Arbitration uarterly Q Issue No 4 – December 2013 Editors’ Remarks In This Issue Page Welcome to the fourth edition of Debevoise’s Arbitration Quarterly, 01 Editors’ Remarks our collection of interesting and significant current developments in 02 Bridging the Atlantic Divide? US Court international arbitration. It has been a year replete with important Enforces Annulled Award developments for arbitral law and practice, and the last quarter was no 04 AAA/ICDR Adopts New Optional exception. Appellate Arbitration Rules In this issue we report on ten arbitration-related judicial decisions 05 Singapore Court of Appeal Clarifies from courts spanning the globe. From US federal courts, we survey Right to Challenge Tribunal’s Decision on decisions concerning the enforcement of annulled awards, standards Jurisdiction at the Enforcement Stage for vacating awards for arbitrator corruption, the availability of court- 07 HKIAC Announces New Administered ordered arbitrator appointments, and the constitutionality of state- Arbitration Rules administered programs allowing judges to function as arbitrators in 09 Second Circuit Adopts “Abundantly Clear” the courthouse. We discuss new pro-arbitration decisions in Europe, Standard for Evidence of Corruption Under the Federal Arbitration Act including a French Court of Appeal decision highlighting France’s approach to compétence-compétence and an English High Court decision 10 The Application of the “Negative Effect” of the Principle of Compétence- concerning the circumstances under which a court should grant Compétence under French Law: A Risk or an application for an interim injunction in connection with arbitral a Solution for Coherence in International proceedings. Our survey continues to Asia and Africa, where we discuss Arbitration? two recent decisions of the Indian Supreme Court narrowing the 11 International Centre for Energy Arbitration grounds for challenging arbitral awards, a significant decision from the Launches in Scotland Singapore Court of Appeal clarifying the right to challenge a tribunal’s 12 Fifth Circuit Refuses to Appoint Arbitrator in Dispute Brought Under the International decision on jurisdiction at the enforcement stage, and a Nigerian Court Arbitration Rules of the International of Appeal decision limiting the circumstances under which a court can Centre for Dispute Resolution intervene in arbitration proceedings. 14 ISDA Adopts New Arbitration Guide Alongside these decisions, we note recent initiatives from various 16 Indian Supreme Court Narrows Grounds institutions to promote best practices and strengthen regional arbitration for Challenging Awards centers. These efforts include recent pro-arbitration initiatives from 18 International Arbitration in Africa: Mauritius, the new optional appellate procedures from the American Round-Up of Recent Developments Arbitration Association, revised rules for administered arbitration from 21 English High Court Defers to Arbitral the Hong Kong International Arbitration Centre, an arbitration guide Tribunal in Connection with Grant of Interim Relief Continued on page 2 23 US Appeals Court Strikes Down Delaware’s Court-Administered Business Arbitration Program If there are additional individuals within your organization 25 Recent and Forthcoming Events who would like to receive Arbitration Quarterly, please email Deborah Enix-Ross at [email protected]. 28 Debevoise International Dispute Resolution Group

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Editors’ Remarks Arbitration Quarterly is a publication of Continued from page 1 Debevoise & Plimpton LLP for parties to derivatives transactions from the International Swaps and New York London 919 Third Avenue 65 Gresham Street Derivatives Association, and the launch of the International Centre for New York, NY 10022 London Energy Arbitration in Scotland. +1 212 909 6000 EC2V 7NQ +44 20 7786 9000 As we mark the first year of Debevoise’s Arbitration Quarterly, we hope you find this and future editions informative and engaging. If you Washington, D.C. Moscow 555 13th Street, N.W. Business Center Mokhovaya wish to discuss any of the articles or topics featured in this edition or any Washington, D.C. 20004 Ulitsa Vozdvizhenka, 4/7 other aspect of international arbitration or dispute resolution, we would +1 202 383 8000 Stroyeniye 2 Moscow, 125009 be delighted to hear from you. Paris +7 495 956 3858 4 place de l’Opéra Very best wishes, 75002 Paris Hong Kong +33 1 40 73 12 12 21/F AIA Central 1 Connaught Road Central Mark W. Friedman Frankfurt Hong Kong Taubenstrasse 7-9 +852 2160 9800 Carl Micarelli 60313 Frankfurt am Main and the International Dispute Resolution Group +49 69 2097 5000 Shanghai 22/F Jin Mao Tower of Debevoise & Plimpton LLP 88 Century Boulevard Pudong New District Shanghai 200121 +86 21 5047 1800

Bridging the Atlantic Divide? US www.debevoise.com

Court Enforces Annulled Award Edition Editors Mark W. Friedman Enforcement of annulled arbitral awards by domestic courts has long [email protected] New York, +1 212 909 6034 been a hotly debated issue in the international arena. Various jurisdictions Carl Micarelli have employed different approaches, and so far international consensus has [email protected] not emerged. French courts, as exemplified by the Hilmarton and Putrabali New York, +1 212 909 6813 decisions, have repeatedly enforced annulled awards. French courts Assistant Editors consider international awards to exist on an international plane unaffected Rushmi Bhaskaran [email protected] by a national court annulment; in addition, French law does not recognize New York, +1 212 909 6905 annulment as a ground for refusal of enforcement of domestic awards, Nwamaka Genevieve Ejebe and Article VII of the New York Convention allows these more favorable [email protected] New York, +1 212 909 6837 enforcement conditions to prevail. US courts, on the other hand, have been more reluctant to adopt such a delocalized approach. Nonetheless, US courts have enforced annulled awards in some circumstances. In one of the earliest cases, Chromalloy Aeroservices v. Arab Republic of Egypt, the D.C. Circuit declined to grant res judicata effect to an Egyptian annulment decision on the grounds that to do so would “violate … clear U.S. public policy” in favor of enforcing arbitral awards. 939 F. Supp. [email protected] 907, 913 (D.C. Cir. 1996). Decisions since Chromalloy have stepped away Please address inquiries regarding topics covered in this publication to from this rationale, however, and toward a narrower public-policy approach the editors or to the article authors. focused more on the merits of the intervening annulment. For example, All content © 2013 Debevoise & Plimpton LLP. All rights reserved. The articles appearing in this publication provide summary information only the D.C. Circuit’s 2007 decision in TermoRio distinguished Chromalloy and and are not intended as legal advice. Readers should seek specific legal advice before taking any action with respect to the matters refused enforcement of an annulled award, while accepting that a foreign discussed herein. Any discussion of U.S. Federal tax law contained in these articles was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. Federal tax law. Continued on page 3

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Bridging the Atlantic Divide the annulment proceedings. The Mexican its dispute would be arbitrable and stated Continued from page 2 court ultimately annulled the arbitral award, that the “unfairness” of the retroactive based in large part on a law that was enacted application of the law was “at the center of judgment annulling an arbitral award could subsequent to the parties’ dispute and the dispute.” The court noted that the effect be disregarded under Article V of the New which provided that disputes concerning of the law was to leave COMMISA without York Convention if it “violated any basic the administrative rescission of contracts any remedy since the time limitations for notions of justice to which we subscribe.” were not arbitrable. The Mexican court also bringing the dispute before the Mexican TermoRio S.A. E.S.P. et al. v. Electranta S.P., determined that the arbitral tribunal lacked courts had already passed, and that the et al., 487 F.3d 928, 939 (D.C. Cir. 2007). jurisdiction over the contract claims because retroactive application of the law benefited A recent decision by a United States the rescission claims were not arbitrable the State party at the expense of the private district court enforcing an annulled award and were inextricably intertwined with the party. Although the court also stated that invokes the TermoRio standard and, in contract claims. PEP resisted enforcement it was “neither deciding, nor reviewing, applying it, provides a specific example of the award in the Southern District on Mexican law,” it held three days of hearings of when an annulment decision may be the basis of the annulment, pursuant to to allow testimony from legal experts on considered to violate “basic notions of Article 5 of the Inter-American Convention substantive issues of Mexican law such as justice.” In a decision by District Judge on International Commercial Arbitration retroactivity. Alvin Hellerstein, rendered on August 27, (known as the Panama Convention), The implications of the district court’s 2013, the United States District Court for which mirrors Article V of the New York decision remain to be seen; they may be the Southern District of New York enforced Convention. limited by the decision’s narrow holding an arbitral award annulled by Mexican The district court, however, declined closely tethered to the facts at issue. The courts.1 to give deference to the Mexican court’s court has continued the apparent trend The dispute arose out of contracts in the US courts of analyzing the issue as between COMMISA, a private corporation, one of when deference to a foreign court and PEP, a Mexican state-owned entity, The implications of the district judgment is appropriate, in contrast to relating to the construction and installation court’s decision remain to be other jurisdictions (such as France) where of two offshore natural gas platforms. The courts do not examine the circumstances contracts were governed by Mexican law seen; they may be limited by of the annulment decision at all. Although and provided for ICC arbitration seated the decision’s narrow holding the decision provides an example of in Mexico. When the parties’ relationship the kinds of considerations that could broke down, COMMISA initiated ICC closely tethered to the facts at justify enforcement of an annulled award, arbitration and PEP responded by seeking issue. consistent standards may be unlikely to administrative rescission of the contracts. emerge any time soon given the court’s Litigation ensued in Mexican courts annulment decision. The court noted that recognition that it is a matter of discretion. regarding the validity of the rescission while it had discretion to refuse enforcement on The Southern District of New York may the ICC arbitration proceeded in parallel. the basis of the annulment, but declined to have occasion to consider the issue again The Mexican courts upheld the validity recognize the Mexican court’s annulment in Thai-Lao Lignite (Thailand) Co. Ltd v. of PEP’s rescission, while the ICC tribunal of the arbitral award because the court Government of the Lao People’s Democratic issued an award in favor of COMMISA. considered it “violated basic notions of Republic, 10 Civ. 5256 (KMV) (S.D.N.Y.). PEP sought annulment of the award in the justice” by applying a subsequently-enacted Judge Kimba Wood of the court granted Mexican courts. In New York, COMMISA law retroactively. The district court found enforcement of the underlying award in obtained an order confirming the award but that the Mexican court had relied on the May 2011, but the Lao government has staying enforcement pending the outcome of newly-enacted law even though the Mexican recently moved to vacate the enforcement court had expressly stated that it was not on the grounds that the award was annulled 1 Corporación Mexicana de Mantenimiento applying the law retroactively. by the Malaysian courts in March 2013. Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción, No. 10 Civ. 206 (AKH), 2013 In reaching its conclusions, the district The court’s ruling on the Lao government’s U.S. Dist. LEXIS 121951 (S.D.N.Y. August 27, court noted COMMISA’s expectations that 2013). Continued on page 4

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Bridging the Atlantic Divide While the delocalized approach adopted when an award debtor’s assets are in the Continued from page 3 by the French courts has its critics, it does United States: parties should pay particular at least offer a degree of predictability that attention to choosing an arbitral seat with a motion is pending. In the May 2013 issue may be more elusive for parties seeking low likelihood of annulment. of the Arbitration Quarterly, we reported on enforcement in US courts. Although the the decision of the Paris Court of Appeal For further information, please contact: approach of US courts continues to develop, Christina T. Prusak in the same dispute, in which the court it seems likely that US courts will continue [email protected] refused enforcement of the underlying New York, 1 212 909 6498 to decide the issue by exercising their arbitral award on the grounds that the discretion on the basis of the facts and their Ina C. Popova arbitral tribunal lacked jurisdiction, without appreciation of the equities surrounding [email protected] considering the intervening annulment by New York, +1 212 909 6754 the foreign court’s annulment decision. the Malaysian courts. Prevention may therefore be the best cure

AAA/ICDR Adopts New Optional Appellate Arbitration Rules

Effective November 1, 2013, the national courts. Instead, parties can ask a the dispute arises. The Optional Appellate American Arbitration Association (AAA) court to vacate the award only on limited Arbitration Rules in their introduction and its international arm, the International grounds such as the tribunal’s bias, where provide a sample clause that the parties can Centre for Dispute Resolution, launched a the award was procured by fraud, or where include in their contract if they want to use new optional set of rules allowing parties, the arbitrators exceeded their powers or the appellate review. The parties may use for the first time, to choose to permit otherwise conducted the proceedings in a the AAA’s Optional Appellate Arbitration appeals of arbitral awards to an appellate manner that deprived a party of substantial Rules even if the underlying arbitration arbitral tribunal. Under the new Optional fairness. The AAA has stated that these was not conducted under AAA rules. The Appellate Arbitration Rules, parties can now optional rules were developed for “the types appellate rules do not, however, apply to an appeal on the grounds that the underlying of large, complex cases where the parties agreement between an individual consumer award is based on an error of law that is agree that the ability to appeal is particularly and a business. material and prejudicial or a determination important.” The AAA estimates that the Under the Rules, an appeal may be taken of fact that is clearly erroneous. appeal procedure should take about three by filing a notice of appeal within 30 days According to the AAA, the rules were months. after the award is submitted to the parties. adopted to provide for an appellate arbitral Parties may make use of this appellate The other party may file a notice of cross- panel that would apply a standard of arbitral process only if there is an agreement appeal within seven days after the initial review greater than that allowed by existing between the parties to use the process. The notice of appeal is filed. By adopting the federal and state statutes. Traditionally, an agreement can be included in a pre-dispute Rules, the parties agree that when a notice arbitral award cannot be appealed before arbitration agreement or in a stipulation after of appeal is filed, the underlying award will not be considered final for purposes of any court actions to modify, enforce, correct or Recognition: The 2013 Financial Times US Innovative Lawyers vacate the award. Unless all parties and the appellate tribunal agree otherwise, the place report has recognized Debevoise in the Litigation & Dispute of the appeal is the same as the seat of the Resolution category for securing a $2.3 billion award for Occidental underlying arbitration. Petroleum Corporation, the largest known arbitration award ever The appellate tribunal by default consists of three appellate arbitrators unless rendered under a bilateral investment treaty. Continued on page 5

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AAA/ICDR Optional Appellate to whom they object from the list. The 30 days. The appeal tribunal, however, Arbitration Rules AAA will then designate an appeal tribunal does not have the power to order a new Continued from page 4 from the remaining candidates. The appeal arbitration hearing or send the case back is determined upon the written documents to the original arbitrators for corrections or the parties agree to use just one arbitrator. submitted by the parties, with no oral further review. Once the appeal tribunal In the case of a domestic AAA arbitration, argument. renders its decision, that decision becomes the appellate tribunal will be selected from the final award for purposes of judicial the AAA’s Appellate Panel and in the The appeal tribunal can (i) adopt proceedings. case of an international dispute, from its the underlying award as its own, (ii) international Appellate Panel. Upon receipt substitute its own award for the underlying The new rules are available on the AAA’s of a notice of appeal, the AAA will send the award, incorporating those aspects of the website at http://go.adr.org/appellaterules. parties a list of ten names of individuals underlying award that are not vacated For further information, please contact: from the international or AAA’s Appellate or modified, or (iii) request additional Corina Gugler information and notify the parties that the [email protected] Panel. If the parties cannot agree on the New York, +1 212 909 6524 constitution of the appeal tribunal, the tribunal is exercising its option to extend parties can strike the names of arbitrators the time to render a decision, not to exceed

Singapore Court of Appeal Clarifies Right to Challenge Tribunal’s Decision on Jurisdiction at the Enforcement Stage

In the recent decision of PT First Media award, reducing the total amount awarded and Shareholders’ Agreement, to which TBK (formerly known as PT Broadband from approximately US$250 million to only five of the Astro companies were Multimedia TBK) v. Astro Nusantara approximately US$710,000. parties; the remaining three companies International BV and Others. [2013] sought leave from the Tribunal to be joined SGCA 57, the Singapore Court of Appeal The Dispute to the arbitration. The Tribunal held a has permitted a party to an international The dispute arose from a failed joint preliminary hearing to determine whether arbitration seated in Singapore – a so-called venture between the Astro Group, a it had the power to join the additional “domestic international arbitration” – to Malaysian media group, and the Lippo companies as claimants and, if so, whether object to the enforcement of an award based Group, an Indonesian conglomerate, such power should be exercised. In an upon the Arbitral Tribunal’s purported to provide multimedia and television interim award, the Tribunal found that it lack of jurisdiction, even though that party services in Indonesia. In October 2008, had the power to join the parties as long as had not exercised its right to appeal the the Astro Group, consisting of eight they consented to be joined, and it held that Tribunal’s ruling on jurisdiction or to seek separate companies, filed for arbitration they should be joined because of the close the setting aside of the award on that basis. seated in Singapore at the Singapore connection between the various claims of The Court of Appeal went on to find that the International Arbitration Centre under its the Astro companies and potential defenses Tribunal’s jurisdiction was indeed lacking 2007 rules, to recover sums invoiced to of the Lippo Group. over certain claimants, and as a result, it the joint venture. The relevant arbitration The Lippo Group chose not to challenge refused to enforce much of the Tribunal’s agreement was contained in a Subscription the Tribunal’s decision, as it was permitted to do under Article 16(3) of the UNCITRAL Model Law, which allows a party to Recognition: Debevoise has been shortlisted for International challenge a tribunal’s preliminary ruling on jurisdiction before the supervisory court Arbitration Law Firm of the Year in the US Benchmark Litigation within 30 days of the ruling. The Model Annual Awards 2014. Continued on page 6

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Singapore’s Highest Court is Section 19, which states: “An award on an to the UNCITRAL Model Law, thus Affirms Choice of Remedies arbitration agreement may, by leave of the the construction of Section 19 “must be Continued from page 5 High Court or a Judge thereof, be enforced consonant with the underlying philosophy in the same manner as a judgment or an of the Model Law.” It found that the system Law is incorporated into Singapore law by order to the same effect and, where leave is of “choice of remedies,” whereby a party Section 3(1) of Singapore’s International so given, judgment may be entered in terms could elect whether to actively challenge an Arbitration Act (Cap 143A, 2002 Rev of the award.” award – via appeal or set-aside proceedings Ed). The Lippo Group also chose not to – or passively resist its enforcement at a later seek to set aside the final awards issued by The High Court found that the exclusion stage, was at the “heart of [the] entire design” the Tribunal, as it could have under Article of Chapter VIII from the International of the Model Law. It also considered this to 34 of the Model Law. When the Astro Arbitration Act, and the grounds it provides be in line with the “seat-neutral” philosophy Group sought leave to enforce the awards to resist the enforcement of awards, meant of the Model Law, which was intended to in Singapore, however, the Lippo Group that, subject to certain limited exceptions, de-emphasize the importance of the arbitral objected on the ground (among others) that the only means to challenge an international seat, particularly when it comes to assessing there was no binding arbitration agreement arbitration award rendered in Singapore is remedies available at the enforcement between the Lippo Group companies and stage. Addressing the exclusion of Chapter the claimants who were not parties to the The Court held that the VIII from incorporation under Section underlying agreement, and therefore, the 3(1) of the International Arbitration Act, Tribunal lacked jurisdiction with regard to International Arbitration the Court stated that had the Singapore claims asserted by those parties. Act’s primary purpose was to Parliament intended to derogate from the The High Court Decision give effect to the UNCITRAL aforementioned philosophy of the Model Law, it would have done so explicitly After high-profile arguments before Model Law, thus the and not merely incidentally. Barring any the High Court – in a rare occurrence, an construction of Section 19 evidence to the contrary, no such derogation English Queen’s Counsel was admitted to had been intended. Further, the Court argue on behalf of each party – the Court “must be consonant with the noted that the purpose of the exclusion of ruled in favor of the Astro Group, finding underlying philosophy of the Chapter VIII was to ensure there would be that the Lippo Group had waived its right Model Law.” no conflict between the Model Law regime to challenge the Tribunal’s jurisdiction and that of the New York Convention, before the Court, having chosen not to do since Singapore has adopted the optional so within 30 days of the Tribunal’s ruling to appeal a ruling on jurisdiction under reciprocity requirements of the latter, on jurisdiction. Article 16(3) of the Model Law, or to bring a set-aside proceeding under Article 34 of extending the protections of the Convention The basis for the High Court’s decision the Model Law. Since the Lippo Group had only to awards rendered in countries that was the result of a quirk in the International not availed itself of either remedy, and since also have adopted the Convention. The Arbitration Act. When Singapore adopted the time limits to seek such remedies had Court therefore held that giving effect to the that Act it did not incorporate Chapter VIII long since passed, the High Court held that philosophy of the UNCITRAL Model Law of the UNCITRAL Model Law (consisting the Lippo Group could not now challenge required that the same grounds for resisting of Articles 35 and 36), which governs the the validity of the awards on the basis that enforcement under Article 36(1) must be recognition and enforcement of arbitral the Tribunal lacked jurisdiction. equally available under Section 19. awards. Instead, Part III of the International Having found that the Lippo Group Arbitration Act incorporates the provisions Reversal by the Court of could resist enforcement of the awards, of the New York Convention to govern Appeal the Court of Appeal went on to determine the recognition and enforcement of awards On appeal, the Court of Appeal reversed whether an arbitration agreement between issued in other countries that are party to the the High Court’s decision. The Court the Lippo Group and the additional parties Convention. As a result, the only provision held that the International Arbitration was ever formed according to the law of of the International Arbitration Act that Act’s primary purpose was to give effect governs awards rendered in Singapore itself Continued on page 7

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Singapore’s Highest Court the claimants who were not parties to the to practitioners worldwide on questions Affirms Choice of Remedies underlying agreement. concerning the “choice of remedies” Continued from page 6 principle of the UNCITRAL Model Law. Comment Singapore. It found that one had not been For further information, please contact: The High Court judgment, had it formed and that joinder was improper Corey Whiting been allowed to stand, would have risked [email protected] because Singapore International Arbitration Hong Kong, +852 2160 9817 disadvantaging Singapore as an arbitral seat Centre Rule (SIAC) 24(b), upon which vis-à-vis other popular arbitral seats in the Constantin Klein (Trainee Associate) the Tribunal had relied in finding it had region. Hong Kong, in particular, explicitly [email protected] the power to join the additional Astro London, +44 20 7786 9152 recognizes the “choice of remedies” companies, did not permit joinder solely principle. The Court of Appeal, in reversing on the basis of consent of the parties to the High Court’s judgment, recognized that be joined. (The fifth edition of the SIAC the latter’s judgment had “potentially far- rules, which came into force on April 1, reaching implications on the practice and 2013, amended Rule 24(b) expressly to flourishing of arbitration in Singapore.” To state that third parties may be joined to an this we may add that, due to its particularly arbitration only if they are also party to the in-depth analysis of the UNCITRAL Model relevant arbitration agreement.) As a result, Law and its travaux préparatoires, the Court it found that the Lippo Group was entitled of Appeal’s decision could be of assistance to resist the enforcement of the awards by

HKIAC Announces New Administered Arbitration Rules

On June 12, 2013, the Hong Kong Interim Measures of Emergency Arbitrator International Arbitration Centre (HKIAC) Protection HKIAC’s new rules also provide, in announced the adoption of revisions to its Provisions governing the issuance of Article 23.1, an emergency arbitrator Administered Arbitration Rules, marking interim relief have been expanded in Article procedure that allows urgent interim relief to the conclusion of a lengthy drafting and 23. Modeled on the corresponding provisions be granted prior to a tribunal’s constitution. consultation process involving both legal of the UNCITRAL Arbitration Rules, these The procedure is set forth in Schedule 4 to practitioners and arbitrators. The new rules provisions add guidance on the circumstances the new rules. Under that procedure, an came into force on November 1, 2013. This that may merit granting interim measures emergency arbitrator will be appointed by represents the first update to the HKIAC’s and the type of relief that such measures the HKIAC within two days of the HKIAC’s Administered Arbitration Rules, which were may include. Factors that should be taken receipt of a request for emergency relief. The adopted in 2008. The revised rules continue into account to determine whether to grant emergency arbitrator then is required to issue the HKIAC’s “light touch” approach to interim relief include whether the harm to the a decision within 15 days after receiving the administered arbitration, although they do applicant can be adequately compensated by file from the HKIAC. To accommodate give the Centre several new tools to help damages, whether the harm to the applicant the emergency arbitrator procedure, the ensure the efficient conduct of arbitrations. outweighs any harm to the respondent, and Hong Kong Arbitration Ordinance also was Many of the changes parallel the changes the likelihood of the applicant succeeding in amended recently, introducing sections 22A that arbitral institutions around the world the merits of the claim. Forms of relief may and 22B, which permit the enforcement of have been implementing in recent years. include maintaining or restoring the status relief granted by an emergency arbitrator in Several of the new provisions, however, are quo pending the outcome of the arbitration, the same manner as an order or direction by truly on the cutting edge, placing the HKIAC preventing actions that would harm or a court. at the forefront of institutional arbitration. prejudice the arbitration, and preserving The most significant changes to the HKIAC assets and evidence. rules include the following. Continued on page 8

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HKIAC Announces New be granted: (i) all the parties have agreed to pay arbitrators on an hourly basis, subject Administered Arbitration Rules to consolidation; (ii) all the claims in the to a maximum rate set by the HKIAC, has Continued from page 7 arbitrations arise under the same arbitration been added and is now the default method agreement; or, (iii) where there are multiple by which arbitrators’ fees are calculated. In Joinder arbitration agreements, there is a common addition, the new rules also provide standard The new rules greatly expand the question of fact or law that arises in each terms of appointment for arbitrators, which provisions governing joinder of parties, arbitration, the rights to relief derive from will likely make the appointment of the which are contained in Article 27 of the the same transaction or transactions, and the arbitral tribunal a smoother and more new rules. Joinder is permitted so long as HKIAC finds the arbitration agreements to efficient process. there is one or more arbitration agreements be compatible. As with the joinder provision, that bind all parties to the arbitration. A if a request for consolidation is granted, the Retroactive Application request for joinder must be submitted parties to the arbitrations are deemed to have Most of the new HKIAC rules will to the HKIAC, with all relevant parties waived their right to designate an arbitrator, apply to all arbitrations where the arbitration having the opportunity to comment on the and the HKIAC shall appoint the tribunal. agreement calls for arbitration administered request. If the request is submitted prior by the HKIAC and where the Notice to the tribunal’s constitution, the HKIAC Expedited Procedure of Arbitration is submitted on or after has the power to join an additional party The new rules improve HKIAC’s November 1, 2013, even if the arbitration if it determines that there is prima facie expedited procedure process, in Article 41, by agreement was executed prior to November evidence that the additional party is bound expanding the scope of arbitrations to which 1, 2013. However, Articles 23.1, 28, 29 and by an arbitration agreement, although the the expedited procedure applies. Previously, Schedule 4 – i.e., the emergency arbitrator, tribunal, once constituted, retains its power the procedure only applied by default in cases joinder and consolidation provisions – will to determine its jurisdiction over that party. where the amount in dispute was less than only apply if the arbitration agreement was More controversially, Article 27.11 provides US$250,000. That limit is now HK$25 entered into after November 1, 2013, or if the that if the joinder is ordered before the million, or approximately US$3.2 million. parties separately agree to the applicability of confirmation of the arbitration tribunal, the In addition, even when the amount in those provisions. parties are deemed to have waived their right dispute exceeds this threshold, the expedited The HKIAC’s new Administered to appoint an arbitrator and to have granted procedure may still apply if the parties agree Arbitration Rules represent an important the HKIAC the right to appoint the tribunal. or if the situation is exceptionally urgent. step in the field of administered arbitration. In such circumstances, the HKIAC may even Under the expedited procedure, a sole They provide useful updates and expanded revoke the appointment of arbitrators who arbitrator is appointed and an award must be procedures, while also introducing novel have already been appointed. This provision rendered within six months of the date the and progressive ideas that should help Hong is an innovative feature that is unique to the tribunal receives the arbitration’s file from the Kong remain among the leading arbitration HKIAC. HKIAC. destinations in the world, and the HKIAC as Consolidation one of the most popular centers for arbitration Arbitrators’ Fees and Terms of international disputes. The new rules also provide, for the The HKIAC previously calculated For further information, please contact: first time, for consolidation of multiple arbitrators’ fees only on an ad valorem basis. Corey Whiting arbitrations. Article 28 sets forth the three That option remains; however, the option [email protected] circumstances in which consolidation may Hong Kong, +852 2160 9817

Xia Li [email protected] Recognition: Debevoise partner Lord (Peter) Hong Kong, +852 2160 9822 Goldsmith QC has been ranked in Band 1 for Dispute Resolution: International Arbitration by the 2014 Chambers UK guide.

8 Issue No 4 - December 2013 Arbitration Quarterly

Second Circuit Adopts “Abundantly Clear” Standard for Evidence of Corruption Under the Federal Arbitration Act

In a recent decision, the United States YLL based its motion for vacatur on vacatur due to arbitrator corruption under Court of Appeals for the Second Circuit three provisions of Section 10 of the Federal §10(a)(2). It also suggested a more rigorous established that an arbitral award may not Arbitration Act. Under § 10(a)(1), which test for vacatur due to arbitrator partiality be vacated for corruption of the arbitrator provides that an award may be vacated if under §10(a)(2). The Court did not under Title 9 of the US Code, often it is “procured by fraud, corruption, or announce new standards for vacatur under called the Federal Arbitration Act, unless undue means,” and under § 10(a)(2), either §10(a)(1) or (3). corruption is “abundantly clear.” which allows for vacatur “where there The Court held that a party must show In Kolel Beth Yechiel Mechil of Tartikov, was evident partiality or corruption in the that there is “abundantly clear” evidence of Inc. v. YLL Irrevocable Trust et al., 729 arbitrators,” YLL argued that one of the arbitrator corruption under §10(a)(2). The F.3d 99 (2d Cir. 2013), the Second Circuit arbitrators, Rabbi Kaufman, was biased in Court adopted the standard it employed in affirmed the decision of the District Court favor of Kolel and corrupt. Under § 10(a) a much earlier case for corruption under denying a motion to vacate an arbitration (3), which provides that an award may be §10(a)(1): an “award must stand unless award. The case arose out of dispute vacated when “the arbitrators were guilty of it is made abundantly clear that it was between Kolel Beth Yechiel Mechil of misconduct … in refusing to hear evidence obtained through corruption, fraud, or Tartikov, Inc. and YLL Irrevocable Trust pertinent and material to the controversy,” undue means.” Karppinen v. Karl Kiefer and Kochav S.A.R.L. over the ownership of YLL argued that Kaufman’s bias caused the Mach. Co., 187 F.2d 32, 34 (2d Cir. 1951). life insurance policies. In accordance with an panel to issue a premature decision without The Second Circuit also held that proof of arbitration agreement, the parties submitted considering material and pertinent evidence. arbitrator “bias” under §10(a)(2) must be the dispute to a rabbinical arbitration panel In support of its arguments under by “clear and convincing evidence.” This appointed by the parties. No records of the §10(a)(1) and (2), YLL offered an affidavit holding builds on the Court’s decision last arbitration proceeding were kept. On April by a non-party stating that he overheard year in Scandinavian Reinsurance Co. Ltd. 10, 2012, two of the three members of the Kaufman promising Kolel a favorable v. Saint Paul Fire and Marine Ins. Co., 668 arbitration panel entered an award directing ruling. YLL also alleged that Kaufman F.3d 60, 64 (2d Cir. 2012), in which the the immediate transfer of insurance policies cut off its first and only witness during his Court stated that to vacate an award for to Kolel. Thereafter, YLL moved to vacate testimony and excluded its chosen arbitrator “evident partiality” under § 10(a)(2) “a the award, and Kolel moved to confirm the from the arbitration such that only two reasonable person would have to conclude award. The District Court, in a decision of the arbitrators entered the award. In that an arbitrator was partial to one party to by Judge Marrero, denied YLL’s motion support of its argument under § 10(a)(3), the arbitration.” and granted Kolel’s motion on July 27, YLL alleged that Kaufman interrupted In Kolel, the Court found that YLL did 2012. The District Court also denied YLL’s its witness’s testimony and that only one not satisfy the standards to vacate an award subsequent motion for reconsideration. witness testified during the proceedings. under either §10(a)(1) or (2). There was no YLL appealed and the Second Circuit The Second Circuit affirmed the District “abundantly clear” evidence of corruption, affirmed the District Court’s decisions on Court’s denial of YLL’s motion to vacate the as the YLL Court did not show how August 30, 2013. award under all three provisions. In doing Kaufman “stood to gain” or had any “special so, the Court articulated a new standard for connection” with Kolel that would give him a “plausible reason to corrupt his decision.” Moreover, evidence of “evident partiality” Recognition: Debevoise has ranked in the Legal 500 Asia Pacific was too “remote, uncertain, or speculative” 2014 guide, the second year the guide has been published. In Hong and without a record of the proceedings, Kong, Debevoise partner Christopher K. Tahbaz was noted in the parties’ disagreement was nothing more than a “he-said, she-said factual dispute.” Dispute Resolution: International Arbitration. Continued on page 10

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“Abundantly Clear” Evidence “reasonable person” would conclude that the consequence of poorly developed facts, of Corruption an arbitrator was biased by “clear and as the Court repeatedly bemoaned that it Continued from page 9 convincing” evidence. had no record of the arbitration proceeding on which to base its decision. Regardless, In addition, the Second Circuit denied The Second Circuit stands apart from the decision makes the already narrow YLL’s appeal of the denial of its motion to other US Courts of Appeals, which have bases for vacating an award under § 10(a) vacate under § 10(a)(3) because YLL did not announced an evidentiary standard appear even more circumscribed. It gives not show how the arbitration panel violated specific to vacatur due to “corruption” some confidence to the parties seeking to “fundamental fairness” by hearing only one under § 10(a)(2). With the exception enforce arbitration awards in the Second witness. of the Fourth Circuit, which stated that corruption under § 10(a)(1) must be shown Circuit that their awards will be respected. At times, the Kolel opinion is not clear by “clear and convincing evidence,” MCI But without much guidance as to what on the distinctions between the concepts Constructors, LLC v. City of Greensboro, 610 “abundantly clear” evidence of corruption of “partiality” and “corruption” and the F.3d 849, 858 (4th Cir. 2010), the other is, or what “clear and convincing evidence” §10(a)(1) and §10(a)(2) grounds for circuits also have not articulated a standard of bias is, it remains to be seen what impact vacatur. However, the overall impact of the particular to “corruption” under § 10(a)(1). the Kolel decision will have on challenges to Kolel opinion is clear. A party must meet arbitration awards. a very high burden for the Court to vacate The high burden borne by a party For further information, please contact: an award on the basis of corruption or seeking to vacate an award for corruption and partiality under the Kolel decision may JoAnna C. Tsoumpas partiality. Vacating an award for corruption [email protected] – whether under §10(a)(1) or (2) – requires reflect public policy in favor of arbitration New York, + 1 212 909 6600 “abundantly clear” evidence. To vacate and the judiciary’s great deference to an award on the ground of partiality, the arbitrators and reluctance to intervene in challenging party must establish that a their decisions. The decision may also be

The Application of the “Negative Effect” of the Principle of Compétence-Compétence under French Law: A Risk or a Solution for Coherence in International Arbitration?

Well-accepted in most jurisdictions A decision of June 27, 2013 rendered yet been brought before the arbitral tribunal throughout the world, the principle of by the Court of Appeal of Versailles1 and the arbitration agreement is manifestly compétence-compétence provides that an emphasizes the current French legal trend void or inapplicable.” The Court of arbitral tribunal, rather than the court, has of giving full effect to the principle of Appeal’s decision is also in conformity with jurisdiction to rule on the arbitrability of compétence-compétence. The case is also one the French case law that preceded the new the dispute. In France, this is commonly of the first applications of this principle law on arbitration. referred to as the “positive effect” of the since the implementation of the new law In that case, the plaintiff, Valuefirst, principle. In addition, the principle of on arbitration, which entered into force on agreed to distribute the software of the compétence-compétence as applied in France May 1, 2011, and more specifically of the defendant, Visionael, pursuant to two permits courts to refuse to adjudicate new version of Article 1448 of the French contracts, one dated March 4, 2007, the whether disputes are arbitrable in order to Code of Civil Procedure, which states that other dated September 3, 2007. The earlier allow arbitral tribunals to determine their “when a dispute is brought before a court of contract included an ad hoc arbitration own competence. This application of the state, the court shall declare itself not to clause, but the latter selected the courts in compétence-compétence is known in France have jurisdiction unless the dispute has not Versailles as the chosen forum. as the “negative effect” of the principle. 1 Cour d’appel de Versailles, 13ème chambre, June 27, 2013, SARL Valuefirst vs. Société Visionael Corporation, R.G. N°12/07880. Continued on page 11

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The Negative Effect of the 4 contract governed the dispute that was compétence-compétence may allow: parallel Compétence-Compétence Principle therefore subject to arbitration. proceedings, one before an arbitral tribunal, Continued from page 10 The court of first instance declined to and the other before a domestic court, if A dispute arose between Visionael and exercise its jurisdiction, invoking Article both entities declare themselves competent. Valuefirst with regard to fee arrears and 1448 of the French Code of Civil Procedure. The application of Section 1448 avoids the the applicability of the liquidated damages On appeal, the Court of Appeal confirmed possibility that the domestic court and the clause. Valuefirst brought the dispute the result. Both courts concluded that it arbitral tribunal could make conflicting before the court of first instance of Versailles was far from clear that the September 3, decisions regarding their competence on the grounds that the March 4, 2007 2007 contract had even come into force. and the merits of the case, without either The decision thus makes clear that only the tribunal having to stay the proceeding in manifest inapplicability (that is, prima facie deference to the decision on competence The decision thus makes inapplicability) of the arbitration clause made by the first tribunal seized of the can lead domestic judges to rule on the matter. clear that only the manifest arbitrators’ competence in advance of an The threat of parallel or conflicting inapplicability (that is, prima arbitration. The logic behind this rule is to proceedings remains, however, in facie inapplicability) of the prevent domestic courts from undertaking international disputes in which a non- a substantive review of the contract or the French court may rule on the competence arbitration clause can lead arbitration clause. of an arbitral tribunal. That risk will be domestic judges to rule on As the Valuefirst case demonstrates, the reduced only if the French application of the principle of compétence-compétence is the arbitrators’ competence in negative effect of principle aids in avoiding a delay in the proceedings caused by the adopted by other jurisdictions worldwide. advance of an arbitration. parties who wish to postpone the start of For further information, please contact: arbitration by submitting questions on Geoffroy Goubin [email protected] contract was an interim agreement, and that the jurisdiction of arbitral tribunals to a Paris, +33 1 40 73 12 24 the parties’ relationship was governed by the domestic court. September 3, 2007 contract. Visionael then More importantly, the French view Roxane Castro [email protected] challenged the jurisdiction of the court of of arbitral competence allows the French Paris, +33 40 73 12 43 Versailles, on the ground that the March courts to prevent what foreign courts that do not recognize the negative effects of

International Centre for Energy Arbitration Launches in Scotland

On October 2, 2013, Scotland’s First The new Centre is a novel initiative. Its what such arbitration rules may include. Minister Alex Salmond announced the initial purpose is to consult with the energy It is likely, however, that they will aim to launch of the new International Centre industry, both within the British North address parties’ concerns as to efficiency for Energy Arbitration in Edinburgh. Sea area and internationally, to research and cost-effectiveness. The rules may also This project promises to be of interest to attitudes to and desired requirements for take account of the frequent desire of parties all players in the energy sector, a sector dispute resolution in the energy sector. in the energy sector for appointment of in which disputes frequently arise and The intention is that this research will form arbitrators with specialty energy expertise, where the preferred forum for resolving the basis of a new set of arbitration rules with an offering similar to the AAA National those disputes has long been international specifically tailored to energy disputes. Energy Panel. arbitration. The project is still in its early stages, and no proposals have been made as to Continued on page 12

11 Issue No 4 - December 2013 Arbitration Quarterly

Energy Arbitration Center Launches on a project targeted at attracting energy seated in Scotland. Any such arbitration Continued from page 11 arbitration to Scotland. would also benefit from recognition under the New York Convention, to which the The project is a joint venture between It is therefore likely that future activity UK is a signatory, and from ready access the Scottish Arbitration Centre, itself only of the International Centre for Energy to UK lawyers and experts familiar with recently founded in 2011, and the Centre Arbitration will focus on arbitrations having and skilled in resolving energy disputes. for Energy, Petroleum and Mineral Law a Scottish seat, to be governed by the new We await further developments and the and Policy at the University of Dundee, arbitration rules that the Centre expects outcome of the Centre’s initial research. a graduate school well known in the field to adopt and the Arbitration (Scotland) of energy law and policy. The launch Act 2010 – a new statute adopted by the For further information, please contact: follows on from work undertaken jointly Scottish legislature in 2010 to govern all Gavin Chesney [email protected] domestic and international arbitrations by those two organizations since April 2012 London, +44 20 7786 5494

Fifth Circuit Refuses to Appoint Arbitrator in Dispute Brought Under the International Arbitration Rules of the International Centre for Dispute Resolution

The Federal Arbitration Act allows “if for any other reason there shall be a lapse the parties’ agreement with the arbitration district courts to intervene in cases where in the naming of an arbitrator or arbitrators clause) governed the dispute, and that the there has been a “lapse” in the appointment or umpire,” the district court shall appoint antecedent agreement did not provide for of an arbitrator. Recently, the Fifth Circuit an arbitrator or arbitrators pursuant to arbitration. Thereafter, the parties pursued in Sutherland Global Services, Inc. v. Adam the relevant arbitration agreement upon mediation; unable to come to a resolution, Technologies International S.A. de C.V., 729 application from a party to the dispute. the parties then pursued arbitration. F.3d 443 (Sept. 5, 2013), upheld a district As the Ninth Circuit stated in Pacific The parties’ arbitration agreement court decision refusing to grant such relief, Reinsurance Management Corp. v. Ohio provided for a sole arbitrator; because the where the arbitral rules selected by the Reinsurance Corp., 814 F.2d 1324 (9th Circ. parties were unable to reach consensus on parties provided that the administering 1987), Section 5 of the Federal Arbitration that appointment, their agreement called institution should resolve challenges to the Act thus furthers US federal policy by for each party to appoint arbitrators, who appointment of an arbitrator. The decision “spur[ring] the arbitral process forward, in turn were to select the third, presiding is consistent with the limited existing rather than [letting] it stagnate into endless arbitrator. After each party appointed an jurisprudence on the Federal Arbitration bickering over the selection process.” arbitrator, Sutherland then challenged Act’s appointment provision, where courts In this case, the parties’ agreement Adam’s selection under Articles 7 and 8 have found lapses only when there has contained an arbitration clause that of the ICDR’s International Arbitration been a “mechanical breakdown” in the called for arbitration under the rules of Rules on the ground that Adam’s appointed appointment process. The Court’s decision the International Centre for Dispute arbitrator had ex parte communications with also emphasizes the statutory scheme’s Resolution (ICDR), the international arm the parties and was formerly involved in the deference to the arbitral rules selected by of the American Arbitration Association. dispute by serving as the parties’ mediator. the parties. Sutherland instituted arbitration Adam resisted the challenge on the ground Section 5, applicable to both domestic proceedings against Adam, alleging that that it was untimely under ICDR Rules. The and international arbitration, provides in Adam failed to pay for services pursuant ICDR ultimately required Adam to appoint part that “[i]f in the agreement provision be to the parties’ agreement. Adam first another arbitrator. Adam then attempted made for a method of naming or appointing attempted, but failed, to obtain a court to arbitrate the removal of its arbitrator, an arbitrator or arbitrators or an umpire, order staying arbitration on the ground which the ICDR denied on the basis such method shall be followed[,]” but that that a different agreement (antecedent to Continued on page 13

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Fifth Circuit Decision on Arbitrator jurisdictional challenge to the appeal. Adam parties’ arbitration agreement, which, by Appointment first claimed that the District Court should incorporating the ICDR Rules, assigned Continued from page 12 have appointed an arbitrator because the challenges to arbitrators to the ICDR. The parties’ specific procedure for appointment Court further added that it was without that its prior decision was administrative of arbitrators had broken down and resulted statutory authority to reach the merits of and not subject to arbitration. Despite in a lapse. In rejecting that claim, the Fifth Adam’s argument. receiving two extensions, Adam ultimately Court interpreted “lapse” as requiring a did not appoint another arbitrator, and thus The Court also observed that Adam’s “mechanical breakdown” to warrant the the ICDR appointed a second arbitrator motion to appoint an arbitrator necessarily court’s intervention – similar to other pursuant to its Rules. The panel was required the Court to remove two circuits, including the Second and Third constituted after the two arbitrators selected arbitrators. That result, the Court held, was circuits, that have addressed this issue. the third arbitrator. not permitted under the Federal Arbitration The Court held that no such breakdown Act, which does not contain any provision While the arbitration was pending, occurred. First, the Court read the ICDR’s for removal of arbitrators by the courts. Nor Adam brought a motion to appoint an decision to appoint an arbitrator as an could Adam challenge the disqualification of arbitrator under Section 5 of the Federal indication of Adam’s own noncompliance its appointed arbitrator under ICDR rules, Arbitration Act in the same action in with the parties chosen rules. Second, the as the challenge amounted to a procedural which Adam had unsuccessfully sought Court held that no mechanical breakdown one to be decided by the ICDR. to stay arbitration. Adam contended that occurred because, at the time that Adam the disqualification of its arbitrator was Section 5 reflects a careful balancing brought its Section 5 motion, a tribunal untimely and thus procedurally faulty, of respecting the parties’ agreement to had already been empaneled and had as well as substantively without merit. It arbitration – including the parties chosen set a hearing date – in other words, the further argued that the ICDR’s appointment method for appointing arbitrators – while arbitration was proceeding as planned. of a second arbitrator ran afoul of the ICDR permitting courts to intervene where Next, Adam claimed that, because Rules. Adam petitioned the District Court the parties reach a deadlock on such the ICDR did not, in its view, follow the to remove two of the arbitrators, reinstate appointments. Section 5 also pays respects parties’ agreed procedure for appointing its disqualified arbitrator, and have the to the parties’ chosen arbitration procedure, arbitrators, the District Court was required third arbitrator selected by Sutherland’s and such that the Court may intervene only to intervene to effectuate the parties’ Adam’s appointed arbitrators. The District in a manner consistent with the parties’ agreement as to arbitrator appointment. Court dismissed the motion, contending agreement. Here, the Fifth Court’s decision Citing the US Supreme Court’s seminal that it presented procedural questions emphasized the parties’ chosen arbitration decision in Howsam v. Dean Witter within the sole purview of the ICDR. Adam rules, and one party’s refusal to comply with Reynolds, Inc., 537 U.S. 79 (2002), where appealed the District Court’s decision to them. The Fifth Circuit’s decision is thus the Supreme Court held that gateway the Fifth Circuit of Appeals, and while the a helpful reminder for practitioners of the procedural issues are presumptively for the appeal was pending, the panel rendered high threshold for seeking court-ordered arbitrator’s determination, the Fifth Circuit its decision in the dispute and awarded appointments, and the deference that courts found Adam’s argument unavailing as a Sutherland US$900,000. On appeal, Adam will show to the arbitration procedure challenge that went to arbitral procedure, requested that the award be vacated. designated by arbitration agreements. not a question of arbitrability presumptively The Fifth Circuit affirmed the For further information, please contact: for the Court’s determination. That District Court’s decision after rejecting a Rushmi Bhaskaran presumption was confirmed by the [email protected] New York, +1 212 909 6905

Appointment: Debevoise associate Joshua Fellenbaum has been appointed to the global advisory board of the International Centre for Dispute Resolution’s under-40 group.

13 Issue No 4 - December 2013 Arbitration Quarterly

ISDA Adopts New Arbitration Guide

The International Swaps and Derivatives resolution. PRIME Finance has developed, The Model Clauses Association (ISDA) released its first among other things, a set of arbitral rules The ISDA Arbitration Guide includes Arbitration Guide on September 9, 2013 to be administered by it. The ISDA Model Arbitration Clauses for inclusion in following a two-year consultation process Arbitration Guide is another encouraging Master Agreements. The Model Clauses set with members. The guidance relates development for parties who may wish to out the law governing the Master Agreement to the incorporation of an arbitration incorporate arbitration in financial contracts (and in appropriate cases, the law governing clause in either of the two standard and will undoubtedly promote greater use of the interpretation of the arbitration clause), ISDA Master Agreements, which are the arbitration by the sector. delete the existing jurisdiction clause, and standard international forms for over- amend other provisions of the Master the-counter derivatives transactions. The Benefits of Arbitration Agreement to reflect the choice of arbitration Arbitration Guide is another step toward Clauses in Financial as opposed to the jurisdiction of the courts. establishing more frequent and consistent Contracts In 2011, the ISDA circulated a use of arbitration in international financial The key advantage offered by arbitration memorandum to members setting out transactions. in the context of financial transactions is the advantages and disadvantages of enforcement. Many parties to derivative arbitration in derivative disputes and seeking Growth of Arbitration in transactions are located in emerging markets comment. One particular issue raised in Financial Disputes in which it is difficult to enforce a foreign the memorandum was how best to address Financial contract disputes have judgment, or where the local courts may developing jurisprudence in arbitral awards traditionally been the preserve of the courts, be ill-equipped to deal with such disputes. though, as noted below, the Guide does typically in London or New York. Given Enforcement of an arbitral award under the not address this matter. Overall, responses the experience of the judges of these courts New York Convention, to which there are were received from more than 60 financial and the volume of jurisprudence, there has almost 150 contracting states, gives parties institutions and trading firms worldwide, in been little incentive to shift to other forms more confidence that the award will be addition to specialized feedback including of dispute resolution. There is growing enforceable worldwide. from law firms and the academy. The Model recognition, however, that arbitration Additionally, arbitration may be Clauses have been based on this feedback. may provide significant advantages for attractive to parties to derivative contracts the financial sector. PwC’s International The Guide sets out recommended because of its procedural flexibility, the Arbitration Survey this year confirmed clauses with various combinations of expertise of arbitrators, the possibility of that most corporations in the sector view governing laws, arbitral rules and seats. The accelerated timetables in certain situations arbitration as “well suited” to the resolution options include the International Chamber (for example, for low-value claims), privacy of disputes. of Commerce Rules (ICC), London and confidentiality, finality of arbitral Court of International Arbitration Rules Recent initiatives such as the Panel of awards and the limited rights of appeal, (LCIA), American Arbitration Association Recognised International Market Experts more restricted document production – International Centre for Dispute in Finance (PRIME Finance), established requirements, and the opportunity Resolution Rules (AAA-ICDR), Hong in the Netherlands last year, have responded under some institutional rules to appoint Kong International Arbitration Centre to the financial sector’s interest in adopting emergency arbitrators and obtain rapid Rules (HKIAC), Singapore International arbitration as the primary means of dispute interim relief. Arbitration Centre Rules (SIAC), Swiss Rules of International Arbitration, and the PRIME Finance Rules, as shown in the Appointment: Jean-Marie Burguburu, of counsel in following table: Debevoise’s Paris office, has been elected as President of the Conseil National des Barreaux (CNB). Continued on page 15

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Arbitration Guide for Financial Sector Continued from page 14

Rules Seat Governing Law of the Master Agreement ICC London English New York New York Paris English or New York LCIA London English AAA-ICDR New York New York HKIAC Hong Kong English or New York (arbitration clause governed by Hong Kong law) SIAC Singapore English or New York (arbitration clause governed by Singapore law) Swiss Arbitration Zurich or Geneva English or New York PRIME Finance London English New York New York The Hague English or New York (arbitration clause governed by Dutch law)

Depending on the nature of the rules Further, the Model Clauses expressly award will be treated as having been made at selected, the Model Clauses may provide an extend to disputes relating to non- the seat so it must be made in a state which option for either one or three arbitrators as contractual claims arising out of or in is a party to the New York Convention. well as the process for appointment. connection with the Master Agreement. There are other provisions parties may The Guide also considers the finality of It must be remembered that the consider including, such as a requirement an arbitration award under the various seat Arbitration Guide is exactly that: a guide. that the arbitrators possess certain expertise options and gives examples of the grounds The nature of a particular transaction or qualifications and provisions dealing with for appeal. Challenges to awards are heard including the location of the parties to it will confidentiality. by the courts of the seat and governed by often necessitate specific and comprehensive Developing a Body of Jurisprudence the relevant arbitration law of the seat. For legal advice as to the most appropriate way Although the 2011 ISDA memorandum example, under the English Arbitration of incorporating (and, if necessary, tailoring) to members raised the prospect of persuading Act 1996, a challenge may be brought on the Model Clauses. parties to agree to the anonymized jurisdictional grounds or on the basis of a publication of awards, the Guide does not Comment serious procedural irregularity giving rise address the issue. That notwithstanding, to a substantial injustice (sections 67 and Tailoring the Model Clauses there are already moves toward developing 68). A party is also granted a limited right Parties may wish to tailor the Model a body of such jurisprudence. Article 34(5) of appeal on a point of law, but this can Clauses to the specific transaction of the PRIME Finance Rules, for example, be excluded by agreement (section 69) concerned and are of course free to choose allows the institution to publish excerpts of (of the London-seated arbitrations in the a different seat and/or set of rules. As the awards in anonymized form if neither party Guide, the ICC Rules and the LCIA Rules Guide explains, however, the choice of seat objects (and full awards by consent). contain provisions excluding this right of is important as the arbitration proceedings appeal; the PRIME Finance Rules do not). will be subject to the arbitration law of that Conclusion With respect to arbitrations conducted in jurisdiction. Thus, the procedure will be The prevalence of cross-border finance Paris, the parties are provided the choice governed by that law and the courts of the transactions involving at least one party of expressly waiving the right to set aside seat will have certain powers, such as the located in an emerging market has put into an award in certain circumstances, as power to hear challenges to an arbitrator sharp focus the benefits of arbitration in authorized by Article 1522 of the French alleged to be biased and the power to hear such transactions. The ISDA Arbitration Code of Civil Procedure. an application to annul an award. The Continued on page 16

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Arbitration Guide for Financial Sector recognition by the financial community a body of jurisprudence, readers would be Continued from page 15 of the New York Convention’s appeal – encouraged to watch this space. certainty and predictability in respect of Guide is therefore welcome news for the For further information, please contact: standard contracts such as the ISDA Master financial sector, which is evidently moving Alexander McKinnon Agreements are equally important. To this [email protected] toward more frequent use of arbitration. end, the Guide is silent; however, given London, +44 20 7786 3038 While the importance of enforcement the interest expressed by the ISDA in its of awards and judgments appears to be initial memorandum to members and the driving this shift – indeed the Guide is clear PRIME Finance Rules’ attempt to establish

Indian Supreme Court Narrows Grounds for Challenging Awards

Two recent decisions of the Supreme applicable to foreign arbitration awards September 6, 2012. In overruling its Court of India mark further important (under Part II of the Act). In broad terms, prior decision in Phulchand Exports Ltd v. steps towards reducing judicial interference the BALCO ruling drew the distinction OOO Patriot, the Shri Lal Mahal Court in the process of enforcement of foreign based on the “site” of arbitration. Such a specifically emphasized that Part II implies arbitration awards. In Shri Lal Mahal distinction is crucial because Part I confers a much narrower application of the “public Ltd. v. Progetto Grano Spa, the Supreme wider authority upon domestic courts to policy” doctrine, which, unlike Part I, does Court of India narrowed the scope of review arbitration decisions. Unlike Part not include challenges based on “patent potential challenges to foreign awards on II, Part I also allows a losing party to file an illegality.” “public policy” grounds, reversing its own application to “set aside” the award (often Background prior precedent that had held that “patent used as a preemptive strike by losing parties The Shri Lal Mahal dispute arose over a illegality” was a public policy ground for against a prospective enforcement of an 1994 contract in which an Indian company refusing enforcement of a foreign award. award), thus delaying the award’s finality in agreed to sell durum wheat to an Italian The Supreme Court also dismissed an the eyes of the Indian judicial system. company. At the time of the delivery, the appeal of Vale Australia Pty Ltd. v. Steel An important limitation of the BALCO seller had obtained a certification verifying Authority of India Ltd., a case involving a judgment is that it applies by its own terms the quality of the wheat. Nevertheless, the challenge to an ICC award issued in India. only to arbitrations conducted pursuant buyer contended that the seller breached the to agreements concluded after September contract by delivering soft common wheat Enforcement Regime in 6, 2012. As such, the enforcement of instead of durum wheat. Pursuant to the India in the Post-BALCO any foreign award issued pursuant to arbitration clause in the contract, the buyer Era an arbitration agreement signed before commenced an arbitration with the Grain Last year, the international arbitration September 6, 2012 is left open to potential and Feed Trade Association (GAFTA). community welcomed the landmark challenges under both Part I and Part II of The GAFTA arbitral tribunal rejected the decision of the Supreme Court of India the Act. seller’s argument that the certification was in Bharat Aluminum v. Kaiser Aluminum sufficient evidence to establish that the seller Technical Services, Inc. (BALCO), which Shri Lal Mahal: Limitation had not breached its contractual obligations. symbolized a departure from earlier of the “Public Policy” The GAFTA arbitral tribunal found in precedents blurring the lines between Doctrine favor of the buyer and awarded it damages. two enforcement regimes in India – one The significance of the recent decision The seller appealed to the GAFTA Board applicable to domestic arbitration awards in Shri Lal Mahal is that it reinforces the of Appeals as authorized by the GAFTA (under Part I of the Arbitration and differences between Part I and Part II for Conciliation Act, 1996) and the other arbitration agreements concluded before Continued on page 17

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Indian International unequivocally close the precarious loophole Australia complements the Shri Lal Mahal Arbitration Update created by BALCO). The possibility thus decision discussed above. Continued from page 16 remains for pre-BALCO foreign arbitration Background awards to be vulnerable to “set aside” tactical arbitration rules. In 1998, the Board of In this case, a single-member ICC strikes under Part I of the Act, including Appeals again found in the buyer’s favor. tribunal (seated in New Delhi) awarded based on a broader definition of the “public Under Part II of the Act, the buyer Steel Authority of India Ltd. damages in policy.” Such tactics could lead to wider commenced and won the enforcement suit the amount of over US$150 million against scrutiny by domestic courts and longer before the Delhi High Court. The seller Vale Australia Ltd. (“Vale”). Vale filed a “set procedural delays. It is worth pointing appealed to the Supreme Court on the aside” challenge under Section 34 of Part I, out that such “set aside” proceedings are grounds that the underlying foreign awards claiming, inter alia, “patent illegality” of the far from being theoretical and might gain were contrary to the “public policy” of award. The Delhi High Court rejected all further traction depending on the outcome India and must not be enforced by virtue of of Vale’s objections to the award, refusing to of the pending appeal to the Supreme Court Article 48(2)(b) of Part II of the Act. Citing engage in an appellate review process. of the recent Delhi High Court decision Phulchand Exports, the seller contended Delhi High Court Ruling in Union of India v. Reliance Industries that the phrase “public policy of India” In its reasoning, the Delhi High allowing a “set aside” petition against a must be interpreted broadly to prevent the Court, relying on prior precedents from foreign arbitral award from the pre-BALCO enforcement of foreign awards contrary the Supreme Court of India, reconfirmed era under Part I while potentially expanding to the contract between the parties and/or that “[i]llegality must go to the root of the the scope of the application of Part I. “patently illegal.” matter and if the illegality is of trivial nature In conclusion, under Shri Lal Mahal, Supreme Court Ruling it cannot be held that award is against the enforcement of a foreign award (regardless public policy.” Notably, the decision The Supreme Court disagreed and of the date of the underlying arbitration also emphasized the limited scope of the held that enforcement of a foreign award agreement) should only be subject to a Section 34 scrutiny – “[t]he scope of the would be refused under “public policy” narrower Part II scrutiny, unless a losing present proceedings under Section 34 does grounds of Section 48(2)(b) of the Act only party in a pre-BALCO foreign arbitration not allow this Court to go over the entire if enforcement would be contrary to: “(1) award commences a “set aside” proceeding evidence again and come to a different fundamental policy of Indian law; or (2) the under Part I, in which case, the Part I conclusion only because it is possible to interests of India; or (3) justice or morality.” broader scrutiny may be applicable to a do so.” As such, the Court concluded that The Supreme Court found that none of foreign arbitration award. the mere fact that a different conclusion the seller’s objections fell within these three could be drawn from the available facts and “public policy” subcategories and dismissed Vale Australia: Section testimonies, “by itself does not constitute a the seller’s appeal. Notably, the Supreme 34 Proceeding is Not an valid ground for a court to interfere under Court specifically held that “patent Appeal Section 34 of the Act.” illegality” could not be raised as a “public In August, the Supreme Court of India The dismissal of Vale’s appeal of the policy” ground to challenge enforcement of also dismissed an appeal of a Section 34 Delhi High Court by the Supreme Court foreign arbitration awards. challenge to an ICC award in Vale Australia, thus further underscores the Supreme It is, however, unclear if and how Shri thus further reinforcing its stance of non- Court’s increasing reluctance to interfere Lal Mahal, which arose under Part II, may interference with the arbitral process. As the with the enforcement process. apply to pre-BALCO cases under Part I appeal was based on a “set aside” petition In addition, following upon the earlier (and why the Supreme Court chose not to filed pursuant to Section 34 of Part I,Vale discussion of the dangers of “set aside” strikes, it is worth pointing out that Vale The recent decisions in Shri Lal Mahal and Vale Australia suggest Australia followed many precedents by requiring the “set aside” challenger to make a that the Indian Supreme Court’s recent inclination toward bolstering substantial deposit (almost the entire award international commercial arbitration is a trend with some lasting power. Continued on page 18

17 Issue No 4 - December 2013 Arbitration Quarterly

Indian International of an Indian joint venture company or the Adjudication Timeframes in India Arbitration Update assets in India are under the control of Last but not least, despite its overall Continued from page 17 the Indian party who could theoretically positive outcome and precedential value, expropriate or waste away the assets in a amount) along with its “set aside” petition. Shri Lal Mahal accentuated one of the bid to hinder recovery. Investors should Such deposit requirement is essential from most fundamental concerns about the note this risk when deciding where to seat the point of view of ultimate recovery, Indian judicial system – the extraordinarily arbitrations, as the risk of delayed and expedited timing of the appeal process and long timeframe of the Indian adjudication protracted litigation in Indian courts may discouraging frivolous challenges. process. In this case, the awards became be counterbalanced by being able to obtain final in September 1998 and were brought Further Considerations interim orders in certain instances. for enforcement before the Delhi High The recent decisions in Shri Lal Mahal Public Policy Doctrine Still Well and Court soon thereafter. Nonetheless, the and Vale Australia suggest that the Indian Alive Supreme Court judgment was not issued Supreme Court’s recent inclination toward While the Shri Lal Mahal ruling until July 2013. As also highlighted by the bolstering international commercial narrowed down the meaning of the “public renowned case of White Industries v. India, arbitration is a trend with some lasting policy” doctrine as applicable to foreign a decade-long queue for the Supreme Court power. However, the enforcement regime arbitration awards, such doctrine can still be verdicts may result in pyrrhic victories. in India remains in a state of flux and, hence, utilized by losing parties unwilling to honor * * * certain further broader considerations are such awards. Please note that Debevoise & Plimpton worth noting: Beyond New Delhi LLP does not practice or give advice on Potential Lack of Interim Measures under It should be also noted that the recent matters of Indian law. If you require such Part II rulings in Shri Lal Mahal and Vale Australia advice, we recommend that you contact Part I of the Act provides Indian courts stem from the Delhi High Court, which has an Indian law firm and would be happy to the authority to grant certain interim become quite familiar with the process of assist you in doing so. measures in aid of arbitration. However, and confounding precedents related to the For further information, please contact: because BALCO Part I does not apply to enforcement of foreign arbitration awards Alexander Dmitrenko [email protected] under the Act. The courts in other parts foreign-seated arbitrations, one potentially New York, +1 212 909 6838 unfavorable outcome of BALCO is that of India, particularly the lower courts in Indian courts may no longer be able to jurisdictions where assets may be located, Parveet Singh Gandoak [email protected] grant interim relief in support of foreign might still view foreign arbitration awards Hong Kong, +852 2160 9865 arbitrations. This could be a significant with a certain degree of caution and cause of concern in foreign arbitrations unfamiliarity. Nwamaka Genevieve Ejebe [email protected] where the foreign party is a minority owner New York, +1 212 909 6837

International Arbitration in Africa: Round-Up of Recent Developments

Foreign direct investment (FDI) in the escalating relevance of international brought against Egypt (23), the Democratic African countries is on the rise. According arbitration. Investor-state arbitration is Republic of Congo (nine) and Niger (five). to the United Nations Conference on Trade no exception to this trend. Forty-four African states also have been among the and Development (UNCTAD), while out of the fifty-four African countries are first to initiate claims against investors and global FDI fell last year by 18 percent, FDI signatories to the ICSID Convention. Out to assert counterclaims within the ICSID to African countries increased by 5 percent. of the 454 cases registered with ICSID as of system. Unsurprisingly, the increase in FDI in December 1, 2013, 104 have been against recent decades has corresponded with an African state, with the most claims being Continued on page 19

18 Issue No 4 - December 2013 Arbitration Quarterly

Recent Arbitration specially-constituted panel of three judges, In its more recent advance, on June 1, Developments in Africa chosen from six designated judges, to resolve 2013, Mauritius adopted a specially tailored Continued from page 18 any international arbitration matter at first set of court rules for international arbitration instance. An appeal from the designated matters. To expedite the resolution of Four recent developments provide panel lies directly to the Privy Council in cases, the Supreme Court (International foreign investors with cause for both London, without an intermediate appeal Arbitration) Rules 2013 emphasize written celebration and caution. We summarize stage. This special procedure guarantees submissions over oral evidence and require below Mauritius’s efforts to become the access to specially-trained judges of the swift timetables for final hearings. In their premier destination for international highest court of Mauritius and an expedited totality, these reforms have significantly arbitration in Africa, a Nigerian Court of appeal process. increased the desirability of Mauritius Appeal’s judgment that promises to reduce as a center for arbitration and raised the judicial interference in arbitral proceedings, In July 2011, the Government country’s profile in the arbitration world. the cautious accession of the DRC to of Mauritius, the London Court of the Convention on the Recognition and International Arbitration (LCIA), and the Mauritius International Arbitration Pro-Arbitration Decision Enforcement of Foreign Arbitral Awards, in Nigeria commonly known as the New York Centre (MIAC) established LCIA- Recent developments in Nigeria are Convention, and South Africa’s termination MIAC, a dedicated arbitration center in also encouraging. On July 12, 2013, the of more bilateral investment treaties. Mauritius. The LCIA-MIAC is organized to administer arbitrations using the same Court of Appeal of the Lagos Judicial New International services and similar rules as the LCIA, and Division issued a final judgment in Statoil Arbitration Rules in plans to develop dedicated hearing facilities (Nigeria) Ltd. et al. v. The Nigerian National Mauritius in the near future. The Permanent Court Petroleum Corporation et al. The dispute arose as a result of a tax disagreement This year saw the most recent step in of Arbitration (PCA), in turn, established relating to a production-sharing contract Mauritius’s determination to establish the PCA Mauritius Office to carry out between the Nigerian National Petroleum itself as an international arbitration the functions assigned to the PCA under Corporation (NNPC) and Nigerian center. Building on a foundation of a the MIAA. The PCA representative in subsidiaries of Statoil and Chevron. NNPC stable government and a business-friendly Mauritius can resolve a number of issues obtained an ex parte injunction to prevent environment, Mauritius has strengthened relating to the appointment of the tribunal the arbitration commenced by Statoil and its arbitration legal framework and without protracted court proceedings. Chevron from moving forward, on the basis administrative capabilities in a bid to Together, the LCIA-MIAC and the that the Nigerian Tax Appeal Tribunal had establish itself as an attractive, neutral PCA have undertaken a series of projects exclusive jurisdiction over tax disputes dispute resolution forum. to promote the settlement of international and that the dispute was not arbitrable. In 2008, the government passed the disputes in the region, including the training Statoil and Chevron appealed the ex parte Mauritius International Arbitration Act of local and regional judges and counsel injunction. (MIAA). Largely based on the UNCITRAL and the biennial Mauritius International Model Law on International Commercial Arbitration Conference. Mauritius will Arbitration, the MIAA featured a few also host the International Council for Continued on page 20 novel adaptations, including a reference to Commercial Arbitration Congress in 2016. arbitration unless there is prima facie a “very strong probability” that the arbitration Although skepticism remains as to the ability of the agreement is ineffective, the principle that “no court shall intervene” except as international arbitration system to address the concerns of provided by the MIAA, and the allocation developing countries, recent developments demonstrate that of authority for arbitral appointments and other administrative functions to the the significance of international arbitration for Africa will only Permanent Court of Arbitration at The continue to grow in the coming years. Hague. In addition, the MIAA created a

19 Issue No 4 - December 2013 Arbitration Quarterly

Recent Arbitration The Court of Appeal, which has Nonetheless, two of the reservations Developments in Africa multiple divisions throughout the country, accompanying the DRC’s accession may Continued from page 19 is the second highest court in Nigeria. Its limit its value to certain investors. First, rulings are binding on lower courts, and a the DRC has specified that the Convention The Court of Appeal overturned the judgment by the Lagos Judicial Division will apply only to awards issued after injunction on two grounds. First, the Court is usually binding on the other divisions DRC’s accession. Second, the accession of Appeal found that NNPC had failed to of the Court of Appeal. If widely adopted will be of limited benefit in mining disputes comply with requirements for an ex parte by other courts in Nigeria, Statoil’s non- because the accession law provides that the injunction, including failing to demonstrate interventionist reading of Section 34 of Convention will not apply to “disputes urgency and irreparable harm. The Court the Arbitration Act could significantly concerning immovable assets situated also noted that NNPC had failed to disclose reduce judicial interference in arbitration in [the DRC] or rights relating to said that it had advised the arbitral tribunal proceedings. assets.” Under the Congolese Mining that it would not be necessary to bifurcate Code, property rights in deposits of mineral the proceedings to consider the issue of Accession of the DRC to the substances are an immovable asset, and arbitrability separately. New York Convention awards in mining disputes may therefore Second, and of particular interest Signaling another pro-arbitration turn, not fall within the scope of the New York to the arbitration community, was the albeit a more cautious one, on June 26, Convention as limited by the DRC’s Court’s holding on the interpretation of 2013, President Joseph Kabila authorized restrictions. Section 34 of Nigeria’s Arbitration and the accession of the DRC to the New York Given that minerals and metals account Conciliation Act. Section 34 of the Act Convention. The accession will take effect for the vast majority of the DRC’s exports provides that “a Court shall not intervene 90 days after the accession instrument is and represent the country’s single largest in any matter governed by this Act except deposited with the United Nations, which source of FDI, this reservation potentially where so provided in this Act.” The private has yet to occur. Upon accession, the DRC represents a significant missed opportunity claimants argued that the Act did not allow will become the 33rd African state to accede to make the DRC a more attractive country a court to intervene in arbitral proceedings to the New York Convention. for investment. by issuing an ex parte anti-arbitration The DRC’s adoption of the New York injunction, whereas NNPC maintained that Convention will facilitate the enforcement South Africa Withdraws such a power derived from the Constitution of awards in the DRC and enforcement from Bilateral Investment and the courts’ inherent power to supervise abroad of awards issued in the DRC. Treaties with Spain, arbitrations. The Court of Appeal held It continues the DRC’s encouraging Germany and Switzerland that Section 34 was mandatory and that engagement with international arbitration, courts could only intervene in arbitration In contrast with the pro-international as announced by the DRC’s membership proceedings in the limited circumstances arbitration developments described above, in the mentioned in the Act. “Where there is no Organisation pour l’Harmonisation en on June 23, October 23, and October (OHADA) last provision for intervention,” the Court held, Afrique du Droit des Affaires 30, 2013, South Africa served notices of year. “this should not be done.” termination of its bilateral investment treaties (BITs) with Spain, Germany, and Switzerland, respectively. These BITs will Hire: Andy Y. Soh, a lawyer specializing in internal continue to protect existing investments for investigations, complex commercial litigation and the next twenty years (or, in the case of the Spain BIT, ten years), but will not apply to arbitration disputes, and government enforcement new investments after their terminations. defense, joined Debevoise in October 2013 as The withdrawals follow South Africa’s International Counsel based in the firm’s Hong Kong office. He termination of its investment treaty with the Belgo-Luxembourg Economic Union was previously Executive Counsel for Asia-Pacific Litigation and in 2012. Investigations at General Electric International. Continued on page 21

20 Issue No 4 - December 2013 Arbitration Quarterly

Recent Arbitration and political circumstances” and that the to be resolved in national courts, not Developments in Africa government would consider terminating or international arbitration; excludes a number Continued from page 20 renegotiating first-generation treaties that of governmental acts from the definition The terminations are part of South were nearing expiration. of expropriation; and does not explicitly Africa’s response to a claim in 2007 by In response to criticism over these contain an obligation of fair and equitable investors from Italy and Luxembourg who policy changes, South African officials have treatment. The legal and dispute resolution alleged that South Africa’s Black Economic remained adamant that traditional bilateral framework for foreign investment in South Empowerment policy, a nationwide investment treaties are inopportune for Africa is undoubtedly changing, but the program to redress Apartheid inequalities, both states and investors, and that South consequences of these changes for foreign violated protections under applicable Africa would replace the terminated BITs investors are not yet clear. In the end, the investment treaties. Although that dispute with domestic legislation, which would transformation may produce additional was eventually settled, the claim led South protect investors, the public interest, and protections for some investors and a Africa’s Department of Trade and Industry constitutional obligations. On November reduction of rights for others. (DTI) to conduct a review of the country’s 1, 2013, the South African government * * * bilateral investment treaties in 2009. published the promised legislation for International arbitration is already an The DTI concluded that the “first public comment. The Promotion and important element of how business is done generation” of treaties, concluded between Protection of Investment Bill of 2013, as in Africa. Although skepticism remains as 1994 and 1998, could potentially preclude currently proposed, would extend basic to the ability of the international arbitration South Africa from advancing the public investment protections to all investors, system to address the concerns of developing good through regulatory and legal including foreign and domestic investors countries, recent developments demonstrate changes. In 2012, the Minister of Trade not currently protected by existing BITs. that the significance of international and Industry, Dr. Rob Davies, declared The Bill obligates South Africa to ensure arbitration for Africa will only continue to that these first-generation treaties “pose national treatment for foreign investors, grow in the coming years. a risk and limitation on the ability of the to protect the security of investments, For further information, please contact: Government to pursue its Constitutional- and to pay timely, just and equitable Nwamaka Genevieve Ejebe based transformation agenda.” Davies compensation for expropriation in the [email protected] New York, +1 212 909 6837 announced that South Africa would not be public interest. However, the Bill does entering into any new bilateral investment not contain some of the most attractive Ina C. Popova [email protected] treaties except for “compelling economic protections commonly found in BITs. New York, +1 212 909 6754 For example, the Bill provides for disputes

English High Court Defers to Arbitral Tribunal in Connection with Grant of Interim Relief

In Barnwell Enterprises Ltd. and others of international arbitral tribunals when A dispute arose under the Put Option v. ECP Africa FII Investments LLC [2013] deciding whether to grant interim relief. Agreement, which led to ECPA claiming EWHC 2517 (Comm), the English High US$22,446,525 in LCIA arbitration Court recently denied an application for The Dispute proceedings seated in London. ECPA then an interim injunction in connection with The dispute arose out of an investment sought to exercise its rights to the shares arbitral proceedings out of deference to by the Respondent, ECPA, in a Mauritian under the Share Pledge Agreement on the the arbitrators’ authority to rule on the company owned by the owners of the basis that there was a valid and unpaid application. The decision demonstrates Applicant companies. The parties entered debt under the Put Option Agreement. that the courts of England and Wales into two relevant agreements: a Put Option The Applicants sought to restrain such an remain sensitive to the independence Agreement and a Share Pledge Agreement. Continued on page 22

21 Issue No 4 - December 2013 Arbitration Quarterly

Deference to Arbitral Determination pending the arbitral tribunal’s decision on tribunal either has no power to act or is Continued from page 21 the renewed application for interim relief. unable for the time being to act effectively. It was a matter of considerable debate in the exercise, contending that an exercise by Analysis present proceedings as to whether, in giving ECPA of its rights under the Share Pledge The decision is notable for two reasons. the ruling set out above, the tribunal had Agreement would prejudge and determine First, it provides an indication that English held (i) that it had no power to act, or (ii) the issue in the arbitration. courts will step outside of the bounds of that it did have the power to act, but that The Applicants applied on a number of section 44 of the Arbitration Act when the interim relief requested ought not to be occasions to both the arbitral tribunal and granting interim relief in arbitration-related granted. Rather than reach its own view as the Mauritian court, but did not obtain the cases only in exceptional cases. The Supreme to what the tribunal had decided, the Court relief that they were seeking. The Tribunal Court in Ust-Kamenogorsk Hydropower Plant held that the most appropriate approach was ruled, in particular, that “the interim JSC v. AES Ust-Kamenogorsk Hydropower to refer the question back to the tribunal measures requested cannot be granted, as Plant LLP [2013] UKSC 35 established to clarify the terms of its previous decision. to do otherwise would prima facie be to that, in cases concerned with arbitration, The Court was only prepared to reach its modify the terms of what was previously the court is not limited to the powers set own decision if the tribunal were to hold agreed between the Parties.” out in Section 44 of the Arbitration Act, explicitly that it did not have power to act. The Applicants then applied to but instead remains possessed of the general The Court’s willingness to defer to the the English High Court for an interim power granted by Section 37 of the Senior arbitral tribunal runs against the tide of injunction, seeking to restrain ECPA’s Courts Act to grant interim relief when it is recent decisions. There had been a number exercise of any rights or purported rights “just and convenient to do so.” In deciding of arguable indications in recent years that under or derived from the Share Pledge not to use the broad power in Section 37, interim relief in arbitration cases was to be Agreement, pending the final determination the High Court heeded the warning of the dealt with in exactly the same way as every of the arbitration proceedings. The Supreme Court in Ust-Kamenogorsk that this other such application. Proponents of this application was made under both Section power ought to be exercised “sensitively” view could point not only to the decision in 44 of the English Arbitration Act 1996 in cases where arbitration is pending or Ust-Kamenogorsk, but also to decisions such and Section 37 of the Senior Courts Act contemplated. as Permasteelisa Japan KK v. Bouyguesstroi 1981. The High Court refused to grant The second point of interest is the and another [2007] EWHC 3508 (TCC), the injunction sought, holding instead that decision to refer the question of interim in which Mr. Justice Ramsey held that the question of interim relief ought to be relief back to the arbitrators. Section 44(5) “the court should generally act as it would referred back to the arbitral tribunal. The of the Arbitration Act provides that a court if the same dispute were before it in court, court did, however, grant temporary relief may exercise its powers to grant interim rather than attempting to adopt a different relief under Section 44 only if the arbitral test so as to hold the position pending a future application to the arbitral tribunal.” In holding that the arbitral tribunal ought New Partner: Debevoise has announced that Tony Dymond will to have the final say, the present decision join the firm as the sixth litigation partner in the firm’s London indicates something of a change of approach. In the process, it strengthens the office. Mr. Dymond is joining us from Herbert Smith Freehills LLP, argument that England and Wales remains where he was co-head of the firm’s Seoul office. Mr. Dymond has an arbitration-friendly jurisdiction. spent the last 20 years in London, Hong Kong and Seoul advising an For further information, please contact: Michael Howe international client base on complex, multi-jurisdictional disputes in [email protected] London, +44 20 7786 5541 both litigation and arbitration. He has a broad commercial practice with a focus on high-value construction and engineering disputes in the energy and infrastructure sectors.

22 Issue No 4 - December 2013 Arbitration Quarterly

US Appeals Court Strikes Down Delaware’s Court-Administered Business Arbitration Program

On October 23, 2013, the US Court of filings, is confidential. The eventual award In 2012, the US District Court for Appeals for the Third Circuit struck down issued by the judge acting as arbitrator is the District of Delaware agreed with the the Delaware Court of Chancery’s court- enforceable in the same manner as any other plaintiffs that the arbitration program sponsored arbitration program in Delaware judgment of the Court of Chancery, but it impermissibly barred public access to Coalition for Open Government v. Strine, is not subject to a normal appeal and may be proceedings that were very similar to civil 733 F.3d 510 (3d Cir. 2013), finding that reviewed by the Delaware Supreme Court trials in nature, whatever they might be it violated the constitutional right of public only on the narrow grounds for vacating labeled, and the injunction was granted. access to the courts guaranteed by the First or modifying an arbitral award under the The defendants immediately appealed and Fourteenth Amendments to the US Federal Arbitration Act. the decision, but lost in October of this Constitution. Though the Delaware program has year when the Third Circuit affirmed the The program, which allows parties generally won the support of the business lower court’s decision. Consistent with to agree to an arbitration procedure community, open-government groups have precedent, that court turned to “experience conducted entirely within Delaware’s and logic” to examine whether the public Court of Chancery, was created in 2009 has historically enjoyed a right of access to in an attempt by the State of Delaware to The majority opinion reveals the kind of proceedings at issue and whether maintain its preeminence as a preferred a level of judicial discomfort public access plays a significant positive role jurisdiction for business incorporation in the proceedings’ functioning. with too close an intermarriage and corporate dispute adjudications. In The ruling was not unanimous. In fact, particular, the program seeks to capitalize of state institutional power the three judges who formed the bench on the widely-touted expertise of the state’s and arbitration proceedings. for the appeal produced not one but three Court of Chancery judges in matters of opinions: a majority opinion for two judges corporate law. striking down the arbitration program, a The program was designed to wed the criticized it as assisting large corporations in concurring opinion by one of those two relative flexibility, confidentiality, speed, keeping their disputes secret at the expense of judges clarifying that the problem lay only and finality associated with arbitrations with shareholders and the general public, who are with the confidentiality of the program the more traditional powers and prestige shut out and kept uninformed. Following and not the general notion of judge-run of a permanent court. The Delaware this line of objection, the Delaware arbitrations, and a dissenting opinion that Chancery Court program differs markedly Coalition for Open Government sued the advocated upholding the program in its from the court-annexed alternative dispute State of Delaware, the Delaware Court of entirety. resolution procedures that are common Chancery, and the individual Chancery A key difference between the Third throughout the United States in that the judges in federal court in 2011, requesting Circuit judges was the type of proceedings proceeding results in a binding decision by that the arbitration program be enjoined as the court should consider when evaluating a judge of the court. Under the enacting an unconstitutional infringement on the whether historical “experience” favored statute and the Court of Chancery’s public’s First Amendment rights. Federal public access. If the court looked to the implementing rules, a judge of the court jurisprudence on the rights to freedom of history of civil trials, it was clear that the (the Chancellor or one of the four Vice- expression and freedom of the press under public had traditionally enjoyed a right of Chancellors) is appointed as sole arbitrator, the First Amendment to the Constitution access; but if the court looked to the history with all proceedings administered by and has historically upheld the public’s right of private arbitrations, the tendency ran carried out within the Court of Chancery. to access civil trials, with the right being much more strongly toward confidentiality. The parties are free to revise the arbitration extended in a more limited fashion to The majority opinion, written by Judge procedures by agreement as they see fit, and criminal trials, immigration hearings, and Dolores Korman Sloviter, found that the the entirety of the proceedings, including all other proceedings. Continued on page 24

23 Issue No 4 - December 2013 Arbitration Quarterly

Delaware Arbitration Program This suggests that Judge Fuentes may have It remains to be seen whether the Continued from page 23 been concerned that Judge Sloviter’s more Delaware program will survive with only general criticisms of the program might be the confidentiality rules excised, and if so, Delaware arbitration procedure shared read too broadly. whether any businesses will avail themselves important characteristics with civil trials: of its services. The defendants have not yet “Although Delaware’s government- The dissenting opinion, by Judge Jane announced whether they will seek review of sponsored arbitrations share characteristics Richards Roth, strongly disagreed with the Third Circuit’s ruling in the Supreme such as informality, flexibility, and limited the majority, arguing that the appropriate Court of the United States, but they have review with private arbitrations, they differ history under the “experience and logic” stated that the option is being considered. fundamentally from other arbitrations test was that of private arbitrations between because they are conducted before active consenting parties, and that this history For further information, please contact: judges in a courthouse, because they result involved little or no tradition of public Terra Gearhart-Serna [email protected] access. Judge Roth also accused the majority in a binding order of the Chancery Court, New York, +1 212 909 6673 and because they allow only a limited of failing to understand the difference right of appeal.” The majority therefore between “adjudication and arbitration,” placed great weight on the history and and reviewed the benefits of the Delaware functioning of civil trials, and held that arbitration program with approval, the “experience and logic” test militated characterizing it as “a set-up [that] creates a in favor of the proceedings being open to perfect model for commercial arbitration.” the public. Indeed, the majority opinion Commentators have already flagged seemed to accept the plaintiffs’ antagonistic the case as significant with respect to view toward the program, criticizing the fact state involvement in arbitration. The that the program was limited to disputes majority opinion reveals a level of judicial over $1 million on the ground that the “the discomfort with too close an intermarriage numerous advantages” of arbitration should of state institutional power and arbitration not be limited “to rich businesspersons.” proceedings. The case, however, also The concurring judge, Judge Julio M. demonstrates the importance of the rise Fuentes, joined the majority opinion but in arbitration as a preferred method of wrote separately to emphasize that “we resolving business disputes. Without that do not express any view regarding the trend, Delaware’s lawmakers most likely constitutionality of a law that may allow never would have entered the arbitration sitting Judges to conduct private arbitrations business to maintain the state’s competitive if the system set up by law varies in certain edge as a business haven. respects from the scheme before us today.”

Relocation: The London office of Debevoise & Plimpton LLP has relocated to new premises at 65 Gresham Street, London EC2V 7NQ. The move comes in the wake of significant growth for the firm in the UK. Debevoise first moved to London in 1989, and later moved to offices in Tower 42 in 1998. At the time, the office had a total of 13 lawyers, including 4 partners. Today, the firm has more than 80 lawyers in its London office, led by a group of 19 partners and 11 international counsel.

24 Issue No 4 - December 2013 Arbitration Quarterly

Recent and Forthcoming Events

• On October 3, Debevoise partner Christopher K. Tahbaz • On October 23, Debevoise partner Lord (Peter) Goldsmith spoke in New York at an event organized by the Hong Kong QC participated in a debate at the ADR in Asia Conference International Arbitration Centre. The event was titled organized by the Hong Kong International Arbitration “Highlighting Hong Kong: A World Class Arbitral Venue.” Centre. The topic was whether an arbitral tribunal should have the power to remove counsel when the integrity of the • On October 7, Debevoise hosted a reception at the Isabella process is jeopardized. Stewart Gardner Museum in Boston in connection with the Annual Conference of the International Bar Association. • On October 24, Debevoise partner Lord (Peter) Goldsmith QC participated in a debate on the motion “This house • On October 7, Debevoise partner Lord (Peter) Goldsmith believes international arbitration needs ‘philosophy’ like a QC spoke in Boston during the Annual Conference of the fish needs a bicycle” at the 3rd Annual Global Arbitration International Bar Association. He spoke at the Dispute Review Live Asia event in Hong Kong. Resolution Showcase Session Panel, titled “What Price Justice? Predicting, Managing and Funding the Costs of • On October 25, Debevoise partner Donald Francis Donovan International Dispute Resolution.” gave the keynote address at the International Law Weekend at Fordham Law School, organized by the International • On October 7, Frederick T. Davis, of counsel in Debevoise’s Law Students Association and the American Branch of the Paris office, participated in a panel discussion on “Journalism, International Law Association. Mr. Donovan’s address was the Media and Criminality” in Boston during the Annual titled “The Advocate in the Transnational Justice System.” Conference of the International Bar Association. • On October 30, Debevoise partner Lord (Peter) Goldsmith • On October 8, Debevoise partner Mark W. Friedman co- QC gave a keynote speech in Hong Kong on Britain’s future chaired a session titled “Back to the Future?” in Boston during in the European Union at an insurance seminar organized the Annual Conference of the International Bar Association. in-house by Debevoise & Plimpton. The session featured a discussion with leading arbitrators on the origins of arbitration and lessons for the future, as well as • On October 31 and November 1, two Debevoise partners a debate on the regulatory and liberal models of arbitration. presented at the Midyear Meeting of the American Society of International Law (ASIL). Donald Francis Donovan, • On October 10, Debevoise partner Christopher K. Tahbaz ASIL President, moderated a panel titled “A Conversation moderated a panel discussion in Boston during the Annual on the Art of Judging,” featuring President Peter Tomka and Conference of the International Bar Association, titled Judge Joan Donoghue of the International Court of Justice “Resolving International Business Disputes: Using the and Judge John Walker of the US Court of Appeals for the World Trade Organization, Bilateral Investment Treaties, Second Circuit. William H. Taft V, co-chair of the Midyear International Commercial Arbitration and European Union Meeting, moderated a panel titled “Making It Count: Recent Courts.” Trends in the Enforcement of Arbitral Awards and Foreign • On October 21, Debevoise partner David W. Rivkin spoke Judgments.” on the delegation of powers to arbitral institutions at a round table titled “The Number of Arbitrators & The Challenges of Efficiency and Legitimacy: Cross Perspectives.” The event took place in Paris at a conference jointly organized by the Corporate Counsel International Arbitration Group and the International Chamber of Commerce Institute for World Business Law. Continued on page 26

25 Issue No 4 - December 2013 Arbitration Quarterly

Recent and Forthcoming Events Continued from page 25

• On November 12, Debevoise partner Lord (Peter) Goldsmith • On December 5, Debevoise partner David W. Rivkin QC spoke at Columbia Law School on “The Last Great presented at a conference on international arbitration in Human Rights Challenge? Global Decriminalization of the Asia Pacific region organized by the International Bar Homosexuality through Constitutional Law,” at an event Association Arbitration, Australian Centre for International organized by the Human Rights Institute, Columbia Outlaws Commercial Arbitration, and the Law Council of Australia. and Social Justice Initiatives. Mr. Rivkin spoke about the road blocks to efficiency and economy in international commercial arbitration. • On November 13, Debevoise partner David W. Rivkin moderated a panel on the differences between investment • On December 6, Debevoise partner David W. Rivkin gave and commercial arbitration at a Joint Conference in Tokyo the opening remarks in Sydney to the inaugural meeting of on “Cross-Border Legal Services in the Asia Region,” co- the International Bar Association Asia Pacific Arbitration presented by the International Bar Association and the Japan Group. Federation of Bar Associations. • On December 6, Debevoise partner David W. Rivkin • On November 19, Debevoise partner Lord (Peter) Goldsmith presented at a symposium sponsored by the Asia-Pacific QC was a guest speaker at Columbia Law School’s Seminar on Forum for International Arbitration. As the guest speaker, International Lawyering for Governments, where he offered Mr. Rivkin spoke on “Creative Approaches to Arbitrating his insights on comparative approaches to international Disputes.” government lawyering. • On December 9, Debevoise associate Alexey I. Yadykin spoke • On November 22, Debevoise partner Christopher K. Tahbaz in Moscow at a young arbitrators’ forum organized by the spoke on a panel on building a successful and satisfying legal International Chamber of Commerce. The forum was titled career in a conference titled “Changing Times: Legal Trends “Arbitration in Emerging Markets.” in the Asia Pacific Region.” The conference, held in Seoul, • On December 10, Debevoise partner Alyona N. Kucher Republic of Korea, was organized by the International Bar spoke on arbitration courts reform at a conference in Moscow Association Young Lawyers’ Committee, the International titled “Russia as a Place for Dispute Resolution: Anticipating Bar Association Asian Pacific Regional Forum and the the Changes,” organized by the International Chamber of Korean Bar Association. Commerce Russia. • On November 27, Debevoise partner Sophie Lamb chaired • On December 16-17, Debevoise partner Alyona N. Kucher the International Chamber of Commerce UK Annual gave a speech titled “What Kind of Arbitration Courts Arbitrators’ Forum in London. Debevoise partner Lord Reform do Russian Businessmen Need?” at a conference in (Peter) Goldsmith QC delivered the keynote address titled Moscow titled “100 Steps Towards Favorable Investment “Are There International Norms of Behavior in International Climate: Achievements and New Challenges,” organized by Arbitration?” the Vedomosti newspaper. • On December 2, Debevoise partner David W. Rivkin was one of the lead speakers on a panel titled “Rethinking Commercial Arbitration” at the Singapore International Arbitration Forum 2013. He spoke about the role of arbitrators as “town elders” who play active roles in the proceedings. Continued on page 27

26 Issue No 4 - December 2013 Arbitration Quarterly

Recent and Forthcoming Events Continued from page 26

• On January 16, 2014, Debevoise partner Donald Francis • On February 21, 2014, Debevoise partner Mark W. Donovan will speak at Stanford Law School on “The Practice Friedman will present in Houston at the Winter Forum of International Law.” on International Energy Arbitration, jointly organized by the Institute for Transnational Arbitration and the Institute • On February 13, 2014, Debevoise partner Catherine for Energy Law. Mr. Friedman’s speech is titled “Can State M. Amirfar will lead a discussion on developments in Counterclaims Salvage Investment Arbitration?” international arbitration at the Young Practitioners’ Symposium in Paris, in her new role as co-chair of the newly • On April 8, 2014, Debevoise partner Catherine M. Amirfar launched IBA Arb 40, a subcommittee of the International will speak in Miami at the 2014 International Council for Bar Association Arbitration Committee. Commercial Arbitration Congress. Ms. Amirfar will speak on “Treaty Arbitration: Is the Playing Field Level and Who • On February 14, 2014, Debevoise partner David W. Rivkin Decides Whether It Is Anyway?” will speak in Paris at a conference titled “Advocates’ Duties in International Arbitration: Has the time come for a set of norms?” This conference is organized by the International Bar Association Arbitration Committee, and Debevoise partner Mark W. Friedman is a member of the organizing committee. Mr. Rivkin will address the issue of whether arbitration counsel owe a duty of honesty in relation to their submissions, and if so, when and to whom.

• On February 20, 2013, three Debevoise partners will participate in the Annual Meeting of the International Institute for Conflict Prevention and Resolution in Charleston, South Carolina. Catherine Amirfar, co-chair of the Annual Meeting, will speak on the issue of divergence in global alternative dispute resolution practice. David W. Rivkin will moderate a discussion on “Big Data” and its implications for alternative dispute resolution, and David H. Bernstein will address the impact that changes in US law are having on alternative dispute resolution relating to intellectual property.

27 Issue No 4 - December 2013 Arbitration Quarterly

Debevoise International Dispute Resolution Group Partners and Counsel

Catherine M. Amirfar Dr. Thomas Schürrle Partner, New York Partner, Frankfurt [email protected] [email protected] +1 212 909 6398 +49 69 2097 5000

Donald Francis Donovan Karolos Seeger Partner, New York Partner, London [email protected] [email protected] +1 212 909 6233 +44 20 7786 9042

Mark W. Friedman Christopher K. Tahbaz Partner, New York Partner, New York and Hong Kong [email protected] [email protected] +1 212 909 6034 +1 212 909 6543 +852 2160 9839 Lord Goldsmith QC Partner, London and Hong Kong Jean-Marie Burguburu [email protected] Of Counsel, Paris +44 20 7786 9088 [email protected] +852 2160 9800 +33 1 40 73 13 09

Antoine F. Kirry Frederick T. Davis Partner, Paris Of Counsel, Paris [email protected] [email protected] +33 1 40 73 12 35 +33 1 40 73 13 10

Alyona N. Kucher Matthew Getz Partner, Moscow Counsel, London [email protected] [email protected] +7 495 956 3858 +44 20 7786 5518

Sophie Lamb Jessica Gladstone Partner, London Counsel, London [email protected] [email protected] +44 20 7786 3040 +44 20 7786 9166

Kevin Lloyd Richard Lawton Partner, London International Counsel, London [email protected] [email protected] +44 20 7786 9020 +44 20 7786 9029

John B. Missing Carl Micarelli Partner, London Counsel, New York [email protected] [email protected] +44 20 7786 9160 +1 212 909 6813

Dietmar W. Prager Steven S. Michaels Partner, New York Counsel, New York [email protected] [email protected] +1 212 909 6243 +1 212 909 7265

David W. Rivkin Philip Rohlik Partner, New York and London Counsel, Hong Kong [email protected] [email protected] +1 212 909 6671 +852 2160 9856 +44 20 7786 9171 Andy H. Soh International Counsel, Hong Kong [email protected] +852 2160 9819 28