-3, Item 8 of the CCP). A tortious act is deemed to happen where the tortious act was committed (including the place where the product has been manufactured in product liability cases) or where the results have occurred (unless the occurrence in Japan of the results of a wrongful act committed abroad was unforeseeable). • Jurisdiction over actions involving consumer contracts and labour relations: • Article 3-4 (1): Consumer dispute commenced by a consumer whose domicile is located in Japan at the time the action is fi led or at the time the consumer contract is concluded. • Article 3-4 (2): An action involving a dispute over a civil matter that arises between an individual worker and that worker’s employer with regard to the existence of a labour contract or any other particulars of their labour relations may be fi led with the Japanese courts if the place where the labour is to be supplied is within Japan. • Article 3-5 (3): Intellectual property (IP) dispute related to the registration of an IP right in Japan, or about the existence or validity of certain IP rights registered in Japan. • Agreement on Jurisdiction: Article 3-7 (1): Parties’ agreement to international jurisdiction. • Article 3-8: Jurisdiction by appearance. • Under Article 3-9 of the CCP, even if one of the foregoing grounds is found, the court may dismiss the case if it fi nds that there exist special circumstances under which a trial and judicial decision by the courts of Japan would harm equity between the parties or impede the well-organised progress of court proceeding. Proceedings, etc. Court proceedings are conducted in Japanese only. Interpretation or translation in Japanese is required for testimonies or submission of documents in a foreign language. Legal representation by an attorney is not required before all courts, especially the lower courts.

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In court proceedings, the basic rule is that only a Bengoshi (attorney-at-law registered in Japan) is able to act as a procedural attorney. A Gaikokuho Jimu Bengoshi (a foreign attorney registered with the Ministry of Justice) is not able to act as a procedural attorney in a court of law in Japan. With respect to the application of a foreign law in the Japanese courts where a foreign law was selected or determined to be the governing law, the foreign law is seen as the norm on which the judgment should be predicated. In principle, the duty of the court is to ascertain the law and its substance and in doing so, the court may make enquiries to the Supreme Court, the Ministry of Justice, universities, the foreign country’s embassy or consulate. An expert witness can be appointed by the court. The court may also ask the parties to assist and produce legal opinions from foreign lawyers or scholars (and in practice, the court very often ends up relying on the submissions of the parties). Service of Summons • Service to a Japanese party Service of summons is important especially if a foreign judgment needs to be enforced in Japan at a later stage. Under Item 2 of Article 118 of the CCP, the defeated defendant must have received proper service of summons or order necessary for the commencement of the lawsuit (or have appeared without service). It also provides that service by publication does not suffi ce. According to a Supreme Court judgment of 28 April 1998, service of summons or order does not need to be done in accordance with Japanese laws but it must notify the defendant of the commencement of the lawsuit and must not impair the defendant’s defence rights. If there is any treaty on the service method to be used between the State where the judgment is entered and Japan, service must be made accordingly. Japan is a signatory to both the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters of 1965 (the Service Convention) and the Hague Convention on Civil Procedure. The Service Convention provides for the channels of transmission to be used when a judicial or extrajudicial document is to be transmitted from one State party to the Convention to another State party, for service of the latter. The Convention deals primarily with the transmission of documents; it does not address or comprise substantive rules relating to the actual service of process. The Service Convention does not preclude a party from exercising its authority to serve directly by post unless the contracting State declares that it refuses such service. Although Japan has not made such a declaration, service directly made by post is considered not to meet the requirements of Item 2 of Article 118 of the CCP. In addition, a Tokyo High Court judgment of 18 September 1997 requires the service of summons or order to include a Japanese translation if the defendant is a Japanese national, regardless of his language skills. The document to be served under the Service Convention is fi rst sent to the Ministry of Foreign Affairs which reviews it to determine whether the document satisfi es procedural requirements (for example, whether the request and the summary of the document are properly fi lled in and whether the complaint is translated). If the requirements are satisfi ed, the Ministry sends the document to the Supreme Court of Japan. Following its own review, the Supreme Court sends the document to the District Court having jurisdiction over the addressee of the document. The District Court then serves the document on the addressee by special mail service. Once this is done, the District Court issues a certifi cate of service which is sent to the Ministry through the Supreme Court. • Service to a foreign party Service outside Japan is performed by service as commissioned by the court to the competent government agency of the foreign country or to a Japanese ambassador or consul

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stationed in the relevant foreign country (Article 108 of the CCP). Even if the foreign country were also a party to the Service Convention and central authority service were allowed, it normally takes between six months and more than a year to complete service. Service by a consul may normally be achieved within six months; however, if a person on whom documents are served refuses to accept them, service cannot be effected. If there is no diplomatic relationship between Japan and the foreign country and service under Article 108 of the CCP may not be performed, or if the competent authority of the foreign country fails to send a report of service for more than six months, documents may be served by publication (Article 110) although, in practice, this is seldom the case.

International arbitration Arbitration is not a popular method of resolving domestic disputes between Japanese companies. The number of cases handled by the main institute, the Japan Commercial Arbitration Association (JCAA), is nominal compared with the number of litigations handled by domestic courts or the caseload of competing institutions in Singapore or Hong Kong. Japanese companies typically rely on Japanese courts for domestic matters and would only favour arbitration for their cross-border activity: in this context, they tend to select major internationally recognised arbitration centres such as the International Chamber of Commerce (ICC) or the Singapore International Arbitration Centre (SIAC). The Arbitration Law, Law No 138 of 1 August 2003 (JAL) is applicable to arbitral proceedings whose place of arbitration is in Japan. The JAL is based on the UNCITRAL Model Law, although there are a limited number of deviations from the Model Law. In addition, the Supreme Court Rules on Procedures of Arbitration Related Cases (Supreme Court Rules No. 27 of 26 November 2003) prescribe procedural rules for court cases relating to arbitration. No distinction is drawn between domestic and international arbitration. The JAL sets out procedural rules but should the parties speciﬁ cally agree on other procedural rules (for example, JCAA’s Commercial Arbitration Rules or the ICC arbitration rules), these rules will override the JAL which will only ﬁ ll the gaps. The arbitration agreement must be in writing (Article 13(2) of the JAL). Documents signed by all the parties or letters exchanged between the parties, including documents exchanged by fax or other communication devices, and other written instruments, are acceptable. The agreement is valid only when the subject matter relates to a civil dispute (excluding divorce, etc.) that can be resolved by settlement between the parties (Article 13(1)). Arbitrability of a dispute is broadly construed in Japan to cover a variety of civil and commercial disputes. A number of matters are generally considered not to be arbitrable, including insolvency, antitrust matters, the validity of intellectual property rights granted by the government; shareholders’ lawsuits against shareholders’ general meeting resolutions. Japanese courts generally take a pro-arbitration approach towards the enforcement of agreements to arbitrate. Article 14(1) compels Japanese courts, upon a petition by the defendant, to dismiss a claim related to a civil dispute that is subject to an arbitration agreement (save in limited circumstances, including when the arbitration agreement is null and void, cancelled or invalidated for other reasons). A consumer may unilaterally terminate an arbitration agreement with a business operator to arbitrate disputes that may arise in the future, and an agreement with respect to labour disputes that may arise in the future between an individual employee and his employer is null and void (JAL Supplementary Provisions, Articles 3 and 4). The tribunal itself may rule on its own jurisdiction (i.e., the authority to conduct arbitral proceedings and make an award). Article 23(1) of the JAL expressly provides the principle

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of competence-competence in the same manner as the Model Law. The tribunal may rule on assertions made on the existence or validity of an arbitration agreement or its own jurisdiction. If such an objection is made, the tribunal shall issue a preliminary independent ruling or an arbitral award when it considers it has jurisdiction, and when it deems otherwise, issue a ruling to terminate the arbitral proceedings (Article 23(4)). Article 36 provides that unless the parties have agreed on the rules of law applicable to the substance of the matter, the arbitral tribunal will apply the substantive law of the State with which the dispute subject to the arbitral proceedings is most closely connected. Unless otherwise agreed by the parties, the tribunal may order a party to take such interim protection measures as the tribunal deems fi t with respect to the subject matter of the dispute and order a party to provide appropriate security in connection with such measure (Article 24 (1) and (2)). Because interim measures decided by arbitrators are not immediately enforceable, Article 15 provides that, notwithstanding the existence of an arbitration agreement, a party may request an interim protection measure from a court before or during arbitration proceedings, and that the court may grant such measure in respect of a dispute which is the subject of the arbitration agreement. Pursuant to Article 39, the award must be in writing, dated and signed by the arbitrators and should, unless agreed otherwise by the parties, state the reasons for the award. If the arbitral tribunal is a panel, it is suffi cient for the award to be signed by a majority of arbitrators. Copies of the award must be served on the parties. The grounds for the setting-aside of an award by the court under Article 44(1) are substantially similar to those entrenched in the Model Law. Article 45 provides that an arbitral award (irrespective of whether or not the place of arbitration is in Japan) shall have the same effect as a fi nal and conclusive judgment. Japan is a party to the New York Convention and the Washington Convention. The JAL also adopts the provisions of the Model Law on the recognition and enforcement of foreign awards. For the enforcement of an arbitral award made in a foreign country, the applicant needs to fi le a petition with the court to get an enforcement order, together with a certifi ed copy of the award and a translation into Japanese (Article 46 of the JAL). The costs of arbitration are apportioned between the parties in accordance with the parties’ agreement (Article 49(1)). If there is no agreement (or applicable rules such as JCAA’s Commercial Arbitration Rules), each party bears the costs it has disbursed with respect to the proceedings (Article 49(2)). The JAL does not provide that the losing party should systematically bear the costs.

Mediation and ADR There is no obligation to pursue alternatives to litigation (except for court-annexed mediation, which is mandatory at ﬁ rst instance for family disputes and certain rent disputes but rarely used for large commercial disputes). Japanese people and corporates typically prefer amicable settlement of disputes through negotiation over court litigation. Even then, a negotiated settlement (wakai) can be made at any time before or during the court proceedings. ADR is available on a voluntary basis in the form of civil mediation under the Law Concerning the Promotion of the Use of Alternative Dispute Resolution Procedures (Law No. 151 of 1 December 2004 (ADR Law)). The ADR Law has introduced an accreditation system for private dispute resolution services, but this is not mandatory. If the parties can reach an agreement, this agreement is put on record by the court and becomes enforceable in the same manner as a ﬁ nal judgment. Civil mediation procedures are simple and cost-

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effective (costs are fi xed) and proceedings are confi dential. The relative success of mediation is due to the increasing costs and sophistication of modern litigation and the recognition that existing commercial relationships had better be preserved insofar as possible. Civil litigants can also agree to refer their dispute to civil conciliation (chotei) under the Civil Conciliation Law (Law No. 222 of 9 June 1951 (CCL)). Conciliation under the CCL is conducted by a conciliation committee composed of one judge and two or more civil conciliation commissioners appointed from amongst knowledgeable and experienced citizens. The committee assists the parties in fi nding an amicable settlement and usually submits a settlement plan to the parties. If the parties can reach an agreement, this agreement is put on record by the court and has the same effect as a court judgment and can be enforced accordingly. If the parties are unable to reach an agreement, the plaintiff must fi le a suit before the ordinary courts to pursue their claims. Arbitration (chusai) is the most frequently used ADR mechanism to resolve large commercial disputes. The main thrust behind the new Arbitration Law (JAL) based on the UNCITRAL Model Law discussed above was to encourage the use of arbitration. Although commercial arbitration has not been used very actively as a means of resolving domestic disputes in Japan, it has gradually become an important option, especially in an international context. The major alternative dispute resolution institutions in Japan include, with respect to arbitration, the Japan Commercial Arbitration Association (JCAA), the Japan Intellectual Property Arbitration Centre, and the The Tokyo Maritime Arbitration Commission (TOMAC) of the Japan Shipping Exchange. For mediation, there are a number of institutions including the Courts, the Financial Instruments Mediation Assistance Centre (FINMAC) and the Japan Bankers’ Association. A number of domestic construction disputes are also resolved through the Med-Arb process before the Construction Dispute Review Boards established pursuant to the Construction Business Act. A number of industry-associated (product-specifi c) trade associations have established permanent dispute resolution organisations in the wake of the enactment of the Product Liability Law (Law No. 85 of 1 July 1994): the Federation of Pharmaceutical Manufacturers Associations of Japan; the Japan Chemical Industry Association; the Association for Electric Home Appliances; the Japan Automobile Manufacturers Association, Inc.; the Center for Housing Renovation and Dispute Settlement Support; the Consumer Product Safety Association; the Japan General Merchandise Promotion Center; the Japan Cosmetic Industry Association; the Fire Equipment and Safety Center of Japan; the Japan Toy Association; the Japan Construction Material & Housing Equipment Industries Federation, etc.

Regulatory investigations There is a variety of regulatory investigations that cannot be summarised here (and as many watchdogs). The main Japanese regulatory authorities are as follows: • The Public Prosecutor’s Ofﬁ ce: investigates and prosecutes criminal matters in general (assisted by the police). • The Ministry of Justice has supervisory responsibility for matters regulated by the Companies Act (Law No. 86 of 26 July 2005), the Commercial Code and Civil Code. • The Ministry of Economy, Trade and Industry (METI) for various economic violations including under the Unfair Competition Prevention Law (Law No. 47 of 19 May 1993). • The Ministry of Finance (MOF): in charge of matters regulated by the Foreign Exchange and Foreign Trade Law.

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• The Ministry of Health Labour and Welfare, in relation to regulatory matters concerning pharmaceuticals and medical devices. • The Financial Services Agency (FSA) and the Securities and Exchange Surveillance Commission (SESC) deal with violations of the Financial Instruments and Exchange Law (Law No. 25 of 13 April 1948). • The Japan Fair Trade Commission, for antitrust violations including unfair practices and cartels under the Law on Prohibition of Private Monopolisation and Maintenance of Fair Trade, Law No. 54 of 14 April 1947), and violations of the Law against Delays in Payment of Subcontract Proceeds, Etc. to Subcontractors. • Japan Financial Intelligence Centre (JAFIC) within the National Police Agency dealing with money laundering investigations and terrorism. • The Personal Information Protection Commission for the supervision and handling of data protection issues under the Protection of Personal Information Law, Law No. 57 of 30 May 2003. The relevant authorities can use a number of methods of investigation, including voluntary and compulsory information requests. They can also apply to a court for a search warrant in serious cases. Where an investigative authority concludes that a crime has been committed, it can refer the matter to the police and/or the public prosecutor.

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Shinya Tago Tel: +81 3 3214 6205 / Email: [email protected] Shinya Tago is a Japanese attorney at law, admitted to the New York State Bar Association, partner and Head of the International Practice Committee of Iwata Godo. His practice encompasses a broad range of litigation that in recent years has included: general commercial litigation; securities litigation; shareholder derivative litigation; arbitration (domestic and international), conciliation and mediation; and tort claims (including product liability disputes). Shinya Tago has particular expertise representing foreign clients in a wide variety of litigations in Japanese courts. He has extensive experience dealing with complicated cross-border issues that can arise involving Japanese and non-Japanese defendants. Iwata Godo’s reputation and wealth of experience has built the fi rm a portfolio of clients comprising many of Japan’s leading companies, including Nikkei 225 companies, across all industry sectors. Clients include large manufacturing and consumer products companies, pharmaceutical companies, electric power companies, companies in banking, fi nance, insurance, and other service industries, as well as start-ups involved in high technology and a variety of other fi elds.

Takuya Uenishi Tel: +81 3 3214 6205 / Email: [email protected] Takuya Uenishi is an associate at Iwata Godo. He has vast experience representing ﬁ nancial institutions (Japanese mega-banks, regional banks, trust banks, etc.) in litigations and cross-border transactions. He also has extensive experience as a litigator involved in corporate-related lawsuits, damages suits, competition law-related disputes, and labour disputes. He was seconded to the legal department of a Japanese mega-bank from 2014 to 2016. Takuya Uenishi graduated from the University of Tokyo (LL.B., 2008) and the University of Tokyo School of Law (LL.M., 2010).

Landry Guesdon Tel: +81 3 3214 6205 / Email: [email protected] Landry Guesdon is a Registered Foreign Attorney, member of the International Practice Committee of Iwata Godo. In Japan since 1997, Landry Guesdon has extensive experience in mergers and acquisitions, joint ventures and general corporate matters and antitrust spanning numerous industries (pharmaceuticals and medical devices, cosmetics, defence and aerospace, food and agriculture, consumer and retail, general industrials, energy and utilities). Landry Guesdon has received a B.A. in law from the University of Kent in Canterbury and an LL.M. degree from the University of Paris.

Iwata Godo Marunouchi Bldg. 10th ﬂ oor, 2-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-6310, Japan Tel: +81 3 3214 6205 / Fax: +81 3 3214 6209 / URL: www.iwatagodo.com

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Thomas Nigg, Eva-Maria Rhomberg & Domenik Vogt GASSER PARTNER Attorneys at Law

Effi ciency of process In general, Liechtenstein has a very effi cient court system. Located between Switzerland and Austria, Liechtenstein is not a common law but a civil law country. Case law does exist, but it does not play as important a role as it does in Anglo-Saxon jurisdictions. In light of Liechtenstein’s history, which has always been closely related to Austria’s, it does not come as a surprise that both our legal system and the organisation of Liechtenstein’s courts depend heavily on Austrian law. Nonetheless, Swiss law has also left signifi cant traces on our legal system. Liechtenstein law is a hybrid of Austrian and Swiss Law. The most common and thus fatal error committed by lawyers regularly dealing exclusively with either Austrian or Swiss law is to ignore Liechtenstein specifi cs, at least in as much as procedural law is concerned. Furthermore, Liechtenstein has its own specialities because it is the only country in continental Europe that has adopted the legal institution of trusts. However, litigation in Liechtenstein is not always the fi rst choice either for foreign parties or their legal advisors. Most parties wish to seek justice in their home country, being unaware of the effi ciency and competence of Liechtenstein lawyers and courts. Compared with other jurisdictions, Liechtenstein justice is considerably swift. There is no rule requiring criminal cases to be granted priority. Once the relevant documents are fi led, a hearing is scheduled within weeks. The median time from commencement of a lawsuit to judgment is 12 months. It may take longer if the case is complex or international, if foreign courts or foreign law must be applied, or if witnesses who live abroad must be heard in court. In the vast majority of civil cases, a fi nal decision can be obtained within two or three years.

Integrity of process In both civil and criminal matters, judicial powers are vested in and exercised by the courts in Vaduz. Historically, judges were selected and appointed by the parliament (the Landtag). Nowadays, under the amended Constitution of the Principality of Liechtenstein, the reigning Prince and the parliament employ a joint commission for the selection of judges, chaired by the Prince, who has the casting vote. The government appoints its own member responsible for supervising the administration of justice. Due to limited human resources, there is a long-standing tradition under which judges are “recruited” from both Austrian and Swiss courts. The circumstances under which a judge may be challenged on the grounds of partiality are determined in the Law relating to the Organisation of the Courts (Gerichtsorganisationsgesetz, GOG). The GOG guarantees, among other principles, the impartiality and independence of the court. As in many other jurisdictions, a judge may not hear a case if that judge, or a person

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with whom that judge has a close relationship, is a party to that specifi c dispute. A judge must also withdraw whenever there is reason to believe that their impartiality may be questioned, specifi cally if they have either a friendly or a hostile attitude toward a party to the dispute. In the Liechtenstein legal system, questions of both fact and law are decided by a judge. Juries as formed in other (especially common law) jurisdictions are alien to Liechtenstein. However, Liechtenstein has the concept of lay assessors. The Superior Court (Obergericht) and the Supreme Court (Oberster Gerichtshof) may be composed of both judges and lay assessors. The various instances guarantee a maximum of judicial security. Proceedings before the District Court (Landgericht) are conducted by a single judge, whereas the Superior Court consists of three judges, one of whom may be a lay assessor; and the Supreme Court consists of fi ve judges, two of whom may be lay assessors. So-called Willkürbeschwerden (appeals on arbitrariness) may be brought to the Liechtenstein Constitutional Court (Staatsgerichtshof, StGH). This could prolong the average duration of a proceeding for another year. Nevertheless, this “last frontline in defending the law” guarantees that severe procedural errors or gross negligence regarding the principles of law result in the lifting of court decisions.

Privilege and disclosure Documents Compulsory pre-trial discovery, as known in common law countries, does not exist and there is no comparable provision under Liechtenstein law. However, it is possible to obtain an order that forces the other party to produce certain types of documents in the course of a civil law procedure. This order is inter alia limited to cases in which the document is in the possession of a party which had previously referred to it. Nonetheless, there are no strong means to force the opposing party to produce relevant documents. A refusal to cooperate could be weighed and considered accordingly by the court only within its free evaluation of the evidence. Such disobedience may lead to the unprovability of important facts. Under Liechtenstein law, there is no deposition without the court’s lead, which means that parties cannot compel a witness to appear at a pre-trial deposition and answer questions under the penalty of perjury. The same applies for pre-trial interrogatories, which are also not to be found within Liechtenstein’s jurisdiction. Privilege Attorneys must respect client confi dentiality concerning issues entrusted to them. Non- compliance with this rule could have severe consequences for lawyers – up to the loss of their licence and criminal proceedings. Under Liechtenstein law, a client may release a lawyer from the obligation of confi dentiality. The lawyer’s duty of professional secrecy is stated in Article 15 of the Law on the Legal Profession (Rechtsanwaltsgesetz, RAG) and refl ected in § 321 of the Code of Civil Procedure, ZPO, which together authorise lawyers to refuse the disclosure of privileged information. In addition, lawyers are allowed to refuse to testify in criminal proceedings (see § 108 Code of Criminal Procedure, StPO). Client confi dentiality may confl ict with the reporting obligations of Liechtenstein professionals which were created by the implementation of the Second and Third Anti-Money Laundering Directive. In these cases, lawyers could face punishment for non-compliance with the Due Diligence Act or, in more severe cases, for aiding and abetting. According to Article 3 para. 1 (m) of the Liechtenstein Due Diligence Act, DDA (Sorgfaltspfl ichtgesetz), lawyers and law fi rms entered in the lists of lawyers or lists of law fi rms under the RAG are subject to various

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due diligence obligations to the extent that they assist in the planning or execution of fi nancial or real estate transactions for their clients in cases set forth in the aforementioned article. However, along with some other professionals, lawyers are not required to report to the Financial Intelligence Unit (FIU) if they have received notifi able information from or about a client in the course of ascertaining the legal position for their client or when performing their task of defending or representing that client in or concerning judicial proceedings, including advice on instituting or avoiding proceedings, whether such information is received before, during or after such proceedings (see Article 17 para. 2 DDA). Under Liechtenstein law, a confl ict of interest arises when a lawyer is acting for both parties involved in the same case. It may also arise if the lawyer acts for a party after having represented the counterparty in the same or in a connected case (cf. Article 17 para. 1 RAG). In the same way, there may be a confl ict of interest if the lawyer acts for one party in one case and for the counterparty in another, pending case.

Costs When it comes to trial, one must always bear in mind the risk of losing a case and the risk associated with its costs. All necessary and appropriate costs caused by litigation are considered as legal costs. As a general rule, each party bears all their own costs. Nonetheless, a party may seek legal aid if he or she is unable to fund legal costs and lawyers’ fees without putting their “daily needs” in danger (see §§ 63 et seq. Code of Civil Procedure, ZPO). Lawyers’ fees are regulated by a statutory tariff. This tariff is applicable on a party-to-party basis and determines which costs have to be reimbursed to the other party. Apart from that, lawyers may freely agree on their fees in relation to each client. The complexity of the case, the kind of services involved and the degree of liability linked to the case determine the calculation of the fees, which are usually calculated on an hourly basis. The amounts expended – costs and legal fees – are generally recoverable from the losing party in proportion to the extent to which the plaintiff or defendant has succeeded with his or her claim or defence. Should the plaintiff prevail with only 50% of his or her claim, the costs are considered compensated and each party is responsible for any costs incurred by him or herself. It is important to note that should the other party fail to pay within the required time, an order for the payment of costs is executable. The danger that a plaintiff might sue for no good cause and might lose against a Liechtenstein resident is the reason why there are laws to the effect that a plaintiff who neither has a residence in Liechtenstein, nor owns land or receivables which are secured on such land, has to pay security in the amount of the defendant’s estimated and presumed court and lawyers’ fees (see §§ 57 et seq. ZPO).

Litigation funding Court proceedings in Liechtenstein are usually funded by the parties themselves. However, as mentioned above, a party may seek legal aid if he or she is unable to fund legal costs without putting his or her “daily needs” in danger. According to § 64 ZPO, legal aid can include a temporary exemption from – inter alia paying court fees, paying an advance on costs for witnesses or ofﬁ cial experts or interpreters, and providing security. Legal aid is available for natural persons as well as legal entities under the conditions set forth in § 63 ZPO. In Liechtenstein, lawyers are not allowed to assert a contingency fee, and they are further not allowed to purchase a client’s claim which is the object of current proceedings (see § 879 ABGB). In the case of successful litigation, only a surcharge to the fees may be agreed.

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Litigation funding by an independent third party is permitted in Liechtenstein. In this case, there is no assignment of rights or the claim. The third party only gains the right to carry out legal proceedings on behalf of the plaintiff.

Interim relief The success of court actions often depends on the effectiveness of provisional remedies, conservatory measures or summary judgments taken before or in lieu of the main proceedings. Generally, interim measures are obtained from a court exclusively upon application by a party for the purpose of preventing (irreparable) injuries to the petitioner. During the pendency of extra-judicial proceedings, interlocutory injunctions may be rendered ex offi cio (see Article 270 (3) EO). The Law on Execution of 24th November 1971 (Exekutionsordnung, “EO”) deals with interim relief, and particularly with such injunctions as described in the following. Interlocutory injunctions – prior to the commencement of a lawsuit and during litigation – may either take the form of a security restraining order (Sicherungsbot) or an offi cial order (Amtsbefehl), the choice of which generally depends on the nature of the claim. Whilst security restraining orders aim exclusively at securing pecuniary claims, offi cial orders deal with claims other than those of a pecuniary nature. (a) Security restraining orders As long as the party may issue execution on the alleged debtor’s assets to achieve the same results, injunctions are inadmissible. If the petitioner is already suffi ciently secured, either by a right of lien or retention, or the court views him or her as suffi ciently protected, an injunction may be denied. To be granted an injunction by a court, one has to fulfi l two major conditions. Besides certifying the claim that warrants such a legally far-reaching measure, it is necessary to establish reasonable security reasons. The applicant must furnish (prima facie) evidence that he is going to face a subjective as well as an objective risk. In some cases, it is suffi cient to certify that the opposing party is a “domiciliary company” (objective reason), i.e. a company which is not engaged in business in Liechtenstein because its purpose is limited to managing funds or holding participations or equity interests. As security for pecuniary claims, the court may order different injunctions such as the seizure, custody and compulsory administration of movable tangible property and the deposit of funds in court, an injunction by order of the court on the sale or seizure of movable tangible property to the effect that the sale or seizure is rendered invalid, or an injunction addressed to a third party in which the alleged debtor has to fi le a pecuniary claim against that third party. (b) Offi cial orders According to Article 276 EO, an offi cial order may be issued if it is otherwise likely that the prosecution or realisation of a claim may be rendered impossible or substantially more diffi cult. Even if there is no particular endangerment or defeat of prosecution, the court can grant such an injunction in order to settle the relation of the parties to the subject of controversy, more precisely to settle the ownership, or maintain the real condition of the tangible property or legal relationship, if such measures are necessary. An offi cial order is a remedy for the temporary regulation of a specifi c situation. As security for such claims, the court may order, among others, a deposit in court of movable, tangible property in the alleged debtor’s custody, or the compulsory

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administration of the movable tangible property or immovable tangible property or rights or, depending on the claim, an order addressed to the alleged debtor (or opposing party) to perform specifi c acts necessary to maintain either the movable or immovable tangible property. In urgent cases, an applicant may make a preliminary request to the competent authorities (the mayor, members of the local council, the court usher, police offi cers, or the bailiff of the court, who are responsible for the alleged debtor) to render a provisional order. However, the applicant must fi le a motion with the court in writing. A preliminary court order loses any effect if the applicant fails to do so (see Article 272 EO). Interim injunctions are always issued and executed at the expense of the applicant, without prejudice to a claim for reimbursement of costs due to the applicant at the end of an ordinary proceeding, but there are exemptions, e.g. in case of interlocutory proceedings (Zwischenstreit) for which the applicant is entitled to the reimbursement of costs. The opposing party will also be ordered to pay the costs should he or she unsuccessfully have applied for the restriction or removal of the interlocutory injunction. Upon service of the injunction, the applicant can be required to pay in advance to the court the amount of money required for the execution of the issued injunction. The execution of the injunction may not be effected until that amount has been paid (see Article 286 (1) and (3) EO).

Enforcement of judgments The enforcement of civil law judgments in Liechtenstein is exclusively based on the Liechtenstein Enforcement Act (EO). According to the EO, a formal recognition, and thus the enforcement of a foreign judgment in Liechtenstein, is contingent upon reciprocity and thus generally not possible. Although Liechtenstein is a member of the EEA (European Economic Area), Council Regulation (EC) No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgements in Civil and Commercial Matters (EuGVVO; Brussels I) does not apply in Liechtenstein. Neither is it subject to EC regulations and directives in this area of law nor, with only very few exceptions, party to general international, multilateral or bilateral agreements when it comes to the acknowledgment and enforcement of foreign judgments. Furthermore, Liechtenstein is not a signatory to the Lugano Convention. Among others, Liechtenstein is a signatory to the following international and multilateral agreements: • Hague Convention on the Recognition and Enforcement of Decisions relating to Maintenance Obligations, 15th April 1958; • European Convention of 20th May 1980 Concerning the Recognition and Enforcement of Decisions relating to Custody Rights for Children; • European Convention on Information on Foreign Law, 7th June 1986; • Additional Protocol to the European Convention on Information and Foreign Law, 15th March 1978; • European Convention on the Calculation of Time Limits, 16th May 1972; • Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), 10th June 1958; • Hague Convention on the Law Applicable to Trusts and on their Recognition (“Hague Trust Convention”), 1st July 1985.

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There are bilateral agreements with Austria and Switzerland when it comes to the acknowledgment and enforcement of judgments in civil law matters, provided the decisions are in compliance with certain prerequisites and formal requirements stated in the agreements. The agreements do not cover every single civil law matter, and expressly exclude the enforcement of interim injunctions, decisions issued in insolvency proceedings, estate proceedings, etc. Finally, it should be mentioned that Liechtenstein has signed the New York Convention. Apart from these exceptions, foreign judgments and authorities are, in general, not recognised and enforced in Liechtenstein. However, Liechtenstein law offers specifi c procedures which may provide a chance for a successful plaintiff, who is a creditor on the basis of a foreign judgment, to achieve his or her goal. Under Liechtenstein law, the decisions of foreign courts may be used as a basis for summary proceedings to convert a foreign judgment into an enforceable Liechtenstein court order. The creditor may apply for a payment order or a court order based on a foreign judgment. Such summary court orders have the quality of a Liechtenstein judgment and can therefore be enforced based on the EO. This only works if the opposing party does not object. If the opposing party objects and the summary court order is disputed, Liechtenstein law provides for a specifi c procedure, the “Reinstitution Procedure” (Rechtsöffnungsverfahren) which is laid down in the Liechtenstein Act on the Protection of Rights (Rechtssicherungsordnung, RSO). The demand for such a reinstitution can be considered in the same way as a regular claim and leads to a court procedure in Liechtenstein which is, however, structured as a speedy summary procedure and gives the opposing party a fi rst chance to argue his or her position. When it comes to submitting evidence, there is a very restrictive approach. The decision of the Reinstitution Procedure is of the utmost importance for what happens next. The creditor has a legal title if the court grants the reinstitution. There is no “normal” appeal against such a decision; rather, the opposing party has to fi le a disallowance claim (“Aberkennungsklage”). Should reinstitution not be granted, the creditor has to act against the debtor through regular procedures (see Article 51 RSO). An attempt to enforce foreign judgments in Liechtenstein could lead to entirely new procedures in Liechtenstein. It may thus be easier and more effi cient to sue a Liechtenstein debtor in Liechtenstein at the very beginning instead of initiating legal proceedings abroad.

Cross-border litigation Liechtenstein is a signatory to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, 1970 (the Hague Evidence Convention). Therefore, Liechtenstein assists in the service of judicial documents, as well as the obtaining of evidence such as local inspections, taking statements from witnesses and parties to disputes, the production of documents, providing expert opinions, etc. Mutual legal assistance to parties not signatory to the aforementioned convention is provided but the extent of the assistance has to be evaluated in each case. Regarding interim injunctions and their enforcement, see the chapter on Interim relief and enforcement of judgments. The responsibility for requests for legal assistance lies with the District Court (Landgericht) and is executed pursuant to Liechtenstein procedural law.

International arbitration Liechtenstein, with its political neutrality, geographically central location, excellent infrastructure and legal framework, is predestined to act as an attractive central European

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arbitration location. Provisions on arbitration in Liechtenstein can be found in the Code of Civil Procedure (see §§ 594 et seq. ZPO). Arbitration law is up to date, due to a total revision in 2010 that closely followed the Austrian provisions and the Model Law on International Commercial Arbitration (“UNCITRAL Model Law”). However, in order to make Liechtenstein more attractive as an arbitration location, it has included several special features in its arbitration procedure, e.g. the grounds for challenging an award are strictly limited and comparable to those under the New York Convention. Furthermore, the Liechtenstein Chamber of Commerce and Industry (LCCI) released Rules of Arbitration in 2012. Parties may agree that an arbitral tribunal has jurisdiction under these rules. As mentioned above, Liechtenstein is a signatory to the New York Convention which entered into force in 2011, with the effect that the enforcement of Liechtenstein arbitral awards and vice versa is guaranteed in all countries party to that convention. Liechtenstein jurisdiction is arbitration-friendly because nearly everything that could be subject to a claim may also be the object of an arbitration agreement. Only certain company-related disputes, matters of family law and disputes arising out of contract articles of apprenticeship may not be subject to arbitration agreements (cf. § 599 para. 2 ZPO). Arbitration agreements have to be in writing and can be entered into either through signing a common document, a (standard) clause in a contract, or through correspondence. Arbitration parties – Legal entities Regarding legal entities with members (see Article 114 para. 2 PGR), the Liechtenstein Supreme Court has held that disputes between legal entities and the members of the legal entity are arbitrable (LES 1982, 16). However, according to Liechtenstein doctrine, the arbitration panel needs to have its mandatory seat at the place of domicile of the legal entity if the statutes of the legal entity generally provide for arbitration or the parties to the dispute specifi cally stipulate arbitration. Art. 114 para. 2 PGR does not apply to foundations and establishments with ceased founder’s rights as they do not have members, but only benefi ciaries. According to the above, the board of a foundation may provide for an arbitration not domiciled in Liechtenstein. The statutes may also provide for arbitration with a non-Liechtenstein venue. All other Liechtenstein legal entities are arbitrable without limitation. Regarding trusts, Article 931 no. 2 PGR provides that a mandatory court of arbitration shall decide in disputes between settlors, trustees and benefi ciaries of trusts settled in Liechtenstein and governed by non-Liechtenstein law. This is the strongest argument for the arbitrability of trusts governed by Liechtenstein law. Arbitrators Unlike Austrian law, Liechtenstein ZPO still excludes judges of the courts of law from serving as arbitrators during their tenure. The minimum standards as to the neutrality of the arbitrators set forth in § 605 para. 1 ZPO constitute mandatory law and may not be derogated by agreement of the parties. The parties could provide for stricter or additional requirements as to neutrality or specifi c qualifi cations. An arbitrator’s duty to disclose any circumstances infringing his or her impartiality or independence lasts from his appointment until the closing of the arbitral proceedings. An arbitrator is obliged to disclose such circumstances immediately. Any challenge to the suitability of a particular arbitrator can only be based on justifi able doubts regarding his or her impartiality or independence. Challenging of arbitrators To challenge an arbitrator, it is not necessary for him or her to actually lack impartiality or independence. To act as an arbitrator, arbitrators are required to disclose several personal

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matters such as fi nancial or other business interests in the subject matter of the dispute, or personal or business relationships with one of the parties. The grounds for challenging an arbitrator are open to interpretation by the courts. The grounds for challenging state judges in Liechtenstein courts, including applicable case law, may serve as a guideline for what will constitute doubts as to an arbitrator’s impartiality or independence. A party challenging an arbitrator must fi le an application with the arbitral tribunal explaining the reasons for the challenge. The application must be fi led within four weeks of the challenging party learning of the circumstances constituting such reasons. If a challenged arbitrator does not resign from offi ce upon such an application or if the opposing party contests the challenge, the arbitral tribunal, including the challenged arbitrator, decides on the challenge. According to § 608 ZPO, a substitute arbitrator must be appointed if an arbitrator resigns or is successfully challenged. Liechtenstein Arbitration Association The Liechtenstein Arbitration Association (LIS) (www.lis.li) is a non-commercial association of lawyers and academics working in arbitration, and was established in June 2011. They closely work together with the Liechtenstein Chamber of Commerce and Industry (LCCI) to establish opportunities for national and international arbitration in Liechtenstein. One core purpose includes the development and advancement of Liechtenstein as an arbitration location. The association currently has 40 members who, in their daily work, are frequently confronted with issues relating to arbitration.

Mediation and ADR Alternative Dispute Resolution (ADR) There are several organisations which provide alternative and extrajudicial means of dispute resolution in Liechtenstein, including the Conciliation Board and the Professional Ethics Committees. The Conciliation Board (www.schlichtungsstelle.li) is a mediator for conﬂ icts between clients and banks, investment and asset management companies and payment service providers. It provides a neutral and cost-free service that deals with speciﬁ c client complaints. An essential precondition is its independence from any possibly involved institutes. The Professional Ethics Committee of the Liechtenstein Institute of Professional Trustees and Fiduciaries (Liechtensteinische Treuhandkammer) is responsible for disciplinary complaints regarding licensed trustees and trust companies.

Regulatory investigations As a member of the EEA (European Economic Area), Liechtenstein has to implement most of the EU legislation, such as directives and regulations on condition that they have been or will be implemented in the EEA Agreement, in addition to international standards and requirements. These numerous regulations have an impact on regulatory investigations and seem to be on the increase. With regard to the litigation landscape, it is safe to say that lawyers have increasingly become involved in issues pertaining to administration and compliance.

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Thomas Nigg Tel: +423 236 30 80 / Email: [email protected] Thomas Nigg is a Liechtenstein lawyer and citizen, currently practising in Vaduz. He studied law at the University of St. Gallen (Switzerland) where he obtained his Master of Arts in Legal Studies HSG (M.A. HSG) in 2008. In 2007 he started his professional career as a lawyer in Liechtenstein and was admitted to the Liechtenstein Bar in 2010. In 2014 he was appointed partner in Batliner Gasser Attorneys at Law (now GASSER PARTNER Attorneys at Law). In 2016 he was appointed senior partner of GASSER PARTNER Attorneys at Law. The greater part of his work involves representing clients, mostly corporations or high-net-worth individuals, before courts in civil, criminal and administrative matters, and assisting clients in commercial, corporate and criminal law, plus banking and regulatory issues pertaining to both national and international affairs. In addition, he is a co-author of Litigation and Arbitration in Liechtenstein, the Liechtenstein chapter in The Asset Tracing and Recovery Review, and has authored articles on various legal topics.

Eva-Maria Rhomberg Tel:+423 236 30 80 / Email: [email protected] Eva-Maria Rhomberg is an associate at GASSER PARTNER Attorneys at Law, currently practising in Vaduz. Before joining GASSER PARTNER in 2017, she studied law at the Universities in Vienna and Innsbruck, where she earned her Master’s degree in law (Mag.iur.) in 2013. After graduating from Innsbruck University, she worked as a patient representative for an extrajudicial mediator and as a legal trainee at the Financial Market Authority (FMA) in Liechtenstein. Her main areas of practice include civil law, criminal law, litigation and arbitration and compliance.

Domenik Vogt Tel: +423 236 30 80 / Email: [email protected] Domenik Vogt is an associate at GASSER PARTNER Attorneys at Law, currently practising in Vaduz. Before joining GASSER PARTNER in 2015, he studied business law at the Vienna University of Economics and Business, where he earned his Bachelor’s degree in law (LL.B.) in 2012 and his Master’s degree (LL.M) in 2014. In 2013, during his Master’s studies, he spent a semester abroad at the University of Chicago. After graduating from the Vienna University of Economics and Business he studied at Christ’s College, Cambridge, where he obtained his second Master’s degree (LL.M.) in 2015. His main areas of practice include civil law and the law of succession, corporate and foundation law, M&A, litigation and arbitration, administrative and tax law.

GASSER PARTNER Attorneys at Law Wuhrstrasse 6, 9490 Vaduz, Liechtenstein Tel: +423 236 30 80 / Fax: +423 236 30 81 / URL: www.gasserpartner.com

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Miguel Angel Hernandez-Romo Valencia & Miguel Angel Hernandez Romo Bufete Hernandez Romo

Effi ciency of process Court procedures in Mexico follow the same steps generally: a) lawsuit; b) answer to the lawsuit; c) evidence period; d) allegations; and e) fi nal judgment. The rules governing the court procedure are different depending on the state where the parties are litigating and the nature of the confl ict (Civil, Criminal, Labour). Mexico is a country that accepts and, to some extent, encourages alternative dispute resolution procedures in order to alleviate the overwhelming number of cases that have to be resolved by the courts. Amongst such ADRs there is arbitration, mediation, and some other forms of conciliation during the proceedings. Decisions in Mexico are based on law and not on equity. But there are exceptions to this rule, and in such exceptions the decision will be based on general legal principles – if and only if there is no applicable law to solve the problem at stake, or if the interpretation of the law would not solve the problem. Also, if there is doubt regarding the interpretation of a contract, and such contract cannot be resolved according to the interpretation rules established in the law; if such doubts relate to accidental clauses of the agreement, and the agreement is gratuitous, such doubts will be resolved in favour of the least transmission of rights and interests; if the agreement is onerous, such doubts will be resolved in favour of the major reciprocity of interests. If doubts relate to the main object of the contract, so that it could not be established what was the real intent of the parties, the agreement will be declared null. Court procedures in Mexico are effi cient, both in time and in essence. Litigation proceedings are not very lengthy, courts follow the deadlines established by law, and render their judgments according to them. Judgments issued by Mexican courts are easily executed.

Integrity of process The judiciary in Mexico is completely independent of any political or religious belief, and its members are impartial when rendering their judgments.

Privilege and disclosure As a general rule, all documents may be considered as privileged, understanding such concept in the sense that parties have no obligation to give such documents to another party, unless they are requested by the authority to do so. Even though parties have no obligation to open their ﬁ les to other parties, this general rule has an exception. Such exception exists when one of the parties requests speciﬁ c documents

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from the other. The request has to be very clear, i.e. establishing date, sender, recipient, etc. Therefore, if parties in litigation don’t have in their possession certain documents (documents that are the basis for their claim and/or defence), they can request a certiﬁ ed copy of such documents to the party that has them in its possession. Once the request has been made, if the requesting party can prove to the court that it has requested the document, but that it has not been delivered by the other party, the court can order such party to give the certiﬁ ed copy requested. In case the other party doesn’t want to give such document, the court can warn the other party that if it doesn’t give the document requested, the court will consider that what the requesting party mentioned in its lawsuit is true and valid. In Mexico, full discovery is not permitted.

Costs In Mexico costs are awarded against the loser party, but not in every case. The law clearly establishes when costs are awarded to the other party. Costs are allocated in a different way, depending on the state where litigation takes place. In Mexico City, costs are awarded to the winning party if the counterparty acted in bad faith, falsely or without any basis for its claim. The purpose of costs is to cover the legal costs that the other party has incurred because of the litigation. However, these legal costs awarded are not based on the real disbursement made by the winning party, but on what the law establishes. Judges can determine the amount of the costs awarded to the winning party, if possible; if it’s not possible to award a specifi c amount, the parties will have to start an ancillary proceeding in order to quantify the costs. Costs will only be awarded to the parties if they prove that they were aided by an attorney. In Mexico City, costs are awarded on the following basis: If the amounts claimed are identifi ed, fi rst instance costs will be awarded: (a) if the amount of the litigation is not higher than 3,000 times the minimum daily wage in Mexico City, costs will be 10% of such amount; (b) if the amount of the litigation is higher than 3,000 but not over 6,000 times the minimum daily wage in Mexico City, costs will be 8% of such amount; and (c) if the amount of the litigation is higher than 6,000 times the minimum daily wage in Mexico City, costs will be 6% of such amount. Second instance costs will be increased by 2% (that is, 10% will be increased to 12%; 8% will be increased to 10%; and 6% will be increased to 8%). If the amounts claimed are not identifi ed, costs will be awarded according to a chart established in the Internal Law of the Superior Tribunal of Justice of Mexico City.

Litigation funding The agreement between clients and attorneys for their fees can be agreed very openly, without limitation, including contingency fee, third-party funders or insurance.

Interim relief Interim remedies can be requested and granted by the court if: (a) there is a threat that the person against whom the lawsuit will be ﬁ led or has been ﬁ led will hide or leave the place where litigation is taking place; (b) there is a threat that assets will be hidden or deteriorate in such cases when an in rem action will be brought; and (c) there is a threat that assets will

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be hidden or sold in such cases where a personal action will be brought, and those are the only assets of the debtor. The only interim remedies available are: (a) confi nement; and (b) provisional seizure of assets. In order for the confi nement to take place, the party requesting it should post a bond in order to guarantee possible damages and loss of profi ts that could be caused to the other party due to such order. The amount of the bond is established by the judge at his discretion. In order for the provisional seizure of assets to take place, the party requesting it should express the value of the claim or of the thing that is claimed, and the judge will determine the amount of the seizure. If the provisional seizure is not claimed based on an executive title, the plaintiff has to post a bond in order to guarantee the possible damages and loss of profi ts that might be caused. If the defendant deposits the value or object claimed, or posts suffi cient bond or proves that it has suffi cient assets (real estate) to pay the amounts claimed, the judge will either deny the interim injunction requested, or leave without effects the interim injunction previously granted. If the interim remedy is requested and granted before the litigation takes place, the party that requested it has to fi le the lawsuit within the following three days if the litigation is to take place in the same jurisdiction; if it is in a different jurisdiction, the court will extend such period of time according to the distance where the litigation will take place (one additional day for each 200 kilometres or fraction exceeding 100 kilometres). Interim injunctions can be obtained without prior notice to the defendant, but not on the same day they are requested. Confi nement is a mandatory interim injunction that compels a party not to leave the place where the litigation is taking place without leaving a suffi ciently instructed representative, and with suffi cient funds, to be responsible for the outcome of the case. In Federal Civil Procedures, the judge can grant all of the appropriate injunctions in order to maintain the status quo. These kind of injunctions are granted without prior notice to the defendant. During the proceeding or before it, the judge can grant the interim injunctions consisting in: (a) seizure of assets in order to guarantee the outcome of the case; and (b) deposit or seizure of things, books, documents or documents that are the subject matter of the litigation. The interim injunctions mentioned in this paragraph can be granted if the party that requests them guarantees the possible damages and loss of profi ts that the defendant may suffer.

Enforcement of judgments The Federal Code of Civil Procedures establishes that foreign judgments can be enforced in Mexico as long as they comply with the following rules: (a) that formalities related to letters rogatory were complied with; (b) that they were not issued in an in rem action; (c) that the foreign judge had jurisdiction according to international rules consistent with those mentioned in Mexican law; (d) that the defendant was notifi ed or served personally; (e) that such judgment cannot be overturned or modifi ed by any means in the jurisdiction where it was issued; (f) that the action brought in such jurisdiction is not pending, between the same parties, before Mexican courts, and in which Mexican courts had heard fi rst about such case; (g) that the fulfi lment of the obligation ordered is not contrary to Mexican Public Policy; and (h) that the judgment fulfi ls the conditions as to be considered authentic (apostille). Mexican courts can deny the execution of foreign judgments, even if they comply with all of the requirements mentioned above, if it can be proven that Mexican judgments are not enforced in the jurisdiction where the judgment was issued.

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In order for a foreign judgment to be executed, it has to be requested through letters rogatory, and such letters rogatory have to comply with the following: (a) have an authentic copy of the judgment, award or judicial resolution; (b) have authentic copies proving that summons were served personally and that the judgment cannot be overturned or modifi ed by any means; (c) translated into Spanish; and (d) that the party that wishes to execute such judgment mentions an address where the homologation will take place. The competent court to enforce a foreign judgment is the court of the domicile of the defendant, or where the defendant has its assets. Once the court receives the request for executing the foreign judgment, it will grant the defendant a period of nine days in order to put up a defence or exercise their rights. If they offer evidence, the court will set a date for a hearing. After the hearing, the court will issue its judgment. Mexican courts are very open in assisting foreign courts. The Federal Code of Civil Procedures has a chapter devoted to assisting foreign courts, and it establishes that requests from foreign courts do not have to be legalised if they are transmitted by offi cial authorities, but they do have to be translated into Spanish. Mexican courts can assist foreign courts in any aspect, since the Federal Code of Civil Procedures doesn’t establish any prohibition on assistance. Letters rogatory have to be delivered to the required authority either through the parties, judicially or by diplomatic or consular agents, or by the central authority of any of the countries involved in this process. Once the letters rogatory are received by the court that will assist the foreign court, such court will assist the foreign court according to the applicable laws, but the foreign court can request the local court to avoid local formalities or to use specifi c formalities different than local formalities, if this is not harmful to Mexican public policy. Mexico is a signatory to several conventions related to the execution and enforcement of judgments and awards, including the New York Convention.

Cross-border litigation The Commerce Code establishes that letters rogatory received from abroad will be carried out according to Mexican law, but local courts can simplify local formalities or act according to different formalities than Mexican, if this is requested by the court that issues the letters rogatory or by the interested party, as long as such lack of formalities or additional formalities are not contrary to public policy and constitutional rights. It is easy to obtain orders in Mexico in support of proceedings elsewhere, as long as such orders are not contrary to Mexican public policy. A very important limitation when obtaining evidence in Mexico has to do with documents; Mexican law clearly states that when documents have to be given to a foreign tribunal, the request of such documents cannot be generic, but rather very speciﬁ c.

International arbitration The following bodies are used to resolve large commercial disputes in Mexico: (a) International Chamber of Commerce. (b) American Arbitration Association. (c) Mexican Arbitration Centre.

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The legislation applicable to arbitration is the Commerce Code. Mexico has incorporated the UNCITRAL Model Law into the Commerce Code, with a few modifi cations. For example, the Commerce Code has a full chapter on costs and fees of the arbitration tribunal. The parties are free to agree on the procedural rules that the arbitrators will follow. If they do not agree, the arbitrators will guide the arbitration in a manner they deem appropriate (this includes determining the admissibility, appropriateness and value of the evidence). However, the parties must be treated equally and be granted the full opportunity to express their rights (Commercial Code), and the arbitration proceedings must refl ect this. Local courts can intervene to assist arbitration proceedings. The competent court is the Judge of First Instance (local or federal) of the place where the arbitration takes place. If the arbitration takes place outside of Mexico, the competent court for the recognition and execution of the judgment is one of the following: (a) federal judge of fi rst instance; (b) local judge of fi rst instance of the domicile of the party against whom the judgment is rendered; or (c) judge where the assets are located. If requested by one of the parties, local courts can adopt provisional interim measures, even if an arbitration agreement exists and the arbitration proceedings have begun. If the arbitration tribunal or one of the parties (after obtaining approval from the arbitration tribunal) requests it, local courts can intervene to assist arbitration by taking or obtaining evidence. Arbitration proceedings and awards cannot be appealed before local courts, but they can be challenged. The only challenge that Mexican law accepts in arbitration, is the challenge against the award on the basis of nullity of the award. After the arbitration tribunal has issued the award, the parties can try to nullify it. The award may be nullifi ed if: (a) One of the parties to the arbitration agreement was incapacitated. (b) The arbitration agreement is not valid under the law chosen by the parties or under Mexican law. (c) One of the parties was not duly notifi ed of the appointment of an arbitrator or of the arbitration proceedings, or if for any other reason it was not able to exercise its rights. (d) The award refers to an issue outside the scope of the arbitration agreement or makes decisions outside the terms of the arbitration. (e) The composition of the arbitration tribunal or the proceedings was not in line with the agreement of the parties. (f) The judge confi rms that under Mexican law, the subject matter of the dispute cannot be subject to arbitration or that the award is contrary to public policy. The party that claims nullity should fi le a writ before the court claiming such nullity and a summary proceeding will initiate. In such proceeding the parties have the right to present evidences and prove the nullity or not of the award. In such proceeding, the defendant may counterclaim recognition and enforcement of the arbitral award. The parties cannot appeal the decision issued by the trial court; the only existing avenue to try to modify it is through

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Amparo proceedings (a remedy for the protection of constitutional rights in Mexico). With respect to arbitration awards, the parties cannot waive their rights to request nullity of the proceeding or the Amparo proceedings.

Mediation and ADR Over the last decade Mexican courts have been vouching for the use of mediation to solve civil, commercial, family and criminal (damages) disputes, but ADRs only apply if the parties agree. Courts cannot compel the parties to use ADR to solve disputes. Mediation that has been supported by Mexican courts has its own set of rules.

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Miguel Angel Hernandez-Romo Valencia Tel: +52 55 5533 2939 / Email: [email protected] Obtained his law degree from Escuela Libre de Derecho in Mexico City in 1992. Studied at the Southwestern Legal Foundation in 1993. Obtained his LL.M. from the University of Texas at Austin in 1994. Worked as a summer clerk in Washington, D.C. for Hogan & Hartson. Worked in Houston, Texas, for Fulbright & Jaworski as an intern. Attended post-degree studies at Escuela Libre de Derecho for the course of Obligations (Torts), Commercial Law and International Business Transactions. Author of an article related to insurance law. Professor of Introduction to the Mexican Legal System and Professor of Procedural Law at Universidad Iberoamericana. Has been practising law since 1992, specialised in civil, commercial, insurance and family litigation, international arbitration and bankruptcy proceedings.

Miguel Angel Hernandez Romo Tel: +52 55 5533 2939 / Email: [email protected] Obtained his law degree from Escuela Libre de Derecho in Mexico City in 1960. Obtained his LL.M. from Harvard Law School in 1961. He has been a professor of law since 1961. He has been practising law since 1961, specialising in civil, commercial, arbitration and bankruptcy proceedings. He studied in Rome, Italy, for three years at the Gregorian University (1952– 1955). He is the former Dean of Escuela Libre de Derecho in Mexico City (1993–1998). Member of the American Law institute. He was the chair and co-reporter for the Transnational Insolvency Project, Mexico, of the American Law Institute. Member of the American College of Bankruptcy. Has written several articles on Mexican Civil, Commercial and Procedural Law.

Bufete Hernandez Romo Av. Paseo De La Reforma 265 – 2, Col Cuauhtemoc, C.P. 06500, Ciudad De Mexico Tel: +52 55 5533 2939 / Fax: +52 55 5511 0642

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Abimbola Akeredolu & Chinedum Umeche Banwo & Ighodalo

Effi ciency and integrity of the Nigerian legal process Introduction The Nigerian Legal System is modelled after the English legal system, by virtue of colonisation and the reception of English law through the process of legal transplant. English Common Law and legal tradition infl uenced the development of the Nigerian legal system. As the grundnorm, the Constitution of the Federal Republic of Nigeria 1999 (as amended) is the bedrock of the Nigerian Legal system1. It provides the ultimate principles and rules upon which other statutes and laws obtain their validity and legitimacy. Other sources of Nigerian laws are Acts of the National Assembly2, received English Laws3, subsidiary legislations, customary laws, judicial precedents and international law. Court process in Nigeria The Nigerian Courts uphold the principles of rule of law and equality before the law. Equal opportunities are available to litigants for the presentation of their cases. Nigeria practises an adversarial system, where two advocates present the litigants’ case or position before an impartial judge or judges, based on applicable laws, the rules of evidence and court procedural laws. The judges determine the truth by placing the evidence on imaginary scales. Nigerian laws ensure free and easy access to courts. A person is empowered by law to approach the courts for the determination of his civil rights and obligations, including any question or determination by or against any government or authority. Such persons are entitled to a fair hearing within a reasonable time by a court or other tribunal established by law and constituted in such manner as to secure its independence and impartiality4. A party who elects to approach the court must observe all the rules of commencement of legal proceedings. The law in Nigeria frowns at springing surprises or overreaching an opponent. Consequently, a party initiating an action in court is expected to comply with the applicable frontloading system5 whereby copies of documents sought to be relied upon are fi led and served in advance. Essentially, the party is to fi le alongside the writ of summons: the Statement of Claim, which sets out the facts of the case; statements on oath of proposed witnesses; documents to be relied on at trial and other processes which will leave no doubt in the opponent’s mind that the said party is the initiator of the suit; what the party is claiming; and the evidence it intends to rely on to prove its claim. The adverse party is to be served, and the rules for such service must be strictly complied with. Upon service, the defendant intending to defend the case is expected to enter appearance by fi ling a memorandum of (conditional) appearance, statement of defence and other accompanying processes in compliance within a specifi ed time6.

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Barring any preliminary challenge or objections to an action in court, a case will normally progress through a pre-trial/case management conference (this will be discussed below) and where required, into a plenary trial. Pre-trial / Case Management Conference In Nigeria, the rules of courts have aided effective and speedy dispensation of justice, through the machinery of Pre-trial or Case Management Conference procedure7. This procedure is designed to enable a judge to aid or guide the parties through possible options to effectively resolve their disputes or create a proper framework upon which the trial of a case may progress. Interlocutory applications are usually determined at this stage. In addition, the judge may issue such orders and directions as are necessary to the future course of the action. Discovery and inspection8 are also done at this stage. This is a procedure whereby a party makes a formal request on oath from the other party, to make available certain documents in its possession. A party may also give notice to the adverse party, who pleaded some documents, to provide such documents for inspection. The courts and ADR Nigerian courts encourage litigants to resolve their disputes by adopting Alternative Dispute Resolution (“ADR”) mechanisms. The court may, with the co-operation and consent of the parties, refer the parties to ADR centres of the courts9, and the parties are expected to report back to the courts for adoption of agreed Terms of Settlement where ADR is successful or, where the ADR proceedings fail, for trial. Under the Lagos Civil Procedure Rules (CPR), cases are screened by the relevant registry offi cial, and suitably qualifi ed cases may be designated for amicable resolution, and referred to the Lagos Multi Door Courthouse or other appropriate ADR institutions10. Integrity of the process The bedrock of the legal process in Nigeria is engraved on the twin arms of natural justice. Courts in Nigeria uphold the provisions of section 36 (7) of the 1999 Constitution of Nigeria (as amended) which provides that in the determination of civil rights and obligation of persons, a trial must be conducted according to all the legal rules formulated, to ensure that justice is done to all the parties. It requires the observance of the twin pillars of the rules of natural justice, to wit: audi alteram partem and nemo judex in causa sua. The principle of fair hearing is not only a question of whether a party is heard, but whether the party is availed of the opportunity to be heard11. The effect of the rule of natural justice in Nigeria is that a court shall hear both sides not only in the case but also in all material issues in the case before reaching a decision which may be prejudicial to any party in the case. The court gives equal treatment, opportunity, and consideration to all concerned. Court proceedings are constitutionally required to be held in public12. In every material decision in a case, justice must not only be done but must manifestly and undoubtedly be seen to have been done13. The test usually adopted in determining the impartiality of a court is the common law ‘reasonable man’ test, which envisages that any member of the public, sitting in the courtroom, should be able to observe the entire proceedings from beginning to end and leave with the impression that justice was done. Electronic case fi ling/searching The Nigeria legal process is still developing and the various courts are continually putting in place machineries that will enhance the effective and speedy delivery of justice. The

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legal system is still at a stage where judges take evidence manually. Although some of our courts have embraced the electronic ﬁ ling14 of court processes, we have yet to develop an effective electronic service mechanism for court process.

Privilege and disclosure The “lawyer-client privilege” or “attorney-client privilege” is one of the oldest principles under common law. Its importance is embedded in the role it plays in the professional functions of a lawyer. In Nigeria, attorney-client privilege operates not only as a rule of evidence but also as a rule of ethics, and is grounded in conﬁ dentiality. Under Nigerian law, a legal practitioner is not permitted, unless with his client’s express consent, to disclose any communication made to him in the course and for the purpose of his employment, or to state the contents or conditions of any document with which he has become acquainted in the course and for the purpose of his professional employment, or to disclose any advice given by him to his client in the course and for the purpose of such employment15. The attorney-client privilege can be involuntarily waived and has limits, such as when the communication is made in furtherance of any illegal purpose, or where the legal practitioner discovers in the course of his employment any fact, showing that any crime or fraud has been committed since the commencement of his employment16. The attorney-client privilege continues even after the attorney-client relationship has been terminated17, and the obligation extends to the legal practitioner’s employees such as associates, clerks and interpreters18.

Cost In Nigeria, each party funds and bears its own cost of the litigation and the professional fees of the legal practitioner. However, the court may, at the end of the proceedings, make cost orders. In addition and in appropriate cases, a party (usually the defendant) may make an application to court to order the adverse party to give security for cost of the litigation. Having regard to all the circumstances of the case, where the court thinks it is just to do so, it may order the plaintiff/claimant to give such security for the defendant’s costs of the action or other proceedings19. In fi xing the amount of costs, the principle to be observed is that the party who is in the right is to be indemnifi ed for the expenses to which he has been unnecessarily put in the proceedings, as well as compensated for his time and effort in coming to court. Therefore, the award of cost is not to be a means of punishing the unsuccessful party. It should not be arbitrary or unreasonable20. Litigation funding Litigation is most commonly funded by parties to the proceedings in Nigeria, as the concept of third party funding has not been institutionalised. This is due to the continuous application of the common law principles of champerty and maintenance which: (i) prohibit a third party from funding litigation between disputants (in which the funder has no legitimate interest); and (ii) render an agreement to provide such funds illegal and void, on the ground of public policy. It is important to note that principles of common law are applicable in Nigeria, unless and until they are abolished (or to such extent that they are modifi ed) by Nigerian legislations and/or case law (A. O. Obilade, The Nigerian Legal System (Sweet and Maxwell, London, 1979) p 79). Since no legislation is yet to abolish or modify the common law principle of champerty and maintenance in Nigeria, it is applicable.

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The Court of Appeal affi rmed the application of the principles of champerty and maintenance to the Nigerian legal system in the cases of Egbor & Anor v. Ogbebor (2015) LPELR – CA/B/136/2006; and Oloko v Ube (2001) 13 NWLR (Part 729) CA 161 at 18, although (based on the facts and circumstances of the cases) the principle was not specifi cally applied in the cases. In Oloko v Ube (supra), per Edozie JCA held thus: “At common law, Champerty is a form of maintenance and occurs when the person maintaining another stipulates for a share of the proceeds of the action or suit or other contentious proceedings where property is in dispute. An agreement by a solicitor to provide funds for litigation or without charge to conduct litigation in consideration of a share of the proceeds is champertious. The solicitor cannot recover from his client his own costs or even his out of pocket expenses (Chitty on Contracts 23rd edition, volume 1 p.391 articles 843-844).” However, legal practitioners are allowed to provide their services in consideration of a contingency arrangement to cover their professional fees21. Yet, they are not allowed to fund the litigation, per se. Also, it appears that Non-Governmental Organisations (NGOs) are allowed to provide funds in support of litigation by or against indigent people, since this will not be based on commercial arrangement. For example, Olusoji O. Elias claims that he has established a legal funding fi rm in Nigeria called AetasLF, with the initiative of providing such support22. Cross-border litigation Cross-border litigation should be viewed from two (2) perspectives, namely: (i) where there is an agreement of the parties as to the forum for litigation and the applicable law; and (ii) the position in the absence of such agreement. Except where there is an agreement of the parties to the contrary, a Nigerian court will typically assume jurisdiction and apply Nigerian law where: (i) the cause of action arises within its territory; (ii) a contract is required to be performed in the court’s territory; (iii) the defendant resides or carries out business in the territory of the court; or (iv) in an action in rem, jurisdiction is activated if the property proceeded against is within the territory of the court. On the other hand, parties are generally bound by their agreement to use a foreign forum and/or application of foreign law, on the basis of the doctrine of pacta sunt servanda. However, where a suit is instituted in Nigeria in breach of foreign jurisdiction clause but the defendant counter-party submits to the jurisdiction of the Nigerian court, such submission overrides the foreign jurisdiction clause. Conversely, upon an application of an aggrieved defendant that a suit should be stayed pending determination by a foreign court in the agreed forum, the Nigerian court will typically adopt the approach of the English court – which is essentially that the court has discretion to stay its proceedings. It is the law that such discretion is readily exercised in favour of stay of proceedings except if the contrary is shown. In the case of Sonnar (Nigeria) Limited & Anor v. Partenreederi M.S. Nordwind & Anor (1987) NWLR (Pt. 66)520: (1987) LPELR-SC.38/1986 (the “Norwind Case”) the Supreme Court of Nigeria accepted the test laid down by Bradon J in “The Eleftheria” (1969) 1 Lloyd’s Rep.237. In the Norwind Case, the plaintiff fi led an action at the Federal High Court, Lagos, Nigeria, seeking general and special damages for breach of contract arising out of non-delivery of goods shipped to Lagos, Nigeria, from Bangkok, Thailand, on board

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the vessel “MV Norwind”. The defendant brought an application for stay of proceedings on the ground that the bill of lading containing the contract of affreightment had a foreign jurisdiction clause to the effect that any dispute should be resolved in Germany, under the German law. The trial court granted a stay of proceedings and the Court of Appeal affi rmed the decision. The Supreme Court reversed the decisions and remitted the matter to the trial court for determination, on merit. The reason for the Supreme Court’s decision in the Norwind Case was that the subject matter of the dispute was already statute-barred under German law and a stay in Nigeria for litigation in Germany would be prejudicial to the plaintiff. The ‘Bradon test’ adopted by the court was that the following factors must be considered: (a) In what country the evidence on the facts is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the Nigerian and foreign courts. (b) Whether the law of the foreign court applies and, if so, whether it differs from Nigerian law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would: (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in Nigeria; or (iv) for political, racial, religious or other reasons, be unlikely to get a fair trial. Having said that, the burden of proving the existence of any of the factors highlighted above lies on the plaintiff who desires that the proceedings should be allowed in breach of the parties’ agreement. In the case of Nika Fishing Co. Ltd. v. Lavina Corporation (2008) LPELR-SC162/2002: (2008) 16 NWLR (Pt.1114) 509, the bill of lading contained a foreign jurisdiction clause and the claimant did not fi le a counter-affi davit to challenge the defendant’s application for stay of proceedings. The Supreme Court held that the burden of proving a “strong cause” why parties should not be held to their agreement in the bill of lading as to the forum for the trial of disputes arising from the bill of lading was to be fi rmly placed on the plaintiff. Thus, the plaintiff having failed to adduce affi davit evidence, the Supreme Court rejected the decision of the lower Courts refusing stay of proceedings and the Supreme Court granted stay of proceedings. It should be noted at this juncture that in respect of admiralty matters, Section 20 of the Admiralty Jurisdiction Act (AJA) provides that an agreement which purports to oust the admiralty jurisdiction of the Federal High Court of Nigeria shall be null and void where: (a) the place of performance, execution, delivery, act or default is or takes place in Nigeria; (b) any of the parties resides or has resided in Nigeria; (c) the payment under the agreement (implied or express) is made or is to be made in Nigeria; (d) in action in rem, the rem is within the jurisdiction of the court; (e) it is a case involving the Federal Government or a State Government which has submitted to the court’s jurisdiction; (f) the court has a mandate or discretion to assume jurisdiction under a treaty to which Nigeria is a party; or (g) the court is of the opinion that the matter ought to be adjudicated upon in Nigeria. In the case of JFS Inv. Ltd v. Brawal Line Ltd (2010) 18 NWLR (Part 1225) page 495 SC at page 531, Adekeye JSC observed that Section 20 of the AJA ‘has almost removed the court’s discretion in deciding whether or not to uphold a foreign jurisdiction clause’ in

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respect of admiralty matters. However, the issue of proper interpretation of Section 20 of the AJA was not in contention in that case. It was a case in which the plaintiff/Appellant’s suit was eventually dismissed on the ground that same was statute-barred. So, His Lordship’s statement was an obiter and did not particularly constitute a legal pronouncement on this point. Although Section 20 of the AJA has been heavily criticised in the case of Owners of MV Lupex v Nigerian Overseas Chartering and Shipping Ltd (1993–1995) NSC 182, where Uwaifo (JCA, as he then was) described the provision as “walking on its head, a section that was wrongly thought out and badly drafted, an inappropriate provision of the law whose meaning cannot be comprehended”, stay of proceedings has been refused by the Court of Appeal in some cases involving admiralty matters on the basis of Section 20 of the AJA. Indeed, there are cases in which the Court of Appeal has refused to grant a stay of proceedings pending arbitration involving foreign forums23. However, in the subsequent case of Onward Enterprises Limited v MV Matrix (2010) 2 NWLR (1179) 530 CA at 555-556, the Court of Appeal disapproved the decision of the earlier cases and held that an arbitration clause with foreign forum does not oust the admiralty jurisdiction of the Federal High Court. Thus, the court held that on a proper construction of Section 20 of the AJA together with Section 10 of the AJA and in light of the decision in MV Lupex’s Case (supra), such arbitration clause is not void and indeed ought to be enforced in appropriate cases. In that case, the Court of Appeal enforced a clause contained in the bill of lading, for arbitration in London, and stayed proceedings pending arbitration. Enforcement of judgments When a judgment has been given, the process of enforcement depends on whether the decision is a domestic or a foreign judgment. In the case of a domestic judgment, a line of distinction is further drawn between enforcement in the state where the judgment is obtained, and inter-state enforcement. Enforcement of domestic judgments is governed by the Sheriffs and Civil Process Act24 (“SCPA”) and the rules made pursuant thereunder25. On the other hand, enforcement of foreign judgments is governed by: (i) the Reciprocal Enforcement of Foreign Judgments Ordinance, 1922, contained in Cap 175, Laws of the Federation of Nigeria and Lagos, 1958 (the “Enforcement Ordinance”); and (ii) the Foreign Judgment (Reciprocal Enforcement) Act, Cap F35, LFN, 2004 (the “Enforcement Act”). It is to be noted that principles of the common law apply in the event of any inadequacy in the above laws, with respect to both domestic and foreign judgments. For domestic judgment, a decision of the court takes effect immediately, except where the judge directs otherwise. Thus, a domestic judgment is enforced through any of the modes available under the SCPA such as garnishee, writ of ﬁ fa, writ of sequestration and writ of possession. However, a domestic judgment cannot be enforced in another state in Nigeria outside the state where the judgment is issued, except if and after it has been registered in that other state. A certiﬁ cate of judgment is issued by the court giving the judgment and same is transmitted to the registry of the court in the state of enforcement where the judgment will be registered and enforced26. With respect to foreign judgments, the Enforcement Ordinance was initially applicable to judgments of courts in England, Ireland and Scotland but it was extended (by a proclamation issued under Section 5) to judgments of courts of the Gold Coast Colony (now Ghana), Sierra Lone, Gambia, Barbados, Bermuda, British Guinea, Gibraltar, Grenada, Jamaica, Leeward Islands, Newfoundland, New South Wales, St. Lucia, St. Vincent, Trinidad and Tobago and Victoria.

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On the other hand, the Enforcement Act applies to judgments of the courts of Commonwealth countries and other foreign countries. By virtue of Section 3(1) of the Enforcement Act, the Nigerian Minister of Justice has the power to make an order extending the application of the Enforcement Act to any foreign country with substantial reciprocity of treatment with respect to enforcement of foreign judgments. However, the Minister of Justice is yet to issue any such order. Thus, the Enforcement Act is yet to be made applicable to any specifi c country. It should be noted that there is a pending suit fi led earlier this year, before the Federal High Court of Nigeria, Abuja judicial division; seeking to compel the Minister of Justice (by mandamus) to issue the aforementioned Order, to extend application of the Enforcement Act to both Commonwealth and non-Commonwealth countries27. Under the Enforcement Ordinance, the procedure for recognition and enforcement is by an application made by way of Petition seeking for the leave of court to register the foreign judgment. Such Petition may be brought ex-parte or on notice and it is supported by an affi davit of facts exhibiting a duly authenticated or certifi ed copy of the judgment sought to be registered. Under the Enforcement Ordinance, the following conditions must be satisfi ed before the court can recognise the foreign judgment: (a) the application is brought within 12 months after the date of the judgment unless the court allows a longer period; (b) the original court acted within its jurisdiction; (c) the judgment debtor voluntarily appeared or otherwise submitted or agreed to submit to the jurisdiction of the foreign court; (d) the judgment debtor was duly served with the court process leading up to the judgment; (e) the judgment was not obtained by fraud; (f) there is no appeal pending or the judgment debtor is not entitled to appeal and if entitled, has not shown any intention of appealing; and (g) the judgment is not in respect of a cause of action which, for reasons of public policy or for some other similar reasons, the courts would have refused to entertain. Where the Petition is brought ex-parte, the court may direct that the judgment debtor be put on notice. In any event, the order granting leave to register shall be served on the judgment debtor, who is also allowed a specifi ed time within which he can apply to set the proceedings aside. Upon successful recognition, either due to lack of objection by the judgment debtor or after resolution of such objection in favour of recognition, the judgment creditor can take steps to enforce the judgment by any of the recognised modes such as fi fa or garnishee. Where the foreign judgment is issued by a court of a country to which the Enforcement Ordinance does not apply, the judgment can be enforced under the principle of common law. The procedure is to fi le a fresh suit making the judgment the cause of action. The option open to the judgment creditor to avoid delay is to fi le the suit under the summary judgment or undefended list procedure. This procedure is applicable to any suit involving a liquidated sum of money, in which the claimant has reasonable ground to believe that the defendant does not have a good defence and should not be allowed to defend just for the sake of delay28. Interim relief Typically, a Nigerian court would grant an interim relief at its equitable discretion either to protect the rights of the applicant or preserve the subject matter of a dispute referred to as the res, pending the determination of a case29. See C. I. Umeche and P. N. Okoli: Between use and abuse: An examination of the effi cacy of interim and interlocutory injunctions in Nigeria30.

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There are various preliminary reliefs that can be granted by the courts in Nigeria to preserve the status quo ante or protect the legal right of the applicant from imminent risk of infringement. The order is put in place to forestall irreparable injury to the applicant’s legal or equitable right, which a ﬁ nal judgment at the end of the proceedings may not redress.31 These include, without limitation, interim injunction, interlocutory injunction, mandatory injunction, Anton Pillar order and Mareva order.

International arbitration Legal framework for arbitration in Nigeria The Arbitration and Conciliation Act 198832 (“the ACA”), is the governing law for both domestic and international arbitration in Nigeria. The ACA largely adopted the provisions of the UNCITRAL Model Law 1985 and incorporates the UNCITRAL Arbitration Rules with respect to international arbitration agreements.33 Nigeria is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and as such, Nigeria’s treaty obligations arising under the New York Convention are domesticated under the ACA. Some states, however, have enacted their own arbitration laws. For example, in Lagos State, the Lagos State Arbitration Law 2009 applies to all arbitrations in the absence of another specifi ed law. In addition, some important investment statutes such as the Petroleum Act34, the Nigerian Investment Promotion Commission Act35 and the Public Enterprises (Privatization and Commercialization) Act36 contain arbitration provisions for settlement of disputes arising under those Acts. Judicial support for and interference in the arbitration process In recognition of the nature of arbitration as fi nal and binding on parties, and in order to ensure that faith in the arbitration process is not diminished, the position of the law in Nigeria is that judicial interference in the arbitration process be kept to a minimum. The foregoing position has been further buttressed by a recent circular dated 26th May, 2017 and issued by the Chief Justice of Nigeria, Walter Onnoghen, to all Heads of Court (“the Circular”). In the Circular, the Honourable Chief Justice proposed that heads of the courts issue Practice Directions with respect to the courts’ jurisdiction in breach of contract matters arising from contracts with arbitration clauses. The CJN proposed that the courts should not encourage or entertain actions instituted to enforce a contract or claim damages arising from a contract in which the parties have by consent, included an arbitration clause, without fi rst ensuring that the clause is invoked and enforced. While the courts have no inherent jurisdiction to supervise arbitration, the ACA makes provision for the courts to support the arbitral process in the following instances: 1. The grant of a stay of court proceedings pending arbitration Where a party to an arbitration agreement brings an action before a court, the court is empowered to stay proceedings pending arbitration, provided the applicant has not taken steps in the proceedings before making the application37. Although the power of a court to order a stay of proceedings pending arbitration is discretionary, the discretion must be exercised judiciously. The court in The Owners of MV Lupex v. Nigerian Overseas Chartering & Shipping Ltd38 held the circumstances where a court may refuse to order a stay of proceedings to include instances where a party establishes that he would suffer injustice from the arbitration tribunal, or that the agreement between the parties is null and void.

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2. Compelling the attendance of a witness before an arbitrator The court has the power on the application of a party to arbitral proceedings, to issue a subpoena against any person in whose possession are relevant documents necessary for the determination of the dispute between the parties39. The court may order the subpoenaed person to produce those documents and/or testify at the hearing before the arbitral tribunal. 3. Enforcement and setting aside of an arbitral award In Nigeria, a party seeking to enforce an arbitral award, irrespective of the country in which the arbitral award is made, has recourse to the courts40. Upon application by said party, the court may enforce an arbitral award in the same manner as a judgment or order to the same effect. However, the enforcing court has no power over the underlying dispute or its subject matter.41 It is settled that an arbitral award is fi nal and binding on the parties. However, section 48 of the ACA further empowers the courts to set aside an arbitral award. The losing party in arbitration may choose to bring an action to challenge the award and the court may set aside an arbitral award on any of the grounds stipulated by ACA, which include: (i) that a party to the arbitration agreement was under some incapacity; (ii) that the arbitration agreement is not valid under the law which the parties have indicated should be applied or, failing such indication, that the arbitration agreement is not valid under the laws of Nigeria; (iii) that he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present his case; (iv) that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration; or (v) if the court fi nds that the subject matter of the dispute is not capable of settlement by arbitration under laws of Nigeria; or that the award is against public policy of Nigeria. However, a court should not completely set aside an award unless it is satisfi ed that it would be inappropriate to send it back to the arbitrators. Arbitration bodies in Nigeria As of today, we have in existence, the following arbitration bodies in Nigeria: 1. The Lagos Court of Arbitration The Lagos State Government enacted the Lagos Court of Arbitration Law 2009, creating the Lagos Court of Arbitration (“LCA”). The LCA is an independent, private-sector- driven, international centre for the resolution of commercial disputes via arbitration and other forms of ADR. The LCA is a signifi cant arbitration institution and facility with immense capacity to accommodate and resolve a wide range of multi-party disputes. It was established to resolve domestic and transnational commercial disputes arising within its ambits. It is noteworthy that the LCA maintains a database of neutrals, which comprises highly experienced, qualifi ed and prominent arbitrators, mediators and ADR professionals from around the world. The proceedings at the LCA are governed by the Lagos Court of Arbitration Rules, 2013. 2. The Nigerian Branch of the Chartered Institute of Arbitrators (UK) The Chartered Institute of Arbitrators (“CIArb”) is recognised as the professional

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body for training and examination of those seeking to become qualifi ed arbitrators, mediators and other ADR Practitioners. CIArb also maintains a register of qualifi ed arbitrators and mediators, and monitors the professional conduct of its members while also providing continuing professional development to ensure that progressive training is undertaken. The Nigeria Branch is one of the branches of the CIArb, having fulfi lled the requirements to be granted Branch Status in 1999. 3. The Nigerian Institute of Chartered Arbitrators (formerly Arbitrators Association of Nigeria) Founded in 1979, under the leadership of His Excellency, Judge Bola Ajibola, SAN, KBE, the Nigerian Institute of Chartered Arbitrators is the fi rst body of Professional Arbitrators in Nigeria. It is a professional body dedicated to promoting and facilitating determination of disputes by arbitration, mediation, conciliation and other forms of ADR. 4. The Maritime Arbitrators Association of Nigeria The Maritime Arbitrators Association of Nigeria is a specialised association which was incorporated in 2005. Its main objective is to enlighten the general public and stakeholders in the maritime industry about arbitration and ADR as a viable alternative to litigation, and to advise on choice of arbitrators. Maritime arbitration has been practised in Nigeria for a long time without a formal association promoting the interests of maritime arbitration. Its membership is made up mainly of admiralty practitioners, lawyers, shipping agents, marine insurers and other professionals with similar interest. 5. The Construction Arbitrators of Nigeria Construction arbitration in Nigeria requires some specialist knowledge and experience in the construction and building industry. As such, the Construction Arbitrators of Nigeria is made up of mainly professionals in the construction industry in Nigeria: Architects, Builders, Civil Engineers, Structural Engineers and Quantity Surveyors. The Nigerian Institute of Architects and the Nigerian Institute of Quantity Surveyors have provisions for the appointment of arbitrators and the conduct of arbitration in their respective statutes.

Mediation and ADR Following developments in other fi elds and global trends, ADR has gained widespread recognition and acceptance in Nigeria. The movement towards ADR has been fuelled by the heavy and oftentimes overfl owing caseload of traditional courts, resulting in protracted delays and considerable expenses for litigants. The increasing use and popularity of ADR is especially notable in commercial transactions. It is almost the standard expectation that commercial agreements incorporate a dispute-resolution clause including ADR. In Nigeria today, mediation tends to take the form of private mediation or court-annexed mediation. Private mediation involves the parties seeking assistance of an independent third party who offers his or her services on a commercial basis, whereas court-annexed mediation involves matters which have already been fi led in court, but with directives from the court that parties should explore amicable settlement through mediation. In such cases, the court directs parties to go to mediation and whatever mediation settlement agreement is reached by parties is entered as the judgment of the court. Unlike arbitration and conciliation, there is no harmonised legislation governing the process of mediation in Nigeria. The process is largely governed by the various regulations and rules of the courts. Court-annexed mediation is available to parties at different levels of court. At the trial court level, the Multi-Door Courthouses and Mediation Centres across the country are the

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established fora for mediation. The Multi-Door Courthouses are court-connected ADR centres which aim to provide the necessary framework for the attainment of alternative dispute resolution processes. They also operate as arbitral institutions with their own rules of procedure. The Multi-Door Courthouse system initially began with three Multi-Door Courthouses: Abuja Multi-Door Courthouse (“AMDC”); Lagos Multi-Door Courthouse (“LMDC”); and Kano Multi-Door Courthouse (“KMDC”). Today, in recognition of the successes and advantages of the Multi-Door Courthouse system, Multi-Door Courthouses have been set up in several other states across the country including Akwa-Ibom, Delta and Ogun States of Nigeria. The 2012 High Court of Lagos State (Civil Procedure) Rules provide that all Originating Processes which are accepted for ﬁ ling at the Registry should be screened for suitability for ADR and referred to the LMDC or other appropriate ADR institutions42. There are also the Mediation Centres set up by the government, where disputing parties can request mediators as well as conduct mediation proceedings. Such centres also support the training of mediators. In Lagos, for instance, the Citizens’ Mediation Centre (“CMC”) provides a non-adversarial forum for the mediation and settlement of a range of civil disputes between parties who voluntarily agree to mediation of their disputes by trained and seasoned mediators. The services rendered by the CMC are free for indigent residents of Lagos State. To ensure good mediation practice at the CMC, the Attorney-General of Lagos State issued the Citizens’ Mediation Centre (Procedure) Guideline Practice Rules 2011. At the appellate court level, the Court of Appeal Rules 2016 provide for the Court of Appeal Mediation Program (“CAMP”). Before the appeal is set for hearing, the court may in appropriate circumstances, upon the request of any of the parties, refer the appeal to the CAMP. However, the Rules limit the scope of matters which can be referred to the CAMP to civil appeals relating to breach of contract, liquidated money demand, matrimonial causes, child custody, parental action, inheritance, chieftaincy or personal actions in tort43. Once there is reference to CAMP, the appeal is to be adjourned. The parties can also resort to other ADR mechanisms. Where the parties are able to settle, the agreement reached by the parties will be adopted by the Court of Appeal as the decision of the court. If they are unable to settle, the appeal will then be set down for hearing.

Regulatory investigations The Nigerian economy, particularly the fi nance and power sectors, has been emboldened by a number of guidelines and regulations. Some of these include the Consumer Protection Framework (“CPF”)44; and the Directive on the Categories of Eligible Customers in the Nigerian Electricity Supply Industry45. Overview of some of the recent regulatory controls The CPF According to the Central Bank of Nigeria46, the CPF was introduced to guarantee high standards for effi cient customer service delivery, market discipline and to ensure that consumers of fi nancial services are adequately protected and treated fairly by fi nancial institutions (“FIs”)47. Furthermore, the CPF stipulates consumer rights and responsibilities and is geared to ensure timely complaints-handling48 and dispute resolution. The highlight of the CPF is the provision of a complaints-management process or procedure which provides that consumer complaints shall fi rst be lodged with the relevant FIs and can only be escalated to alternative dispute resolution organs, inclusive of the CBN’s Consumer Protection Department, if the consumer is dissatisfi ed with the FI’s decision or the complaint is not resolved within the time stipulated by the FI’s procedures.

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The Directive on the Categories of Eligible Customers in the Nigerian Electricity Supply Industry This directive was issued on May 15, 2017 by the Honourable Minister of Power, Works, and Housing, Babatunde Fashola, SAN, (“the Minister”) pursuant to his power under section 27 of the Electric Power Sector Reform Act (“EPSRA”). The directive is designed to give some redress to the illiquidity issues in the market, especially the crunch experienced by the power generating companies (“Gencos”), by specifying four categories of customer who are eligible to purchase electricity directly from the Gencos instead of the Distribution Companies (“Discos”). Impact of these developments on the litigation landscape The CPF The CPF, especially with the complaints-management process, does not purport to, and indeed cannot, oust the jurisdiction of the court, nor a litigant’s access to court in light of his constitutionally entrenched right of access to the court. However, to the extent that this regulation directs FIs to have dispute-resolution channels, one would expect that the court would be inclined to make them conditions precedent to accessing its jurisdiction. It is therefore believed that if the principles of the CPF are incorporated into the consumer’s contract, it has the potential to reduce unnecessary litigation. The Directive on Eligible Customers in the Nigerian Electricity Supply Industry The Directive on Eligible Customers has created a lot of controversies. While the Discos argue, on the one hand, that they are entitled to be compensated for any reduction in their ability to “earn permitted rates of return on their assets”, or “the inadequacy in their revenues as a result of the directive”49, the Minister, and NERC, on the other hand, hold the view that the Discos were not granted exclusive licences in their respective geographical areas and thus are not entitled to any compensation, as NERC can lawfully grant licences in respect of those areas. To this extent, the courts may be called upon to: (i) determine whether the Minister and NERC are under mandatory obligations to compensate the Discos for any loss of revenue the directive may engender, especially in light of the discretionary nature of the Minister’s duty to issue further directives bringing about the compensatory regime of the competition transition charge; and (ii) whether the situation qualiﬁ es as a force majeure, which can be relied upon by the Discos to avoid their contractual obligations. Judicial review of regulatory agencies Judicial review has been deﬁ ned by the Nigerian courts50 as the supervisory jurisdiction of the court exercised in the review of the proceedings, decisions and acts of inferior courts and tribunals and acts of governmental bodies. In achieving its aim, the court is usually concerned with the legality and not with the merit of the proceedings, decisions or acts of the affected tribunal or governmental body. Thus, in the exercise of its jurisdiction to regulate the actions of the agencies, the courts can declare such acts invalid or ultra vires and void for either being unconstitutional, or offending the twin rules of natural justice, i.e. the principles of audi alteram partem, or nemo judex in causa. The reliefs typically used in the review process include the orders of mandamus, certiorari, prohibition and the writ of habeas corpus. For example, in a recent judgment of the Federal High Court51, sitting in Lagos, in granting an order restraining NERC from proceeding to implement its directive to increase the electricity tariff, the court held that in light of the provisions of the EPSRA52, the action of the NERC was procedurally ultra vires, irregular and illegal.

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Conclusion In conclusion, the Nigerian litigation and dispute resolution landscape is indeed growing to accommodate the commercial realities of this present age and is responding to the call to facilitate quicker, efﬁ cient and effective resolution of disputes. However, it could very well be argued that in cases of signiﬁ cant commercial importance to the parties, arbitration may be the more cost-effective option, especially in matters that involve cross-border disputes.

* * *

Endnotes 1. Section 1 of the Constitution. 2. Acts of the National Assembly and the Laws of the State Houses of Assembly. 3. By virtue of section 32 (1) of the interpretation Act Laws of the Federation of Nigeria, 2004, the common law of England, principles of Equity and other statutes of general application in force in England on 1st January 1900 are applicable in Nigeria. 4. Section 36 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). 5. Order 3 Rule 3 (1) Federal High Court (Civil Procedure) Rules 2009; Order 3 Rule 2 (1) of Lagos State High Court (Civil Procedure) Rules 2012; Order 4 Rule 15 and 17 of the High Court of the Federal capital Territory (Civil Procedure) Rules 2004. 6. Order 7 Federal High Court (Civil Procedure) Rules 2009; Order 9 of Lagos State High Court (Civil Procedure) Rules 2012; Order 12 High Court of the Federal capital Territory (Civil Procedure) Rules 2004. 7. Order 25 of the High Court of Lagos State (Civil Procedure) Rules 2012. 8. Order 26 Lagos State (Civil Procedure) Rules and Order 30 High Court of the Federal Capital Territory (Civil Procedure) Rules. 9. Order 25 Rule 6 of the Lagos State (Civil Procedure) Rules 2012; Order 18 Federal High Court (Civil Procedure) Rules 2009. 10. Order 3 Rule 11 of the Lagos State (Civil Procedure) Rules 2012. 11. Kantin Kwari Market Traders Association & Ors v Labaran & Ors (2016) LPELR- 41329(CA). 12. Section 36 (1)(3) of the constitution. 13. Kotoye v. Central Bank of Nigeria & Ors. (1989) 1 NWLR (Pt.98) 419@ 414 were reiterated by the court in Baba v. N.C.A.T.C. Zaria (1991). 7 SC (Pt. 1) 58 @ 81–83. 14. This is still at its infancy in the Court within Nigeria and laden with attendant challenges; it is hopeful that the system will take a common place in due course of time. 15. Section 192 (1) of the Evidence Act 2011; Rule 19 of the Rules for Professional Conduct. 16. Proviso (a) & (b) to section 192 (1); Section 192 (2) of the Evidence Act 2011; Rule 19 (2) (c) of the Rules for Professional Conduct. 17. Section 192 (3) of the Evidence Act 2011. 18. Section 193 of the Evidence Act 2011; Rule 19(4) of the Rules for Professional Conduct. 19. Order 49 of the Lagos State High Court (Civil procedure) Rules; Order 52 High Court of the Federal Capital Territory (Civil procedure) Rules.

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20. ACB Plc v. Ndoma-Egba (2001) All FWLR (pt. 40) 1780. 21. Rule 50 of the Rules of Professional Conduct for Legal Practitioners, 2007. 22. http://blog.legalfunding.com/litigation-funding-in-nigeria/. 23. M.V. Parnomous Bay & Ors v. Olam Nigeria Plc (2004) 5 NWLR (Part 865) 1: Lignes Aeriennes Congolaises v. Air Atlantic Nig Ltd (2005) 11 CLRN 55. 24. Cap S6, Laws of the Federation of Nigeria (“LFN”), 2004. 25. Judgments (Enforcement) Rules and Enforcement of Judgments and Service of Process Rules. 26. Sections 104–110 of the SCPA. 27. Suit No. FHC/ABJ/CS/203/2017 – Emmanuel Ekpenyong v. Attorney General of the Federation. 28. Woodgrant Ltd v. Skye Bank Plc (2011) 12NWLR (Part 1260) page 61 at 97. 29. Anthony v. Surveyor-General, Ogun State (2007) ALL FWLR (Pt. 354) 375 at 390. 30. Commonwealth Law Bulletin (Vol 37, 2011 – Issue 2) – http://dx.doi.org/10.1080/030 50718.2011.570899. 31. Madubuike v. Madubuike (2001) 9 NWLR (Pt. 719) 698. 32. Cap. A18, Laws of the Federation of Nigeria 2004. 33. Section 53 Arbitration and Conciliation Act. 34. Cap P10, Laws of the Federation of Nigeria 2004. 35. Cap N117, Laws of the Federation of Nigeria 2004. 36. Cap P38, Laws of the Federation of Nigeria 2004. 37. Section 5, ACA; Obembe v. Wemabod Estates Ltd [1977] 11 NSSCC 264 at 271–272. 38. (2003) 15 NWLR (Pt 844) 469 (SC). 39. Section 23 ACA. 40. Section 51 ACA. 41. Tulip (Nig.) Ltd v. Noleggioe Transport Maritime SAS (2011) 4 NWLR (Pt 1237) 254 (CA). 42. See Order 3 Rule 11 Lagos State (High Court) Rules 2012. 43. See Order 16 r 1 CAR. 44. The Consumer Protection Framework for Banks and other Financial Institutions was issued by the Central Bank of Nigeria (CBN) on November 7, 2016, in exercise of the powers conferred on it by section 43 of the Central Bank of Nigeria Act of 2007 and sections 57, and 61(1) of the Banks and Other Financial Institutions Act of 2007, as amended. 45. Although the policy directive was issued on May 15, 2017, as at the time of writing this article, we gather that the directive has not yet been implemented because the NERC is still working out the implementation framework for the policy. 46. The Statement was made in a communiqué issued by U. A. Dutse, Director, Consumer Protection Department, issued on November 7, 2017. 47. Financial institutions include Commercial or Merchant Banks, Specialized Banks, Micro- ﬁ nance Banks (MFBs), Discount Houses (DHs), Development Finance Institutions (DFIs), Finance Houses (FHs), Bureaux-de-Change (BDC), Primary Mortgage Banks

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(PMBs), Credit Bureaux, Mobile Payment Companies, Mobile Money Operators or any other institution as may be licensed by the CBN from time to time in line with the relevant provisions of BOFIA. 48. A complaint is defi ned under paragraph 1.3 of the CPF as a dissatisfaction expressed by a consumer on a fi nancial product or service provided by a FI which may or may not have caused fi nancial loss. 49. This compensation will come by way of competition transition charges pursuant to Sections 28 and 29 of the EPSRA. 50. See ACB Limited v. Damian Ikechukwu Nwaigwe &Ors (2011) 7 NWLR 380 (SC). 51. FHC/L/CS/768/2015 Mr Toluwani Adebiyi v. NERC – Unreported. 52. Sections 31, 32, and 76 of the EPSRA.

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Abimbola Akeredolu Tel: +234 1 4615 2034/4630 8534 / Email: [email protected] Abimbola is a target-driven and goal-oriented lawyer. She joined the fi rm in September 2007. Her resolute commitment to the best interests of her clients in transactions and in the course of litigation and negotiation of settlements, and the inevitable attendant success, is an attribute for which she is often commended. She is quite renowned for her vast experience in commercial litigation and arbitration. Her multilingual skills (English, French, Italian and German) make her a lawyer with a difference. In 2013, she was appointed as Attorney General and Commissioner for Justice, Ogun State, the fi rst female to be appointed to that offi ce. In 2015 she was conferred with the prestigious rank of Senior Advocate of Nigeria.

Chinedum Umeche Tel: +234 1 4615 2034/4630 8534 / Email: [email protected] Chinedum has consistently demonstrated a passion for law practice. His exceptional understanding of legal issues reﬂ ects in his output in and out of court. A passionate writer and thinker, his articles on a wide range of legal issues have been published in reputable international and local law journals. Chinedum is a Notary Public for the Federal Republic of Nigeria.

Banwo & Ighodalo 98, Awolowo Road, South-west Ikoyi, Lagos, Nigeria Tel: +234 1 4615203-4; 4630853-4 / URL: www.banwo-ighodalo.com

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Katarzyna Petruczenko, Marcin Radwan-Röhrenschef & Anna Witkowska RöHRENSCHEF

Effi ciency of process Most civil cases in Poland are handled in litigious proceedings, where the parties to the dispute have to be active, explain the factual circumstances on which they base their claims, and submit evidence to support them. The judge’s role, as a rule, is rather passive, different from continental court proceedings and common law system proceedings. The judge does not collect evidence ex offi cio, and bases his/her judgment on the material presented by the parties. Non-litigious proceedings are used mainly in family, inheritance and some property law cases. The parties are allowed to present facts and evidence up to the end of the proceedings. However, the court disregards late allegations and evidence, unless this was due to no fault of the party in not presenting them earlier, or does not delay the procedure. In general, the parties should present all the facts and evidence in their pre-trial pleadings, i.e. in the statement of claims and the defence. Further pleadings can be fi led only upon the instruction of the court (to prevent continuous exchanges of pleadings between the parties). The principle of concentration of procedural material, together with the possibility to burden the party with any costs caused by their undue conduct, is aimed at providing quicker and more effi cient proceedings. The Polish legal system has undergone many changes in this respect in the past few years. Initial extreme formalism has been replaced by a more citizen- friendly kind of realisation of the formal truth principle. Under Polish law, there are also special simplifi ed proceedings for certain types of claims. One of them is the order for payment procedure, in which fi nancial claims can be sought, if they are confi rmed by offi cial documents, or documents in which the debtor accepts or acknowledges the debt (e.g., invoices). The court issues the order of payment based exclusively on the submitted documents without examining the circumstances or verifying the facts presented by the claimant. A hearing is scheduled only if the defendant fi les allegations. If he or she fails to do so, the order for payment is equivalent to a judgment, and can be challenged in appeal proceedings only. Financial claims can also be sought via the electronic order for payment procedure, if they became due within three years before a statement of claims is fi led. So far, all electronic claims have been handled by one court in Poland. In this procedure, all the court’s actions are recorded in the computer system, and all the claimant’s pleadings are fi led only via the system, while the defendant may decide whether or not he wants to access the e-procedure. In 2010, Poland introduced group proceedings into its legal system. This type of proceedings is developing rapidly. A collective action may be fi led in cases where a minimum group of 10 persons pursues claims of the same type on the basis of the same or

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identical factual grounds, and equal as for the claimed amount (in case of monetary claims and with some exceptions). The law provides for opt-in collective claims for damages. The fi nal judgment in the collective proceedings is effective for all group members. The role of technology has increased in traditional proceedings as well. Most hearings are recorded as audio, or audio and video, and the parties can obtain copies of the records together with simplifi ed minutes. It is also possible to order transcripts, and some judges do this ex offi cio for ease of reference. In a growing number of courts it is possible to obtain information on the case’s status and the court’s decisions via information portals. Starting from July 2016, the courts perform service via the computer system, if the addressee fi led a pleading through the system, or chose to fi le pleadings via the system in any type of proceedings. The court also has the possibility to summon parties, witnesses, expert witnesses or other persons in any manner that is the most expedient, if the court fi nds it essential to accelerate the examination of a case. At the same time, access to judges and presidents of the court divisions is becoming increasingly limited. In Poland, there is no possibility to discuss the procedural aspects of the case outside the courtroom.

Integrity of process Independence of the judiciary is a constitutional principle in Polish law, and judges are subject only to the Constitution and the statutes. Precedents do not bind the courts; however, Polish Supreme Court rulings play an important role in the court practice, and are followed by the courts of lower instances. Civil proceedings in Poland are two-instance, with the possibility of fi ling extraordinary means of appeal. The appeal may generally be based on any allegations, referring both to the facts and the law, and the higher court’s judgment is based on material gathered in both instances. The parties can submit new evidence; however, the court may disregard it, if it would have been possible to present it earlier. The higher court may change the judgment or, if it is impossible due to severe misconduct of proceedings, repeal it and refer the case back to the court of fi rst instance. Extraordinary means of appeal consist of: cassation complaint; complaint for reopening the proceedings; and plea of illegality of a non-appealable ruling. There are several limitations of the possibility to fi le them regarding both the type of cases and the grounds of the complaint. The rules of natural justice are not directly applicable in Polish civil proceedings, and the court should base its judgment on the statutes. But because there are several general clauses referring to norms of social coexistence and established customs in both substantive and procedural law, therefore, such values may in some cases be legally relevant. The court also has discretionary power, especially concerning evaluation of evidence. According to the principle of free appraisal of evidence, the reliability and validity of evidence is assessed at the court’s discretion using the rules of logical reasoning, and following extensive deliberations of the available material.

Privilege and disclosure Disclosure, within the meaning of the common law system, is unknown in Polish proceedings, with the exception of proceedings for damage resulting from infringement of competition law; however, the scope of such disclosure is very limited.

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The court may order a party or any other person to present a document that is in his or her possession and constitutes proof of a fact which is important for the case, unless the document contains confi dential information. If ordered so, each person is obliged to present documents unless he or she has a right to refuse to testify as a witness. A third party who does not present a document may be fi ned; a party cannot be fi ned, however, and the court has to assess in its discretion the signifi cance of the party’s refusal while issuing the judgment. This kind of “disclosure” refers to a particular document or types of documents identifi ed by the requesting party. There is no possibility to request all documents that may be of any relevance for the case. According to the codes of ethics, attorneys-at-law and legal advisors (the two Polish legal professions) are subject to the unconditional and absolute obligation of professional secrecy regarding all the facts they learned while performing their duties. Nevertheless, codes of ethics are not a source of universally binding law and, therefore, in civil proceedings lawyers only have the right to refuse to answer particular questions according to the general rules. General refusal to testify can be made only by close family members. A witness can also refuse to answer a particular question if his/her testimony could expose him/her or his/ her relatives to criminal liability, disgrace or direct and severe fi nancial loss, or if his/her testimony would involve signifi cant violation of professional secrecy. A mediator may not testify as a witness with respect to facts which he has learned in connection with the mediation, unless the parties release him from the obligation of confi dentiality of mediation. Documents prepared by lawyers for their clients are privileged.

Costs In general, under Polish law, the losing party is obliged to reimburse the winning one (upon request) for the costs of proceedings, which include lawyers’ fees, court fees, costs of taking evidence (i.e., expert opinions), and costs of witnesses’ and expert witnesses’ appearance in the court, as well as the party’s appearance, if the party was ordered to appear. Lawyers’ fees are reimbursed in the amount established in statutes, which is usually lower than actual costs, and claiming full reimbursement is not possible. In cases where the claim value exceeds €1,180,000, the minimum recoverable fee is PLN 25,000 (approx. €5,900), and the maximum amount to be recovered from the losing party is PLN 150,000 (approx. €35,500). The courts award the maximum rate extremely rarely, and only when the claim value is very high. If a claim is only partially awarded, the costs are reimbursed proportionally or are reciprocally exclusive. A party fi ling a pleading initiating the proceedings or means of appeal has to pay a court fee. The fee may be established in statutes or, in case of fi nancial claims, is equal to 5% of the claim value. In any case, it cannot be lower than PLN 30 or higher than PLN 100,000 (€23,500). As to certain motions for evidence, the court may oblige the requesting party to pay an advance. This payment is taken into account when determining the fi nal costs of the proceedings. In some cases, the claimant without a place of residence or usual stay, or a registered offi ce in Poland or another EU Member State, may be obliged to pay bail to secure the costs of the proceedings at the defendant’s request, unless he or she has suffi cient property in Poland to

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pay the costs. The deposit value is determined based on the costs that the defendant is likely to bear. If costs are not awarded to the defendant, the bail is repaid to the claimant once the judgment is fi nal; the court may also repay the bail earlier, if the reasons to provide security cease to exist in the course of the proceedings. If the party does not have suffi cient funds to bear the cost of the proceedings or lawyer fees, it may be exempted by the court from the whole or part of the costs and/or granted an attorney appointed by the court. This requires fi ling a motion and presenting documents confi rming the party’s fi nancial status.

Litigation funding Third-party funding and legal costs insurance are becoming more popular, although third- party funding still functions mostly in theory as a tempting alternative to fund litigation. Agreements on fi nancing the proceedings are not regulated by law, however they are allowed due to the general principle of freedom of contracts. Such agreements are irrelevant for the proceedings – the funders have no rights to infl uence the case, and the means of fi nancing has no impact on the court’s decision on costs.

Interim relief Each party or participant may request a temporary injunction to be awarded before initiating proceedings, or in the course of them in order to secure the possibility of enforcing the judgment. The requesting party has to present prima facie evidence of the claim (substantiate the claim), and the legal interest in being granted a temporary injunction. Under Polish law, legal interest in temporary injunction exists if its lack would prevent or signifi cantly hinder the enforcement of a judgment issued in a given case, or otherwise prevent or seriously hinder achieving the purpose of proceedings in a given case. A motion for temporary injunction should specify the method of providing security. In the case of fi nancial claims, the Civil Procedure Code lists the methods possible, similar to those applicable in enforcement proceedings, i.e. attachment of movables, bank accounts, mortgaging real property or compulsory administration over the enterprise. As for non- fi nancial claims, the court may grant any type of injunction appropriate for securing the claim, i.e. regulate the rights and obligations of parties and participants for the duration of the proceedings, or prohibit the disposal of objects or rights involved in the proceedings. The general rule is that a temporary injunction cannot lead to satisfying the claim; with some exceptions only for non-fi nancial claims. When deciding on the method of security, the court considers the interests of the parties in order to ensure adequate legal protection for the entitled party without excessively burdening the obliged party. When granting the injunction, the court obliges the entitled party to initiate proceedings within a specifi ed time limit, which cannot be longer than two weeks. The motion for injunction should be decided within one week of fi ling. However, this deadline is only a guide for the court and is commonly exceeded. Granting or refusal to grant a temporary injunction may be appealed. The obliged party may at any time request to repeal or change a fi nal decision to award temporary injunction, if the reason to provide it changes or ceases to exist. The court’s decision on this petition may also be appealed. A temporary injunction is cancelled after the claim is fi nally rejected or dismissed or proceedings are terminated. It is also cancelled two months after the judgment

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acknowledging the claim becomes fi nal (one month for attachment of the bank account) and the party does not initiate enforcement proceedings within this time. The obliged party may claim compensation from the entitled party, if the entitled party did not fi le the fi rst pleading within the deadline (if the injunction was granted before initiating the proceedings), withdrew a complaint, or if his complaint was returned rejected or dismissed, or proceedings were terminated.

Enforcement of judgments Enforcement of foreign judgments in Poland depends on the state of origin of the judgment and may be regulated by EU law (Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters), international agreements or – in the absence of both of them – Polish law. Judgments issued in one of the EU Member States are recognised without any special procedure and enforceable without any declaration of enforceability required. An enforceable judgment is by law a basis for any protective measure existing under Polish law. The court may refuse to recognise a foreign judgment only in cases listed in the regulation, i.e. if recognition is manifestly contrary to public policy, the defendant did not have the opportunity to defend his rights, or a judgment is irreconcilable with a judgment given between the same parties. The same reasons can be grounds for refusal of enforcement, if the person against whom enforcement is sought requests it. Poland is a party to the Convention on jurisdiction and enforcement of civil and commercial matters, signed in Lugano on 30 October 2007. If the state in which the judgment was issued is not a member of the EU and there are no applicable international agreements, recognition and enforcement is regulated by the Polish Civil Procedure Code, according to which judgments are recognised by virtue of law unless there are obstacles specifi ed in the Code. The list is enumerative and includes, inter alia: situations where the ruling is not fi nal in the state where it was issued; the ruling was issued in a case falling under the exclusive jurisdiction of Polish courts; a party was deprived of the possibility to defend itself in the course of proceedings; or recognition of the ruling would be contrary to the basic principles of legal order. In contrast to recognition, for enforcement of foreign judgment, a court decision is required. Enforcement is confi rmed if a ruling is enforceable in the state of issue and if there are no obstacles from the above-mentioned list. The proceedings for obtaining the enforcement clause are initiated by a creditor’s petition, and a debtor can present his position before the court’s decision. When the decision on the recognition is fi nal, it may become a basis for the enforcement. The Polish Civil Procedure Code also includes provisions on the European order for payment, the European enforcement order, and European small claims procedure based on EU law. Poland is also a party to the Convention on Recognition and Enforcement of Foreign Arbitral Awards signed in New York on 10 June 1958, according to which foreign arbitration awards are recognised in Poland as binding and are enforceable in accordance with Polish law provisions. Recognition and enforcement may be refused only on the grounds listed in the convention.

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Cross-border litigation According to Regulation No. 1215/2012, an application for provisional and protective measures provided under the law of the state may be made to the courts of an EU state, even if the courts of another state have jurisdiction as to the substance of the matter. There are no provisions on the subject for non-EU states in the Polish Civil Procedure Code. However, if requested the court can secure evidence located in Poland, if it is required to pursue a claim abroad. Legal aid between EU states (except for Denmark) is regulated by Council Regulation (EC) No. 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters. According to the Regulation, the court of one state can request the court of another state to take evidence or request to take evidence directly. The requested court performs the request in accordance with the law of its state without delay and, at the latest, within 90 days of receipt of the request. If provided under the law of the requesting court’s state, the parties and their representatives have the right to be present at the performance of the taking of evidence by the requested court. The requested court may refuse legal aid only in the situations listed in the Regulation, and cannot refuse solely on the grounds of exclusive jurisdiction over the subject matter of the action, or the fact that the law of that Member State would not admit the right of action on it. Legal aid outside the EU is regulated by Polish law. Polish courts take evidence and serve writs on the petition of courts and other authorities of a foreign state, unless it is contrary to the basic principles of the legal order, or performance of those actions is beyond the scope of the activities of Polish courts. Legal aid is based on the reciprocity rule. Poland is also a party to the Convention on the taking of evidence abroad in civil or commercial matters, signed in The Hague on 18 March 1970, according to which a judicial authority from one state can request an authority of another state to obtain evidence or perform other judicial act (except for service of judicial documents, enforcement acts and provisional or protective measures) that is intended for use in judicial proceedings. The requested authority performs the act expeditiously, applying its own law, and may refuse aid only on the grounds listed in the convention. In certain situations, evidence may be taken by a diplomatic ofﬁ cer or consular agent. A party who does not have a place of stay, residence, or registered address in Poland or another EU Member State, and who has not appointed a court representative domiciled in Poland, is obliged by Polish law to appoint a representative ad litem in Poland. If he or she did not appoint a representative, judicial writs addressed to that party are left in the case ﬁ les and considered duly served.

International arbitration Polish arbitration regulations are based on UNCITRAL Model Law on International Commercial Arbitration, and are the same for domestic and international arbitration. Parties may bring disputes before an arbitration court involving property rights or non- property rights, which can be resolved by a court settlement. An arbitration clause should be made in writing and cannot violate the principle of equality of the parties, especially entitling only one party to bring a dispute before an arbitration court. A case brought before a court concerning a dispute covered by an arbitration clause is rejected by the court if the defendant’s allegation is brought before defending on the merits of the case. Parties may determine the terms and conditions, and proceedings before an arbitration court and permanent arbitration courts (i.e. Court of Arbitration at the Polish Chamber of

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Commerce in Warsaw, Lewiatan Court of Arbitration in Warsaw) have their rules. However, they may also be changed by the parties. The Civil Procedure Code applies only in the absence of the parties’ agreement on the rules, and the courts and proceedings under them are rather similar to proceedings before the court. An arbitration court resolves a dispute according to the law applicable to a given relationship or, where expressly authorised by the parties, on the basis of general principles of law or equity. An arbitration court judgment may only be repealed by the court on the grounds listed in the Civil Procedure Code, i.e. if there was incorrectness regarding the arbitration clause, the proceedings, or if fi nal judgment in the same case has been issued by a court. An arbitration court judgment issued abroad, or a settlement reached before an arbitration court abroad, is recognised or enforced by the court after the hearing. The court refuses recognition or enforcement if: the dispute cannot be adjudicated by an arbitration court; recognition would be contrary to the basic principles of the legal order; there were certain failures in the arbitration proceedings; or an arbitration court judgment is not yet binding on the parties, has been repealed, or its enforcement has been postponed by a court of the state in which, or according to whose laws, the judgment was issued. Since 1 January 2016, the process of court control of arbitral awards has changed substantially. The basic grounds for challenge, enforcement and recognition are still in line with the New York Convention and have not been amended. However, the procedure has been substantially simplifi ed and accelerated. The cases were referred in the fi rst instance to the courts of appeal, and not to the regional courts as previously. In case of awards of Polish arbitration courts, recognition and enforcement cases may be appealed to another court of appeal panel and, in case of foreign awards, the decision of the court of appeal is fi nal. In both cases, the fi nal decision is subject to a cassation complaint fi led to the Supreme Court. The cassation complaint to the Supreme Court does not deprive the Court of Appeal judgment of the fi nal and enforceable nature. A party may also request a resumption of proceedings on repealing an arbitration court judgment, concluded with a fi nal judgment, and declaring a fi nal judgment related thereto unlawful. Motions for repealing arbitral awards of the Polish arbitration courts are decided in the fi rst instance by the courts of appeal and are subject to the cassation complaint (without the appeal phase). The term to fi le a motion for repealing an arbitral award has also been amended. This term was shortened from three to two months, counting from the moment when the party was served the relevant arbitration award or – if a motion is founded on the basis that a judgment was achieved by means of an offence, or on the basis of a false or falsifi ed document, or that a non-appealable court judgment has been issued in the same case between the same parties – from the moment when a party became aware of that basis. However, a party may not request a judgment of an arbitration court to be rendered after fi ve years from the day of service of the judgment of the arbitration court. There is no possibility to fi le a motion for repealing an arbitral award of the foreign arbitration court.

Mediation and ADR The role of mediation in Polish civil procedure continues to develop. At the beginning of 2016, further amendments to the Civil Procedure Code entered into force in order to promote this means of solving disputes.

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Under Polish law, mediation is voluntary and conducted on the basis of a mediation agreement, or a court decision to refer parties to mediation that may be issued at each stage of the proceedings, and before the fi rst hearing the court has to assess if there is a need for mediation. If parties have concluded a mediation agreement before initiating proceedings in court, the court refers the parties to mediation upon a plea fi led by the defendant, before defending on the merits of the case. Parties’ consent is necessary for conducting mediation based on the court’s decision. A mediator may be appointed by the parties or the court. There are lists or permanent mediators. However, parties may also appoint a mediator from outside the lists. Mediation is confi dential, although parties may release mediators from the obligation of secrecy. Any proposed settlements, mutual concessions or other statements made in mediation have no effect when invoked in the course of proceedings before a court or court of arbitration. The mediator has access to case fi les unless the party declares lack of consent. Mediation lasts for the time determined by the court; no longer than three months. However, the court may extend this if both parties fi le a joint request. During mediation, parties may reach a settlement that is subsequently approved by the court and becomes an enforcement order. A settlement reached before a mediator and approved by the court has the binding effect of a settlement reached before the court. Before fi ling a statement of claim, a party may fi le a motion to call for settlement which initiates conciliation proceedings. During the hearing, parties may reach the settlement, which is then approved by the court. Filing such a motion interrupts the limitation period. Both types of settlement result in terminating the proceedings; however, without the force of res judicata. Therefore, it is possible to fi le a new statement of claim in the same case, but the defendant will then have the allegation of res transactae that causes dismissal of a claim. If parties want to avoid such risk, they can fi le a joint motion for issuing the judgment based on their settlement, instead of a motion for approving the settlement and termination of proceedings.

Regulatory investigations The number of regulators has varied in Poland over the years. The main role is played by the Offi ce of Competition and Consumer Protection (OCCP), which has the power to: (a) approve mergers; (b) sanction abuse of a dominant market position; (c) sanction agreements restraining competition; or (d) sanction practices harming consumers’ interests (abusive general terms and conditions, hazardous products, etc.). The Offi ce has wide investigatory powers and the refusal to produce documents, data, etc. is punishable by severe fi nes. The Offi ce may punish both the company and management board members. The company can be fi ned up to the amount of 10% of the previous year’s turnover for breaching certain prohibitions (regardless of whether the infringements were intentional or unintentional), and up to €50,000,000 for obstructing proceedings. Members of the board and other management staff can be fi ned up to €2,000,000 for intentionally contributing to the infringement, or up to 50 times the average salary for obstructing proceedings. Delay in performing the Offi ce’s decisions may be fi ned up to €10,000 per day of the delay.

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The parties may use the procedure for settling with the Offi ce – mainly the procedure of leniency, or the procedure of issuing a so-called decision imposing the duty upon the application of the party recognising the fault. In both scenarios, the Offi ce may resign from imposing the fi nes. The procedure of leniency may be applied in case of anti-competitive agreements, if one of the companies involved has fi led a motion indicating the details of the agreement and cooperates with the Offi ce during the proceedings. The other procedure is connected with voluntary submission to penalty (therefore the party’s motion is always required), and is aimed at expediting the proceedings. The maximum fi ne is 10% lower than without the motion; however, when fi ling an appeal, the Offi ce changes the decision and imposes a fi ne in the full amount. Only the second decision is appealable to a court. The other regulators are usually sectorial and mainly concentrated on health and safety, tariffs and consumer interest. The rules of proceedings before the regulators are similar to those relating to the OCCP. The Regional Court in Warsaw − the Court of Competition and Consumer Protection − has jurisdiction for appeals and complaints from decisions of the President of the Offi ce of Competition and Consumer Protection, the President of the Energy Regulatory Offi ce, the President of the Offi ce of Electronic Communications, and the President of the Railway Transport Offi ce. The court may repeal the decisions, or change them and rule on the merits of the case. The judgment is appealable and a cassation complaint is allowed irrespective of the value of the claim. The recent amendments to competition law also simplifi ed the procedure for declaring the general terms & conditions provision as abusive. Instead of the current model in which the President of the OCCP sues the company and the court decides upon the issue, the new system allows the President to issue a decision prohibiting the application of a given provision. The company may fi le an appeal to the court. It should be noted that the bill implementing Directive 2014/104/EU of 26 November 2014 has recently been enacted to facilitate the private enforcement of the competition law. The law entered into force on 27 June 2017. Under the new regulation, fault-based liability for damage resulting from the infringement of the competition law is introduced. The signifi cant novelty is the possibility of disclosure of documents, however in a very limited scope.

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Katarzyna Petruczenko Tel: +48 22 266 0 900 / Email: [email protected] Katarzyna Petruczenko is a partner at RöHRENSCHEF, a member of the District Chamber of Legal Advisers in Warsaw. She specialises in commercial dispute resolution and has wide experience in construction disputes management, including FIDIC-based contracts, especially in the road and railroad sectors. Her practice also includes assistance in bankruptcy, restructuring, corporate and labour law proceedings. She has also advised international insurers on managing claims in Poland, in particular D&O liability claims. She has authored numerous publications on civil procedure and arbitration issues, competition, bankruptcy and banking law. She is also a frequent speaker at conferences and workshops.

Marcin Radwan-Röhrenschef Tel: +48 22 266 0 900 / Email: [email protected] Founding partner at RöHRENSCHEF, Marcin Radwan-Röhrenschef provides advice on complex commercial disputes, including cases in the area of criminal, administrative and bankruptcy law. He participated in many infrastructural projects. He has worked for clients in the real estate, hotel, spirits, shipbuilding, railway, pharmaceutical and banking sectors. He has also provided advice to central public administration bodies and ministries. He has participated in a wide range of cross-border disputes. Author of a wide range of publications and a frequent speaker on international conferences, he is a Member of the Warsaw Bar of Advocates, where he holds the position of a judge in the Superior Disciplinary Court, Membership Ofﬁ cer of the Litigation Committee at International Bar Association (IBA), and Country Chair of the IBA Litigation Committee in Poland (2008–2009). He represented the Polish Bar Council in the Council of the International Bar Association (2011–2013).

Anna Witkowska Tel: +48 22 266 0 900 / Email: [email protected] Anna Witkowska is a junior lawyer at RoHRENSCHEF and a trainee at the Warsaw Bar of Advocates. She graduated from the Faculty of Law and Administration at the University of Warsaw. She also studied at the University in Uppsala. She prepared and defended a Master’s thesis on medical conﬁ dentiality in criminal procedure. She was an intern at the Helsinki Foundation of Human Rights.

RöHRENSCHEF Nowogrodzka Street No. 11, 00-513 Warsaw, Poland Tel: +48 22 266 0 900 / Fax: +48 22 266 0 901 / URL: www.rohrenschef.pl

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Anastasia Astashkevich & Roman Shtykov Astashkevich and Partners

Effi ciency of process From January 1, 2017, procedural documents can be fi led electronically, not only in arbitration, but also in civil or administrative proceedings. At the same time, the relevant provisions of the new version of the APC of the Russian Federation, the CCP of the RF and the CAS of the Russian Federation will be applied only in courts that have the necessary technical capabilities (Part 4, Article 12 of the Federal Law No. 220-FZ of June 23, 2016 “On Amending Certain Legislative Acts of the Russian Federation with regard to the use of electronic documents in the activities of the judicial authorities”, further – Law No. 220-FZ). This means that if, for example, in a court of general jurisdiction, there is no possibility to receive documents electronically or to notify the participants of the process via the Internet, the court will work according to the previous rules. Submission of an electronic document for the court All procedural documents (claims, applications, complaints, petitions, etc.) can now be fi led in the courts in both paper and electronic form (part 7 of Article 4 of the APC of the RF, part 1.1 of Article 3 of the RF Code of Civil Procedure, Part 2, Article 45 of the CAS RF). In the arbitration process, electronic document management is already in place. However, the application for securing the claim, the statement of claim with the petition for securing the claim, the application for securing the property interests and the petition for the suspension of enforcement of the judicial acts, could be submitted only in paper form. From January 1, 2017, the applicant has the right to fi le such documents electronically, but they must be signed by a strengthened qualifi ed electronic signature (part 1 Article 92, part 1 Article 99, part 1 Article 125, part 1 art. 265.1, part 1 of Article 283, part 3 of Article 291.6, part 3 of Article 308.4 of the agrarian and industrial complex of the Russian Federation). Also from January 1, 2017, the rules of electronic document management begin to operate in civil and administrative processes, and not just arbitration. Any procedural document can be submitted to the court of general jurisdiction in electronic form. To do this, you will need to fi ll out a special form on the court website. As a general rule, documents that are submitted to the court of general jurisdiction in electronic form will not need to be sealed with a qualifi ed electronic signature. However, just as in the arbitration process, documents will appear that can be submitted to the court of general jurisdiction in electronic form only if they are sealed by a qualifi ed electronic signature. The courts will accept electronic documents as written evidence. If copies of documents are submitted electronically, the court may require the originals of such documents (para 1, part

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3, Article 75 of the APC of the Russian Federation, part 1, Article 71 of the Code of Civil Procedure of the Russian Federation, part 1.1 of Article 70 of the CAS RF). In the CAS RF initially electronic documents were named as a separate type of evidence. Now electronic documents are attributed to written evidence. For the judicial act, which is compiled in electronic form, the judge will have to certify the enhanced qualifi ed electronic signature. As a general rule, the arbitral tribunal will not send to the participants in the process a paper version of the judicial act, which is produced in the form of an electronic document. This judicial act will be placed on the offi cial site of the arbitration court on the Internet in the restricted access mode (in the arbitration process – not later than the day after the day when the court adopted it). But upon the petition of the persons participating in the case, the court will send them a copy of the judicial act in hard copy within fi ve days by registered mail or hand them over against receipt. If the court does not have the opportunity to draw up an act in the form of an electronic document, the old rules apply: only a paper version is drawn up. Such an act under general rules is sent to the persons participating in the case by mail or handed over against receipt. Such rules are contained in Part 1 of Article 177 and in Part 1 of Article 186 of the Arbitration Procedural Code of the Russian Federation. In addition, the judge will not draw up a judicial act in electronic form in cases where it contains information that relates to state or other secret protected by law, and the court has considered the case in a closed hearing (Part 5, Article 15 of the Code of Administrative Procedure of the Russian Federation).

Integrity of process Independent and professional judges are the basis of a fair, unbiased and constitutionally guaranteed system of courts known as the judiciary. This independence does not mean that judges can make decisions based on personal preferences. Rather, they are free to make lawful decisions – even if these decisions are contrary to the opinion of the government and the inﬂ uential parties involved in the process. In democracy, independence from the political pressure of elected representatives and legislative bodies guarantees the impartiality of judges. Judicial decisions should be unbiased and be based on facts of the case, personal qualities and legitimate arguments, as well as laws relevant to the case, without limitation or undue inﬂ uence of interested parties. These principles provide equal legal protection for all. The powers of judges to review public laws and declare them to be in violation of the national constitution are a fundamental means of controlling the government in order to prevent possible violations by the government – even if the government is chosen by the majority of the people. However, in order to exercise these powers, courts must be independent and able to base their decisions on law, rather than on political preferences. Whether they are elected or appointed, the law should guarantee to judges that they will not be dismissed from their post, or determine the term of their authority so that they can make decisions without fear of pressure from the powers that be. Civil society recognises the importance of professional judges and provides them with the necessary training and rewards. The belief in the impartiality of the judiciary – since it is considered a “non-political” branch of power – is the main source of its power and legitimacy.

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Courts, however, have no more immunity with respect to public comment, analysis of their work and criticism than other institutions. Freedom of speech belongs to everyone: both judges and their critics. In order to ensure impartiality, judicial ethics require judges to refuse to take (or not to participate in) decisions in cases in which they may have a conﬂ ict of interest. Judges in a democratic society cannot be dismissed as a result of minor complaints or as a result of criticism based on political considerations. They can only be removed for serious crimes or violations through a lengthy and complex impeachment procedure (indictment) and litigation – either in the legislature or in a special court session.

Privilege and disclosure Courts, pursuant to the Law on Access to Information, provide users with: • Information prepared by the courts within the limits of their authority in the administration of justice (for example, information on the progress of the case or material) and other powers attributed by the law to the competence of the courts (for example, reviews of judicial practice approved for publication by the presidiums of the courts concerned). • Information received by the courts relating to the activities of the courts (for example, court statistics of the Judicial Department attached to the Supreme Court of the Russian Federation). At the same time, information on the activities of the courts is not information on the activities of courts, and therefore the court is not entitled to provide such information, referring to paragraph 2 of Article 1 of the Law on Access to Information. • Judicial acts in specifi c cases, that is, judicial decisions made in the form established by the relevant law on the merits of the case by the courts of the fi rst, appeal, cassation, and supervisory instance. • Information contained in acts regulating the activities of the courts (for example, court regulations). • Information on the legislation that establishes the procedure for judicial proceedings, the powers and procedure of the courts. Within their competence, courts provide other information in accordance with federal laws, in particular in accordance with the Law of the Russian Federation No. 3132-I of June 26, 1992, “On the Status of Judges in the Russian Federation”; Federal Law No. 273 of December 25, 2008-FZ “On Counteracting Corruption”; and Federal Law No. 94-FZ of July 21, 2005 “On the Placement of Orders for the Supply of Goods, Works, and Services for State and Municipal Needs”. Information on the activities of the courts is open and accessible (art. 4, para. 1 of the Access to Information Act), except in cases where access to such information is restricted by federal laws (art. 5 of the Access to Information Act): • Information classifi ed as a state secret (Article 5 of the Law of the Russian Federation “On State Secrets”), other secret protected by law (for example, the secret of adoption) (Article 139 of the Family Code of the Russian Federation), medical secrecy (art. 13 of the Federal Law of November 21, 2011 N 323-FZ, “On the Fundamentals of Protecting the Health of Citizens in the Russian Federation”), as well as other information, access to which is limited by federal law (for example, information about persons subject to the state, in accordance with the Federal Law of August 20, 2004, No. 119-FZ “On State Protection of Victims, Witnesses and Other Participants in Criminal Proceedings”.

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The court cannot refuse to provide the requested information by referring to the fact that part of it is information of limited access. In this case, the public part of the information is provided (Part 3 of Article 19 of the Law on Access to Information). The information provided to users on the activities of the courts should be reliable and timely (Article 4, paragraph 2, of the Access to Information Act); that is, it must correspond to reality and be provided within the statutory deadlines. Courts need to take into account the nature of the information requested and its relevance to the user at a particular time, and take measures to provide such information promptly.

Costs and funding As general rule, during judicial proceedings each party bears its own costs. The court expenses are usually paid by the plaintiff. But there are exemptions for some citizens. The losing party will bear all costs determined in the arbitration award. (Article 110 of the Code of Arbitration Procedure of the Russian Federation). The losing party will reimburse the expenses for conducting expert examinations, postal expenses and expenses of the party in whose favour the decision is made, including e xpenses for legal representatives and the court. However, it is worth noting that expenses for legal representatives are collected from the losing party in “reasonable limits”. This criterion, in practice, allows courts to signiﬁ cantly reduce the amount of reimbursement of the expenses of the party in whose favour the decision is made, while being imprecise and not clearly transparent. There are no complicated constructions for ensuring legal expenses by the legislation of the Russian Federation, and their absence is compensated only by a very low amount of state duty.

Interim relief Interim measures can be taken by the state courts at any stage of the arbitration process, but the following mandatory conditions must be met: the applicant must prove the expediency of applying interim measures; and such measures should be proportional to the claims and balance the interests of the parties concerned. The interim measures include the seizure of money or property of the defendant, the prohibition of the defendant from certain actions, the assignment of the obligation to perform certain actions, the transfer of the disputed property to the plaintiff as a depositor, and so on (Article 91 of the Code of Administrative Procedure of the Russian Federation). Although this list is not complete, courts rarely resort to other forms of interim measures, popular in other countries. The court may also ask to provide a cross-undertaking.

Enforcement of judgments/awards The procedure of the recognition and enforcement of the decision of the foreign court is also regulated by the Arbitration Procedural Code of the Russian Federation and the Civil Procedure Code of the Russian Federation. It is necessary to ﬁ le an application for the recognition of such decision by the court. The decision of a foreign court generally is recognised and enforced, considering reciprocity and equality. However, the criteria for determining reciprocity are not accurate, although

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there is a requirement (1189 of the Civil Code of the Russian Federation) to prove a lack of reciprocity. In practice, courts can also apply the principle of international courtesy and recognise the decision, ignoring the lack of reciprocity. For example, Russian courts recognise the decisions of English courts, although they refuse to recognise court decisions repeatedly (for example, decisions on Yukos cases). The only time when it will be possible to accurately count on recognition will be the existence of a bilateral agreement on the recognition of decisions in civil cases. Also, there is a certain list of grounds for refusal to recognise and enforce (31 Chapter of APC Russian Federation). The court may refuse to recognise and enforce if such recognition contradicts the public policy of the Russian Federation, and if the decision is made in violation of the exclusive jurisdiction of the Russian courts.

Cross-border litigation The legislation of the Russian Federation does not provide a possibility of enforcing inconclusive decisions of foreign courts. For example, there are no grounds to recognise and enforce a decision on taking interim measures, or inconclusive decisions on bankruptcy cases. In practice, courts, considering their interpretation of the law, can recognise such interim solutions and take interim measures. Russia is a party to the Hague Convention on Civil Procedure of March 1, 1954, according to which (Article 8) foreign courts can apply, by means of a Letter of Request, to the competent authority of another Contracting State to request it, within its jurisdiction, to obtain evidence, or to perform some other judicial act. Within a bilateral agreement it may be possible to apply for provisional evidence or to perform other procedural actions in Russian courts.

International arbitration Russia is a party to the New York Convention of 1958 and the European Convention on International Commercial Arbitration of 1961. The Law of the Russian Federation “On International Commercial Arbitration” (further – Arbitration Law) is almost identical to the provisions of the UNCITRAL Model Law (1985 version) and highlights the principle of non-intervention by the courts. The provisions of named treaties are incorporated into the national legislation and they limit judicial interference in the arbitration process. Courts, pursuant to the APC (Chapter 32) and Article 9 of Arbitration Law, may assist arbitration by enforcing an arbitration Award or by setting aside the Award. A state court may appoint an arbitrator by the request of the parties or take interim measures (Articles 9, 11. part. 1, Article 13 of the Arbitration Law). The list of grounds for cancellation of an Award is restrictive and is fully related to provisions of the New York Convention of 1958. But in practice, the state courts often make major mistakes by applying provisions related to international commercial arbitration because of lack of understanding of the essentials of international commercial arbitration, which leads to long procedures, as well as to poorly justiﬁ ed refusal of recognition and enforcement of Arbitration Awards.

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It should also be noted, that after the 2016 reform of the system of internal arbitration, an improvement in the level of understanding of the objectives and principles of international arbitration should be expected. The best-known arbitration body in Russian Federation is the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC). ICAC is the leading arbitration institution in Russia; it has a list of recommended arbitrators for hearing international commercial disputes and administers about 300 international arbitrations annually. However, most Russians legal entities prefer to refer their disputes for consideration to foreign arbitration courts.

Mediation and ADR Mediation and ADR are not as developed as in the European countries; however, the trend to solve disputes in a peaceful way is becoming more evident. The universities have started to elaborate special educational programs, meanwhile Russian teams are participating in major mediation competitions, which is bringing more interest to this sphere. In addition, after the Federal law № 193 “On alternative procedure of dispute resolution (Mediation)” entered into force in 2010, Russian legal entities have started to refer their disputes to mediation. The reform of internal arbitration, mentioned above, is aimed to increase the confi dence of commercial structures in internal arbitration as an alternative procedure of dispute resolution. After the federal Law “On Arbitration Proceedings” № came into force on 1 September 2016, most preferential conditions for the establishment and functioning of arbitration courts have been abolished. The abolition of conditions has led to the establishment of affi liated courts and to the state courts copying them. Now, the right to establish an arbitration court may be provided to non-profi t organisations only by the Government of Russian Federation.

Regulatory investigations State control and supervision of the activity of business entities has always had a very negative impact on business activity in Russia for several reasons. But some gradual reductions in the powers of regulatory bodies have generally facilitated the activities of legal entities. However, the number of disputes between business entities and regulatory bodies is still signiﬁ cant. According to a review of jurisprudence related to the protection of foreign investors published 12 July 2017 by the Supreme Court of the Russian Federation, state courts are ready to protect the rights of legal entities in disputes with regulatory bodies. This is also conﬁ rmed by some cases, that show that the courts ask for real evidence of violations of the law by legal entities.

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Anastasia Astashkevich Tel: +791 5145 5864 / Email: [email protected] In 2007 Anastasia graduated from Moscow State Linguistic University (former Moscow Institute of Foreign Languages named after M. Torez), faculties of law and translation. In 2008 she fi nished her MBA course at the International University of Moscow. In 2013 she graduated from the University of Liverpool, where she obtained a Master’s degree in International Business Law (LL.M.). Currently Anastasia is fi nishing her Ph.D. research at Moscow State Academy of Law named after O.E.Kutafi n. Anastasia started her career in one of Russian pipe trading companies in 2003. (Pipe Trading House LLC). In 2004 she was transferred to another company of the holding to the same vacancy, where she dealt mostly with corporate law and contract law issues. Since 2007 Anastasia has been working as a legal counsel in one of the leading pipe engineering companies, Pipe Innovation Technologies LLC. The company has a long-term relationship with Gazprom, and supplies Pipes of Large Diameter for major pipeline construction projects. In 2012 Anastasia was appointed Adviser of the CEO on legal issues. In 2014 Anastasia graduated from the University of Liverpool where she obtained the degree of Master in Law (LL.M.) In December of 2014 she successfully passed the qualifi cation exam at the Chamber of Attorneys of the city of Moscow, and was granted the licence of Attorney-at-Law. Since 2015 Anastasia has joined the Bureau of Attorneys “Chaadaev, Kheyfets and Partners” as the Head of the International Law practice. Since December 2015 Anastasia Astashkevich has been Managing Partner at “Astashkevich and Partners” Attorneys at Law.

Roman Shtykov Tel: +790 9998 6215 / Email: [email protected] Shtykov Roman is a lawyer at “Astashkevich and Partners” Attorneys at Law. He specialises in international commercial arbitration, litigation and enforcement of arbitration Awards. Mr Shtykov graduated from Moscow State Insitute of International Relations (University) in 2017 and has a Master of Law degree.

Astashkevich and Partners Tsvetnoy blv. 2, ent. C, 6th ﬂ oor, Moscow, Russia Tel: +791 5145 5864 / URL: www.astashkevich.com

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Gavin Rome SC, Ziyaad Navsa & Sechaba Mohapi Group One Chambers

Introduction Arbitration has been adopted worldwide as a means of resolving domestic and international commercial disputes and South Africa is no exception. There is broad consensus that arbitration is the preferred form of dispute resolution for international commercial disputes in South Africa. That much is clear from a recent survey on international arbitration presented by the Arbitration Foundation of Southern Africa (AFSA), a leading domestic arbitration institution. According to the AFSA survey, expert determination through arbitration and mediation are preferred forms of dispute resolution.1 Arbitration is also reported to be the least resisted one, with only 6% of the surveyed respondents saying it is their least favourable form2 of dispute resolution. Arbitration proceedings have traditionally been most used in the areas of shipping, insurance, building and engineering contracts but are now encountered in almost all forms of commercial agreements.3 Domestic arbitrations in South Africa usually take place pursuant to fairly standard-type dispute resolution clauses in commercial agreements; such clauses typically provide for the referral of all disputes arising from the relevant agreement to an independent and impartial arbitral tribunal, the members of which is/are to be appointed by the parties either by subsequent consensus, or failing which via the procedure provided for in the clause governing the reference. Consensual, private arbitrations are distinct from the mandatory arbitrations forming part of dispute resolution mechanisms for employer-employee relations facilitated by the Commission for Conciliation, Mediation and Arbitration (CCMA). The CCMA has exclusive jurisdiction to entertain all labour matters assigned to it by the Labour Relations Act 66 of 1995.4 The South African law relating to arbitrations in general was originally governed by the common law, mainly Roman-Dutch law,5 but since 1965 it has been governed principally by the Arbitration Act 42 of 1965. The Arbitration Act was enacted to provide for the settlement of disputes by arbitration and for the enforcement of arbitration awards.6 The Act applies to all domestic arbitration proceedings brought about through a written agreement, but it excludes from its ambit, matrimonial matters and matters relating to status.7 The common law further excludes from the scope of arbitration: (i) matters concerning minor children;8 (ii) actions of a juristic person which are ultra vires its articles of association;9 (iii) criminal cases; (iv) cases concerning liberty; and (v) ‘popular actions or actions involving infamy’. According to established principles of South African law, these sorts of status and personality-type matters are dealt with by judges who are armed with the transparent and public powers best suited for their adjudication.10

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Effi ciency of the process In Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another 2009 (4) SA 529 (CC), South Africa’s apex court, the Constitutional Court, favourably compared arbitration with conventional litigation as more effi cient for, among other things, its: (i) fl exibility (as parties can determine the process to be followed by an arbitrator, including the manner in which evidence will be received, the exchange of pleadings and the like); (ii) its cost- effectiveness; (iii) its privacy; and (iv) its speed (particularly as often, no appeal lies from an arbitrator’s award, or lies only in an accelerated form to an appellate arbitral body). The Constitutional Court further stated the following when affi rming the constitutionality of arbitrations (para 197 and 198): ‘In determining the proper constitutional approach to private arbitration, we need to bear in mind that litigation before ordinary courts can be a rigid, costly and time-consuming process and that it is not inconsistent with our constitutional values to permit parties to seek a quicker and cheaper mechanism for the resolution of disputes. The twin hallmarks of private arbitration are thus that it is based on consent and that it is private, i.e. a non-State process.’ The procedural rules governing an arbitration are usually set out in the contract’s dispute resolution clause; such rules may also be jointly determined by the parties in consultation with the arbitrator at the very outset of the arbitration. In commercial arbitrations, the Uniform Rules of Court11 or a similar procedural regime are often adopted; this is largely because of practitioners’ familiarity with these Rules and because the Arbitration Act is largely silent as to the procedural aspects of reference. Parties may also adopt rules that are cognate with the procedural provisions of the English Arbitration Act, or the UNCITRAL Contractual Rules.12 One of the principal characteristics of arbitration is that the dispute is fi nally resolved without any reference to the courts. Parties do not have a right to appeal to the courts when aggrieved by what they regard as legal errors in an arbitral award. Appeals are limited to instances where the parties agree that the arbitral tribunal’s award is subject to a private arbitral appeal. Such private appeal proceedings will be held under the framework established by the Arbitration Act and where the parties have agreed appeal procedural rules. The principle of fi nality of awards is one that is clearly and fi rmly established as a cardinal principle of arbitration proceedings under both the South African common law13 and by the Arbitration Act.14 It is only under certain restricted circumstances, which are expressly prescribed in section 33(1) of the Act (involving instances of misconduct, gross irregularity and the like), that application can be made to the courts to review an award in order to either set it aside or to remit it to back the arbitrator for reconsideration.

Integrity of the process The courts have displayed a high degree of deference to the validity of the arbitral process. Courts will not interfere with the decisions of arbitrators unless the award fails to meet the minimum standards barring injustice, such as if: (i) obtained fraudulently or through the arbitral tribunal’s – (ii) misconduct, (iii) gross irregularity; and (iv) the exceeding of powers conferred on it. In Lufuno (para 195) the Constitutional Court endorsed the integrity and validity of arbitration in the following emphatic terms:

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‘Private arbitration is a process built on consent in that parties agree that their disputes will be settled by an arbitrator. It was aptly described by Smalberger ADP in Total Support Management (Pty) Ltd and Another v Diversifi ed Health Systems (SA)(Pty) Ltd and Another [2002 (4) SA 661 (SCA) para 25] as follows: “The hallmark of arbitration is that it is an adjudication, fl owing from the consent of the parties to the arbitration agreement, who defi ne the powers of adjudication, and are equally free to modify or withdraw that power at any time by way of further agreement. ”’ South African courts have clearly moved away from older and traditional notions of wanting to assiduously protect their own jurisdiction, by accepting and recognising that arbitration is an acceptable form of dispute resolution, with which courts should not lightly interfere.15 Thus, by agreeing to arbitration, the parties limit the intervention of courts to the circumscribed grounds of procedural irregularities set out in section 33(1) of the Arbitration Act. By necessary implication, the parties to an arbitration agreement waive the right to rely on any further ground of review.

Privilege and disclosure One of the attractive features of arbitration, especially for commercial litigants, is the privacy or conﬁ dentiality of arbitration proceedings. By contrast, court proceedings and records in South Africa are ordinarily held in public and are assessable to the general public.16 One of the usual advantages of private arbitration as opposed to conventional litigation is the desire of the parties to avoid publicity; this feature of privacy has been found to be constitutionally defensible (Lufuno paras 213–215). It is generally accepted that the privacy of the hearing is a natural consequence of the arbitration agreement.

Costs and funding The costs of arbitration proceedings, unless the arbitration agreement provides otherwise, are at the discretion of the arbitration tribunal which shall, if it awards costs: (i) give directions as to the scale on which such costs are to be taxed; and (ii) may direct to whom, (iii) by whom, and (iv) in what manner such costs or any part thereof shall be paid; (v) may tax or settle the amount of such costs or any part thereof; and (vi) may award costs as between attorney and client (section 35 of the Arbitration Act). One of the well-known drawbacks of private arbitration is the high cost associated with arbitration. The costs of the losing party are greater in arbitrations than in conventional litigation because they include the arbitrator’s fees, costs of the venue and the transcription services costs above the ordinary costs of litigation. However, the relatively more efﬁ cient, specialised and expeditious resolution of disputes through arbitration offsets the high costs associated with it. Costs have similarly been a major issue around international arbitration for some time.17 According to the AFSA survey presentation, corporations are taking action to reduce costs and delay – seen as the two difﬁ cult pillars of international arbitration – by recruiting specialist in-house counsel, which effects more control over costs and delay through dealing with the matters internally. The survey presentation added that corporations were looking at alternative fee arrangements: 61% of the survey respondents had some kind of capped fees or blended rates and a number had a basic fee, a discounted rate or a success fee that was either based

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on the result in damages or a percentage of the fee; and only 10% of the respondents had a pure contingency fee arrangement.18

Interim relief Although the parties to an arbitration agreement agree to resolve their dispute extra-curially, the effect of that agreement is not entirely to exclude the jurisdiction of the courts. The court at common law and in terms of the Arbitration Act retains certain powers in relation to the dispute (i) prior to the commencement of arbitral proceedings, (ii) during those proceedings, and (iii) after the award. These powers may loosely be called powers of assistance; they include powers of recognition and enforcement, and to give interim relief. Section 21 of the Arbitration Act provides the court with such number of residual powers as to make orders with regard to interim relief. It provides, without derogating from any power, which may be vested in an arbitration tribunal for itself giving interim relief, that the court shall have the same power of making orders in respect of (subsection (1)): ‘(a) security for costs; (b) discovery of documents and interrogatories; (c) the examination of any witness before a commissioner in the Republic or abroad and the issue of a commission or a request for such examination; (d) the giving of evidence by afﬁ davit; (e) the inspection or the interim custody or the preservation or the sale of goods or property; (f) an interim interdict or similar relief; (g) securing the amount in dispute in the reference; (h) substituted service of notices required by this Act or of summonses; and (i) the appointment of a receiver, as it has for the purposes of and in relation to any action or matter in that court.’ In anticipation of the arbitral tribunal potentially being constituted by non-lawyers, section 20 of the Act further makes provision for referring questions of law for determination to the court. It provides: ‘An arbitration tribunal may, on the application of any party to the reference and shall, if the court, on the application of any such party, so directs, or if the parties to the reference so agree, at any stage before making a ﬁ nal award state any question of law arising in the course of the reference in the form of a special case for the opinion of the court or for the opinion of counsel.’

Enforcement and challenge of an award Arbitration awards may, under the Arbitration Act, be made orders of court so as to ensure their enforceability as such (section 31 of the Arbitration Act). In the process of doing so, the court to which application is so made, may, before making the award an order of court, correct in the award any clerical mistake or any patent error arising from any accidental slip or omission (section 31(2); cf section 30). Nonetheless, since it is the parties themselves who agree to refer a dispute to arbitration, they accept that the award of their chosen arbitral tribunal will bind them ﬁ nally.19 For that reason, arbitration awards may only generally be challenged by a dissatisﬁ ed party on the

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limited grounds set out in section 33(1) of the Act, as pointed out earlier. Once fi nalised, absent voluntary and timely compliance with the award by the losing party, the award is enforceable by the successful party. The enforcement is done through an application to the make the award an order of court. In such an application the successful party, in seeking to enforce the award, must establish that (i) it has an award in its favour, (ii) which can properly be made an order of court. And if satisfi ed of these requirements being met, the court may make the award an order of court (section 31(1) Arbitration Act). The court, when dealing with such an application, will not concern itself with possible errors of fact or law of the arbitrator in making the award, but only with the propriety of the award and the curial force of a court order. This approach of courts is consistent with the policy, not only in South Africa, but also internationally, to strike a balance between party autonomy and judicial intervention in a way that attaches considerable weight to party autonomy.20 A court will not normally order the enforcement of an award where compliance with the award would constitute a criminal offence, as this would be contrary to public policy.21 In Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA), the Supreme Court of Appeal outlined, as follows, the relevant principles that apply to the review of private arbitration awards under the Arbitration Act: (a) before resorting to the review grounds as provided in section 33(1) of the Arbitration Act, the point of departure is to establish the nature of the inquiry, as well as the arbitrator’s duties and powers; (b) the resort by the parties to private arbitration, as a natural corollary, limited the grounds of interference by the courts to those set out in section 33(1) of the Arbitration Act, with the parties being unable to then resort to any further grounds of review as provided for at common law, or otherwise; (c) a qualifi cation to the general principle that an irregularity related to the conduct of the proceedings rather than to the merits, was that a ‘gross irregularity’ was committed where the decision-maker misconceived the whole nature of the enquiry, i.e. he misconceived his mandate, or his duties in connection therewith;22 and (d) an arbitrator has the right to be wrong on the merits of the case, and such errors do not constitute the arbitrator exceeding his powers, but rather errors committed within the scope of his mandate, which are non-reviewable.

Cross-border litigation South Africa is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, adopted by a United Nations diplomatic conference on 10 June 1958 and which entered into force on 7 June 1959.23 The principal aim of the Convention is to ensure the enforcement of foreign arbitral awards and that State parties give full effect to arbitration agreements by censuring attempts to circumvent arbitration agreements. South Africa ratiﬁ ed the Convention on 3 May 1976 and domesticated it through enacting the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977, which came into effect on 13 April 1977. The Recognition Act provides: (i) that foreign arbitral awards may be made an order of a South African court and enforced as such (section 2); (ii) for and how applications should be made for an arbitral award to be made an order of court (section 3); and (iii) when an order of court may be refused (section 4).

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In terms of both the South African common law and section 4 of the Recognition Act, a South African court will recognise and enforce a foreign arbitral award if the following requirements are met:24 (i) there was a valid submission to arbitration; (ii) the reference to arbitration concerns a matter which it is permissible to refer to arbitration in the Republic and the award is not contrary to public policy; (iii) the arbitration tribunal was duly constituted and its proceedings were in accordance with the law of the country where the arbitration took place; (iv) the award was not obtained by fraud or by means contrary to the principles of natural justice; (v) the award falls within the jurisdiction of the tribunal; and (vi) the award is ﬁ nal.

International arbitration In terms of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, an arbitration is ‘international’ if:25 (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; (b) the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country; or (c) one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; or (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed, or the place with which the subject matter of the dispute is most closely connected. Although the Model Law was specifi cally compiled for international commercial arbitration, some countries have decided to adopt it (with minor adaptations) for both domestic and international matters and for all disputes, not only for commercial disputes.26 In July 1998 the South African Law Commission published a report which recommended that the UNCITRAL Model Law on International Commercial Arbitration of 1985 should be adopted by South Africa for international commercial arbitrations.27 The purpose of the Model Law is to contribute towards the uniformity of the law of arbitral procedures and to promote the fair and effi cient settlement of disputes arising in international commercial relations.28 The Model Law refl ects ‘best arbitral practice’. The Commission’s recommendations on International Arbitrations have been acted on by the Legislature. The International Arbitration Bill published in Government Gazette No 40687 of 15 March 2017 is intended to incorporate the Model Law of the United Nations Commission on International Trade Law (UNCITRAL) as the cornerstone of the international arbitration regime in South Africa. The UNCITRAL Model Law was developed to address the widely divergent approaches taken in international arbitration throughout the world and to provide a modern and easily adapted alternative to outdated national regimes. The Bill aims to: provide anew for the recognition and enforcement of foreign arbitral awards; repeal the Recognition and Enforcement of Foreign Arbitral Awards Act, 1977; amend the Protection of Businesses Act, 1978; and provide for matters connected therewith.

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Mediation and ADR As with the other ADR processes, mediation is only possible if there is a mutual agreement between the parties to subject themselves to mediation. Contractually, the mediator is normally given a time frame within which to mediate a settlement or compromise.29 If a settlement or compromise has not been attained within that time-frame then the claimant, if still dissatisﬁ ed, may commence the next step in the multi-step dispute resolution process, which would generally be to escalate the dispute to arbitration.30 The agreement to mediate usually nominates a mediator or sets out how the mediator is to be appointed.31 The result of a successful mediation is a settlement or compromise that is captured in an agreement which both parties have signed. This agreement is legally binding in the same way and to the same extent as any other legal contract. The mediator may assist in drafting the settlement agreement.32

Future direction of South African arbitration In October 2014, the Deputy Minister of Justice and Constitutional Development said that the International Arbitration Bill comes at an opportune time for South Africa, to opt into the international standard for the resolution of commercial disputes. He said that not only does it have the potential to attract foreign direct investment, but that it also gives greater legal protection to South African investments abroad.33 Arbitration is increasingly recognised as an important mode of dispute resolution which alleviates the pressures on the civil justice system. Nonetheless, given South Africa’s history of apartheid and an enduring ill-legacy of systemic discrimination, pro- transformation advocates have on occasion viewed private arbitration as a hindrance to the imperative of a post-apartheid transformation of the legal profession. Their concern is that through diverting the adjudication of large complex commercial matters from adjudication before an increasingly diverse bench, arbitration may entrench past patterns of discrimination and exclusion within the legal profession. This concern is amplifi ed by the fact that more often than not parties will select retired judges, the majority of whom are white males, as their arbitrators. On the other hand, there are indications that litigants eschew court proceedings as a method of commercial dispute resolution because of perceptions as to the bench’s perceived lack of commercial experience. Professor Olivier states, inter alia, in this regard that: ‘There is a rise in arbitration in commercial matters, often before retired judges, resulting in less signifi cant commercial litigation being conducted in the courts.’34 Despite substantive concerns about the use of arbitration proceedings as a preferred method of dispute resolution, it is clear that over the past two decades South African courts have created the jurisprudential bedrock for the continued effi cacy of both domestic and international arbitral procedures held within South Africa. It is hoped that as South Africa’s post-apartheid dispensation continues to mature, the concerns about arbitration being the preserve of the previously advantaged will be addressed as part of broader initiatives designed to promote more cost-effective access to dispute resolution mechanisms.

* * *

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Acknowledgment The authors acknowledge with thanks the contribution to this chapter of Dennis Fine SC, leader of Group One Advocates (2009–2013) and chairperson of the Johannesburg Society of Advocates (1996).

* * *

Endnotes 1. ‘Corporate choices in international arbitration’, De Rebus 2013 (July) 15. 2. Ibid. 3. Peter Ramsden & Kelly Ramsden, The Law of Arbitration: South African and International Arbitration (2009). 4. Section 115 of the Labour Relations Act 66 of 1995. See also Sidumo and Another v Rustenburg Platinum Mines Ltd and Others 2008 (2) SA 24 (CC) paras 258–260; Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another 2009 (4) SA 529 (CC) para 198). 5. Lazarus v Goldberg and Another 1920 CPD 154. 6. See the long title of the Arbitration Act. 7. Section 2 of the Arbitration Act. 8. Ressel v Ressel 1976 (1) SA 289 (W); Estate Setzen v Mendelsohn and Another 1948 (3) SA 292 (C). See also In Re Marriage of Bereznak U.S. California Appellate Districts (07/24/03) H025176. 9. Grobbelaar en ‘n Ander v De Villiers NO en ‘n Ander 1984 (2) SA 649 (C). 10. Voet 4.8.10, Percival Gane, The Selective Voet being the Commentary on the Pandects by Johannes Voet [1647–1713] (Paris Edition, 1829) at 1698–1704. 11. Rules regulation the conduct of the proceedings of the several Provincial and Local Divisions of the Court of South Africa. 12. Peter Ramsden & Kelly Ramsden, The Law of Arbitration: South African and International Arbitration (2009) part II at 22. 13. Dutch Reformed Church v Town Council of Cape Town (1898) 15 SC 14 at 20; Dickenson & Brown v Fisher’s Executors 1915 AD 166 at 174. 14. Section 28 of the Arbitration Act. 15. Aveng (Africa) Ltd (Formerly Grinaker-Lta Ltd) T/A Grinaker-LTA Building East v Midros Investments (Pty) Ltd 2011 (3) SA 631 (KZD) para 13. 16. Section 32 of the Superior Courts Act 10 of 2013; and Cape Town City v South African National Roads Authority and Others 2015 (3) SA 386 (SCA) paras 12–22. 17. ‘Corporate choices in international arbitration’, De Rebus 2013 (July) 15. 18. Ibid. 19. Amalgamated Clothing & Textile Workers Union of SA v Veldspun (Pty) Ltd 1994 (1) SA 162 (A) 169G-H. 20. Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic and Others 2014 (1) SA 381 (WCC) para 11. See also Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) para 4 in the context of international commercial arbitrations; and cf Lufuno

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Mphaphuli & Associates (Pty) Ltd v Andrews and Another 2009 (4) SA 529 (CC) paras 28 and 73; and Road Accident Fund v Cloete NO and Others 2010 (6) SA 120 (SCA) para 36 in the context of domestic arbitrations. 21. Cool Ideas 1186 CC v Hubbard 2014 (4) SA 474 (CC) para 58. 22. Telcordia paras 71–73. 23. Article XII of the New York Convention. 24. David Pistorius Pollak on Jurisdiction 2 ed (1993) at 179. Compare with Article V of the New York Convention. 25. Article 1(3) of the UNCITRAL Model Law on International Commercial Arbitration. As adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended by the United Nations Commission on International Trade Law on 7 July 2006. 26. For example, Zimbabwe Broadcasting Corporation v Flame Lily Broadcasting (Pvt.) Ltd: Harare High Court 15 December 1999 No HH-249-99, CLOUT case 322. 27. SALRC Report Project 94 Report on “Arbitration: An International Arbitration Act for South Africa” July 1998, accessed at http://salawreform.justice.gov.za/reports/r_prj94_ july1998.pdf, on 27 June 2017. See also Peter Ramsden & Kelly Ramsden, The Law of Arbitration: South African and International Arbitration (2009) at part II at 18. 28. Article 1(3) of Model Law. 29. Peter Ramsden & Kelly Ramsden, The Law of Arbitration: South African and International Arbitration (2009) at part I at 2. 30. Ibid. 31. Ibid. 32. Peter Ramsden & Kelly Ramsden, The Law of Arbitration: South African and International Arbitration (2009) at part I at 3. 33. ‘South Africa’s new International Arbitration Bill brings … dawn of new era’, De Rebus 2016 (Dec) 14. 34. See Morné Olivier, ‘The selection and appointment of judges’ in Cora Hoexter & Morné Oliver (contributing eds), The Judiciary in South Africa (2014) at 152. (Footnote omitted.)

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Gavin Rome SC Tel: +27 11 290 4000 | Email: [email protected] Gavin Rome SC is a senior counsel and member of Group One Chambers. He joined the Bar in 1996 and was nominated for silk in 2015. He was elected as a member of the Bar Council of the Johannesburg Society of Advocates from 2013 to 2016. Gavin also had several years of commercial litigation experience in the Canadian Provinces of Albert and Ontario. He has recently acted as a Judge in both the North and South Gauteng Divisions of the South African High Court. His op-ed article responding to populist claims about South African Courts’ alleged judicial overreach was published (in June 2017) by South Africa’s leading business newspaper.

Ziyaad Navsa Tel: +27 11 290 4000 | Email: [email protected] Ziyaad Navsa is an advocate/barrister and member of Group One Chambers. He joined the Bar in 2014. He holds an undergraduate Bachelor of Arts degree having majored in Political Studies and Law and a postgraduate LL.B. degree, both obtained from the University of Cape Town in 2005 and 2007, respectively. Ziyaad was formerly an attorney and employed as a senior associate at Cheadle, Thompson & Haysom Inc. in its Labour Department from 2012 until 2013, having completed his articles with the ﬁ rm in 2010 and serving as an associate from 2010 until 2012.

Sechaba Mohapi Tel: +27 11 290 4000 | Email: [email protected] Sechaba Mohapi is an advocate of the High Court of South Africa and a pupil at Group One Chambers. He commenced pupillage in January 2017. He obtained his LL.B. degree from the North West University and was awarded a distinction for his LL.B. dissertation entitled, “Leave to Appeal and its impact on the Right to Appeal”. After completing his LL.B. studies, he worked for two months as a student intern at the Lesotho Highlands Development Authority, the parastatal charged with implementing the bi-national Lesotho Highlands Water Project in Lesotho (which is an inter-basin water transfer scheme between RSA and Lesotho) where he worked in the ofﬁ ce of the Corporate Secretary. Sechaba was formerly an attorney at Phatshoane Henney Attorneys, where he specialised in litigation serving corporate and private clients. He then joined Poswa Inc. in April 2014 as a Commercial and Civil Litigation Associate. Then from 1 October 2014 until 25 January 2017 he worked as a Law Researcher at the Supreme Court of Appeal.

Group One Chambers Corner Maude & Gwen Streets, Sandown, Sandton 2010, South Africa Tel: +27 11 290 4000 / Fax: +27 11 783 6331 / URL: www.groupone.co.za

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Balz Gross, Claudio Bazzani & Julian Schwaller Homburger

Introduction Located in the heart of Europe, Switzerland is a civil law country with a long tradition as one of the major global venues for international commercial arbitration and commercial litigation. Switzerland has a reliable court system and its judges are known for their impartiality and independence. Civil proceedings in Switzerland are comparably fast and not overly complicated or costly. Broad pre-trial discovery proceedings, jury trials and long hearings are foreign to Switzerland. Arbitration The Swiss cities Geneva and Zurich are among the world’s leading venues for international commercial arbitration, with approximately 300 arbitrations commenced in these cities annually. In addition, Switzerland is home to several specialised arbitration centres, such as the Tribunal Arbitral du Sport / Court of Arbitration for Sport, with its steadily increasing number of new arbitration requests each year (599 in 20161). Traditionally, cities in Switzerland have been among the top venues for arbitration proceedings conducted under the ICC arbitration rules worldwide. In a survey conducted on behalf of the European Parliament, arbitration practitioners were asked to recommend the fi ve most favoured States as the seat of an international arbitration. Of the participating practitioners, 85.62% recommended Switzerland, more than any other State included in the study, and 13.6% more than the next most recommended State.2 One of the factors that has contributed to Switzerland becoming one of the world’s leading international arbitration jurisdictions is Switzerland’s arbitration-friendly legislation. Other factors include an excellent arbitration infrastructure, high professional standards in the legal profession, as well as Switzerland’s reputation for neutrality and political stability. International arbitrations seated in Switzerland are in principle governed by Chapter 12 of the Swiss Private International Law Act (the PILA3), which is currently being revised to refl ect the latest developments in international commercial arbitration. The PILA’s rules on international arbitration provide for a short and concise legal framework that affords the parties maximum fl exibility and recognises the principle of party autonomy to the fullest extent possible. The parties are free to agree on all aspects of the arbitral procedure, and to tailor the arbitration to the specifi c needs of their case, subject only to the principle of due process (the parties’ right to be heard and to equal treatment). The PILA only provides for a very limited number of grounds to challenge the award. Unless the award violates public policy, there is no review on the merits of the award. Challenges to an award are heard exclusively by the Swiss Federal Supreme Court (the highest court in Switzerland) and are generally adjudicated within a time period of four to six months from the date of

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the challenge. The Swiss courts have a well-established, arbitration-friendly practice, and both legal and commercial infrastructures are well suited to serve the needs of international arbitration proceedings. Switzerland has ratifi ed the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention4), and foreign arbitral awards are enforced in Switzerland as a matter of course. State court proceedings State court proceedings in civil matters are primarily governed by the Swiss Civil Procedure Code of 1 January 2011 (the CPC5). The CPC, as well as Switzerland’s substantive civil law, is federal law, whereas the organisation of the judicial system on a cantonal level remains the responsibility of the cantons. Federal law, however, provides for certain guidelines as to the organisation of the judiciary. In particular, the CPC as a general rule requires the cantons to establish a court system with two cantonal instances: a court of fi rst instance; and an appellate court as a second instance for fi rst (and usually full) appellate review. In international cases, State court proceedings are also regulated by the rules of private international law of Switzerland, set forth in the PILA and other bilateral and multilateral instruments. Switzerland has ratifi ed a large number of international treaties that are relevant in an international context, including but not limited to the following: • The Hague Convention of 1 March 1954 on Civil Procedure;6 • The Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents;7 • The Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention);8 • The Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters;9 • The European Convention of 16 May 1972 on the Calculation of Time-Limits;10 • The European Agreement of 27 January 1977 on the Transmission of Applications for Legal Aid;11 • The Hague Convention of 25 October 1980 on International Access to Justice;12 and • The revised Lugano Convention of 30 October 2007 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Lugano Convention13). As a general rule, civil proceedings before State courts must be preceded by an attempt at conciliation before a conciliation authority, although the CPC also contains certain exceptions to this requirement. One such exception applies where the respondent is domiciled abroad, in which case the claimant may waive conciliation proceedings. Conciliation proceedings are initiated by an application for conciliation containing, among other things, the prayers for relief and usually a brief description of the matter in dispute. Upon fi ling the conciliation application, the case becomes pending (lis pendens) and the statute of limitations is interrupted. Conciliation proceedings are confi dential and rather informal. Within two months of receipt of the application, an oral hearing takes place at which the conciliation authority attempts to reconcile the parties in an informal manner. If no agreement is reached, the conciliation authority issues the authorisation to proceed, allowing the claimant to fi le the claim before the competent court of fi rst instance within three months after issuance of the authorisation to proceed.

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Court proceedings are initiated by fi ling a fully substantiated statement of claim. The statement of claim must contain, among other things, the prayers for relief, a statement regarding the value in dispute, all relevant allegations of facts, and a specifi c notice of the evidence offered for each allegation of fact. Along with the statement of claim, the claimant has to submit the original copy of the authorisation to proceed as well as the available physical records (documents) to be offered in evidence. Upon receipt of the statement of claim, the court usually orders the claimant to pay an advance on costs. At the request of the respondent, the claimant must also provide security for party costs where the claimant is not domiciled in Switzerland, appears to be insolvent, owes costs from prior proceedings, or where there otherwise appears to be a considerable risk that the respondent’s party costs, if awarded, would not be paid. Thereafter, the court serves the respondent with a copy of the statement of claim and sets a deadline for the respondent to submit a statement of defence. If the respondent is domiciled abroad, service is effected in accordance with the applicable bilateral or multilateral conventions, namely the Hague Service Convention. The court may order a second exchange of written submissions if the circumstances so require, or directly summon the parties to the main hearing. State court proceedings are generally structured in three stages. In a fi rst stage, the factual assertions are pleaded and the evidence is offered. The second stage is the actual evidentiary phase during which the evidence is taken by the court (e.g. witness testimony, fi ling of expert reports, production of documents, etc.). The last phase of the proceedings is the post-hearing stage, where the parties may comment on the result of the evidence-taking and, thereafter, the judgment is rendered. In principle, civil proceedings before Swiss courts follow an adversarial model. Accordingly, it is up to the parties to present the court with the relevant facts in support of their case and to submit the respective evidence, unless the law provides that the court has to establish the facts and to take the evidence ex offi cio.14 Conversely, pursuant to the principle iura novit curia, the courts always apply the law ex offi cio. As an exception to the principle of double instance, the cantons are granted the option of establishing a specialised commercial court for commercial and corporate disputes. These courts serve as the fi rst and sole cantonal instance. Where a dispute is heard by a commercial court, the claimant has to fi le his statement of claim directly with the court, without the need to fi rst participate in conciliation proceedings. Challenges to judgments rendered by a commercial court are handled directly and exclusively by the Swiss Federal Supreme Court. Four cantons in the German-speaking part of Switzerland (Zurich, Aargau, Bern and St Gallen) have established such a specialised commercial court. The commercial courts, in particular the commercial court of the canton of Zurich, are frequently chosen as a legal venue by international contracting parties. An important feature of the procedure before the commercial court of the canton of Zurich is the built-in conciliation/settlement hearing, during which a majority of cases are settled. The purpose of such a hearing is to assist the parties in settling their dispute amicably. To this end, a delegation of the commercial court usually presents its preliminary and non-binding analysis of the case to the parties and comments on the strengths and weaknesses of their respective allegations. Settlement hearings take place at an early stage of the proceedings (usually after the fi rst exchange of written briefs) and prior to the taking of evidence. On average, about 65% of all cases are settled by the parties in the course of such a hearing. Proceedings before Switzerland’s State courts are conducted in one of Switzerland’s offi cial languages (German, French or Italian, depending on the canton). However, some judges at

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the commercial court of Zurich are sometimes willing to conduct the settlement hearing in English if a foreign party is involved and provided no party objects. Decisions of the cantonal appellate courts (or the commercial courts) may then be appealed to the Swiss Federal Supreme Court in Lausanne, provided that the amount in dispute is least CHF 30,000.15 Proceedings before the Federal Supreme Court are governed by the Federal Act on the Federal Supreme Court. The grounds for appeal are limited to violations of federal law, international public law or constitutional law (including violations of a cantonal constitution). As a general rule, the Federal Supreme Court is bound by the facts established by the lower cantonal court, unless they were established in a manifestly erroneous manner, and new facts and evidence may not be submitted. In 2016, the Swiss Federal Supreme Court heard 7,743 new cases (7,853 in 2015) and concluded 7,811 cases (7,695 in 2015). Out of these 7,811 cases, 1,733 cases concerned civil/commercial matters including cases relating to the Federal Debt Enforcement and Bankruptcy Act (the DEBA). Out of these 1,733 cases, 34 cases were appeals against an international arbitral award. In 2016, the average duration of proceedings in civil matters before the Swiss Federal Supreme Court was 133 days.

Privilege and disclosure Document production Broad (pre-trial) discovery proceedings, as known in common law jurisdictions, do not exist in Switzerland. The scope of document production under the CPC is rather limited. Generally, the court will order a litigant or a third party to produce documents requested by a party where a material allegation of fact is disputed; the requested documents are suitable to prove the alleged and disputed facts; the documents are suffi ciently described; and the documents are in the custody of the requested party (or arguably, where the documents are not in the custody of the requested party, the requested party is entitled to retrieve them from a third party). Such production orders are issued at an advanced stage of the proceedings when the court takes evidence. Additionally, the CPC provides for ‘precautionary evidence-taking’ (pre-trial production of documents or witness questioning) which may be initiated before an ordinary proceeding is pending. This procedure is available where a specifi c statutory right so provides, or where the requesting party credibly demonstrates either that the evidence it seeks is at risk or that it has a legitimate interest worthy of protection. Notably, the need to assess the prospects of potential litigation does not itself constitute such a legitimate interest and without more, will not justify precautionary evidence-taking. Rather, in order to justify a legitimate interest, the requesting party must credibly demonstrate that certain particular facts, if proven, would give rise to a claim against the opposing party, and that the evidence it is seeking through precautionary evidence-taking would enable it to prove such facts. If these facts are pleaded in a suffi ciently substantiated manner, a party may be able to obtain the relevant evidence in order to assess the prospects of litigation. However, where the party is seeking the production of documents, it should be recalled that the particular prerequisites for document production mentioned above also apply in the case of precautionary evidence-taking. Court orders for document production against the opposing party are not enforceable. Rather, where the opposing party refuses without valid reason to comply with a production order, the court will take this into account when appraising the evidence. On the other hand, court orders ordering the production of documents by third parties may be enforced under the threat of criminal sanctions.

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Given the limited possibilities of obtaining documents in civil proceedings, parties often attempt to collect information through criminal proceedings, or based on the right to access arising out of data protection law. Regarding the latter, the Swiss Supreme Court has held that requesting access to one’s personal data from a bank with a view to potential litigation against that bank does not constitute an abuse of a person’s (data protection) rights, among other things. This broad interpretation of the right to access personal information, together with the broad defi nition of personal data contained in the Data Protection Act – encompassing all information relating to identifi ed or identifi able individuals and legal entities – renders the right to access arising out of data protection law a potentially powerful tool for the gathering of evidence with a view to potential litigation. Privilege Registered lawyers (excluding in-house counsel) are subject to a duty of professional secrecy. This duty of professional secrecy covers all confi dential information connected with a particular lawyer-client relationship, provided that the mandate does not relate to mere ancillary activities such as asset management or board member activities. A lawyer’s duty of professional secrecy is refl ected in the relevant Swiss procedural codes, which provide that lawyers, clients and third parties may invoke legal privilege to refuse the disclosure of privileged documents. These procedural provisions thus complement the lawyers’ duty of professional secrecy by providing comprehensive legal privilege encompassing lawyers’ documents. In a recent decision of 20 September 2016,16 however, the Swiss Federal Supreme Court held that certain reports prepared by attorneys in the course of internal investigations may not always be covered by attorney-client privilege, namely if the investigation relates to the compliance with anti-money laundering regulation and the performance of a bank’s related obligations which the bank has outsourced to external counsel. The case concerned a Swiss bank which engaged two law fi rms to examine the bank’s compliance with documentation and reporting obligations under the Swiss anti-money laundering regime. According to the ruling, which was heavily criticised in legal writing, the bank could not limit the law enforcement authorities’ access to a specifi c anti-money laundering dossier by delegating its own compliance-related obligations to external counsel. In contrast, in-house counsel are not covered by a duty of professional secrecy under Swiss law. As a result, in-house counsel cannot withhold information from the courts and authorities, and their documents are not protected by legal privilege.

Costs and funding Costs Procedural costs include court costs (judgment fee, the costs of evidence-taking, etc.) and party costs (the costs of legal representation and expenses). Generally, the losing party must bear the procedural costs. If neither party is deemed to have entirely prevailed on the merits of the dispute, the procedural costs are allocated in accordance with the outcome of the case. In case of a settlement, the costs usually are charged to the parties according to the terms of the settlement agreement. Both the court costs and the party costs are determined and allocated ex ofﬁ cio according to the tariffs for the procedural costs. Each canton has its own rate scale that is normally based on the amount in dispute. Procedural costs, therefore, differ from canton to canton. In the canton of Zurich, for example, the following rates apply in ordinary civil proceedings: • if the value in dispute amounts to CHF 100,000, the party costs are about CHF 11,000 and the court costs CHF 9,000;

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• with a value in dispute of CHF 1m, both court costs and party costs amount to approx. CHF 31,000 each; • where the value in dispute is CHF 10m, party costs amount to approx. CHF 106,000 and court costs to CHF 120,000. Court costs may be increased (by one third or, in exceptional cases, up to a maximum of 200%) or decreased, depending on the complexity of the case and the time spent by the court on the matter. If a case is settled in court, the parties are usually granted substantial reductions in their court costs. Similarly, party compensation may be increased or decreased by one third, depending on the complexity of the case, the responsibility of the lawyer, and the time and efforts spent by the lawyer on the matter. In practice, however, the compensation paid by the losing party rarely covers the actual legal costs incurred by the prevailing party. Reduced rates for court costs and party costs apply in summary proceedings, in proceedings concerning real estate leases and tenancy disputes, and non-pecuniary disputes. Employment law proceedings with a value in dispute of up to CHF 30,000 are free of charge. The procedural costs of appellate proceedings before cantonal courts and the Federal Supreme Court are determined pursuant to similar rules. As explained, courts may order the claimant to make an advance payment up to the amount of the expected court costs. In practice, it is standard procedure for courts to request advance payments, although certain exceptions apply. The court costs, which are generally fi xed in the fi nal decision, are set off against the advance paid by the claimant and the balance is collected. If the claimant prevails, it will be granted the right to recover the costs from the respondent. As a result, the claimant bears the risk of the respondent becoming insolvent. With respect to the taking of evidence, each party has to advance the costs for taking the evidence it requested. Further, at the request of the respondent, the claimant may be required to provide security for potential party compensation where the claimant has no residence or registered offi ce in Switzerland, appears to be insolvent, owes costs from prior proceedings, or where there otherwise appears to be a considerable risk that such compensation, if ordered, will not be paid. If the claimant does not provide the ordered advance or security, the court will declare the action inadmissible. Claimants, and in particular foreign claimants, therefore face signifi cant fi nancial hurdles in initiating civil litigation before the Swiss courts. Litigation funding Court proceedings in Switzerland are usually funded by the parties themselves. However, a party may seek legal aid if it lacks the fi nancial resources to fund the proceedings and if the case does not seem devoid of any chance of success. Legal aid can comprise an exemption from the obligation to pay an advance on costs and to provide security; an exemption from court costs; or the appointment of a legal representative (attorney) by the court, if necessary, to protect the rights of the party. In theory, legal aid is also available to companies, provided, among other things, that the object in dispute is the company’s only remaining asset. According to the Federal Supreme Court’s practice, third-party litigation funding is in principle protected by the fundamental right of economic freedom. Litigation funding by an independent third party is thus permitted in Switzerland, provided that the (funded) party’s lawyer acts independently from – and free from any instructions of – the third-

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party funder. The attorney representing the party in court is, however, prohibited from participating in the funding. This is due to the fact that attorneys in Switzerland are generally not allowed to make arrangements with their clients pursuant to which their fees are determined exclusively by reference to the proceeds in the case of a success (pactum de quota litis). These principles have been conﬁ rmed recently by the Federal Supreme Court (decision 2C_814/2014 of 22 January 2015). Despite its permissibility, litigation funding is still not very common in Switzerland. The conditions for obtaining third-party litigation funding are usually rather strict. It may therefore be difﬁ cult, but not impossible, to obtain litigation funding in Switzerland. The funding party usually requires a success fee. While the fees vary from case to case, a fee of about 30% of the outcome of the litigation is not unusual.

Interim relief In general, interim measures may be ordered if the applying party can credibly establish that: (i) a right to which it is entitled has been violated or that a violation is anticipated; (ii) the applying party holds the entitlement which the requested interim measure is intended to protect (prima facie case); and (iii) the violation threatens to cause harm to the applicant that cannot be easily remedied (see Article 261 CPC). In cases of special urgency, Swiss courts may also order interim measures on an ex parte basis, i.e. without hearing the opposing party. This is the case where there is a risk that the enforcement of the measure will be frustrated if the opposing party is informed of the requested relief before it is ordered. Once an ex parte measure is ordered, the court will either summon the parties to a hearing, which must take place immediately, or set a deadline for the opposing party to comment on the measures in writing. Thereafter, the court must again decide on the request immediately. According to the CPC, the court may order whatever is necessary and suitable to prevent imminent harm to the applicant. By way of example, the court may render an injunction prohibiting the opposing party from continuing with a certain unlawful conduct, or it may order such party to remedy an unlawful situation. A party may submit a request for interim relief either before or after the main proceedings have become pending. If interim measures are ordered before the main proceedings have become pending, the court must set a deadline (usually of about 30 days) for the applicant to fi le the principal action. If no principal action is fi led within this deadline, the interim measures become automatically ineffective. The court decides on a request for interim relief in summary proceedings. Consequently, the primary means of evidence to obtain interim relief are documents. An important feature that has been newly introduced in the CPC is the precautionary taking of evidence, which is also governed by the rules on interim measures (see above). If the opposing party provides appropriate security, the court may refrain from ordering interim measures. In addition, any person having reasons to believe that an ex parte interim measure or an attachment will be requested against him or her can fi le a protective brief. The purpose of the protective brief is to allow such person to set out in advance of any request its position in response to the other party’s anticipated arguments. The opposing party will only be served with the protective brief if it initiates the anticipated ex parte proceedings for interim relief. If no application for interim relief is fi led within six months, the protective brief becomes ineffective.

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Enforcement of judgments Main sources of law The main sources of law governing the enforcement of State court judgments and arbitral awards are – on a national level – the CPC and the DEBA, and – in international cases – the Lugano Convention, the PILA and the New York Convention. Enforcement of domestic judgments The enforcement of Swiss judgments is governed by the CPC (Articles 335 et seq.) and – to the extent the judgment relates to the payment of money – by the provisions of the DEBA. A judgment rendered by a Swiss court is enforceable if: (i) it is fi nal and binding and the court has not suspended its enforcement; or (ii) it is not yet legally binding (e.g. because an appeal can be fi led against it), but its provisional enforcement has been authorised by the court. The court making the judgment on the merits is competent to directly order the necessary enforcement measures. The party seeking the enforcement of the judgment has to fi le a request for enforcement with the enforcement court. The enforcement court decides in summary proceedings. The opposing party can comment on the request; however, if necessary, the enforcement court may order interim measures on an ex parte basis. If the judgment relates to the payment of money, the party seeking the enforcement can request the local debt collection offi ce to issue a payment order against the other party. If the other party objects to the payment order, any enforceable judgment or arbitral award constitutes a valid title to set aside the objection. Enforcement of foreign judgments and awards a) Judgments rendered in a signatory state of the Lugano Convention If the foreign judgment was rendered in a State which is a party to the Lugano Convention, the judgment will be recognised in Switzerland in accordance with the rules of that convention. There are only limited grounds for non-recognition. In particular, a judgment will not be recognised in Switzerland if recognition would be manifestly contrary to Swiss public policy or, if the judgment was rendered in default of appearance, where the respondent was not served with the document which instituted the proceedings, or with an equivalent document in suffi cient time and in such a way as to enable him to arrange for his defence. Importantly, the Lugano Convention does not require the party seeking recognition to provide evidence that the document that instituted the proceedings was properly served on the respondent, i.e. that it was served in accordance with the provisions of the Hague Convention of 15 November 1965 on the Service Abroad. Under the Lugano Convention, service is deemed to be suffi cient if it enabled the respondent to arrange for its defence. Upon application of the party seeking enforcement, the foreign judgment will immediately be recognised and declared enforceable upon completion of the formalities provided for in the Lugano Convention. These formalities include submission of an original or authenticated copy of the judgment to be enforced, and of the certifi cate referred to in Article 54 of the Lugano Convention (i.e. the standard form in Annex V to be issued by the court or another competent authority of the State in which the judgment was rendered). The party against whom recognition is sought is not entitled to make any submission on the application. The respondent is heard on appeal only. b) Other foreign judgments and foreign arbitral awards Outside the scope of the Lugano Convention, the recognition and enforcement of a foreign State-court judgment is subject to the principles set forth in the PILA.

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Under the PILA, a foreign judgment may be recognised in Switzerland if: • the foreign court having rendered the judgment had jurisdiction according to PILA; • no ordinary appeal can be fi led against it or if it is fi nal; and • no grounds for refusal exist. In particular, recognition of a foreign judgment will be refused where doing so would be obviously irreconcilable with Swiss public order, or where the respondent can prove that: (i) it was not properly served; (ii) the judgment was reached in a procedure that violated basic principles of Swiss procedural law, in particular the right to be heard; or (iii) a dispute between the parties was fi rst pending in Switzerland. Whether the foreign court that rendered the judgment had jurisdiction must be determined on the basis of the criteria set forth in the PILA. The PILA sets forth the specifi c situations in which the jurisdiction of the foreign court will be recognised. These include: where a provision of the PILA provides for such jurisdiction; where the respondent was domiciled in the State in which the judgment was rendered; or, in matters of a fi nancial nature, where the parties subjected themselves to the jurisdiction of the foreign court by means of an agreement that is valid under the rules of the PILA. Foreign arbitral awards are enforced in accordance with the New York Convention. According to the Federal Supreme Court’s practice, the formal requirements of Article IV New York Convention should not be applied too strictly (decision 5A_752/2011 of 9 February 2012). In particular, a Swiss court may enforce an English award even though no German translation was submitted by the applying party. Attachment proceedings A request for attachment will be granted if the creditor credibly establishes that: (i) it has an unsecured and matured claim against the debtor; (ii) assets belonging to the debtor are located in Switzerland; and (iii) a ground for attachment pursuant to Article 271 of the DEBA exists. By far the most relevant grounds for attachment in practice are the following two: • the debtor does not live in Switzerland, and no other ground for attachment exists, provided that the claim has a suffi cient connection with Switzerland or is based on a written recognition of debt pursuant to Article 82 (1) of the DEBA; • the creditor holds an enforceable title permitting the defi nitive setting aside of an objection by the debtor in debt enforcement proceedings (“defi nitiver Rechtsöffnungstitel”). Examples of valid titles are enforceable domestic state court judgments or awards, court- approved settlements, or enforceable public deeds. The term “enforceable title” also relates to foreign arbitral awards and to foreign State court judgments (decision of the Federal Supreme Court 5A_355/2012 of 21 December 2012). As a result, any enforceable judgment or (foreign) arbitral award in the hands of a creditor entitles the creditor to attach assets of his debtor in Switzerland, provided that the creditor can credibly show that the foreign judgment or award can be recognised and declared enforceable in Switzerland. The competent Swiss court – i.e. the court located either in the area in which the debtor has assets or in the area which the debt enforcement proceedings are offi cially based – can issue a Swiss-wide attachment order; it is therefore no longer necessary to initiate attachment proceedings in each district in which attachable assets are located. If the requirements for an attachment order in Switzerland are not met, creditors may try to obtain a freezing order in another state that is a party to the Lugano Convention (in

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particular, a worldwide Mareva injunction of an English court), and then seek recognition of such order as well as a declaration of enforceability in Switzerland. As a rule, freezing orders are deemed to be judgments within the meaning of the Lugano Convention (and can thus be recognised in Switzerland), provided that the defendant was granted the right to be heard before the foreign court prior to the application for recognition and enforcement in Switzerland. By contrast, a foreign ex parte order (i.e. an order issued without the respondent being heard) cannot be recognised in Switzerland. While inter partes English freezing orders are recognised by a Swiss court as a matter of course; the issue, however, of whether (and how exactly) an English freezing order is to be enforced and implemented in Switzerland is not settled in Swiss practice.

International arbitration Switzerland continues to be one of the most frequently chosen venues for international commercial arbitration. Over the last decades, Swiss arbitrators have been among the most frequently chosen arbitrators; cities in Switzerland among the most frequently chosen venues; and Swiss law among the most frequently chosen applicable laws. In addition to ICC proceedings, a number of other international arbitration proceedings are conducted in Switzerland, including ad hoc proceedings; proceedings under the Swiss Rules; and proceedings under the rules of one of the specialised arbitration centres such as the Tribunal Arbitral du Sport / Court of Arbitration for Sport. International arbitration proceedings – deﬁ ned as proceedings in which at least one party had its domicile in Switzerland at the time the arbitration agreement was executed – are generally governed by the rules of the PILA. However, the parties are free to opt out of the PILA and choose the rules of the CPC, which in principle govern domestic arbitrations. The rules of the CPC are much more detailed than those of the PILA and differ in certain relevant points. Currently, Chapter 12 of the PILA is undergoing a review process. On 11 January 2017, the Swiss Federal Council released a draft of the revised Chapter 12 and invited the public to comment on the draft by 31 May 2017. Since the existing provisions of the PILA remain a widely-accepted standard for modern arbitration legislation, the review aims at brushing-up the arbitration framework by adopting certain best practices as well as some of the most important decisions of the Swiss Federal Supreme Court. Among other things, the released draft bill contains provisions relating to the possibility of pleading in the English language in appellate proceedings before the Swiss Federal Supreme Court. Under the PILA there is only one instance of appeal in international commercial arbitration. All appeals must be brought before the Federal Supreme Court. The grounds for appeal under the PILA are very narrow: the award may only be set aside if the arbitral tribunal was constituted irregularly; wrongly accepted or declined jurisdiction; ruled ultra or infra petita; violated the parties’ right to equal treatment or to be heard; or if the award itself violates public policy. In practice, only very few awards are set aside, and these have primarily been based on the grounds of lack of jurisdiction or violation of the right to be heard. Only one arbitral award has been successfully challenged on the ground that it breached substantive public policy (decision 4A_558/2012 of 27 March 2012, relating to a dispute between the Brazilian football player Francelino da Silva Matuzalem vs. the Fédération Internationale de Football Association, FIFA). An appeal to the Federal Supreme Court is normally adjudicated within four to six months.17 The CPC, on the other hand, permits the parties to choose to have a cantonal court hear the appeal, rather than the Federal Supreme Court. As to the grounds for appeal, in addition

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to the grounds set forth in the PILA, the CPC also permits arbitral awards to be set aside where they are arbitrary or based on an obviously incorrect application of the law or determination of the facts, or on a violation of equity. The grounds for appeal under the CPC are thus substantially broader than under the PILA. Another feature of international arbitration proceedings under the PILA is that the parties – provided that no party is domiciled in Switzerland – may, by an express statement in the arbitration agreement or by a subsequent written agreement, fully waive their right to appeal the arbitral award. The parties do not have this right under the CPC. Such a waiver is sometimes made in order to further expedite the resolution of the dispute and to ensure an increased level of confi dentiality. While initially the Federal Supreme Court was very reluctant to enforce such advance waivers, requiring that the waiver of the appeal be express and clear, the court appears to have become more liberal in this respect. In its early decisions, the Federal Supreme Court refused to enforce general statements, providing that the award “shall be fi nal and binding”, or general waivers of challenges to the award. In a decision of 21 March 2011 (decision 4A_486/2010), however, the Federal Supreme Court concluded that the following statement, contained in the parties’ arbitration agreement, constituted a valid waiver of the parties’ right to appeal: “The decision of the arbitration shall be fi nal and binding and neither party shall have any right to appeal such decision to any court of law.” Similarly, in a decision of 3 April 2014 (4A_577/2013), the Federal Supreme Court confi rmed that a statement pursuant to which “neither party shall seek recourse to a law court nor other authorities to appeal for revision of this decision” could only be understood in good faith as an expression of the parties’ intent to waive their right to appeal the arbitral award, despite the rather unusual wording of the clause. Conversely, the Federal Supreme Court has maintained its position that a mere statement to the effect that the award shall be “fi nal” still does not qualify as a valid waiver of the right to appeal (decision 4A_460/2013). According to the Supreme Court’s practice, the parties’ declaration to waive their right of appeal must refl ect their unmistakable will to avail themselves of that opportunity and to opt out of the right to appeal an arbitral award to the Federal Supreme Court. Whether this is the case must be determined by interpretation of the arbitration agreement at hand. In a decision of 27 February 2014 (4A_438/2013), the Federal Supreme Court reiterated its practice regarding the severability of the arbitration clause. The dispute related to a licence agreement which stated that after the expiry or termination of the licence, all rights and obligations of the parties would terminate but for some provisions. The arbitral tribunal accepted jurisdiction despite the termination of the agreement. On appeal, the Federal Supreme Court, by referring to the principle of autonomy of the arbitration clause, confi rmed that it must generally be assumed that the arbitration clause contained in a contract is not affected by the expiry or termination of the contract, thereby underscoring the principle of severability of the arbitration clause as a cornerstone of arbitration. On 7 July 2014 (decision 4A_124/2014), the Federal Supreme Court issued a judgment as to whether the pre-arbitration dispute resolution tier in the FIDIC General Conditions is mandatory and, if so, what the legal consequences of a failure to comply with this procedural requirement are. According to that ruling, arbitration proceedings may not be commenced without fi rst completing the DAB procedure, if the contract so provides. However, if the ad hoc DAB has not been constituted 18 months after it was requested, the responding party in the arbitration can no longer rely on the mandatory nature of the DAB

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procedure. In a further decision of 16 March 2016 (decision 4A_628/2015), the Federal Supreme Court held that in the case of a party’s failure to comply with a contractual pre- arbitration dispute resolution provision, the arbitral tribunal should stay the proceedings until the pre-arbitration dispute resolution mechanism has been implemented, while the modalities of the stay (notably the time limit of the suspension) are to be determined by the arbitral tribunal. The Federal Supreme Court expressly rejected other options discussed in legal writing, namely the possibility of an award of damages and the option to reject the claim and terminate the proceedings, fi nding that a stay of the proceedings was the only reasonable solution that properly balanced the parties’ interests. In a decision of 27 February 2014 (4A_438/2013), the Tribunal had ordered a stay of one month in order to allow the parties to follow the mandatory mediation proceeding. See also the Federal Supreme Court’s decision 4A_492/2016 of 7 February 2017, according to which a former FIFA employee would have been required to apply to the FIFA dispute resolution chamber before commencing arbitration proceedings. In a decision of 29 May 2015 (4A_633/2014), the Federal Supreme Court reaffi rmed its practice (see decision 4A_508/2013) regarding res judicata in international commercial arbitration, stating that the disregard of the res judicata effect of an earlier award between the same parties in respect of the same subject matter amounted to a violation of procedural public policy. It reaffi rmed, in particular, that the question whether the claims are identical should be determined in application of the lex fori. In a decision of 18 January 2017 (4A_5000/2015), a Belize company challenged an arbitral award issued in favour of a Jordanian investment fund, holding that the fund’s signature on a share purchase agreement was forged, and thereby dismissing the Belize company’s claim for penalty payments. The forged share purchase agreement contained a clause pursuant to which the parties waived their right of appeal. During the arbitration proceedings, the Belize company made claims under the agreement, arguing that the agreement was valid. Before the Federal Supreme Court, however, the company claimed that the agreement did not exist and that, therefore, the aforementioned waiver clause was inexistent. The Federal Supreme Court dismissed the Belize company’s appeal due to the company’s contradictory behaviour in breach of good faith (venire contra factum proprium). In its decisions 4A_444/2016 and 4A_446/2016 of 17 February 2017, the Federal Supreme Court explained that the deadline for the fi ling of an appeal only begins to run upon receipt of the fully reasoned award, as opposed to the operative part of the award only. On 2 March 2017 (decision 4A_405/2016), the Federal Supreme Court held that a sole arbitrator’s decision to grant a one-day extension for the fi ling of the statement of claim did not violate the principle of equal treatment. It also confi rmed the views of legal scholars that under the Swiss Rules, a belated submission would not necessarily result in an inadmissibility of claims. On the other hand, on 6 March 2017 (decision 4A_490/016), the Federal Supreme Court rejected an alleged breach of due process, confi rming an arbitral tribunal’s decision not to consider arguments submitted in an incorrect format (by e-mail) and in an untimely manner (i.e. not in accordance with the agreed-upon timetable). Swiss Arbitration Centres (Swiss Chambers; Court of Arbitration for Sport) The Swiss Chambers’ Court of Arbitration and Mediation (www.swissarbitration.org) mostly administers commercial arbitrations, investment arbitrations being the exception. Nearly one third of the arbitrations are expedited proceedings, in which the award should be rendered within six months from the date the fi le is transmitted to the arbitral tribunal. The Swiss Rules are widely acknowledged as an alternative to other mainstream rules

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of arbitration, in particular to the ICC Rules of Arbitration. Under Swiss law and under the revised Swiss Rules, the parties to an arbitration agreement have the right to request provisional, interim or emergency relief from a State court or from the arbitral tribunal. In the past, parties often had to seek provisional relief from a State court in case of particular urgency – and if the arbitral tribunal was not yet constituted. The revised Swiss Rules address the need to have a choice between the State court and the arbitral process also in these circumstances by clarifying that the arbitral tribunal has the authority to make ex parte provisional orders, and by introducing an emergency arbitrator proceeding. In the case of an ex parte order, the order must be communicated to the other party at the latest together with the provisional order, and the other party must then be immediately granted the right to be heard. The effect of such an ex parte provisional order in practice remains to be seen, since effi cient enforcement may be diffi cult. However, most parties comply voluntarily with the orders of an arbitral tribunal. Under the rules on emergency arbitrator proceedings, parties to an arbitration agreement can opt out of the emergency arbitrator proceeding. If they have not done so, and if there is a need for a provisional measure, and the applying and the opposing party have entered into an arbitration clause providing for the application of the Swiss Rules, a party can apply for emergency relief even before the arbitral tribunal is constituted or even before arbitration proceedings are initiated. Upon receipt of the application (and payment of the advance for the emergency relief proceedings), the Swiss Chambers’ Court of Arbitration will transfer the application to a sole arbitrator, unless it determines that there is manifestly no arbitration agreement, or it concludes that an arbitral tribunal should be constituted fi rst. The sole arbitrator is expected to render the decision on the provisional measure within 15 days from the day the fi le was transmitted to the sole arbitrator. The enforceability of the decision of the emergency arbitrator is unclear – regardless of whether it is called an interim award or an order. Enforcement will hardly be possible under the New York Convention, but it may very well be enforceable under the law of certain jurisdictions, such as Switzerland, where the State court judge will assist in the enforcement (Article 183(2) PILA). The most important of the specialised arbitration centres is the Tribunal Arbitral du Sport / Court of Arbitration for Sport (TAS/CAS; www.tas-cas.org), which handles a large number of sports-related arbitrations. Partially amended CAS rules entered into force on 1 March 2013. Among several amendments that are designed to expedite and streamline the appeal procedure, the introduction of the possibility for a party to request provisional measures immediately after the notifi cation of a fi nal decision by a sports federation, but before the fi ling of a formal appeal at the CAS, is noteworthy.

* * *

Endnotes 1. http://www.tas-cas.org/en/general-information/statistics.html. 2. http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_ STU(2015)509988_EN.pdf. 3. Federal Private International Law Act of 18 December 1987, SR 291. An unofﬁ cial English translation of Chapter 12 PILA is available at http://www.arbitration-ch.org/ asset/92989ed67945478fc27d8b28ce80276e/iprg-english-version.pdf.

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4. SR 0.277.12. The English text of the New York Convention is available at http:// www.uncitral.org/uncitral/de/uncitral_texts/arbitration/NYConvention.html. 5. Swiss Civil Procedure Code of 19 December 2008, SR 272. An unofﬁ cial English translation of the CPC is available at http://www.admin.ch/ch/e/rs/c272.html. 6. SR 0.274.12. The English text of the Convention is available at https://www.hcch.net/ en/instruments/conventions/full-text/?cid=33. 7. SR 0.172.030.4. The English text of the Convention is available at https://www.hcch. net/en/instruments/conventions/full-text/?cid=41. 8. SR 0.274.131. The English text of the Convention is available at https://www.hcch. net/en/instruments/conventions/full-text/?cid=17. 9. SR 0.274.132. The English text of the Convention is available at https://www.hcch. net/en/instruments/conventions/full-text/?cid=82. 10. SR 0.221.122.3. The English text of the Convention is available at http://conventions. coe.int/treaty/en/Treaties/Html/076.htm. 11. SR 0.274.137. The English text of the Convention is available at http://conventions. coe.int/treaty/en/Treaties/Html/092.htm. 12. SR 0.274.133. The English text of the Convention is available at https://www.hcch. net/en/instruments/conventions/full-text/?cid=91. 13. SR 0.275.12. The English text of the Lugano Convention is available at https:// www.eda.admin.ch/content/dam/eda/fr/documents/aussenpolitik/voelkerrecht/autres- conventions/Lugano2/02-conv-prot-ann-corr09_en.pdf. 14. This is the case only in a limited number of matters, such as employment law disputes with a value in dispute not exceeding CHF 30,000, divorce proceedings or disputes between tenants and landlords. 15. In the case of a dispute relating to employment or tenancy law, the minimum value in dispute is CHF 15,000. 16. Decision 1B_85/2016 of 20 September 2016. 17. See the updated statistics for 2013 at http://www.arbitration-ch.org/pages/en/asa/news- &-projects/details/974.challenges-of-swiss-arbitral-awards-–-selected-statistical- data-as-of-2013.html.

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Balz Gross Tel: +41 43 222 10 00 / Email: [email protected] Balz Gross is the Head of the Litigation | Arbitration practice of Homburger. His practice focuses on international arbitration proceedings and complex domestic and international litigation. He has acted as party counsel in more than 100 international arbitrations, and as arbitrator in numerous international arbitrations. Balz Gross acts as counsel in large, mostly international proceedings before the State courts in all Swiss cantons, in particular the Commercial Courts, and represents foreign and Swiss clients in proceedings involving criminal law issues. “Leading litigator and arbitration counsel” (Chambers 2010), “quick witted and prudent” (Chambers 2011), also praised for his “excellent strategic advice” (Chambers 2012), Balz Gross is described as a “shrewd litigator and master technician” (Chambers 2013), being “very efﬁ cient, convincing and powerful in his interventions during hearings” (Chambers 2014), recommended in Chambers in Arbitration (International), Dispute Resolution (Arbitration Counsel, Litigation) and Employment.

Claudio Bazzani Tel: +41 43 222 10 00 / Email: [email protected] Claudio Bazzani is admitted to practise law in Switzerland and in New York. He is a partner in Homburger’s Litigation | Arbitration practice and White Collar Crime | Investigations working group. Claudio Bazzani has more than 10 years of experience in conducting large-scale internal and regulatory investigations and in advising corporate clients in compliance matters. He represents clients in investigations by Swiss and foreign authorities and in domestic and international litigation and arbitration proceedings. According to Who is Who Legal Switzerland, Claudio Bazzani is particularly well regarded for his experience in cases involving US regulators.

Julian Schwaller Tel: +41 43 222 10 00 / Email: [email protected] Julian Schwaller is a counsel in Homburger’s Litigation | Arbitration team and a member of Homburger’s Restructuring | Insolvency practice group. His practice focuses on international and domestic litigation and international commercial arbitration and includes, in particular, disputes involving real estate and construction law, insurance law, corporate acquisitions, general contractual matters as well as insolvency issues. He regularly represents clients in proceedings regarding the recognition and enforcement of foreign judgments in Switzerland, and has broad experience in attachment proceedings.

Homburger Prime Tower, Hardstrasse 201, CH-8005 Zurich, Switzerland Tel: +41 43 222 10 00 / Fax: +41 43 222 15 00 / URL: www.homburger.ch

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Hung Ou Yang, Hung-Wen Chiu & Jia-Jun Fang Brain Trust International Law Firm

Effi ciency of process Case assignment system In order to improve the effi ciency of the court process, the Judicial Yuan enacted the criminal case assignment regulations in the district courts in 2015. Because of the new regulations, the courts now hold an additional hearing before the Preliminary Hearing, focusing on procedural issues, such as whether the defendant pleads guilty or not, whether the indictment is lacking necessary legal conditions which cannot be cured, and whether there is any exemption from prosecution. Thus, with the assistance of this assignment system, the court may deal with cases by an appropriate and suitable procedure which may facilitate the effi ciency of the court process. Online fi ling In 2015, with technology improvement, the Judicial Yuan set up an electronic system for both parties in a civil case or administrative case to fi le complaints or affi davits to the court online. This system changed the traditional rule which required sending the legal documents in person or by mail. However, for the moment, the system only allows online fi ling for civil lawsuits and administrative lawsuits regarding tax and intellectual property issues. In a criminal case, defendants and their attorneys still have to fi le the affi davits in person or by mail. Through this system, both parties and the court can easily review all the affi davits and the hearing records. It can save time, efforts and money for both parties. Online searching for judgments All the civil, criminal, administrative, and IP judgments and rulings can be found on the website established by the Judicial Yuan on http://jirs.judicial.gov.tw/FJUD/. Unfortunately, the searching system can only be accessed and used in Chinese.

Integrity of process Natural justice The spirit of natural justice is reﬂ ected in the Taiwanese Code of Criminal Procedure with regard to due process of law. First, under Article 95 of the Taiwanese Code of Criminal Procedure, the defendant shall be notiﬁ ed of all the charges against him. Further to this, like the Miranda warning in the U.S., the defendant may remain silent and is not required to say anything against his own free will during interrogation, not only by the police and the prosecutor, but also by the judge. The defendant may retain a lawyer who may express his legal opinions at any time

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during the criminal proceedings. In addition, the defendant may request the police offi cer, the prosecutor, and the judge to investigate evidences in favour of him. Any confession made by the defendant cannot be used as the only evidence with regard to the guilty verdict unless there is corroborating evidence. The most important principle of the criminal justice system, the presumption of innocence, is also adopted under Taiwanese laws so that the criminal defendant cannot be found guilty until proved beyond reasonable doubt by the prosecutor in the trial. Secondly, a foreign defendant has a right to recuse an interpreter because of potential confl ict of interests when the interpreter is a victim in this case, a prosecutor or a police offi cer who is involved in the investigation in connection with the defendant under Article 211, Article 200, and Article 17 of the Taiwanese Code of Criminal Procedure. In the past few years, many foreigners who do not speak Mandarin in Taiwan have failed to realise that they may be interrogated by a police offi cer who is also interpreting for the defendant. The potential risk is that the interpreter may mislead or twist what the defendant states or argues during the investigation stage. Third, although in Taiwan criminal justice adopts the inquisitorial system, the Code of Criminal Procedure has been modifi ed multiple times to refl ect the key points of the adversarial system since 2003. The defendant may: call witnesses and present evidences; cross-examine witnesses face-to-face in front of the court; be represented by a lawyer during investigation and the court process; and be automatically appointed a lawyer during investigation by the police or prosecutor if the defendant has a mental illness or is an aboriginal. In addition, the defendant may argue that the evidences are not admissible in the preliminary hearing on the basis of the hearsay rule under Article 159 of the Code of Criminal Procedure. Before being detained by the court, the defendant and his lawyer may request the court to disclose all the evidences against him, as required by Judicial Yuan Interpretation No. 737. Such regulations are crucial to defendants’ rights, especially when the defendant is a foreigner who is not familiar with Taiwanese laws. Fortunately, recently the Legal Aid Foundation, a pro bono non-profi t organisation, has accepted many foreigners’ requests for free legal assistance provided by volunteer lawyers. Independence and impartiality of the judiciary According to the Taiwanese Constitution, judges shall be free from any intervention while exercising judicial power. Judges may obtain tenure except if they receive criminal or disciplinary measures. For the purpose of protecting the independence and impartiality of the judiciary, the lawmakers further enacted the Judges Act, which provides for judges’ appointment, protection and evaluation. For example, the high court or the supreme court’s opinion of the law cannot restrict the district court judge’s judicial power because of the protection of the Constitution and Judges Act. Any judge or prosecutor guilty of misconduct would be soon punished severely – but it is not common to see illegal conduct by judges or prosecutors inappropriately interfering with the judicial system.

Privilege and disclosure Disclosure Generally speaking, in a civil case, each party shall present evidences for the favourable facts alleged in his claims under the Taiwanese Code of Civil Procedure. However, neither

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the civil procedure nor the criminal procedure in Taiwan provides for a US-style disclosure system. In a criminal case, the lawyers may request the court to allow them to review the evidences and documents submitted by the prosecutor. In a civil case, both parties are obligated to give the opposing counsel a copy of any affi davit and evidences submitted to the court. Nevertheless, when the court fi nds that the case is obviously unfair to one of the parties in a civil case, or it is necessary to protect the defendant’s right or the justice in a criminal case, the court shall investigate the evidences in the absence of any request from any party. In addition, when in some cases only one of the parties has access to the most important evidence, like the medical records owned by the hospitals, the court will rule that the hospitals have to present the evidence for the purpose of review. Privilege Under Taiwanese laws, any communication between a lawyer and his client will be protected by the attorney-client privilege. It will be considered as confi dential and shall not be disclosed to the court or the prosecutor unless the disclosure is required by laws or permitted by the clients. According to the Taiwanese Code of Criminal Procedure, the lawyer may refuse to testify confi dential information because of the privilege. In addition, similar to the Fifth Amendment in the U.S., the defendant may refuse to testify against himself or his relatives.

Costs In a civil lawsuit, the court fees will be nearly 1.1% of the subject-matter amounts of monetary claim. In general, both parties would claim that the court fees should be paid by the losing party during the trial and the appeal process. As for the lawyer’s fees, they are not included in the court fees. In Taiwan, both parties shall pay the lawyer fees by themselves. However, pursuant to Taiwanese Code of Civil Procedure, both parties shall retain lawyers to represent them in the Supreme Court because of the mandatory representation requirement. In this situation, the lawyer’s fees can be considered as part of the court fees which shall be paid by the losing party.

Litigation funding The Legal Aid Foundation is a non-proﬁ t organisation which provides free legal assistance to low-income households, aborigines or foreigners who are involved in civil, family, criminal or administrative cases under the Taiwanese Legal Aid Act. It has many branch ofﬁ ces in every major city in Taiwan so that the people in need may seek legal assistance.

Interim relief Provisional attachment Regarding monetary claims, Article 522 of the Taiwanese Code of Civil Procedure provides that a provisional attachment may be petitioned for the purpose of securing the enforcement when the impossibility or extreme diffi culty of future enforcement is shown. Where the enforcement will be conducted in a foreign country, the extreme diffi culty of future enforcement requirement is automatically satisfi ed under Article 523 of the Taiwanese Code of Civil Procedure. The petitioner of a provisional attachment must state clearly in the petition with regard to four points, that is: 1) the parties; 2) the claim and its cause of action; 3) the reason for a provisional attachment; and 4) the court and the jurisdiction. Under Article 526 of the Taiwanese Code of Civil Procedure, the petitioner must show and

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explain to the court about the claim and the reason for a provisional attachment. It is an ex parte proceeding, so the court does not require preponderance of evidence or convincing evidences to grant a provisional attachment. However, it is not easy to satisfy the impossibility or extreme diffi culty of future enforcement requirement, even though Article 526 of the Taiwanese Code of Civil Procedure states that the petitioner can provide enough funds as security. To reduce the petitioner’s burden, the Supreme Court in 2016 stated that in a tort case where the petitioner has diffi culty in ascertaining the defendant’s assets, the court can additionally consider the likelihood of success on the merits, the amount of the claim, and the defendant’s attitude to such claims. Provisional injunction Regarding non-monetary claims, Article 532 of the Taiwanese Code of Civil Procedure provides that a provisional injunction can be petitioned to secure the enforcement. Similarly, a provisional injunction will not be granted unless the impossibility or extreme diffi culty of satisfying the claim by future enforcement when the status quo is changed, can be shown. Unlike the provisional attachment, the party to be enjoined may be given a notice and an opportunity to attend a hearing, making arguments in opposition to the requested provisional injunction.

Enforcement of judgments/awards In Taiwan, a foreign judgment, ruling, or award shall be recognised by a Taiwanese court ﬁ rst. After recognition, it will be enforceable. Formally, the foreign judgment or ruling must be a ﬁ nal and binding judgment or ruling rendered by a foreign competent court. Substantially, it will be recognised by a Taiwan Civil Court or any other government agency as long as it does not fall into one of the exceptions listed by Article 402 of the Taiwan Code of Civil Procedure. There are four exceptions under the Article 402. A foreign judgment or ruling will not be recognised: 1. where the foreign court lacks jurisdiction pursuant to Taiwanese laws; 2. where a default judgment is rendered against the losing defendant, except in the case where the notice or summons of the initiation of action had been legally served in a reasonable time in the foreign country or had been served through judicial assistance according to the Taiwanese laws; 3. where the performance ordered by such judgment or its litigation procedure is against Taiwanese public policy or morals; or 4. where there exists no mutual recognition between the foreign country and Taiwan. According to the Taiwan Code of Enforcement, a foreign judgment or ruling will be enforced if it does not meet any exceptions listed by Article 402 and if the Taiwanese court permits such foreign judgment to be enforced by a judgment of recognition. Once a foreign judgment, ruling, or award is recognised by a Taiwanese court, it is deemed to be as effective and enforceable as a local judgment.

Cross-border litigation If a lawsuit is not ﬁ led in Taiwanese courts but evidence in Taiwan needs to be investigated, the competent foreign court shall issue a letter of request via diplomatic channels to Taiwanese courts. The letter of request shall contain enough details of the request, such as names, nationalities, addresses of the parties, content and category of evidence, and summary of the case, with a Chinese translation attached. Generally, Taiwanese courts would grant such

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requests in the context of mutual legal assistance. Currently, the Taiwanese government is amending relevant laws to accept a wider range of requests from foreign courts. The most common issue is how to serve the legal documents to a defendant or respondent who resides in Taiwan. Because personally serving the documents to a Taiwanese resident does not violate any Taiwanese law, many foreign law ﬁ rms would request a Taiwanese law ﬁ rm to assist the process of service.

International arbitration There are four established arbitration bodies in Taiwan: the Chinese Arbitration Association; the Taiwan Construction Arbitration Association; the Chinese Construction Arbitration Association; and Chinese Labor Dispute Arbitration Association. If an arbitration clause between the parties is in force, they will be qualiﬁ ed to enter an arbitration award regarding an international dispute. However, if the arbitration award is determined pursuant to foreign laws other than Taiwanese laws, it shall be deemed as a foreign arbitration award pursuant to Article 47 of the Taiwanese Arbitration Law. A foreign arbitration award shall be recognised by Taiwanese Courts for enforceability according to Article 49 of the Taiwanese Arbitration Law. Further to this, Taiwanese Courts shall oversee the selection and disqualiﬁ cation of arbitrators and the revocation of an illegal arbitration award which has procedural or evidentiary defects. The court can also investigate evidences if requested by one of arbitration bodies mentioned above.

Mediation and ADR Taiwanese laws provide three main kinds of alternative dispute resolution: mediation; settlement in court; and arbitration. All of these have become more and more important and commonly used in Taiwanese society, whether in criminal cases or civil disputes. In a criminal law case, a defendant can get a more lenient sentence when he reaches a settlement with the victim. Generally mediation and settlement in court are commonly used in small cases, whereas arbitration is usually adopted in very professional cases like ﬁ nancial, construction, labour or intellectual property disputes. Mediation is also mandatory in family law cases under the Taiwanese Code of Family Procedure. The mediation result as shown on the mediation transcript, issued either by the court or by the local mediation committee, will be enforceable exactly like a judgment.

Regulatory investigations In Taiwan, courts are not bestowed with the power to oversee or interfere with a regulatory investigation conducted by governmental agencies because of separation of powers. However, a citizen whose right or interest is unlawfully affected or injured may fi le an administrative appeal with the governmental agency and re-appeal with its superior agency. Finally, the citizen can also fi le a lawsuit against the governmental agency with the Taiwanese administrative court to review the decision or report made, based on regulatory investigations. Like most civil law countries, Taiwanese courts are very conservative in this respect so that most of the time, the decisions of government agencies will not be changed by the court. In addition, government agencies’ decisions or reports when used as evidence usually would be adopted by Taiwanese courts without any diffi culties.

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Hung Ou Yang Tel: +886 2 2707 9976 / Email: [email protected] Hung Ou Yang is the Managing Attorney of Brain Trust International Law Firm, and specialises in handling transnational legal disputes, business and white collar crime, business litigations, and the negotiation and drafting of international agreements. Hung Ou Yang has successfully resolved many high-proﬁ le civil, criminal and transnational disputes, including: a complaint concerning pesticide-contaminated land leased by RT-Mart; anti-dumping investigation in connection with CSC’s carbon steel plate; and transnational property litigations concerning an internationally renowned scholar. Hung Ou Yang also has a wealth of experience in domestic and overseas litigations and negotiations.

Hung-Wen Chiu Tel: +886 2 2707 9976 / Email: [email protected] Hung-Wen Chiu, Esq. ﬁ nished his education at National Taiwan University (Taiwan’s top university) and amassed plentiful experience in criminal investigation before joining the Firm. Hung-Wen Chiu mainly takes charge of e-commerce and labour law consultations and ordinary civil and criminal litigations.

Jia-Jun Fang Tel: +886 2 2707 9976 / Email: [email protected] Jia-Jun Fang specialises primarily in legal translations of trial documents and contracts. In addition, his abundant experience in domestic litigation qualiﬁ es him to provide clients with strategies for conﬂ ict and dispute resolution.

Brain Trust International Law Firm 20F.-1, No. 76, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City 106, Taiwan Tel: +886 2 2707 9976 / Fax: +886 2 2707 9606 / URL: www.btlaw.com.tw

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Orçun Çetinkaya & Burak Baydar Moroğlu Arseven

Procedural effi ciency Turkey has implemented a series of judicial reforms in the last decade to enhance the effi ciency of its judicial system. Within this scope, it has renewed fundamental legislation, as well as introduced the National Judiciary Informatics System (“UYAP”), enabling courts and individuals to now carry out procedural acts online. UYAP has received multiple awards, including the 2016 WSIS prize and second place at the 2012 United Nations Public Service Awards. The tool eases every legal practitioner’s life in Turkey, meaning lawyers are no longer required to physically visit the courthouse in order to: • review court fi les appointed to them by their clients; • submit petitions and take copies from documents submitted; • deposit expenses and litigation costs with the court; and • conduct asset research of debtors in insolvency cases. In July 2016, Turkey introduced regional courts of justice, a new appellate layer aiming to ease the Court of Cassation’s workload. The effectiveness of this remedy is currently being tested and will be seen over the near future. In general, Turkey has a multi-layered judicial system, addressing two pillars: civil and criminal law. Civil proceedings are based on the principle of party preparation, whereas criminal courts apply the inquisitorial system. The evidence-collection phase takes the majority of time in both types of proceedings. Courts tend to place the most evidential weight on expert testimony. However, criticisms have been raised about ineffi ciencies in the system to review experts’ competency. Parties in Turkey tend to be quite litigious, regardless of the prospects of success. There are no real measures which force parties to think twice before resorting to litigation. For instance, the losing party will not be forced to remunerate the winning party for professional fees incurred due to the proceedings. If the case can be categorised as a claim for an indefi nite amount, the claimant can avoid depositing the pro rata application fee at the beginning of the claim, as well as paying the winning party’s pro rata representation fee in case the claim is rejected. Thus Turkish courts’ workload continuously increases every year. Introducing regional courts of justice has accelerated the appeal process. Decisions by courts of fi rst instance for pecuniary matters over TRY 3,110 (approximately US$ 860) can be appealed to regional courts of justice. Likewise, a regional court of justice’s decision regarding monetary issues over TRY 41,530 (approximately US$ 11,500) can be appealed

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to the Court of Cassation. If a court of fi rst instance’s decision is reviewed by both the regional court of justice and then the Court of Cassation, the process for a decision to become fi nal may take four to fi ve years, depending on the complexity of the case. Regardless of how long the appellate process stretches, the winning party can enforce their decision against the losing party following the fi rst instance court’s decision. To avoid this, a losing party should fi le an appeal including a specifi c request to freeze enforcement, by depositing a sum or bank guarantee letter equal to the amount granted by the fi rst instance court. Generally, parties prefer a bank guarantee letter if the amount granted by the fi rst instance court is signifi cant as it enables them to use their money instead of keeping it idle as collateral in the enforcement offi ce’s bank account while the case is being reviewed by a regional court or Court of Cassation.

Procedural integrity Turkey adopted several legislative changes regarding the rules of natural justice as part of the EU accession process. Signiﬁ cant constitutional changes in 2001 improved Turkey’s rules of natural justice, in line with EU legislation. Accordingly, the constitution protects a fair hearing, the death sentence was abolished, and importance was given to the right to access legal remedies. The constitution protects and guarantees judicial neutrality. The Turkish Code of Civil Procedure also stipulates several detailed provisions to eliminate the partiality of judges. Turkey’s three-layered judicial system allows decisions to be reconsidered by higher courts in terms of both substantive and procedural requirements. As a rule, the regional courts review both the facts and the legal expediency of the ﬁ rst instance court’s decision, limited only within the scope of the appealing party’s requests, while the Court of Cassation only reviews the legal expediency of regional courts’ decisions without being limited by parties’ requests. For some time, the Turkish Court of Justice has been working on a system to improve procedural integrity, involving mechanisms to monitor judges and prosecutors more closely and objectively.

Privilege and disclosure Turkish legislation outlines several provisions regarding attorney privilege and disclosure obligations (Attorneys Law No. 1136). Accordingly, attorneys cannot disclose information obtained from clients during their duties. Attorneys cannot testify about facts obtained from clients, without prior client consent. Even if a client does consent, an attorney can still choose to abstain from testifying. However, attorneys must decline to pursue lawsuits or other tasks for a party if they have worked as an attorney or argued in favour of the counter-party in the same matter. Attorneys must retain documents entrusted to them by clients for three years after their power of attorney expires.

Costs Claimants are expected to deposit various fees before, during and after trials, such as: • Fees (such as court fee). • Attorney’s fee.

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• Other trial costs (such as viewing, notifi cation costs, charges paid to witnesses and experts, etc.) According to the Law of Fees No. 432, when making a claim, a claimant must deposit: • a proportional fee, calculated as a quarter of 6.831% of the claimed amount; plus • a fi xed fee of TRY 31.40 (approximately US$ 9). For instance, to fi le a collection claim for US$ 100,000, the claimant must deposit: • Proportional fee: US$ 1,707.75 (6.831% of US$ 100,000, divided by four). • Fixed fee: TRY 31.40. Claimants must deposit an advance to the court fund offi ce, or their lawsuit will be deemed as unfi led (Code of Civil Procedure). During proceedings, judges can request fees from both parties, depending on the actions taken to resolve a dispute. At the end of the trial, the court can decide that the losing party must pay all of the winning party’s litigation costs (including court fees and advance payment deposited by the claimant) along with the attorney’s fee. The attorney fee is calculated on a pro rata basis based on the Attorney’s Fee Tariff revised annually by the Union of Turkish Bar Associations. In a partial decision, the court distributes litigation costs on a pro rata basis. If there are multiple losing parties, the court can distribute litigation costs amongst them, or hold the parties jointly and severally liable.

Litigation funding There is no legislation speciﬁ cally regulating litigation funding in Turkey. Even though litigation funding is not forbidden, it is not seen in local litigations and arbitrations. In practice, Turkish parties do use litigation funders during international arbitrations, particularly for investment arbitrations.

Interim relief Turkish legislation defi nes interim relief as temporary legal protection, with interim injunctions and precautionary attachments being the most signifi cant and effi cient methods in Turkey. Many types of relief exist, spread over the different laws. In general though, temporary legal protection is primarily regulated under the Civil Procedural Law and the Bankruptcy and Enforcement Law. Interim injunctions Interim injunctions can be requested from the court either before or after fi ling a lawsuit. An interim injunction claim must raise a concern that: • acquiring a right will become more diffi cult, or impossible, due to a change which will occur in the circumstances, and/or • damages will be incurred due to any delay. Interim injunction decisions protect the claimant’s interest during trials, provided that no change occurs to the present circumstances. If a claimant fi les an interim injunction request before fi ling a lawsuit, the original lawsuit must be fi led within two weeks after execution of the interim injunction order, or the injunction will be automatically lifted. The party requesting an interim injunction must deposit a security for the counter party, in order to prevent possible damages which may arise. In practice, courts tend to request at least 15% of the claimed amount as collateral.

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It is possible to object to an interim injunction decision by appealing to the authorised regional court. Precautionary attachments Precautionary attachment requests enable temporary seizure of a specifi c amount of the debtor’s assets, without hearing the debtor’s defences. Such interim relief is available for receivables (payable and due) in ongoing or planned execution proceedings, where the receivables are not guaranteed with a pledge and at risk of having collection diffi culties. The party requesting a precautionary attachment must: • deposit collateral with the court (usually no less than 15% of the claimed amount); and • seek enforcement of the attachment from the authorised enforcement offi ce within 10 days of the court’s precautionary attachment decision. Failure to do so will mean the precautionary attachment is automatically lifted. Upon executing a precautionary attachment order, the creditor must fi le the claim or start an execution proceeding regarding the merits of their case within seven days, or the relief will again be automatically lifted.

Enforcement of judgments Foreign civil judgments are enforceable in Turkey if they are recognised by a competent Turkish court. If there is no bilateral reciprocity agreement between Turkey and the state where the decision was made, a recognition action will be subject to the Turkish International Private and Procedural Law. Accordingly, decisions will be requested from the court at the place of habitual residence of the person against whom enforcement is requested. If such person does not live in Turkey, the Istanbul, Ankara and Izmir courts will be deemed competent. The original decision, duly approved by the relevant country’s authorised departments, together with an approved translation, must be submitted to the Turkish courts. The competent court will enforce the decision subject to the following conditions: • Any agreement which may exist, on a reciprocal basis between Turkey and the state where the court decision is given, or de facto practice, or a provision of law enabling the authorisation of the execution of a fi nal decision given by a Turkish court in that state. • The decision must not be on a matter within the exclusive jurisdiction of the Turkish courts, or being contested by the defendant; the decision must not be given by a state court which has accepted itself as competent in jurisdiction even if it is not. • The decision must not be clearly contrary to public order. • The person against whom enforcement is requested and whose right of defence has been violated by that foreign state shall not bring forward that violation before the Turkish court. Turkish enforcement offi ces will enforce recognised foreign judgments as if they were rendered by a Turkish court. When it comes to the enforcement of civil judgments by Turkish courts, except with certain exceptions, a fi rst instance court’s decisions can be enforced even if the case is appealed.

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Cross-border litigation As part of the rogatory process, Turkish courts assist foreign courts for cross-border litigation in accordance with the terms and conditions set out under international treaties. Turkish courts can collect information, take party statements, carry out site examinations and appoint experts to do reviews if needed, depending on the nature of a request.

International arbitration The International Arbitration Law (“IAL”) outlines principles and procedures regarding international arbitration processes where a foreign element exists and Turkey is determined as the seat of arbitration. Accordingly, the parties can either agree the arbitration rules to be applied, or determine these by referring to international or institutional arbitration rules. Any party can claim an arbitration exists before the courts. If such clause exists, the lawsuit will be dismissed. However, the IAL adopted a limited scope for judicial interference in international arbitrations, only allowing courts to intervene for supportive purposes, such as arbitrator selection if a dispute arises. Like other contemporary arbitration legislation, the IAL minimised the scope of judicial intervention into arbitration during the proceedings themselves. Courts can only review mistakes and faults made within arbitration proceedings during actions to set aside the arbitrated decision, ﬁ led by the counter-party. There are no other legal remedies against arbitration awards. There are two notable arbitral institutions in Turkey: 1. The Istanbul Arbitration Centre: Established in 2014, it aims to become a regional international arbitration body and increase the demand for arbitration in Turkey. Its rules apply to both domestic and international disputes, without discrimination. Parties can determine the arbitration’s seat and language, as well as select the arbitrators. Unless the parties otherwise agree, the arbitration seat will be Istanbul and the arbitrator (or tribunal) will determine the arbitration’s language, considering all circumstances and conditions. 2. The Istanbul Chamber of Commerce Arbitration Centre: Established in 1979, it operates for both domestic and international disputes. Its rules apply the same approach as above regarding the arbitration’s seat, language, and selection of arbitrators.

Mediation and ADR Mediation has an increasing profi le in Turkey and is considered as a fi nal chance for parties to settle disputes amicably under Turkish law. The Law on Mediation in Civil Disputes was enacted in June 2013, which also established a Mediation Authority. Judges must encourage parties to settle disputes through mediation before initiating a lawsuit. Also, a draft labour law was announced in 2016, envisaging meditation as a mandatory pre-condition for fi ling lawsuits. However, other ADR tools are not common in Turkey.

Regulatory investigations There is no central authority regulating and conducting regulatory investigations in Turkey. Investigations are conducted by several authorities, such as the Ministry of Customs and Trade and the Ministry of Health. Market regulatory authorities such as the Banking

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Regulation and Supervision Agency, Energy Market Regulatory Authority, Information and Communications Technology Authority, Capital Markets Authority, Public Procurement Authority, Tobacco and Alcohol Market Regulatory Authority and The Competition Authority also carry out regulatory investigations, either ex-ofﬁ cio or upon receiving complaints. Although the procedure of regulatory investigations for each regulatory body differs, usually the investigations are conducted by a team of specialists appointed by the decision- making body of the regulatory authority. The time frames for investigations for different regulatory authorities would be different. Usually the investigations involve written and oral argumentation phases, depending on the subject matter of the investigation. There might be more than one round of each phase. The decisions of the regulatory authorities must be reasoned and they are usually public.

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Orçun Çetinkaya Tel: +90 0212 377 47 00 / Email: [email protected] Orçun has 15 years of experience. He regularly advises and represents local and foreign clients during cross-border disputes and high-risk issues. He advises clients in regulated markets and represents clients in administrative and criminal investigations. He appears before high courts in Turkey as counsel and is appointed abroad as a Turkish law expert. He is consistently recognised by The Legal 500 and Chambers & Partners for his expertise in disputes, investigations and regulatory advice. He is exclusively recognised for commercial litigation by Client Choice in 2017.

Burak Baydar Tel: +90 0212 377 47 00 / Email: [email protected] Burak concentrates on commercial litigation and dispute resolution. He has been involved in a large number of cases related to commercial, corporate and contract law. Burak’s experience spans all stages of execution and enforcement proceedings, as well as debt collection, portfolio compensation and personal injury claims, among others. His work also includes strategic planning and counselling on a range of commercial and corporate issues when these intersect with dispute resolution matters.

Moroğlu Arseven Abdi İpekçi, 19-1, 34367, Nişantaşı, İstanbul, Turkey Tel: +90 0 212 377 47 00 / Fax: +90 0212 377 47 99 / URL: www.morogluarseven.com

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Oleksandr Zavadetskyi Zavadetskyi Advocates Bureau

Effi ciency of process The year 2016 was a pivotal one in reforming the Ukrainian judicial system, as several fundamental laws were introduced, in particular: amendments to the Constitution of Ukraine relating to justice functions; the Law “On High Council of Justice” (the High Council of Justice is perceived to be a primary guard of judicial independence); and restatement of the Law “On Justice System and Judges”, which are supposed to be followed by several other enactments during 2017. This process is generally referred to as the “Judicial Reform” and is aimed at improving justice effi ciency, independence and transparency of courts, optimisation of the court system and the raising of judiciary qualifi cations. The Courts of Ukraine have jurisdiction over all and any disputes arising in the country, according to the Ukrainian Constitution. Therefore, a situation where a claimant has no competent court to consider a case is unlikely to happen. However, the common opinion among the Ukrainian public has been that courts in the country are often biased or even corrupt and are not an effi cient instrument to exercise justice. Parties that face litigation usually prepare for a prolonged process with an outcome that is hardly predictable. There are courts of fi ve jurisdictions in Ukraine, divided by specialisation (Constitutional, Civil, Commercial, Administrative and Criminal) that hear cases, depending on subject matter and location. All jurisdictions have their instance levels and territorial competence, with the exception of the Constitutional Court of Ukraine, which is a separate (and the only) judicial authority to hear constitutional cases, and whose resolutions are not the subject of review by the Supreme Court of Ukraine or any other authority. Establishment of a separate anti-corruption court is a part of the Judicial Reform being presented by the recent legislative changes, as corruption is perceived to be the largest impediment to the country’s efforts to reform, and there are opinions that existing courts are unable to avert corruption either. Judicial consideration of most disputes starts in the courts of the fi rst instance. Administrative courts consider disputes arising out of public-private relations, i.e. when a private law person or entity has a confl ict with a public law entity. Commercial courts consider cases arising out of commercial activity, where disputing parties may be entities as well as individuals, engaged in some sort of commercial activity, plus some specifi c cases, e.g. corporate disputes, insolvency cases, disputes relating to titles on securities, and some others. Civil courts, or “general”, as they are named in the professional circles, have competence over all other disputes and also have departments that handle criminal cases. Proceedings in courts are governed by their respective Codes of Procedure, in particular the Civil Process Code, the Commercial Process Code, the Administrative Process Code and the Criminal Process

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Code. The law prohibits extraordinary courts of any kind. Courts of appeal consider cases that have been heard by the courts of the fi rst instance, and based on the evidence and arguments presented by the parties during the fi rst instance hearing, unless it is proven that presentation of the new materials had been impossible earlier on good reason. Courts of cassation consider cases only within the limits of the submitted statement of cassation. The Judicial Reform will lead to three existing courts of cassation being eliminated and transfer of all cassation authority to the Supreme Court of Ukraine; actually, that represents a return to the status quo ante. The ultimate level for cassation appeals in the country is the Supreme Court of Ukraine and appeals are admissible there only on a limited list of grounds. There is also a possibility to initiate judicial review of a case after the fi nal judgment has been made and even enforced, if new circumstances pertaining to the case have been discovered and such circumstances would have had infl uenced the outcome of the hearing substantially had they been discovered at the time of the hearing – this procedure has its specifi c rules and limitations, set forth by the process law. As a rule, judgments of the courts of the fi rst instance come into force and become enforceable either upon lapse of the time for appeal or, if appealed, after a court of appeals renders its resolution on the case. Ukrainian courts have wide authorities as to the management of the cases they consider. In particular, courts may adjourn hearings in some cases, determine a procedure for hearing a case, suspend a proceeding, hold a hearing outside of the court premises, join or split proceedings, etc. At the same time, courts may act in strict compliance with the process laws only and they cannot act in a way that is not set forth directly by the law of procedure. While hearing cases, the courts issue: a) defi nitive resolutions that settle disputes, order actions or confi rm facts that have legal consequences; and b) procedural orders, rulings, etc., that are instruments of proceeding management. Ukrainian names for resolutions and orders depend on the kind of proceeding, court jurisdiction, composition of the court (one judge or a panel) and instance of proceeding (First, Appeal or Cassation). Apart from that, some courts are authorised to issue “separate rulings” that may be addressed to any person regarding whom a court has identifi ed an illegal activity and requesting such person to terminate the violations of laws. Process laws set forth quite short run-through terms for consideration of disputes (except criminal process, where an appropriate run-through term in the fi rst instance is determined as “reasonable”) – mostly one or two months, depending on jurisdiction and instance. Theoretically, most disputes may be resolved in fi rst, appellate and cassation instances during a 4–5 month period; however, in practice that usually takes from two to three years. Notwithstanding recent changes in Ukraine and social reform aimed at raising the standards of the justice, the courts are still seen by the majority of Ukrainians as corrupt and incompetent. The on-going Judicial Reform is viewed as a chance to improve the situation and raise trustworthiness of the court system.

Integrity of process The laws of Ukraine provide that the courts form a separate, independent branch of the state authority and resolve disputes based on comprehensive, impartial and independent consideration of cases. There is a possibility to seek recusal of judges should there arise a ground to claim that a judge cannot exercise an unbiased approach to the case. In each court, cases are required to be allocated to judges automatically by a special software system. The purpose of automated allocation is to provide for impartial сonsideration of disputes and to resist corruption, as well as using it as a workload management tool. There is also an

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online register of courts’ resolutions in place, where the public can view court resolutions, defi nitive as well as procedural, throughout the court system; however, this register still operates with some fl aws and does not guarantee absolute completeness. In general, court proceedings in Ukraine are public, which means that the public has a right to witness the process, unless a court specifi cally rules on a closed proceeding. However, in practice, many courts, especially in the countryside districts, do not have enough capacity to accommodate public witnesses to the proceedings. Though the Constitution of Ukraine is an act that can be directly implemented by the courts while hearing cases and the Ukrainian law doctrine recognises all values of the modern concept of human rights, in practice Ukrainian courts quite often, as compared to other European countries, deliver judgments that lack proper interpretation of laws and raise questions as to their impartiality. The statute law has overwhelming priority over natural justice, therefore litigating parties are highly dependent on the provisions of applicable regulation. To some extent, judicial discretion is balanced by the operation of the High Council of Justice and the High Judiciary Qualifi cations and Disciplinary Commission, who are involved in the appointment, dismissal and sanctioning of judges, but currently they have limited capacity. The public has very little infl uence on the process of judges’ appointment and dismissal. As a consequence, in the European Court of Human Rights appeals from Ukraine form one of the largest categories of cases. Efforts are being made currently by Ukrainian society and the state authorities to improve the operation of the country’s judiciary.

Privilege and disclosure There is no concept fully analogous to disclosure in the Ukrainian court procedures, however there is a procedure of provision of evidence, where courts issue mandatory rulings to parties of a dispute or third parties. The party to a case may ﬁ le a motion to the court compelling any person to produce evidence, and must specify the piece of evidence, substantiate why such piece of evidence is relevant, and indicate who possesses such piece of evidence. In general, a principle of competition between the disputing parties is set forth for civil and commercial proceedings, whereby each party takes the burden of proof regarding parties’ positions in the dispute, and courts are not obliged to investigate the circumstances of the cases they hear. Courts are authorised to decide whether a piece of evidence is admissible and relevant to the proceeding or not, and they can decide whether to sanction mandatory provision of evidence or not. In administrative proceedings courts may also request evidence at their own initiative. Courts may order the parties or third parties to submit evidence directly to the court or through one of the parties to the proceeding. State courts may compel any person, notwithstanding whether they are participants to the case or not, to produce necessary evidence. It is also required that a party that initiates provision of evidence substantiates the impossibility of obtaining such evidence without the involvement of the court. Some categories of information are treated by Ukrainian law as information with restricted access, or privileged. The best examples are client-advocate privilege, military information with restricted access, and personal medical information. In cases where it is necessary to obtain and consider such information in a court proceeding, a court would issue a special ruling sanctioning necessary actions including conduct of a closed (with no admission of public) court hearings. In general, any person who has obtained a document or has been acquainted with information with restricted access or under privilege, is obliged to preserve

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it from unauthorised disclosure and otherwise treat it as provided by the applicable laws, irrespective of whether this was received during a court proceeding or otherwise.

Costs The costs of court proceedings consist of court duty and the expenses of the litigating parties. Expenses include legal fees in amounts that may be properly substantiated and recognised as reasonable by a court. While amounts of court duties are set forth by the law, expenses vary from case to case. The court duties are usually payable by the party that initiates a proceeding or some procedural actions in advance and vary depending on court jurisdiction, instance and the nature of the claim or motion. For example, a pecuniary lawsuit in the general Civil or Administrative court of the fi rst instance, fi led by a legal entity, would be subject to a court duty of 1.5% of the claimed value. A lawsuit of the same nature in the Commercial court would entail the same 1.5% court duty but with a maximum limit of UAH 243,600 (€8,202 as of 1 June 2017). Statements of appeals and cassation are mostly subject to a percentage of the court duty of the fi rst instance (110–120% accordingly in most cases). As a rule, courts allocate offi cially confi rmed costs of proceedings between the parties depending on the fi nal judgment and in proportion to upheld claims. It also should be noted that a court may decide not to recognise some expenses of a party as a cost of proceeding, thus refusing to reimburse them on account of a failing party.

Litigation funding There are no particular rules on litigation funding in Ukrainian law, with the exception of state legal aid, where those eligible for the aid may receive it from the assigned state authorities. Any fee structure, including hourly rates, fi xed fees, conditional or success fees, are permitted in Ukraine. All of these fee structures are used in practice. Third- party funding is allowed. However, it is impossible to have legal fees and other litigation- related expenses compensated unless they are actually paid specifi cally by the party to the proceedings and no earlier than the day when the proceeding is fi nalised, which usually means the date of the court decision.

Interim relief In any type of proceedings, various interim measures aimed at securing the claim are available after the claim is fi led and, in some cases, prior to that, such as seizure of assets, provision of proof, prohibition of certain actions, obligation to perform certain actions (the named may be treated as Ukrainian analogues for attachment and injunction), suspension of a public agency’s decision, etc. Examples of interim relief applications that parties may fi le are: motions for engagement of third parties; preliminary injunctions or orders; requests for evidence; requests for expert opinions; summoning and questioning of witnesses (the latter is permitted in general Civil and Administrative cases), etc. Usually a party fi ling an interim relief application covers the costs that arise as a result of this. For example, the party requesting an expert opinion shall make advance payment for the services of the expert or expert institution. These costs are to be fi nally allocated between the parties by the court when rendering a judgment. Pre-action interim remedies are available in commercial litigation proceedings regarding all matters and in civil proceedings regarding intellectual property disputes and may be such as provision of evidence, observation of premises related to the disputed matter, prohibition to perform specifi c actions, arrest of assets.

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In order to obtain pre-action interim remedies, an interested party should fi le a motivated motion to the court; the latter has the authority to uphold the motion as well-grounded or to dismiss it as not suffi ciently grounded. A claimant must fi le a statement of claim within a limited number of days following the court ruling on granting pre-action interim remedies. If the claimant fails to do so, pre-action remedies terminate. As regards measures in the protection of international arbitration, the Act of Ukraine “On International Commercial Arbitration” provides that “it is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, a court to order interim measures of protection and for a court to take a decision granting such measures”. The court may request a claimant to provide security for covering possible losses on the defendant side as a result of imposing interim measures. Some instruments used in other jurisdictions, e.g. worldwide freezing order or some kinds of injunction, are not known in the Ukrainian litigation practice but in most cases there are possibilities with analogous effect, and problems that arise in using them stem rather from weak law enforcement system in Ukraine than from lack of legislative instruments.

Enforcement of judgments The Ministry of Justice of Ukraine is the governmental body that is responsible for operation of the state enforcement service and for regulation of the private bailiffs. There are specifi c regulations that govern enforcement proceedings. The most important recent legislative novation in this area has been introduction of the Law “On entities that enforce judgments” which, along with the other several fundamental changes, sanctioned the use of private bailiffs. As a rule, a holder of a court award needs to apply to the state enforcement service with a statement of enforcement or to assign a private bailiff, and if such application or assignment is done in accordance with the regulation, the state enforcement service or a bailiff will commence an enforcement proceeding. In the course of the enforcement proceeding, parties to it (the claimant and the defendant), and in some cases third parties, may apply to the courts, or vertically up the Ministry’s of Justice functions, with appeals and statements regarding protection of their interests. Foreign judgments are subject to enforcement proceedings in the same manner as domestic judgments, but after their recognition as set forth by the law, including international treaties that govern such recognition, or on a reciprocity basis. Foreign arbitral awards can be enforced in Ukraine pursuant to the international treaties, such as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) and the European Convention on International Commercial Arbitration (Geneva, 1961), as well as under the reciprocity principle. In the latter case, it shall be presumed that reciprocity exists unless it is proven otherwise. Provisions of the Civil Process Code apply to foreign judgments at all times when there is no superior international treaty on the matter at hand. The Civil Process Code of Ukraine provides that enforcement of a foreign court resolution can be rejected when any of the specifi cally listed circumstances exist, but the state courts do not have competence to review foreign judgments or arbitral awards in their substance. Grounds for rejection of enforcement include: breach of exclusive competence of Ukrainian courts; unawareness of a party to the dispute about the procedure; unenforceability of the judgment in accordance to the laws of the place of trial; existence of a confl icting judgment or active procedure in Ukrainian courts; the term for recognition has lapsed; the subject matter of the dispute is not admissible to consideration in the Ukrainian courts; or enforcement violates Ukrainian public order or

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national interests. It is also possible to obtain interim measures from the state courts at the stage of recognition and enforcement of an arbitral award in Ukraine. Garnishment measures are provided for by law but they are perceived mainly as an enforcement measure in cases where there are no assets located in the possession of the defendant.

Cross-border litigation The Civil Process Code and the Commercial Process Code of Ukraine set forth that foreign parties can sue and be sued in Ukraine in the same way as residents, unless otherwise is specifi cally provided by law. In addition to the local laws, regulations of international treaties apply to the procedural status of foreign parties to litigation. In the Administrative jurisdiction, foreign parties generally may act as claimants in the same manner as the local parties while the defendant side may be represented by the public Ukrainian bodies according to the subject matter of this jurisdiction, with some exclusions from this rule, specifi cally mentioned by law. For example, compulsory extradition of a foreign citizen from Ukraine requires an administrative lawsuit to be fi led by a competent authority versus an individual. There is a concept of “legal assistance” used in the Ukrainian process regulations, which means cooperation between judicial and enforcement authorities of different countries. In the process of litigation, a Ukrainian court can interact with authorities from other countries where there is a treaty governing international legal assistance in order to receive help in the litigation process such as summoning of parties, provision of evidence, service of documents, etc. In the same manner, Ukrainian courts and other authorities may assist foreign courts in litigation proceedings that involve Ukrainian elements. In particular, starting from 2001, Ukraine is a party to the Hague Convention on the obtaining of evidence abroad in civil and commercial proceedings of 1970, and is a successor-party to the Hague Convention on Civil Procedure of 1954. Legal assistance is available to litigating parties also in the absence of international treaties, however in this case interaction between judicial authorities would be exercised via the Ministry of Foreign Affairs offi ces and therefore would be considerably slower and restricted in capacity.

International arbitration In addition to the state courts, Ukrainian law recognises domestic arbitration and permanent or ad hoc international commercial arbitration. There is a category of disputes that fall within exclusive jurisdiction of the Ukrainian state courts and the Constitutional Court of Ukraine, which include, as a rule, relationships with involvement of the state interest. For example, civil disputes falling under the jurisdiction of the Administrative or Criminal courts may not be resolved under arbitration or ADR procedures. The main rules governing international arbitration with the seat of the tribunal in Ukraine are set forth by the Law of Ukraine “On International Commercial Arbitration”. Some rules concerning international arbitration are also found in the Civil Process Code, the Law of Ukraine “On Enforcement Proceedings”. The permanent Ukrainian arbitration courts operate according to their bylaws. Under the general rules, a national court may not intervene in arbitral proceedings except for very few reasons provided by the law. If any of the parties so requests, a state court shall stay its proceedings and refer parties to arbitration in disputes that are covered by an arbitration agreement, unless it ﬁ nds that the latter is not applicable. A party may also request a competent court to consider the issue of arbitral tribunal jurisdiction. According to the Ukrainian law, arbitration awards are binding upon the parties and enforceable through

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the state courts and the enforcement service. To get enforcement of an arbitration award, a claimant needs to apply to a general civil court to get an enforcement order within three years from the date of the arbitration award. An arbitral award may be set aside by a local court if reasons for that, speciﬁ cally listed in the law, exist. The application for setting aside an award of arbitration should be made by the complainant within three months from the date of the award, and reasons for setting aside an award include those which undermine competence of the arbitration tribunal, correctness of the arbitration procedure, and conformity with the public order. There are two main international commercial arbitration institutions in Ukraine: the International Commercial Arbitration Court; and the Maritime Arbitration Commission of the Ukrainian Chamber of Commerce and Industry. Also, there are a number of arbitration institutions at various industry organisations and professional associations, however many of them do not function actively.

Mediation and ADR Litigation remains the prevailing method of dispute resolution in Ukraine, though arbitration is also frequently used. Generally, cross-border commercial disputes, with few exceptions, may be referred to either local or foreign commercial arbitration. Mediation is emerging but is rarely used, with the exception of fi nancial relations between corporate borrowers and banks, who can benefi t from the Law “On Financial restructuring” that came into force in October 2016 and sets forth in detail the organisation and procedure for restructuring bad loans. There is also a concept of settlement agreement used in the civil and commercial process codes, and disputing parties may agree on any procedure of reaching a settlement agreement, unless it contradicts the applicable laws. As regards settlement of disagreements between business entities and public offi ces, the offi ce of the Business Ombudsman is worth mentioning – it has been established in 2014 and its core body, the Council, operates as mediator between businesses and regulators. Negotiations are generally recognised as a helpful means of dispute resolution, but the involvement of outside experts is uncommon. When concluding commercial contracts, domestic businesses mostly rely on litigation as a dispute resolution method in case of a confl ict with their contractors. As an exception to this general trend, banks rather frequently insist on referring disputes with retail borrowers to the competence of arbitration tribunals, but this is mainly due to the fact that these tribunals operate on the basis of banking associations.

Regulatory investigations There are several public agencies operating in Ukraine whose functions may be characterised as “investigatory”; however, the term itself is not embedded into every of the regulations governing the activity of these agencies. Amongst the agencies that combine regulation and controls over compliance with regulations, the most prominent are: the National Bank of Ukraine (the NBU); the Anti-Monopoly Committee (the AMC); and the State Fiscal Service (the SFS) of Ukraine. The AMC has authority to investigate anti-trust and anti-competition violations and its authority covers almost all areas of commercial activity in the country and a wide range of public regulatory activity. The NBU started investigatory activity in 2015, commencing with thorough banking industry diagnostics, aimed at identiﬁ cation and resolution of malfunctioning, non-transparent and non-compliant banks. A substantial part of these diagnostics consisted of procedures based on investigatory methodologies. Moreover, the investigatory element has been interwoven into many regulations of the NBU

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related to banking supervision and AML control, which are likely to stay for a long time. The SFS’s purpose is to investigate tax avoidance and this agency uses instruments both unique to them as well as similar to those used in the investigation of other white-collar crimes. According to all applicable laws, any regulatory investigation in Ukraine may only be conducted in strict compliance with the procedural rules that speciﬁ cally apply to the respective investigation. Therefore, any deviation from the applicable rules, wrong action or inaction, is a ground for applying to the competent court (in most such cases, to the Administrative courts) for protection of rights.

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Oleksandr Zavadetskyi Tel: +380 504 169 258 / Email: [email protected] Oleksandr Zavadetskyi started his career in 1996 and received his advocacy licence in 2001. Oleksandr has gained substantial hands-on experience in Litigation, White-Collar Crime and Finance Regulation. Zavadetskyi Advocates Bureau, which was founded by Oleksandr in 2009, has been assigned to handle litigation and white-collar crime cases, as well as to provide advice in various areas of business and civil law, by high-profi le international corporations. Along with practising as an advocate, Oleksandr in different times has occupied several managerial positions in multinational banking groups such as Citigroup, Svedbank, Kommerzbank, where he managed legal affairs and recovery of non-performing loans. Moreover, in 2015 and 2016 Oleksandr was engaged with the National Bank of Ukraine to fulfi l several of the NBU’s obligations under the MEFP between the IMF and Ukraine. There Oleksandr worked as Head of the Licensing and the Related Parties Monitoring, simultaneously being the fi rst ever Chairman of the NBU Qualifi cation Commission and member of the Banking Supervision Committee.

Zavadetskyi Advocates Bureau 03150, 16 Dylova Str., ofﬁ ce 9, Kyiv, Ukraine Tel: +380 504 169 258 / URL: www.zkadvocates.com

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Hamdan Al Shamsi Hamdan AlShamsi Lawyers and Legal Consultants

Litigation procedures differ in the UAE in each of the seven emirates. The seven emirates that form the UAE each have a Court system and every emirate has a rental dispute centre. That means the Courts (and the rental centres) can operate differently from one another. The Courts of Sharjah, Ajman, Umm Al Quwain, Fujairah Courts fall under the federal administration whilst the Courts of Dubai, Ras Al Khaima and Abu Dhabi each have an independent Court administration. The Courts of Dubai have an independent Supreme Court, namely the Court of Cassation, which determines the interpretation and meaning of the legislator, whilst all the other emirates fall under the Supreme Court based in Abu Dhabi. In addition there are the Dubai International Financial Centre (DIFC) Courts and the newly established Abu Dhabi Global Markets Courts (ADGM). The DIFC Courts are set up within the economic freezone DIFC area in Dubai. The ADGM Courts are based in a similar freezone in Abu Dhabi. Both are independent Courts of the UAE in their own right. They are described as common law islands in a civil law sea, applying a set of laws based largely on the common law of England and Wales.

Efﬁ ciency of process I shall be analysing the process of registering claim, evidence and resources available to a litigant, and the time disputes require. Generally the comments are directed to the UAE Courts, with the DIFC Courts being dealt with speciﬁ cally. The ADGM Courts follow the course of the DIFC Courts. This study does not extend to the criminal Courts or any penal- related matters. Cases are registered in the Courts through the Registrar who will accept the statement of claim and set a hearing date after the parties have paid the fees for the case. This is processed at the Courts and can take as little as one day to complete, unless there are issues that arise and need correcting or clarifying. With the advance of technologies some Courts have opted now to use online methods of registration. The Dubai Courts have introduced an online system and procedure for registering and dealing with cases. The online feature is very helpful and functional and allows parties including lawyers to register any case, injunction or application online. The Dubai Courts’ process of registering a claim online is straightforward and the requirements are set out clearly in the website. After the claim is registered, it is reviewed by the Registrar’s Department who provide their comments on whether or not there are any changes that are required to be made. The Registrar may, in certain circumstances, go so far as to require changes in the particular or statement of claim, particularly focusing on

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the format of the claim. In those circumstances, the process of registration takes up to one week. In the event there is a requirement to change the statement of claim, it may take up to two weeks to resolve the matter. Claims in the other courts in the emirates are registered over the counter; the registration takes one day with payment required on the same day. A hearing date will be provided on that same day. Once a case has been accepted by the Registrar, the online system will request payment and thereafter, after payment is made, a date may be set to hear the dispute. The DIFC requires the parties to register a claim through its online form. There is a 40% surcharge for claims registered over the counter. An ordinary claim will be started through the fi ling of a claim form under Part 7 of the DIFC Courts rules. An application (not expected to involve a substantial dispute of fact) would be commenced under Part 8 of the Rules and an interlocutory application under Part 23. The Civil Courts of the UAE (not the DIFC Courts) are organised by the claim amount in question; the rules for such organisation are found in the civil procedures law and may sometimes be organised further by decisions made by the head of the Courts who oversees and manages the Courts. The case allocation system in the UAE Civil Courts allocates cases in accordance with the amount claimed and its type. Cases under the amount of AED 500,000 in Dubai Courts (AED 200,000 for the other emirates) will be considered minor, and cases above the amount of AED 500,000 (AED 200,000 for the other emirates) for Dubai Cases will be considered major. The minor and major Courts are separate divisions in their own right. In the event a claim value changes, it would be re-assigned to the correct Court. An unquantifi able claim is referred to the major Court. The First Instance Courts are split in accordance with the type of dispute. Cases also are split into type and these typically are: civil; commercial; and labour and property. Therefore there would be a minor and major Court for each type of claim, i.e. a labour minor and a labour major, and so forth. Each Court will usually assign Judges that are specialised in the fi eld that the Court’s name suggests. The minor Courts will have a Judge and an amanuensis (or court secretary). The major Courts will have three Judges presiding, with one of them being the head of the panel together with an amanuensis. There may be a policeman and a translator who will be present at any of the Courts if required. Anyone may attend the Court hearing, whether he is involved in the dispute in question or not. The UAE Civil Courts have four stages, namely: mediation; fi rst instance courts; appeal courts; and cassation courts. After fi ling but before a case is referred to the Courts, it is referred to a settlement stage where a Judge or an offi cer of a Court will attempt to resolve the matter amicably. Currently, in the majority of the emirates, the mediation process is conducted by a Court offi cer rather than a Judge. There are many claims in the Dubai Courts that will not require mediation. For civil or commercial claims, the mediation stage is unnecessary for claims that, inter alia, do not have a part of the claim that is unquantifi able or where the claim value is more than AED 50,000. In the Dubai Courts there are certain additional processes that are followed before the Courts receive the claim. In respect of real estate cases in the Dubai Courts, they have to be referred to the land department to investigate certain aspects of the real estate, namely whether it is registered, and the details of such registration. For off-plan properties, whether

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it is registered, and if it is a dispute in respect of a handover of an off-plan property, the land department will investigate the construction status and other details of the project. This will assist the Judge in handing down his award. A labour complaint must be made in the Ministry of Labour (or labour offi ce), which takes up to three weeks to complete. In emirates other than Dubai there are no referrals before a case is heard before a Judge, other than mediation. The assignment and specialisation of the Courts and Judges assist in ensuring the best experience is provided in determining the award for the parties. The organisation of the Court provides that the dispute is resolved in the fastest manner possible, with a judgment that considers the circumstances in light of the industry or subject of which the parties are part. Cases that are registered with the UAE civil courts will have a fi rst hearing date set and thereafter there will be a series of adjournments for several reasons. Arguments are not made in a trial once: rather they may continue over several hearings; the hearings are short and there are few oral arguments made. The most common reason for an adjournment is that parties wish to reply to each other’s submissions. In most instances, a Court will allow a party to reply to other parties’ submissions, and in particular, where a party submits new documents. Adjournments are commonly provided for a party to provide translations and documents from abroad. This method of having a series of adjournments, with each party replying to the other’s arguments from one adjournment to another, can allow for the case to be ineffi ciently handled. The late provision of documents can exhaust the previous arguments and start a new set of arguments that could have been effi ciently handled from the outset. The Courts have case management powers including fi ning parties for such acts, though seldom used. An adjournment for judgment signals that either an interim or fi nal judgment may be awarded/pronounced by the courts. The parties will not generally be aware whether a fi nal judgment or an interim judgment is to be pronounced. An interim judgment could be to appoint an expert, stay proceedings, refer the claim to another Court, refer a particular part of the claim to be investigated by the Judge (where there is power to hear from witnesses, with additional powers to call and analyse different evidence that may be impractical in a Court room), or to decide that a certain statement that shall be made under oath. The UAE Civil Court’s tradition is for written submission to be made rather than trials. Parties will present their arguments and reply to each other’s arguments and the Judge thereafter will make a determination. The system does not provide for trials where the arguments of either party will be heard at one sitting. The UAE Civil Court Judges, in some instances, will ask a party for further clarifi cation, at a hearing, if a part of the claim or defence is not clear. In some instances, this can lead to a large number of adjournments. This increase in unnecessary adjournments, and use of written submissions rather than oral pleadings, sometimes encourages lawyers to provide proxies for other lawyers to appear rather than appearing themselves. This adds to the repetitive arguments and increases ineffi ciency, with the Court having to deal with many more submissions than should be the case. The UAE Civil Court system, as it stands, does not manage the arguments and contentions of the parties. The parties can generally provide the arguments how and when they like. An adjournment for a party to reply to submissions made, does not necessarily mean that such a reply will be confi ned to the points made. New and repeated arguments are generally entertained. There is generally very little interference by the Courts in this process.

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The parties should attempt to cover the arguments in their exchange of memorandums and particulars, claim and defence. The fi rst hearing generally deals with the issue of service. This will have been attempted by the Court Bailiff, there being no party service in the UAE Courts. The rules provide that adjournments will be made until service is deemed effective, and it requires that investigations are made to fi nd the correct address of the respondents. After the parties have been summoned and have appeared, the Courts shall order an exchange of argument and submissions. The use of Court-appointed experts is very common in the UAE. In Dubai, the appointment of an expert is fi rst dealt with at the dispute resolution centre, which can take up to fi ve months. Experts need to be registered with the UAE Ministry of Justice and Courts to obtain their licence. After receiving the expert report, there is a further exchange of arguments for and against the expert report. The Courts may, if they fi nd the arguments against the expert report signifi cant, refer it back to the same expert again, or to another expert, or to a panel of experts. Once the Court is satisfi ed there is enough evidence, it will adjourn for fi nal judgment. The process of hearings and adjournment can work out to be very effi cient, since a large amount of cases can be handled, but it requires the parties to assist in managing the case. Some parties abuse the process by dragging and confusing the cases and making them much lengthier than what they ought to be. Evidence laws In general, the onus is on the claimant to prove his case. The evidence and civil procedure laws of the UAE control the admission of permissible evidence including witness statements, written evidence, expert evidence (appointed independently by the Courts), documentary and electronic evidence, including emails. Parties may rely on viva voce witness evidence to prove their case, but this is not the rule. Presenting witness evidence usually requires the consent of the Courts to set a date for such a hearing. The lawyer acting on behalf of the litigant will request either in writing or orally before the Courts to hear any witnesses the party may have. The witnesses will be heard in one Court session. Witnesses are excluded from the Courtroom until after they have given their evidence, to ensure that they do not hear another witness’s statement before giving theirs. The witnesses will be called in one by one by the Court until all of the witnesses are heard. Both the claimant’s lawyer and respondent’s lawyer may be present in these witness hearings. Direct and cross-examination is controlled by the Judge. The Judge will ask any questions to the witness fi rst. The claimant and the respondent may then ask questions (in the event there are several claimants and respondents, there is no particular order between the parties). The amount of time a dispute remains in the Civil Courts depends on the type of dispute, the forum and the complexity. As discussed, some disputes require a preliminary step to be taken before proceeding to the First Instance Court. After all preliminary steps are taken, a claim may be made in the First Instance Court. The First Instance Courts typically take up to one year to fi nish a case. Thereafter if there is any appeal, the appeal Courts would likely take seven months for judgment. Thereafter if an appeal is made to the cassation Court or the Supreme Court, it will typically take anything between four months to a year or more. Thereafter any enforcement of judgment can either take around three months, in

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the event the counter-party has liquid assets (bank accounts), or years in the event there are immovable or other assets. A claim in the UAE Civil Courts can take anywhere between a year to three years for judgment and enforcement. In some instances, it could last for more than three years. In respect of specialised centres such as rental dispute centres, cases at the ﬁ rst instance generally take two months and thereafter appeals take two months, with enforcement taking up to one month. The amount of time that a case may dwell in the DIFC First Instance Courts varies signiﬁ cantly according to the size and complexity of the case. In theory, if all available procedures are adopted, but time is not extended, a case should reach a defended trial hearing in nine months. There is rigorous case management in place in the DIFC and the parties are expected to comply, or make a timely application for adjournment or extension of time.

Integrity of process There are rules governing confl icts of interest in the UAE for the participants in the legal system and judiciary. Whilst they lay the foundation, they are suffi cient to protect the legal system from matters of integrity and confl ict. Lawyers have a specifi c law that governs their profession. Lawyers are administered and licensed in the UAE by the Ministry of Justice, the Dubai Ruler’s Courts and the DIFC Academy of Law. There are general rules governing the conduct of lawyers in the UAE Courts. These protect the integrity of the legal professional and have certain requirements, requiring any licensed lawyer to have the necessary qualifi cations and proof of reputation from a recognised jurisdiction. Committees hear any complaints against a lawyer’s misconduct and such committees have powers to revoke the licence of the lawyer to practise in the UAE. The rules found in the DIFC Courts are comprehensive, with both a mandatory code of conduct and an advisory code of conduct. Lawyers are subject to compulsory education in both Dubai and the DIFC Courts. The civil procedures code ensures that Judges have no confl icts and provide that any decision made by a Judge in such circumstances shall be void. The regulation in the UAE of licensing and appointing Judges ensures that checks are carried out. There is training to ensure that Judges carry out their duties with integrity. There are departments set up in the UAE to receive any complaints in respect of any Judges or the Courts in general. These specifi c departments have many powers in their hands, will seek to investigate the complaint independently, and may refer the matter to the Ministry of Justice. There are available recourses, found in the civil procedures law, for parties to bring action against Judges and prosecutors. The justifi cations for such actions require some elements of fraud, deceit or gross negligence. The most important result will be for the party to void the act or judgment that was made by such persons. Experts play an important function in the justice and legal system. The DIFC Courts accept party-appointed experts and consider the merits of any such expert evidence through examination and cross-examination. The other UAE Courts may accept expert reports provided by parties, but if the Courts are intending to rely on that evidence to determine any part of the claim, the Court should appoint an expert from an approved register of experts. Instances of corruption are rare in the UAE. There are certainly examples where corruption

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has occurred and even been prosecuted, but the UAE is fortunate to have very little corruption. Any corruption is usually taken very seriously by the prosecutors and/or government departments, who will ensure that such corruption is discontinued and recourse is taken against people who have participated in such corruption. The articles which address corruption are found in the criminal laws and the prosecution are very motivated in pursuing such cases. Furthermore, the police and investigation departments in the UAE ensure that any corruption that has taken place is brought to justice. Such departments appear to have the necessary tools, knowledge and checks in place to spot any corruption occurring. There are many rules in the UAE justice system to ensure that a fair trial is given and that each party is afforded protection by the Courts. One example is the ability under the civil procedure rules to re-hear cases for reasons of evidence being unacceptable, such as that a party acted fraudulently by the withholding of documents, as later discovered by the other party. These rules, among others, ensure that the UAE legal system provides the parties with the justice they are seeking and preserves the integrity of the whole legal system of the UAE. The Cassation and Supreme Courts determine whether or not the law has been applied correctly, in the Courts below. The Cassation and Supreme Courts also oversee the application of justice found within the general rules of the civil code. These rules are there to protect the fundamental values and legal culture of the UAE Court system. In some instances, the Cassation and Supreme Courts will remit the case back to the Appeal Courts and replace the Appeal Judges with a new panel if the appeal judgment was incorrect, unjust or unfair.

Privilege and disclosure The UAE Courts will seldom compel a party to disclose all the documents in its hands unless there is a compelling reason for doing so. The basic rules of disclosure are that: i) the law obliges the party to disclose such documents; ii) if the document was shared between the parties and necessary for proving any of their rights or obligations; or iii) if the counterparty has relied on such document in any stage of its defence. There are rules in the evidence laws in the UAE to oblige the counter-party to provide classes of documents in their possession under certain circumstances. Furthermore, the Courts may also oblige a third party to provide the Courts with documents following certain rules within the evidence laws. Electronic documents obtain their standing from the electronic law of the UAE and are governed in a very similar way. The basic rules for electronic disclosure are that a party should mention their source and provide a printed copy of such documents or evidence. If the claimant or respondent does not earlier submit a document and later wishes to rely upon it, and as a result it has caused an adjournment, the Court may (or if the counter-party requests) ﬁ ne the party causing such delay. It is possible to obtain a pre-order (interim relief) to investigate certain evidence, but that requires that a party prove that there is a fear that it may not be able to obtain such evidence later. The Courts will generally appoint an expert to go to the place where such evidence may be obtained and obtain the evidence that is requested. There are no classes of documents that do not require disclosure. The parties may request the Court to order disclosure from third parties and/or the Court may also oblige a third party to provide documents to the Court. The Courts may, in the interests of justice, order a disclosure in accordance with the rules to ensure that the Judge obtains everything he needs to make a correct judgment.

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There are no rules or restrictions as to the use of documents obtained by disclosure by the UAE civil courts. Therefore the parties to a dispute may sometimes avoid disclosure in the event the disclosure of the document would be more harmful to the party than the dispute matter at hand. The DIFC Courts instead may conﬁ dentially deal with documents that are considered conﬁ dential, and a party may request that from the courts.

Costs and funding In the UAE Federal Court the rule is (other than trivial registration fees and transaction fees) 4% of the claim amount, up to a maximum of AED 30,000. The Dubai Courts have amended the fee structure to 7% of any claim amount, up to a maximum of AED 40,000. The Abu Dhabi Courts have a 3% Court fee with no maximum amount. Other fees include fees for applications, interim relief, enforcement; appeal, cassation or supreme Courts do not exceed these amounts. The typical amount a party is expected to pay for a claim with appeal stages and an interim relief application such as a freezing order can be in the region AED 125,000 for the UAE Federal Courts and the Dubai Courts. There is a general trend to set legal fees as a percentage of the claim amount, with some exceptions where law fi rms charge fi xed sums or hourly rates. With small claims, namely less than AED 1 million, the typical legal fees that might be expected are in the region of 4–15% of the claim amount. With larger claims, the legal fees would typically be as low as 2% of the claim amount. For law fi rms that charge a fi xed sum, many parties to litigation can expect anything between AED 20,000 and AED 100,000 or more. The larger part of the legal fees is not awarded in the Federal and UAE Courts, with awards being as low as AED 500, and at the higher end around AED 3,000. Therefore parties do not expect to recover any legal fees. Most of the Court fees are recoverable, including any experts appointed by the Courts, but not experts used by the parties independently. A party can expect recovery of more than 90% of the Court fees. The Courts seldom split the costs specifi cally according to the arguments won, but rather decide to either award the full cost of the case to either party or jointly. The DIFC Courts’ fees are published on scale, with a highest fee of up to US$ 130,000.00 for claims above US$ 50m. The scale can be found at http://difcCourts.ae/wp-content/ uploads/2015/05/COURT-FEES-AUGUST-2015_31.pdf. Within the UAE, conditional and contingency fee arrangements are not allowed. Given the amount of recovery possible in the UAE Federal Courts (other than the DIFC), parties pay less attention to the recoverability of such arrangements in the Courts. The DIFC allows for conditional fee arrangements and most contingent fee arrangements. There are no rules pertaining to funding litigation in the UAE with the exception of the DIFC jurisdiction, where one of its sources of law is English law, and the rules on funding litigation agreements are expected to be the same as in England and Wales. It is possible for lawyers to fund parties in litigation and this is widely practised by some law fi rms, whilst others ensure they do not fund any costs or fees on behalf of their client. The law fi rms that engage in funding their clients’ litigation tend to recover the costs when any award is collected from the litigation. The money is collected by the law fi rm, then the remaining award is sent to the client. There is no regulation governing how client monies should be handled, with the exception of rules allowing lawyers to recover the costs they have paid, with their debts having priority over other debts in respect of the award.

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Interim relief There are pre-action or pre-suit remedies available in the UAE both in the UAE Courts and the DIFC Courts. The criteria to obtain such remedies vary according to the remedy a person is seeking. Generally such remedies will require two important elements: a) fear of irrecoverable loss; and b) fear of evasion. Parties in litigation in the UAE can ﬁ nd a range of interim relief and recourses to protect their interests. Interim relief may be awarded very quickly; in a matter of a day or two in the UAE Federal Courts and the Dubai Courts. The Federal and Dubai Courts, in most cases of interim relief, will not require a hearing and a submission will be sufﬁ cient. The submission will be submitted to the Registrar, and a Judge will either award or reject the interim relief within two days. The Judge in some instances can request additional documents and queries be answered by the parties in an ad hoc manner, without the need for a formal hearing to be convened. Most interim relief will be awarded ex parte, and the respondent may appeal the decision, where both parties will defend their position. Interim relief in the UAE will lapse if the party who has sought the interim relief does not present a claim to the Courts within seven days of the award of the interim relief. Ex parte urgent and interim relief can be obtained in the DIFC Courts. An immediate order might be obtained, in exceptional circumstances, without hearing but only for preservation purposes. Freezing Orders may be obtained without notice. There will always be a requirement for undertakings, and an early return date will be set. Absent those circumstances, obtaining interim orders and relief from the DIFC will generally require a hearing, which shall be set on three clear days’ notice.

Enforcement of judgments In the UAE, awards are generally enforced by fi ling an enforcement application. Foreign awards may be enforced by obtaining recognition of the judgment and then by enforcement. The UAE is a signatory to the New York Convention on the recognition and enforcement of foreign arbitral awards and has ratifi ed the rules found in the convention. In respect of conventions with other countries the UAE has signed the following: the GCC; the Riyadh convention with France, India, Egypt and China. The treaties have similar requirements and differ slightly, if at all. In respect of the UAE Civil Courts, unless stated otherwise by another treaty or law dealing with a particular foreign country’s judgments, a foreign award must satisfy the normal requirements of raising a case in the UAE Courts and, in addition: i) the subject matter of the dispute should not belong to the jurisdiction of the UAE Courts and the foreign Courts must have jurisdiction in accordance with their laws in respect of jurisdiction; ii) the Court that awarded the judgment was the correct forum to entertain the dispute in accordance with their laws; iii) the parties to the dispute have been requested to appear and have correctly been given representation; iv) the judgment is not subject to any appeal in the country it was issued in; and v) the judgment does not confl ict with a judgment or order of the UAE Courts previously issued and does not contradict the order public and morality/ ethics of the UAE. The respondent will be notifi ed to appear before the Courts in the UAE in a matter of recognition of a foreign award. The respondent will have the right to challenge the award in the UAE and a respondent may request the Courts to refuse the recognition of the award. In respect of the DIFC Courts, a certifi ed copy of the judgment obtained from the originating

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Court will usually be suffi cient. If the judgment arises from a Court in respect of which the DIFC Courts have a Memorandum of Guidance or Understanding, the procedures will be set out therein. It is also a requirement that the foreign Court had jurisdiction in respect of the matter. Absent a treaty, those requirements can be restrictive. Article 7(6) of Dubai Law No. 12 of 2004 (as amended) simply states that foreign judgments “shall be enforced within the Centre in the manner prescribed in the Rules of the Courts”. The Rules are closely modelled on the Civil Procedure Rules of England and Wales. After an award is made by the Courts, or a foreign award or arbitration award is eventually recognised by the Courts, the party may fi le an enforcement fi le. In terms of procedure, an enforcement fi le might differ slightly between different Courts in each emirate. After a decision of a Judge on enforcement, the Judge’s secretary will send the Order to the respective authorities and persons to perform. Among other enforcement recourses available are freezing and transferring any monies with any banks, auctioning any real estate found registered with the land department, auctioning any cars registered, and auctioning any shares in the stock exchanges in the UAE. The Courts will not freeze any amount more than the debt owed.

Mediation and ADR Different forms of dispute resolution have become widely available to parties in the UAE, with mediation and ADR being widely encouraged. The legal system of the UAE, in respect of dispute resolution, requires parties to attempt settlement or mediation. The civil procedures law requires that cases fi rst go through an informal mediation process. Furthermore the Dubai Courts, in certain types of cases, will require that parties fi rst undergo a formal mediation process, even going so far as appointing an offi cial Court expert to provide the technical support required that will assist the parties in reaching a settlement without allowing the dispute to take more time. In certain types of cases such as employment, the law obliges the parties to fi rst seek to resolve the matter before an offi cial of the Ministry of Labour advises on the rights and obligations of each of the parties. In other instances of family law, and in particular divorce, the parties are required to seek family counselling with an offi cer at the Courts before the matter is referred to the Courts. These types of mediation and ADR required by law assist the parties to understand their position in respect of one another, with the hope that a settlement is achieved without the need to litigate. The DIFC-LCIA Arbitration Centre has mediation rules which can be invoked on request by the parties. The mediator will be appointed by the LCIA Court in London.

Regulatory investigations The most common form of regulatory investigations is in connection with the Public Joint Stock Companies (PJSC) listed in the stock exchanges in the UAE. The supervision of the Securities and Commodities Authorities (SCA) over public joint stock companies offers protection to the stock exchanges and investors. The powers of the SCA to regulate the trading and issue of securities on the exchanges include that the board may suspend a company’s stocks from being traded and freeze a number of, or classes of, stocks on the exchange. The SCA will generally send ofﬁ cers to annual general assemblies of companies to ensure that the correct procedures are being

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followed, and in particular the PJSC board and chairman. The SCA will levy ﬁ nes and penalties in the event that there are any irregularities. In the DIFC, control of the regulatory environment for DIFC Registered companies is in the hands of the DFSA. This is an organisation which closely models itself on the London FCA.

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Hamdan Al Shamsi Tel: +971 4 346 9262 / Email: [email protected] Hamdan completed his LL.B. at the University of Warwick and has been admitted to the Bar in the UAE. He has a decade of experience in litigation in the UAE and has been involved in many different claims that were both civil and common law disputes. He also assists many in their commercial matters, including negotiations and drafting of contracts. He set up his law fi rm at a young age and has now a team of lawyers and partners that are qualifi ed in many areas of the law. The law fi rm has been practising in the UAE since 2011.

Hamdan AlShamsi Lawyers and Legal Consultants 1611, Al Manara Tower, Al Abraaj Street, Business Bay, Dubai, UAE Tel: +971 4 346 9262 / Fax: +971 4 346 9272 / URL: www.alshamsilegal.com

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Rodney G. Strickland, Jr., Matthew R. Reed & Anthony J. Weibell Wilson Sonsini Goodrich & Rosati, P.C.

Effi ciency and integrity of process The American legal system. The American legal system, founded on notions of fairness and due process, is respected throughout the world for its ability to deliver predictable, equitable, and effi cient justice. It employs an adversarial model to reach the truth of a matter wherein each litigating party (rather than the court or special prosecutor) bears the responsibility to prove its own case to a jury and/or impartial judge by producing and challenging evidence and legal arguments. American courts adhere to the principle of “stare decisis”, which is “the idea that today’s Court should stand by yesterday’s decisions”. Kimble v. Marvel Entm’t, LLC, 135 S. Ct. 2401, 2409 (2015). The rationale behind this rule of law is that it “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.” Id. Natural justice and due process. Similar to principles of natural justice under English law, the American legal system is grounded in several fundamental rights of procedural due process guaranteed by the United States Constitution. In most American legal proceedings, a party is granted, among other rights, the right to an impartial and unbiased judge and (in many cases) jury, to formal written notice of the proceeding and the grounds asserted for it, to an opportunity to object to the proceeding, to obtain evidence prior to trial (“discovery”), to call witnesses and present evidence, to cross-examine adverse witnesses, to a judgment limited by the evidence presented, to be represented by legal counsel, to a record of the proceedings, and to written fi ndings of fact and the reasons for a decision. These protections are afforded equally to corporations and individuals. The discovery process can be the most expensive and important aspect of U.S. litigation. Courts, both state and federal, allow litigants to serve subpoenas and similar requests for documents on people and institutions relevant to the litigation. Litigants are also permitted to take testimony under oath before trial from adverse parties and non-parties in order to obtain the information and evidence necessary to present the litigant’s case to the judge and/or jury. Court systems. The United States comprises a single federal government and 56 separate governments for each of the 50 states, fi ve territories, and the District of Columbia. Each of these entities has its own court system and laws. Because the substantive and procedural laws of each jurisdiction are different, the choice of venue (e.g., a federal court or a state court) for a civil action will usually have a substantial effect on the procedure and outcome of the action. The federal court system and nearly all of the state court systems are divided into three levels that in most cases consist of: (1) a trial court in which either a jury or judge will examine evidence, hear arguments, and make fi ndings of fact, and a judge will apply the law to the factual fi ndings; (2) an intermediate court of appeal in which a panel of judges will

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review any appeal from the trial court’s decision; and (3) a court of last resort comprised of several judges that may or may not choose to review decisions of the intermediate court. In the federal court system, these three levels consist of 94 federal district trial courts, 13 circuit courts of intermediate appeal, and the United States Supreme Court as the court of last resort, which all operate under uniform sets of rules, such as the Federal Rules of Civil Procedure and the Federal Rules of Evidence. Each state has its own procedural and evidentiary rules, although state rules are often based on and very similar to the federal rules. The federal court system also includes several courts of special limited jurisdiction whose jurisdiction is defi ned by subject matter, such as the United States Tax Court, the United States Court of Federal Claims, and the United States bankruptcy courts. Jurisdiction. With some limited exceptions, the jurisdiction of the federal courts is limited to cases arising under federal laws enacted by the United States Congress or cases arising between citizens of different states or a foreign nation. The state courts have jurisdiction over all cases that have a suffi cient nexus with the state, regardless of citizenship, arising under either state law or federal law, except where federal law has bestowed exclusive jurisdiction on the federal courts (such as in cases arising under admiralty, bankruptcy, copyright, patent, and tax laws, among others). Standing. Before a party can initiate a civil action, it must demonstrate that it has “standing” to do so. For civil actions in federal courts and most state courts, this means demonstrating that the party has suffered an “injury in fact” that was caused by the conduct complained of and that can be redressed with a favourable decision from the court. Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014). An “injury in fact” must be concrete (not abstract), particularised (identifi able), and imminent (rather than conjectural or hypothetical). Id. An allegation of future injury may only suffi ce if the threatened injury is “certainly impending”, or there is a “‘substantial risk’ that the harm will occur”. Id. In creating causes of action in the courts, Congress is given wide discretion to identify which injuries will satisfy these standing requirements. “Congress has the power to defi ne injuries and articulate chains of causation that will give rise to a case or controversy where none existed before.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016) (citation omitted). Class actions. Federal and state laws in the United States permit civil actions to be brought by or against representatives of a class of similarly-situated persons on behalf of the absent members of the class. Class actions are appropriate when the class is so numerous that joinder of all members is impracticable, there are questions of law or fact common to the class, the claims or defences of the representative parties are typical of the claims or defences of the class, and the representative parties will fairly and adequately protect the interests of the class. See Fed. R. Civ. P. 23(a). Class actions may be used to obtain a monetary judgment, injunctive relief, and civil penalties on behalf of the class. Class actions may also be settled and dismissed on a class-wide basis, binding the absent members of the class, but only if the court reviews the settlement and fi nds the settlement terms are fair, adequate, and reasonable as to the absent class members. See Fed. R. Civ. P. 23(e). Early resolution of civil actions. When a civil action is fi led in federal or state court, the defendant may respond initially by challenging the suffi ciency of the complaint on several different procedural and substantive grounds, including lack of subject-matter jurisdiction; lack of personal jurisdiction; improper venue; insuffi cient service of process; failure to state a claim upon which relief can be granted; and failure to join a necessary party. See Fed. R. Civ. P. 12(b). In many cases, courts will stay further proceedings, including discovery, until a challenge to the pleadings is resolved. A civil complaint that fails to state “a plausible

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claim for relief” cannot survive dismissal, and “a plaintiff armed with nothing more than conclusions” cannot “unlock the doors of discovery”. Ashcroft v. Iqbal, 556 U.S. 662, 678- 79 (2009). Alternative resolution of civil actions. Most federal and state courts have implemented requirements and procedures designed to encourage litigants to resolve disputes outside of court through mediation or private arbitration. Litigants may be required to review materials about alternative dispute resolution (“ADR”) processes, to discuss settlement options with a court employee, to present the merits of their positions to an early neutral evaluator (ENE), or to attend a mandatory settlement conference with a magistrate judge. Options for ADR are discussed in more detail in the Mediation and ADR section below. Electronic case fi ling/searching. The federal court system has adopted an electronic case fi ling (ECF) system that allows for electronic fi ling and service of nearly all papers in a federal case. The federal court system has also adopted a document retrieval system (PACER) that allows the public (for a small per document fee) to search for and view nearly all court records going back several years (except for information that a court may have sealed, such as personal private information or highly sensitive corporate trade secrets). Many state court systems have likewise adopted electronic fi ling and record searching systems that are made available to the public for free or for a small fee. Hence, when litigating in the United States, it should be assumed that the proceedings will become a matter of public record and readily accessible over the internet to anyone, including the media.

Privilege and disclosure Attorney-client privilege. The American legal system vigorously protects communications between an attorney and a client made for the purpose of giving or receiving legal advice. “[T]he privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.” Upjohn Co. v. United States, 449 U.S. 383, 390 (1981). “By assuring conﬁ dentiality, the privilege encourages clients to make ‘full and frank’ disclosures to their attorneys, who are then better able to provide candid advice and effective representation.” Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100, 108 (2009). Although robust, the attorney-client privilege can be involuntarily waived and has limits, such as the “crime- fraud exception”, pursuant to which there is no privilege over communications made to assist in committing a crime or fraud. United States v. Zolin, 491 U.S. 554, 562-63 (1989) (citation omitted) (“The attorney-client privilege must necessarily protect the conﬁ dences of wrongdoers, but the reason for that protection − the centrality of open client and attorney communication to the proper functioning of our adversary system of justice − ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing.”). Attorney work product. Related to the attorney-client privilege is the attorney work product doctrine, which the federal courts and most state courts recognise as protecting documents prepared by an attorney in anticipation of litigation, especially documents revealing “the mental impressions, conclusions, opinions, or legal theories of a party’s attorney or other representative concerning the litigation”. Fed. R. Civ. P. 26(b)(3). Attorney work product generally receives the same protections afforded attorney-client communications. Corporations. Corporations are treated the same way as individuals under the law with respect to the attorney-client privilege. And communications with a client corporation made for the purpose of giving or receiving legal advice are protected regardless of whether the

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legal advice is provided by an outside attorney or an attorney employed by the corporation. Hence, the privilege extends to internal investigations conducted by a corporation at the direction of an attorney for the purpose of giving legal advice, even if the attorney is an employee of the corporation. While courts in some U.S. jurisdictions have held that the privilege only applies if the primary purpose of the communication was a legal purpose rather than a business purpose, others have held that so long as “one of the signifi cant purposes of the internal investigation was to obtain or provide legal advice, the privilege will apply.” In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014). The participants to a communication do not necessarily need to include an attorney: “communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney-client privilege.” Id. at 758. Waiver of the privilege. The holder of a privilege (the client) can waive the privilege, either intentionally or unintentionally, by disclosing privileged information to third parties that owe no duty of confi dentiality; by relying on privileged communications to support a claim or defence, thereby placing the privileged communications at issue; by failing to take reasonable precautions to maintain the confi dentiality of the privileged communication; or by otherwise acting inconsistent with the purpose and protection of the privilege. Rules of disclosure. A party to litigation is generally entitled to obtain discovery of any information in the possession of adversaries or non-parties “regarding any non-privileged matter that is relevant to any party’s claim or defense”. Fed. R. Civ. P. 26(b). As this rule indicates, however, disclosure of attorney-client privileged communications and attorney work product cannot be compelled in civil or criminal litigation (unless the privilege has been waived or the crime-fraud exception applies). In the interests of judicial effi ciency, federal and some state court rules have been enacted to preserve the privilege despite inadvertent or limited-purpose disclosure during litigation. Under the federal rules, for example, an inadvertent disclosure of a privileged communication does not waive the privilege, and the disclosed communication may be retrieved, if the owner of the privilege took reasonable steps to protect the privilege prior to the disclosure and reasonable steps to rectify the error after discovering the inadvertent disclosure. Fed. R. Evid. 502(b). A court is also free to enter orders that preserve the privilege even where privileged communications are intentionally disclosed for a limited purpose. Fed. R. Evid. 502(d). Using these rules, parties in litigation may stipulate discovery procedures that allow for the disclosure of documents to a litigation adversary without having to conduct a costly attorney review of each document beforehand. Such stipulations are especially convenient in cases involving the exchange of large volumes of electronic documents. Protective orders may also be obtained from a court to prevent or limit the disclosure of confi dential proprietary information and other sensitive information. See Fed. R. Civ. P. 26(c). Settlement and the mediation privilege. All courts in the United States recognise a “mediation privilege” that protects from disclosure any communications made in the context of mediation. Outside the context of mediation, courts in the United States (with some limited exceptions) do not generally recognise a privilege over settlement communications that would prevent such communications from being discovered by a litigation adversary. However, federal and state rules of evidence generally prevent a party from using an opponent’s offers of settlement and statements made in the context of settlement negotiations against the opponent to prove liability. See Fed. R. Evid. 408. Client confi dentiality and confl icts of interest. Attorneys in the United States are bound by rules of professional responsibility that require, among other things, the protection of

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confi dential client communications and the avoidance of confl icts of interest. The specifi c rules vary by state although many states have adopted the Model Rules of Professional Conduct. Attorneys may only represent clients with potential confl icts of interest after obtaining a written waiver from the affected clients. For instance, if an attorney attempts to represent a party that is adverse to a current or former client in litigation, the court may disqualify the attorney from the representation.

Costs and funding Each side pays its own fees and costs. The general rule in the American legal system is that each party must pay its own attorney’s fees and costs unless a specifi c statute or court rule provides otherwise or the parties have contractually agreed to a shifting of fees and costs. See, e.g., Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550 (2010). Many federal and state statutes allow for the shifting of attorneys’ fees and costs to a losing party when doing so would be in the interest of the public good or to deter particularly bad conduct. For example, some federal and state statutes allow courts to shift fees and costs to the losing party where a party has successfully prosecuted an action resulting in the enforcement of important rights affecting the public interest, such as consumer rights or civil rights (See 42 U.S.C. § 1988(b)). Other statutes shift fees and costs where a losing defendant engaged in wilful violations of the law, or where a losing plaintiff has brought a frivolous lawsuit. But even where provided by statute, the shifting of fees and costs is generally left to the discretion of the court, making fee shifting the rare exception rather than the rule. Contractual fee shifting. To deter litigation and prevent a party from using the threat of expensive litigation as leverage to obtain an unfair advantage in business dealings, many business contracts contain fee-shifting provisions. Such provisions allow the prevailing party in any litigation arising from the contract to recover its litigation fees and costs. Courts will enforce these provisions, and most states (like New York) allow courts to enforce even unilateral, nonreciprocal fee-shifting provisions that allow one contracting party to recover fees in litigation but not the other contracting party. Other states (like California) have enacted statutes that effectively convert nonreciprocal fee-shifting provisions into reciprocal provisions, such that if one party would be allowed to recover its fees by contract after prevailing in litigation, any party to the contract that prevails in litigation may recover its fees. Funding litigation. For plaintiffs seeking alternative ways to fund litigation, there are several options. Under a contingency fee arrangement, the client will usually agree to pay its attorneys a fi xed percentage of any settlement or monetary judgment obtained, often around 30% for cases that end before trial and 40% for cases that end after trial. Another option for plaintiffs is to obtain funding from third-party litigation investment fi rms who invest in litigation expected to provide a fi nancial return. Match-making fi rms also exist to help connect plaintiffs with investment fi rms and individual investors. More recently, some companies have begun offering a crowd-source platform for funding litigation that brings litigation fi nancing opportunities to the masses. There are fewer options for defendants seeking alternative funding arrangements. This is because, even if they win on the merits, defendants receive no monetary judgment that can be used to pay legal bills, and in most cases the defendant still has to pay its own attorneys’ fees and costs. Most corporations and many individuals carry insurance policies designed to cover legal fees for the most common types of claims. Law fi rms may also use creative payment plans for defence clients that involve fl at-fee arrangements, capped arrangements,

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and even contingent fee arrangements which vary the fee depending on the results obtained for the client.

Interim relief Preliminary injunctions. Courts in the United States have the power to enter preliminary injunctions to preserve the status quo pending resolution of a lawsuit where a monetary award at the end of the litigation could not redress the plaintiff’s injuries. See Fed. R. Civ. P. 65(a). Preliminary injunctions are an “extraordinary remedy never awarded as of right”. Winter v. NRDC, Inc., 555 U.S. 7, 24 (2008). Parties seeking a preliminary injunction must show that they are likely to succeed on the merits, that they are likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in their favour, and that an injunction is in the public interest. Garcia v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015). The most important factor is the likelihood of success on the merits. Id. Additionally, if a party seeks an injunction that orders the other party to “take action” and do more than maintain the status quo, then the party seeking the injunction must establish that the law and facts clearly favour their position, not simply that they are likely to succeed. Id. Preliminary injunctions cannot be entered unless the party to be enjoined has been given notice and an opportunity to present evidence in opposition to the requested injunction. Temporary restraining orders. If there is no time to wait for a hearing and decision on a motion for a preliminary injunction, a court may enter a temporary restraining order to preserve the status quo. Such orders may be entered without notice to the party to be restrained if specifi c facts in an affi davit or verifi ed complaint clearly show that immediate and irreparable injury, loss, or damage will result before the party to be restrained could be heard in response to the motion. See Fed. R. Civ. P. 65(b). Posting bond for interim relief. Courts will usually issue a preliminary injunction or temporary restraining order only if the party seeking the restraint or injunction gives security in an amount that the court considers proper to pay the costs and damages sustained by a party later found to have been wrongfully enjoined or restrained. See Fed. R. Civ. P. 65(c). Range of injunctive relief available. Courts in the U.S. have power to enjoin any action necessary to preserve the status quo of the parties prior to fi nal judgment. Courts may also enjoin a party from transferring money or property outside the United States, but only if the party seeking the injunction claims a lien or equitable interest in the money or property. Grupo Mexicano de Desarrollo v. All. Bond Fund, 527 U.S. 308 (1999) (assets could not be frozen where no lien or equitable interest was claimed); Deckert v. Indep. Shares Corp., 311 U.S. 282 (1940) (freezing assets was allowed as a reasonable measure to preserve the status quo pending a fi nal determination of the plaintiff’s equitable claims). Courts are also empowered to order many types of prejudgment remedies. Fed. R. Civ. P. 64(a). These additional remedies, which may vary by jurisdiction, include arrest (taking a person into the custody of the court), attachment (taking property into the custody of the court), garnishment (ordering a third party that owes money to the defendant to set aside that money for the benefi t of the plaintiff), replevin (order requiring defendant to return personal property to plaintiff), sequestration (removing property from possession of current possessor pending outcome of proceeding), and other corresponding or equivalent remedies. Fed. R. Civ. P. 64(b).

Enforcement of judgments Enforcement of judgments. The enforcement of a judgment obtained in federal or state court is governed by individual state law. Similarly, the enforcement in the U.S. of a

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judgment obtained in the court of a foreign nation is governed by individual state law, as “[t]here is currently no federal statute governing recognition of foreign judgments in the federal courts.” Yahoo! Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme, 433 F.3d 1199, 1212-13 (9th Cir. 2006). Accordingly, enforcement actions must be fi led in state court unless the federal courts have jurisdiction to hear the case by virtue of the diversity of citizenship of the parties (i.e., the parties are citizens of different states). State laws usually allow a judgment to be enforced through a variety of mechanisms, including garnishment of wages or income, placing a levy on fi nancial accounts or safety deposit boxes, placing a lien on real property or personal property, or placing a lien on a future monetary judgment. Other ways to collect judgments include seizure orders (which allow sheriffs/marshals to seize property from a private home or business), turnover orders (which require debtors to give property to sheriffs/marshals), and assignment orders (which require debtors to assign ongoing payments, such as royalty payments, to creditors). Additional procedures for enforcing judgments vary from state to state. Uniform Foreign-Country Money Judgments Recognition Act. In contrast to the federal system, most states have enacted the Uniform Foreign-Country Money Judgments Recognition Act (UFCMJRA) or its predecessor, the Uniform Foreign Money Judgments Recognition Act (UFMJRA), both of which enable parties to enforce foreign judgments in the U.S. Under these laws, a U.S. state court (or federal court sitting in diversity) may enforce a foreign judgment for money damages that is fi nal, conclusive, and enforceable where entered, with some exceptions. Ohno v. Yasuma, 723 F.3d 984, 991 (9th Cir. 2013). Those exceptions include judgments rendered: (i) under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law; (ii) judgments where the foreign court did not have personal jurisdiction over the defendant; and (iii) judgments where the foreign court did not have jurisdiction over the subject matter. See, e.g., Cal. Code Civ. Proc. § 1716(b). In addition, a court has discretion to refuse to enforce foreign judgments if it is concerned that the defendant did not receive suffi cient notice of the foreign proceeding, if the judgment was obtained by fraud, if the judgment is repugnant to the public policy of the state, if the judgment confl icts with another fi nal judgment, if the foreign proceeding was contrary to a venue agreement between the parties, if the foreign forum was seriously inconvenient for the defendant, if there are substantial doubts about the integrity of the foreign court, or if the judgment violates the freedom of speech and freedom of the press under either the U.S. or individual state Constitutions. See, e.g., Cal. Code Civ. Proc. § 1716(c). International comity. In cases that are not governed by the UFCMJRA or UFMJRA, courts will follow the principle of international comity. “The extent to which the United States, or any state, honours the judicial decrees of foreign nations is a matter of choice, governed by the comity of nations.” Asvesta v. Petroutsas, 580 F.3d 1000, 1010 (9th Cir. 2009) (quoting Hilton v. Guyot, 159 U.S. 113, 163 (1895)). “Where there has been opportunity for a full and fair trial abroad before a court of competent jurisdiction, conducting the trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries, and there is nothing to show either prejudice in the court, or in the system of laws under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect, the merits of the case should not, in an action brought in this country upon the judgment, be tried afresh, as on a new trial or an appeal, upon the mere assertion of the party that the judgment was erroneous in law or in fact.” Id. at 1011 (quoting Hilton, 159 U.S. at 202-03).

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Cross-border litigation Section 1782 Orders. U.S. federal law allows a party to a foreign judicial proceeding to apply to a federal court in the U.S. for an order to obtain documentary and testamentary evidence from within the court’s jurisdiction for use in the foreign proceeding. 28 U.S.C. § 1782. The application may be made directly to a U.S. federal court by the party seeking the evidence or as a letter rogatory or request issued by a foreign tribunal, and there is no requirement of reciprocity with the foreign nation. However, the court is not required to grant the application and has wide discretion in deciding the application. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004). In exercising its discretion, a court will consider whether the person from whom discovery is sought is a participant in the foreign proceeding, the nature of the foreign proceeding, the receptivity of the foreign court to U.S. federal court judicial assistance, whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies, and whether the request is unduly intrusive or burdensome. Id. at 264–65. The same privileges (such as the attorney- client privilege) that apply in U.S. litigation will apply to a Section 1782 order, but the applicant need not prove that the evidence sought is actually discoverable in the foreign proceeding or that it would be discoverable in a hypothetical proceeding in the U.S. Id. The Hague Evidence Convention. Evidence in the U.S. may also be obtained for use in foreign litigation by letters rogatory under the Hague Evidence Convention. In deciding requests under the Convention, courts will consider the importance of the evidence to the foreign proceeding, the degree of speciﬁ city of the request, whether the information originated in the U.S., whether there are alternative means to obtain the evidence, and whether denial of the request would undermine important U.S. interests. Société Nationale Industrielle Aerospatiale v. United States Dist. Court for S. Dist. Iowa, 482 U.S. 522, 544 n.28 (1987). A Section 1782 order is usually more beneﬁ cial to a foreign litigant than a request under the Convention because discovery under Section 1782 is not limited by whether the requested information is discoverable in the foreign proceeding, and because a court considering a Section 1782 order is not required to consider whether the foreign tribunal has subject matter jurisdiction.

International arbitration Arbitration laws. The Federal Arbitration Act (“FAA”) was enacted by the U.S. Congress to “revers[e] centuries of judicial hostility to arbitration agreements.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 510 (1974). The FAA embodies the “national policy favoring arbitration, and a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary”. AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1749 (2011). The FAA declares all arbitration agreements “valid, irrevocable, and enforceable” as a matter of federal law. 9 U.S.C. § 2. It requires the enforcement of all agreements to arbitrate, even those that require dispute resolution on an individual basis and that prohibit the use of “class action” procedures to aggregate the claims of individuals. Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309, 2312 (2013); AT&T Mobility, 131 S. Ct. at 1748-49. And the FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed”. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (citing 9 U.S.C. §§ 3, 4). In light of the FAA’s “strong national policy favoring arbitration of disputes”, “all doubts concerning the arbitrability of claims should be resolved in favor of arbitration.” Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002).

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International arbitration bodies in the U.S. The U.S. hosts the headquarters of several leading international arbitration bodies, including the International Centre for Dispute Resolution (ICDR) (the international arm of the American Arbitration Association), the International Centre for Settlement of Investment Disputes (ICSID), JAMS International (JAMS), and the International Institute for Confl ict Prevention and Resolution (the CPR Institute). In addition, the U.S. hosts offi ces of the Inter-American Commercial Arbitration Commission (IACAC) and the International Court of Arbitration of the International Chamber of Commerce (ICC). Enforcement of international arbitration awards. In addition to the FAA, the U.S. is a signatory to international conventions regulating the enforcement of arbitration awards, including the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the Inter-American Convention on International Commercial Arbitration (the Panama Convention). Under the FAA, a federal court must confi rm a foreign arbitration award, unless a party seeking to have the award vacated can establish one of the following: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon suffi cient cause shown, or refusing to hear evidence pertinent and material to the controversy; or of any other behaviour by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, fi nal and defi nitive award upon the subject matter submitted was not made. 9 U.S.C. § 10(a). Public policy in the U.S. strongly favours confi rmation of international arbitration awards. Ministry of Def. & Support v. Cubic Def. Sys., 665 F.3d 1091, 1096 (9th Cir. 2011). “Extensive judicial review frustrates the basic purpose of arbitration, which is to dispose of disputes quickly and avoid the expense and delay of extended court proceedings.” Parsons & Whittemore Overseas Co. v. Societé Generale de L’Industrie du Papier (RAKTA), 508 F.2d 969, 977 (2d Cir. 1974) (citation omitted). Thus, confi rmation proceedings are necessarily “summary” in nature and are “not intended to involve complex factual determinations, other than a determination of the limited statutory conditions for confi rmation or grounds for refusal to confi rm.” Marker Volkl (Int’l) GmbH v. Epic Sports Int’l, Inc., 965 F. Supp. 2d 308, 311 (S.D.N.Y. 2013) (citation omitted).

Mediation and ADR ADR is strongly encouraged and supported by courts in the U.S., and most federal and state courts have implemented ADR procedures and programs. In addition to encouraging ADR options, some courts facilitate their own mediation and settlement programs at no cost to litigants. Depending on the nature of the case, courts may order parties to participate in non-binding ADR with a judicial ofﬁ cer, a court-appointed neutral, or a private neutral retained by the parties. Mediation, arbitration (both binding and nonbinding), and early neutral evaluation (“ENE”) are popular forms of ADR in the U.S., and several organisations − such as the American Arbitration Association and JAMS, Inc.) − help supply litigants with private neutrals for these ADR options. In addition, all courts in the United States recognise a “mediation privilege” that protects from disclosure communications made in the context of conﬁ dential mediation.

Regulatory investigations Various federal and state agencies in the U.S. have authority to conduct regulatory investigations to enforce the law in the areas of their jurisdiction. These investigations are

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generally non-public unless and until the agency is required to ﬁ le a formal lawsuit to enforce its orders or a settlement is reached. See, e.g., Securities v. Jerry T. O’Brien, Inc., 467 U.S. 735, 737 (1984). An agency’s investigative powers typically include the power to compel the production of relevant documents and witness testimony and to hold hearings before an administrative adjudicator and/or commission. See, e.g., 15 U.S.C.S. § 77s(c); 15 U.S.C.S. § 46. Some agencies have authority to seek evidence from entities that reside outside of U.S. territorial boundaries and/or the ability to enlist the aid of a foreign government or agency in the investigation. See, e.g., 15 U.S.C.S. § 46(j)(4). The party that is the target of the investigation is entitled to certain due process rights, including the right to object to the discovery sought by an agency as being improper or beyond the scope of the agency’s authority. See United States v. Morton Salt Co., 338 U.S. 632 (1950); Okla. Press Pub. Co. v. Walling, 327 U.S. 186 (1946). The party may also seek to challenge any order or other action of the agency in a court that sits within the Judicial Branch of the applicable federal or state government. Id.

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Rodney G. Strickland, Jr. Tel: +1 650 320 4857 / Email: [email protected] Rod Strickland is a member of Wilson Sonsini Goodrich & Rosati, where his practice focuses primarily on consumer and securities class action defence and general commercial litigation for technology companies. Mr. Strickland’s practice includes cases involving allegations of false advertising, violations of consumer protection and privacy statutes, unfair competition, breach of ﬁ duciary duty, and securities fraud. He is the practice development leader of the ﬁ rm’s commercial litigation practice. He received a J.D., summa cum laude, from Santa Clara University School of Law in 1992, and a B.A. in History and English from the University of Notre Dame in 1989. Mr. Strickland was recognised in the 2014 and 2015 editions of Northern California Super Lawyers.

Matthew R. Reed Tel: +1 650 565 3990 / Email: [email protected] Matt Reed is a member of Wilson Sonsini Goodrich & Rosati, where he focuses on technology-focused domestic and international arbitration, as well as intellectual property litigation, including patent litigation in U.S. district courts and the U.S. International Trade Commission and trade secret disputes in state and federal court. With a background in chemical engineering, Mr. Reed has successfully litigated numerous cases in a variety of areas, ranging from medical devices to semiconductor processing and packaging to core logic chipsets. Mr. Reed received a J.D. from Columbia University Law School in 1997, where he was a Harlan Fiske Stone Scholar and Book Review Editor of the Columbia Journal of Transnational Law. He received a B.S., magna cum laude, in Chemical Engineering from Brigham Young University in 1994.

Anthony J. Weibell Tel: +1 650 354 4134 / Email: [email protected] Tony Weibell is a member in the Internet Strategy and Litigation group of Wilson Sonsini Goodrich & Rosati, where he represents some of Silicon Valley’s most successful internet and technology companies in complex civil litigation involving consumer class action, e-commerce, intellectual property, privacy, computer fraud, data breach, antitrust, false advertising, and contractual disputes. Mr. Weibell received a J.D., cum laude, from Brigham Young University in 2005, an M.S. in Civil and Environmental Engineering from Brigham Young University in 2002, and a B.S. in Civil and Environmental Engineering from Brigham Young University in 2001. For the past three years (2013–2015), Mr. Weibell has been named to the “Rising Stars” list published by Northern California Super Lawyers.

Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road, Palo Alto, CA 94304, USA T el: +1 650 493 9300 / Fax: +1 650 493 6811 / URL: www.wsgr.com

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